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Delaware Federal Court Examines the Case or Controversy Requirement For Declaratory Judgments
Draeger Medical Systems, Inc. v. My Health, Inc.
In Draeger Medical Systems, Inc. v. My Health, Inc., the United States District Court for the District of Delaware held that a technology company’s actions in providing a letter to a competitor claiming that the competitor’s products were improperly infringing one of its patents without a license, were sufficient to give rise to an actual case or controversy as required for the Court to exercise subject matter jurisdiction under the Declaratory Judgment Act. Accordingly, the Court denied the technology company’s motion to dismiss the competitor’s complaint seeking a declaratory judgment of non-infringement for lack of subject matter jurisdiction.
By way of factual background, Plaintiff Draeger Medical Systems, Inc. ("Draeger") filed the complaint at issue on March 19, 2015, against Defendant My Health, Inc. ("My Health") seeking a declaratory judgment of non-infringement and invalidity of U.S. Patent No. 6,612,985 (the “'985 patent"). The '985 patent, issued on September 2, 2003, is entitled, "Method and System for Monitoring and Treating a Patient." Draeger is a Delaware corporation with operations in Massachusetts and Pennsylvania. Through its Infinity M300 system, Draeger provides diagnostic ambulatory devices that help patients self-manage and improve their health through technology. My Health is a non-practicing entity incorporated in Delaware and headquartered in Plano, Texas. My Health engaged Patent Licensing Alliance ("PLA"), a non-party, to identify and solicit companies whose products and services may benefit from the technology covered by the '985 patent.
In February 2015, the Chief Executive Officer of Draeger received a letter from PLA stating that its "research group and legal team have thoroughly reviewed the Infinity M300 system and believe that it utilizes the technology claimed and disclosed in the ['985 patent]." The letter explained that due to "improper use without a license, My Health has been enforcing its intellectual property rights." Accordingly, the letter stated that Draeger "required a license" if it intended to continue to sell its products. The letter then quoted the language of 35 U.S.C. § 271, including the statement that "whoever without authority makes, uses, offers to sell, or sells any patented invention ... infringes the patent." The letter concluded that My Health was "interested in reaching a direct, negotiated (and without litigation) licensing arrangement.”
The letter was accompanied by a binder that contained: (1) a notice "Re: Infringement of the U.S. Patent No. 6,612,985;" (2) a copy of the '985 patent; and (3) a "Pre-filing Investigation Claim Chart" that explained, on an element-by-element basis, the allegedly infringing nature of the Infinity M300 system. The notice stated that My Health "reserves all rights ... to seek damages anytime within the last six years," and warned that "you should not rely on any communication ... from My Health as a relinquishment of any of My Health's rights."
No one from Draeger responded to PLA or contacted My Health regarding the letter, the binder, or its contents before filing the declaratory judgment action. My Health subsequently filed a motion to dismiss the complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1), on the grounds that Draeger had failed to identify actions sufficient to give rise to an actual case or controversy, as required by Article III of the U.S. Constitution.
The Court began its analysis by noting that the party asserting subject matter jurisdiction has the burden of proving its existence. See Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015). The Court explained that "challenges to subject matter jurisdiction under Rule 12(b)(1) may be facial or factual," and that a facial attack contests the sufficiency of the pleadings, whereas a factual attack contests the sufficiency of jurisdictional facts. Id. The Court further explained that in reviewing a facial attack, a court considers only the allegations in the complaint and any documents referenced in or attached to the complaint, in the light most favorable to the plaintiff; however, when reviewing a factual attack, a court may weigh and consider evidence outside the pleadings, and "no presumptive truthfulness attaches to plaintiff’s allegations."See Church of Universal Bhd. v. Farmington Twp. Supervisors, 296 F. App'x 285, 288 (3d Cir. 2008); Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000).
Next, the Court noted that the Declaratory Judgment Act requires an actual controversy between the parties before a federal court may exercise jurisdiction. See 28 U.S.C. § 2201(a). The Court explained that an actual controversy exists where "the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." See Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).
Turning to the facts of the case, the Court noted that identical facts were sufficient to support subject matter jurisdiction in the Federal Circuit's seminal case on this issue - SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007). In SanDisk, the Federal Circuit explained that an Article III case or controversy exists where "a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without a license.” Id. at 1381. The SanDisk court found jurisdiction where the defendant provided a "thorough infringement analysis" prepared by legal experts, stated that plaintiff's conduct infringed its patents, and claimed that plaintiff would need to pay a royalty for its infringing product. Id. at 1382. According to the Court, that was “exactly what My Health, through its agent, PLA, had done” in the case at bar.
The Court noted that PLA sent Draeger a letter stating that its "legal team" believed the Infinity M300 system used technology claimed in the '985 patent and, therefore, Draeger "require[d] a license" if it intended to continue to sell its products, pursuant to 35 U.S.C. § 271 (sale of a patented invention without authority infringes the patent). PLA supported the infringement accusation with, among other things, a detailed and studied claim chart prepared with input from legal counsel.
The Court further noted that PLA's letter also informed Draeger that My Health "ha[d] been enforcing its intellectual property rights," which was confirmed by the fact that My Health had filed complaints against at least 24 other companies alleging infringement of the '985 patent.
The Court also found that, under the totality of the circumstances, it did not weigh against jurisdiction that Draeger failed to engage in licensing negotiations before initiating a lawsuit, or that My Health remained interested in a negotiated resolution. The Court noted that “the possibility of negotiation is not a sufficient reason to refuse jurisdiction." See Saberi Corp. v. Waddington N. Am., Inc., 2007 WL 2705157, at *5 (D.N.J. Sept. 14, 2007) (finding subject matter jurisdiction where the parties had not engaged in negotiations even though patentee offered).
For the above reasons, the Court concluded that Drager had identified actions sufficient to give rise to an actual case or controversy. Thus, the Court denied My Health's motion to dismiss for lack of subject matter jurisdiction.
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