Issue 06/17 | March 30, 2006
Declaratory Judgment Jurisdiction Can Not Be Sustained Based on Adverse Financial Interest Alone

Declaratory judgment jurisdiction cannot be sustained where the declaratory judgment plaintiff has an economic interest in a patent infringement suit between the patentee and one of its customers, but has no adverse legal interest.

In Microchip Technologies Incorporated v. The Chamberlain Group, No. 05-1339 (Fed. Cir. March 15, 2006), the federal circuit remanded a district court ruling in favor of Microchip with instructions to dismiss the action based on lack of jurisdiction. Chamberlain owned several patents relating to garage door openers that used a remote transmitter with a unique and permanent code and a receiver placed into a program mode.

An earlier patent infringement action between Microchip and Chamberlain resulted in a settlement agreement that included a provision prohibiting Chamberlain from suing "Microchip or Microchip's current Affiliates" on Chamberlain's patents covering the garage door opener. After Chamberlain sued one of Microchip's customers, Microchip initiated a declaratory judgment action, after which, Chamberlain settled with Microchip's customer. The district court denied Chamberlain's motion to dismiss, based on its conclusion that Microchip retained a reasonable apprehension that its customers would again be exposed to legal action.

The federal circuit disagreed, reiterating that a declaratory judgment plaintiff must establish (1) a reasonable apprehension of suit, and (2) the declaratory plaintiff engaged in potentially infringing activity or initiated concrete steps of such activity. According to the federal circuit, Microchip did not possess the requisite apprehension because (1) of the prior settlement agreement (including the patents-in-suit), (2) the fact that Chamberlain did not threaten Microchip itself, and (3) Microchip's interest in the patent infringement suit only amounted to an economic interest, not a legal one. A declaratory plaintiff cannot establish the requisite apprehension absent any "adverse legal interest. " According to the court, Microchip's purported apprehension of its customers being sued did not satisfy the first criterion for declaratory judgment jurisdiction.

The court distinguished its decisions in Medimmune and BP Chemicals as involving an underlying legal cause of action that the declaratory defendant could have brought or threatened to bring, if not for the fact that the declaratory plaintiff preempted it. Without an underlying legal cause of action, any adverse economic interest that a declaratory plaintiff may have against the declaratory defendant is not a legally cognizable interest sufficient to confer declaratory judgment jurisdiction.

Please visit http://media.aplf.org/rm/20060329-public/Microchip.pdf for a copy of the case for your reference.

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

The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

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