Issue 217 | June 21, 2004
Sierra Applied Sciences, Inc., v. Advanced Energy Industries, Inc.

In Sierra Applied Sciences, Inc., v. Advanced Energy Industries, Inc., No. 03-1356 (Fed. Cir. April 13, 2004), the federal circuit reversed-in-part, vacated-in-part, and affirmed-in-part a dismissal of Sierra’s declaratory judgment complaint against Advanced Energy Industries, Inc. (“AEI”) for lack of a case or controversy.

In 1994, Sierra began manufacturing and selling a 2 kW power supply for use in, inter alia, reactive sputtering, but ceased in the fall of 1995 because of low sales. AEI’s December, 1995 notice letter charged Sierra with infringement of its ‘669 patent, which Sierra responded to by saying it no longer commercialized its 2 kW units. AEI took no action for 4 years, and the federal circuit held that any reasonable apprehension of suit on behalf of Sierra diminished over that time period.

AEI sent additional warning letters in 1999 and 2000 after learning of Sierra’s proposed 150 kW units under development and Sierra sought declaratory judgments of invalidity and noninfringement. Granting AEI’s motion to dismiss for lack of case or controversy, the district court observed there was no persuasive evidence that Sierra was engaging in infringing activity with regard to either of its 150 kW devices at the time it filed its complaint. Moreover, Sierra admitted in discovery that its only 150 kW power supply as of March 2002 (the Coleman design) was a first prototype that had been destroyed. Moreover, Sierra’s only existing prototype (the Billings design), presumably in working condition, was never fully tested and was undergoing further improvements. Sierra never sold any 150 kW devices as of September 14, 2001, and had no concrete plans to do so then.

On appeal, the 1999 and 2000 letters were considered broad enough to include each of the two different 150 kW power supply designs developed by Sierra, as well as the 2 kW unit previously manufactured, sold, and currently used in house for testing. Thus, while AEI’s admission that it would not sue for infringement based on Sierra’s in-house use of the 2 kW unit created a judicial estoppel as to that use (foreclosing reasonable apprehension of suit), the admission did not apply to previous uses and sales. Thus, a case or controversy existed as to previous sales of 2 kW units based on the 1999 and 2000 letters.

The federal circuit vacated the district court’s dismissal of the complaint as to the Coleman 150 kW power supply and remand for further fact-finding, to determine whether the unit was destroyed during testing or was ever successfully used for reactive sputtering; in the latter case, the testing would satisfy the “activity” prong of the case-or-controversy test, and could be characterized as a potentially infringing activity (i.e., use). Affirming the district court with respect to the Billings 150 kV device, the record contained no evidence that the prototype of the Billings 150 kW power supply was even built and/or operational until about a year after the complaint was filed. To the contrary, the design of the Billings 150 kW power supply was fluid and indeterminate as of the date of suit.

To view the full decision visit http://www.aplf.org/mailer/Issue217.doc

To discuss this topic further, please feel free to contact the author Michael R. Dzwonczyk, (mdzwonczyk@sughrue.com), at Sughrue Mion, PLLC in Washington DC., USA.

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