Covenant to sue that does not cover future infringement insufficient to defeat DJ jurisdiction

March 03, 2009
Post by Blog Staff

In a recent decision, the Federal Circuit reversed a district court's dismissal for lack of declaratory judgment jurisdiction over a defendant's counterclaims for non-infringement, invalidity, and unenforceability of a patent. The plaintiff brought suit against the defendant for infringement in 2003, and on the eve of trial on the issues of invalidity and unenforceability, offered a covenant not to sue for past infringement and filed a motion to dismiss. The district court granted the motion, holding there was no longer a case or controversy. The defendant appealed.The Federal Circuit reversed, noting that the covenant not to sue did not cover future infringement, and the defendant had a large amount of stock of the accused products ready to sell pending the outcome of the case. The patentee asserted that if the defendant resumed sales, it would once again bring suit for infringement. Under these facts, the Federal Circuit agreed with the defendant and held that the plaintiff, by retaining its right to sue for future infringement, had preserved the controversy at a level of sufficient immediacy and reality to allow for declaratory judgment jurisdiction.More detail of Revolution Eyewear, Inc. v. Aspex Eyewear, Inc. after the jump.In 2003, Revolution sued Aspex for infringing U.S. Patent No. 6,550,913, which "relates to magnetically-attached auxiliary eyeglasses." An embodiment of the patent is depicted below:6550913After the suit was filed, Aspex discontinued selling the allegedly infringing eyewear "out of an abundance of caution." On September 6, 2007, following several years of litigation, Revolution backed out and sent Aspex a covenant not to sue, stating that it would be filed with a motion to dismiss. The covenant stated:

Revolution and counter-defendant Gary Zelman hereby unconditionally covenant not to sue Aspex for patent infringement under the '913 patent based upon any activities and/or products made, used, or sold on or before the dismissal of this action (03-5965 case).
Aspex, however, objected to the dismissal, arguing that an actual controversy continued to exist because Revolution's covenant applied only to past infringement. Aspex planned on continuing selling its stock of the accused products, and therefore wanted the matter settled once and for all.The district court granted Revolution's motion to dismiss, holding the covenant not to sue removed the case or controversy, and divested the court of jurisdiction. Aspex appealed.On appeal, the Federal Circuit reversed. The court agreed with Aspex that a case or controversy continued to exist and that under MedImmune, the district court retained jurisdiction. According to the court, the case was "of larger substance than merely a would be competitor seeking to test the waters by way of an advisory judicial opinion on an adverse patent." Rather, Aspex maintained its right to make and sell the disputed eyewear products and had in storage a quantity which it could sell within months. The court also observed that the lengthy litigation and limited covenant suggested a real and substantial dispute.Moreover, the court made a point to contrast situations where declaratory judgment jurisdiction does not exist: a statutory exemption applies (such as the exemption for testing and research allowed by the Hatch-Waxman Act) or where a covenant extends to future production and sale of the same products that were the subject of the infringement suit. This was not the case here, because the covenant not to sue did not extend to future sales of the same product. Accordingly the court reversed the dismissal of Aspex's counterclaims.To read the full decision in Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., click here.

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