Meaningful Preparation Must be Considered for Declaratory Judgment Jurisdiction

In Cat Tech. LLC. v. Tubemaster Inc. May 28, 2008), the U.S. Court of appeals for the Federal Circuit examined the second prong of the thw-prong test for determining the existence of declaratory judgment authority.

1. whether conduct by the patentee created a "reasonable apprehension" of suit on the part of the declaratory judgment plaintiff.
2. whether the plaintiff had done "meaningful preparation" to conduct potentially infringing activity.

According to the opinion by Circuit Judge Mayer,

. . . the issue of whether there has been meaningful preparation to conduct potentially infringing activity remains an important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate. See Teva Pharms., 482 F.3d at 1339 (MedImmune requires that a court look at "all the circumstances" to determine whether a justiciable Article III controversy exists.). If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither "immediate" nor "real" and the requirements for justiciability have not been met. See Lang v. Pac. Marine & Supply Co., 895 F.2d 761, 764 (Fed Cir. 1990) . . .

We conclude that although MedImmune articulated a "more lenient legal standard" for the availability of declaratory judgment relief in patent cases, Micron Tech., 2008 U.S. App. LEXIS 4387 at *12, the issue of whether there has been meaningful preparation to conduct potentially infringing activity remains an important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate. See Teva Pharms., 482 F.3d at 1339 (MedImmune requires that a court look at "all the circumstances" to determine whether a justiciable Article III controversy exists.). If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither "immediate" nor "real" and the requirements for justiciability have not been met. See Lang v. Pac. Marine & Supply Co., 895 F.2d 761, 764 (Fed Cir. 1990) . . . .

. . . although a party need not have engaged in the actual manufacture or sale of a potentially infringing product to obtain a declaratory judgment of non-infringement, there must be a showing of "meaningful preparation" for making or using that product. Id.; DuPont Merck Pharm., 62 F.3d at 1401; see also BP Chems. Ltd v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993) (requiring "present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity"); Goodyear Tire & Rubber, Co. v. Releasomers, Inc., 824 F.2d 953, 955-56 (Fed. Cir. 1987) (requiring that the plaintiff "actually have either produced the device or have prepared to produce that device"). In general, the greater the length of time before potentially infringing activity is expected to occur, "the more likely the case lacks the requisite immediacy." Sierra Applied Scis., Inc. v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1379 (Fed. Cir. 2004).

. . . In the present case . . ., TubeMaster has taken significant, concrete steps to conduct loading activity with configurations 1, 2 and 4. It has developed two basic loading device designs—one with circular plates and one with circular plates with tabs—and has developed four loading device configurations. TubeMaster has generated AutoCAD® drawings for each of its four configurations.

Each reactor is different because the tube diameter, the spacing between tubes and the size and shape of catalyst particles can vary significantly. Because TubeMaster’s loading device designs are customized based upon the dimensions of each customer’s reactor, it can take no further steps toward manufacturing its loading devices until it receives an order from a customer with the appropriate dimensions.

TubeMaster has already successfully manufactured and delivered a loading device using configuration 3. See Interdynamics, Inc. v. Wolf, 698 F.2d 157, 169-74 (3d Cir. 1982) (Declaratory relief appropriate where the manufacturer of a rear window defroster had produced a prior version of its product.); see also Super Prods. Corp. v. D P Way Corp., 546 F.2d 748, 754-55 (7th Cir. 1976) (Declaratory relief appropriate where the plaintiff had a business enterprise specifically directed to the manufacture and sale of a potentially infringing product.). It is prepared to produce loading devices using configurations 1, 2 and 4 as soon as it receives an order with the appropriate dimensions.

Furthermore, it expects that it can produce devices using these configurations "within a normal delivery schedule" once it receives an order. Constitutionally mandated immediacy requirements have been satisfied because once the threat of
liability to Cat Tech has been lifted, it appears likely that TubeMaster can expeditiously solicit and fill orders for loading devices using configurations 1, 2 and 4.

. . . The dispute between TubeMaster and Cat Tech also meets constitutionally mandated "reality" requirements. In the context of patent litigation, the reality requirement is often related to the extent to which the technology in question is "substantially fixed" as opposed to "fluid and indeterminate" at the time declaratory relief is sought. Sierra, 363 F.3d at 1379.

. . . Unlike the technology involved in Telectronics, Sierra and Benitec, which was fluid and in an early stage of development, TubeMaster’s technology is "substantially fixed." TubeMaster’s four basic loading device designs are designed "to cover virtually all of the reactor configurations that might be encountered at customers’ facilities." Thus, TubeMaster does not expect to make substantial modifications to its loading device designs once production begins. The dispute with Cat Tech is "real," not hypothetical, because it appears likely that, once the cloud of liability for infringement is eliminated, the accused products can be produced without significant design change. See Interdynamics, 698 F.2d at 174 (proceeding where the plaintiff planned to market a product that it would "be able to manufacture relatively quickly").

. . . Where, as here, there is cogent evidence that a declaratory plaintiff has made meaningful preparation to conduct potentially infringing activity, a showing that the plaintiff has prepared draft sales literature or otherwise disclosed its products to potential customers is not an indispensable prerequisite. See Interdynamics, 698 F.2d at 172 (sufficient that although the plaintiff "had not yet advertised or solicited orders for its proposed new product," there was significant evidence that the plaintiff intended to manufacture it).