By Stephen B. Schott
“They are infringing but I don’t want to sue them: Let’s just send them a letter.” That’s a common thought among patent owners but before sending a letter with accusations of infringement, it’s important to understand that such a letter can itself be the basis for a lawsuit. And while you can send a letter and perhaps avoid getting sued, the threshold for being subject to a lawsuit, called a declaratory judgment action, is low.
The Declaratory Judgment Act provides that “[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). The Supreme Court has helped disentangle this gobbley-gook statute by clarifying that one party may seek a declaratory action against another (say, a threatening letter writer) when “there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality.” Medimmune, Inc. v. Genetech, Inc. 549 U.S. 118, 127 (2007). What both the statute and the Supreme Court are driving at is that you can sue a threatening letter writer if the letter in question is actually threatening.
There’s no definitive test elucidating the elements of a threatening letter that can get you dragged into court, but the Supreme Court and Federal Circuit have offered some guidance in the past.
[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.
Medimmune. The Federal Circuit gave another helpful piece of advice when it advised that an accuser may avoid a DJ action if it conducted pre-filing discussions under a confidentiality agreement, since discussions under such an agreement would be inadmissible. (3M Company v Avery Denison Corp.,Appeal No. 2011-1339 (Fed. Cir. 2012)).
The Federal Circuit recently served a reminder, however, of how low the threshold is for a threatening letter to give rise to a declaratory judgment action in Asia Vital v. Asetek Danmark.
In Asia Vital, the defendant patent owner Asetek’s letter noted its ownership of a patent and some pending litigation with others but was careful to never mention any Asia Vital-accused product in its letter. Asetek argued that its omission of a specific product did not give rise to a threat of litigation required in a declaratory judgment action. The letter in relevant part read as follows.
Please be advised that Asetek believes that AVC is likely selling other infringing products in the United States. We are sure you are aware that Asetek enforced its IP, as it has in pending litigations against CoolIT and Cooler Master. Asetek has also been allowed a patent in the European Union with claims similar to the US ’362 and ’764 patents, with priority in 2003, and also has similar claims pending in China.
In particular, the Federal Circuit noted that a totality of circumstances gave rise to Asia Vital’s belief that Asetek intended to enforce its patent.
Asetek (1) rehashed the volatile relationship between the parties, saying that poor experiences with AVC [Asia Vital] in the past have “sown distrust in Asetek for AVC”; (2) stated that it “does not license its patents” generally and, more specifically, that it would not license them to AVC due to the previous conflicts between the parties; (3) accused AVC of “likely selling other infringing products in the United States”; (4) warned AVC that it “enforced its IP” and noted its “pending litigations against CoolIT and Cooler Master”— companies that AVC alleges sell products similar to the K7 and K9; and (5) emphasized that it has been allowed a patent in the European Union with claims similar to the asserted patents and also has similar claims pending in China…Moreover, AVC alleges that Asetek made threats to its customers regarding AVC’s infringement of the asserted patents.
The Federal Circuit concluded that “Such threats constitute affirmative actions by Asetek to impede and frustrate AVC’s attempts to meaningfully participate in the liquid cooling market and further support our conclusion that a substantial controversy existed between the parties.”
As advised previously, someone who wants to write a letter to a potential infringer without getting sued must walk on a tight rope to avoid being subject to a declaratory judgment. When formulating such a letter, consider these points:
Cease and Desist Letter Ingredients to Avoid a DJ Action
(1) Identify a patent but no product line, without accusation of infringement.
(2) Include a nondisclosure agreement, which would mean that any conduct after the nondisclosure agreement’s signing (and during its term), such as a specific allegation of infringement, would not be admissible to support a DJ action.
(3) Include a provision to specifically not sue for a period of time.