E-Alert Case Updates
Delaware Federal Court Examines Subject Matter Jurisdiction for Declaratory Judgments
Pride Manufacturing Company, LLC v. Evolve Golf, Inc.
Pride Manufacturing Company, LLC v. Evolve Golf, Inc. involved a Plaintiff’s declaratory judgment action seeking a declaration that the Plaintiff had not infringed the Defendant’s design patent for an ornamental design of a golf tee, pursuant to the Declaratory Judgment Act,28 U.S.C.§2201, et seq. The Defendant filed a motion to dismiss the claims related to infringement of the Defendant’s patent for lack of subject matter jurisdiction. The United States District Court for the District of Delaware concluded that there was no actual controversy between the parties, as required by the Declaratory Judgment Act for a federal court to exercise jurisdiction, because the Defendant had provided the Plaintiff with an executed release and covenant not to sue the Plaintiff for infringement of the Defendant’s patent. Accordingly, the Court granted the Defendant’s motion to dismiss for lack of subject matter jurisdiction.
By way of factual background, Plaintiff Pride Manufacturing Company, LLC (“Plaintiff” or “Pride”) is a Delaware limited liability company with its principal place of business in Brentwood, Tennessee. Defendant Evolve Golf, Inc. (“Defendant” or “Evolve”) is a Delaware corporation with its principal place of business in Carolina Shores, North Carolina. Evolve was the owner of U.S. Patent No. D502,972 (the “’972 patent”), a design patent for an ornamental design of a golf tee which utilized four (4) raised posts to hold a golf ball. On July 21, 2015, Pride received a demand letter from Evolve (the “July 21 letter”) stating that Pride was:
The July 21 letter further stated that customers were confused between the two (2) products due to the design similarities, and that Pride infringed on Evolve’s intellectual property, specifically the ‘972 patent and Evolve’s trademarked name, U.S. Trademark Registration No. 3280419 (the “’419 mark”). The July 21 letter concluded with a demand for Pride to stop using the EVOLUTION mark and the four (4)-post golf tee design.
On November 9, 2015, Pride brought an action for declaratory judgment of non-infringement and invalidity of the ‘972 patent and the ‘419 mark against Evolve. On February 24, 2016, Evolve answered the complaint, asserted counterclaims of trademark infringement, and unequivocally admitted that Pride’s golf tees did not infringe the ‘972 patent. Responding to Pride’s concerns regarding Evolve’s admission of non-infringement, Evolve sent Pride a release and covenant not to sue. Evolve subsequently filed a motion to dismiss the declaratory judgment action claims related to the ‘972 patent for lack of subject matter jurisdiction.
The Court began its analysis by noting that the “Declaratory Judgment Act requires an actual controversy between the parties before a federal court may exercise jurisdiction,” and that “an action for declaratory judgment must have an actual controversy existing by a preponderance of the evidence.” See 28 U.S.C. § 2201(a); Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 887 (Fed. Cir. 1992). The Court explained that an “actual controversy is determined by whether 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 Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007); Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). The Court further explained that “an ‘adverse legal interest’ necessitates a dispute regarding a legal right, such as an underlying legal cause of action that the declaratory defendant could have brought or threatened to bring.” See Arris Grp., Inc. v. British Telecommunications PLC, 639 F.3d 1368, 1374 (Fed. Cir. 2011). The Court noted that there was no “bright-line test,” and that the “Supreme Court has recognized this standard of review will necessarily be fact specific and takes into account all of the relevant circumstances.” See Maryland Cas., 312 U.S. at 273; Medimmune, 549 U.S. at 127; Sony, Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271, 1283 (Fed. Cir. 2007).
Turning to the facts of the case, the Court noted that “a covenant not to sue deprives the court of declaratory judgment jurisdiction relating to claims addressed by the covenant.” See Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 855 (Fed. Cir. 1999); Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1060 (Fed. Cir. 1995); Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc., 527 F.3d 1278, 1296 (Fed. Cir. 2008) (“a covenant not to sue eliminates any reasonable apprehension of suit of a patent. If a threat of suit was the only action allegedly taken that effectively excluded the competitor from the marketplace, the covenant not to sue would moot the competitor’s case and divest the district court of Article III jurisdiction”).
According to the Court, Evolve’s covenant not to sue protected Pride from the threat of future litigation for infringement of the ‘972 patent by any products that Pride made, used, sold, offered for sale, or imported into the United States on or before May 5, 2016. The Court was satisfied that, “despite the covenant’s lack of any specific product descriptions, the covenant met the purpose of removing any concern of liability for infringement of the patent currently in suit.” See Merck & Co. v. Apotex, 488 F.Supp.2d 418 (D. Del. 2007), aff'd in part, vacated in part, 287 F.App’x 884 (Fed. Cir. 2008). Accordingly, the Court granted Evolve’s motion to dismiss Pride’s claims regarding infringement of the ‘972 patent for lack of subject matter jurisdiction.
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