Court Finds Lack of Subject Matter Jurisdiction Over Invalidity Claim After Plaintiff Dismissed its Infringement Claim

In a November 10, 2015 ruling, Judge Jed S. Rakoff dismissed the defendant's declaratory judgment counterclaim of invalidity for lack of subject matter jurisdiction when the plaintiff dismissed its infringement claim after an adverse Markman construction.  The plaintiff also offered a covenant not to sue that was effective as to future claims against the defendant unless the adverse claim construction was reversed.  Judge Rakoff found that the covenant not to sue eliminated subject matter jurisdiction over the invalidity counterclaim, writing:

In light of the parties' joint stipulation of non-infringement and plaintiff's covenant not to sue on the [patent-in-suit] barring a change in the law of the case, there is no live controversy between the parties as to infringement and defendants have no immediate interest in the validity of defendants' . . . Patent as long as that remains so. While defendants might gain such an interest if plaintiff both appeals the Court's Markman Order and persuades the Federal Circuit of what it could not persuade this Court, there is no certainty that plaintiff will even take an appeal. Plaintiff has not committed to doing so and defendants themselves recognize that plaintiff very well may choose not to, asserting that plaintiff is posturing in threatening to appeal. . . . A controversy this speculative simply cannot be considered to have the "sufficient immediacy" needed to invoke the Declaratory Judgment Act. As such, this Court does not have jurisdiction to entertain the invalidity claim.

Judge Rakoff also ruled that even if the Court had jurisdiction, the Court would decline in its discretion to exercise it given the lack of any immediate controversy.  Judge Rakoff found that "that it would be imprudent and a potential waste of both the parties' and judicial resources for the Court to proceed to determine the validity of the [patent-in-suit], when plaintiff has categorically dropped its infringement allegations barring a reversal of the Court's construction of the term" at issue.

Court Remands Removed Action as Not Involving a Substantial Federal Question

In a July 7, 2015 ruling, Judge John G. Koeltl ruled that the Court lacked subject matter jurisdiction over a removed action in which the plaintiff alleged that the defendant submitted false affidavits in an earlier copyright infringement action about a third party’s (named Sorenson) ownership of the copyrights at issue. The plaintiff prevailed in the earlier action, but claimed that the defendant’s false declarations prolonged it. Judge Koeltl found that although the present action raised a federal question (authorship in the copyright context), it was not a “substantial” question. The Court wrote:

In this case, [the plaintiff] agrees with this Court’s conclusion that Sorenson did not have a valid copyright. His argument is that this Court would have reached that decision earlier on a motion for summary judgment, or that Sorenson would not have brought the prior lawsuit, had it not been for [the defendant’s] allegedly fraudulent affidavits. That is not a substantial copyright question because it will not change the result of the prior litigation with respect to the invalidity of Sorenson’s copyright, and indeed [the plaintiff] does not argue that it should change the result.

Court Declines to Dismiss Trademark Infringement Declaratory Judgment Action on Subject Matter Jurisdiction Grounds

In an April 15, 2014 ruling, Judge P. Kevin Castel denied defendant Eveready Battery’s motion to dismiss Gelmart Industries’ declaratory judgment action over the trademark “Skintimate” based on lack of subject matter jurisdiction. Judge Castel imported the Rule 12(b)(6) standard under which a complaint must state a claim that is plausible on its face. Noting that even though Gelmart was not yet in the market with its product, Eveready had sent two cease and desist letters, and opposed Gelmart’s application to register “Skintimate,” the Court wrote:

Here, the Complaint and its annexed exhibits allege the existence of adverse legal interest between the parties, with sufficient immediacy to allege a case of actual controversy under the Declaratory Judgment Act. First, Eveready’s own statements in its cease-and-desist letter and its public filing with the USPTO establish ‘adverse legal interests’ under the Declaratory Judgment Act. . . . While stopping short of using the words “infringement” and “dilution,” Eveready has, in sum and substance, asserted that the proposed Gelmart mark is infringing and dilutive. . . .

Judge Castel rejected Eveready’s contention that the action was not ripe because Gelmart was not yet in the market, finding it “sufficient that Gelmart has alleged that it solicited retailers, designed branding materials, is capable of commencing manufacture of products within weeks, and was ‘poised’ to commence a product launch before Eveready asserted infringement.

Copyright Infringement Action Dismissed for Lack of Subject Matter Jurisdiction after Judgment on the Merits

In a June 10, 2013 ruling, Judge Loretta A. Preska dismissed a copyright infringement action on the ground that the Court lacked subject matter jurisdiction after the plaintiff had already been awarded $100,000 for the defendants’ willful copyright infringement. The defendants moved to set aside the judgment under Fed. R. Civ. P. 60(b), contending “that newly discovered evidence shows that Plaintiff has no direct ownership interest in the copyrights over which it has sued because those rights are owned by subsidiaries of the Plaintiff who were never joined to the action.” The plaintiff conceded that it did not directly own the copyrights at issue, but that its wholly-owned subsidiaries did, which, the plaintiff argued was sufficient. Noting that lack “of standing of the party bringing suit would result in a lack of jurisdiction of the Court to hear the matter and would require a dismissal of the action,” Judge Preska found that there “is support from decisions in this circuit for the holding that a parent company lacks standing to bring claims on behalf of its subsidiary,” and dismissed the action.

Federal Circuit Affirms Judge Buchwald's Dismissal of Patent DJ Action for Lack of Controversy

In a June 10, 2013 decision, the Federal Circuit affirmed Judge Naomi Reice Buchwald’s dismissal of a patent non-infringement and invalidity declaratory judgment action because there was not justiciable controversy.  At issue in the action were twenty-three of Monsanto’s patents for “Roundup Ready” genetically modified seeds (that were also the subject of a recent Supreme Court decision).  A “coalition of farmers, seed sellers, and agricultural organizations” had sued Monsanto out of a concern that their crops or seeds could inadvertently become contaminated with Monsanto’s genetically modified seeds, and that they could therefore be accused of infringement.  As a result of this concern, some of the plaintiff’s used costly “buffer zones” to protect their crops from contamination and others refrained from planting certain crops altogether.  After the lawsuit was started, the plaintiffs asked Monsanto to “‘expressly waive any claim for patent infringement [Monsanto] may ever have against [the plaintiffs] and memorialize that waiver by providing a written covenant not to sue.’”  Monsanto declined to provide a formal covenant not to sue, but it did point the plaintiffs toward a statement on its website that it has never been Monsanto’s intention to sue over trace amounts of seeds that are present through inadvertent means.  Monsanto’s counsel also assured the plaintiffs’ counsel that “Monsanto is unaware of any circumstances that would give rise to any claim for patent infringement or any lawsuit against your clients.  Monsanto therefore does not assert and has no intention of asserting patent-infringement claims against your clients.”  Judge Buchwald dismissed the action, holding that “these circumstances do not amount to a substantial controversy and . . . there has been no injury traceable to defendants.”