Just as the affronted gunfighter of yore offered his foe the choice to “get out of town” (said with a snarl) or “meet me in the street at high noon,” so the modern, white-hatted patent owner often seeks to offer a choice to a black-hatted, scum sucking infringer, contacting the swine and offering a license before initiating suit for patent infringement. Since the Medimmune decision, it has required great care to achieve this without conferring upon the infringer standing to bring a declaratory judgment action. It was difficult, but it could be done. In any event, all patent owners suffered under the same oppressive rule.
Well, no longer. Now, if you happen to be an N.P.E. (Nonpracticing Entity or, pejoratively speaking, a troll), the rule just got worse. Yep, the courts are now discriminating against the guys in the white hats – the N.P.E.s. (Hewlett-Packard Company vs. Acceleron LLC).
Acceleron is an N.P.E. – a fact that will prove to be of supreme importance. In May 2007 Acceleron acquired the `021 patent and, four months later, wrote to HP. The letter called the `021 patent to HP’s attention and requested that all information exchanged between the parties not be used for litigation purposes.
Two weeks later, HP responded, offering a mutual standstill agreement. Acceleron rejected both the standstill agreement and, seemingly, a confidentiality agreement. Two weeks thereafter, HP filed its declaratory judgment action. Acceleron moved to dismiss this action, claiming HP lacked standing, as it had not been threatened.
The trial court observed that Acceleron had failed “to specifically request a confidentiality agreement” and accept HP’s proposed standstill agreement. However, the Acceleron correspondence lacked “a statement of infringement, identification of specific claims, claim charts, prior pleadings or litigation history, or the identification of ‘other licensees’.” Despite taking into consideration Acceleron’s business model as an N.P.E., the trial court held that any threat of litigation against HP was “too speculative a prospect to support declaratory judgment jurisdiction.”
HP appealed. The C.A.F.C. began by noting that “a communication from a patent owner to another party, merely identifying its patent and the other party’s product line, without more, cannot establish adverse legal interests between the parties, let alone the existence of a ‘definite and concrete’ dispute.” So far, so good for the N.P.E. However, the appellate court went on to declare that “[t]he purpose of a declaratory judgment action cannot be defeated simply by the … stratagem of a correspondence that avoids the magic words such as ‘litigation’ or ‘infringement’.” Like the trial court, it noted that Acceleron failed to propose a confidentiality agreement and failed to accept the proposed standstill agreement.
Here is where it gets interesting. The C.A.F.C. held that “the receipt of such correspondence from a non-competitor patent holding company … may invoke a different reaction than would a meet-and-discuss inquiry by a competitor, presumably with intellectual property of its own to place on the bargaining table.” Further, “we observe that Acceleron is solely a licensing entity, and without enforcement it receives no benefit from its patents. This adds significance to the fact that Acceleron refused HP’s request for a mutual standstill.” Finally, “Acceleron took the affirmative step of twice contacting HP directly, making an implied assertion of its rights under the `021 patent.” Note the presence of “may invoke,” “presumably” and “implied” in the forgoing quotes.
Nevertheless, the C.A.F.C. – the so-called “Patent Court” – reversed the dismissal of HP’s declaratory judgment action, admitting “[o]ur decision in this case undoubtedly marks a shift from past declaratory judgment cases.”
THE LESSON TO BE LEARNED: No more Mr. Nice Guy; if you’re an N.P.E., sue first, talk later.