Asia Vital v. Asetek was decided on September 8, 2016 on appeal from the Eastern District of Virginia. There, the district court dismissed Asia Vital’s declaratory judgment action for lack of subject matter jurisdiction. After bringing suits against other competitors, Asetek sent Asia Vital a letter, accusing it of manufacturing an infringing product. Asia Vital did not manufacture the referenced product, but it manufactured a similar one. The district court concluded that Asia Vital’s complaint did not plead enough to show a substantial controversy between the parties. Asia Vital appealed.
The Federal Circuit reversed the district court’s dismissal for lack of subject matter jurisdiction, and remanded.
A district court’s dismissal for lack of subject matter jurisdiction is reviewed de novo, and the factual findings underlying the determination for clear error. The burden is on the party claiming jurisdiction to show that “such jurisdiction existed at the time the claim for declaratory relief was filed.”
The Declaratory Judgment Act, 28 U.S.C. § 2201(a), 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.” A controversy exists where the facts alleged 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.” The controversy must be based on a “real and immediate injury or threat of future injury” that is caused by the DJ-defendant (the patentee). This “objective standard” cannot be met by a “purely subjective or speculative fear of future harm.” Under this standard, a DJ action is not proper “merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee.” Rather, there must be “conduct that can reasonably be inferred as demonstrating intent to enforce a patent.”
The Federal Circuit reversed the district court’s dismissal, holding that there was an actual controversy between the parties at the time of the DJ complaint. In April 2014, five months before Asia Vital filed the complaint, Asetek sent Asia Vital a letter, incorrectly accusing Asia Vital of manufacturing an infringing product. Although Asia Vital did not manufacture the product referenced in the demand letter, it did manufacture a very similar product. The communications that followed show the “volatile relationship between the parties,” and suffice to show an actual controversy existed. In August, Asetek emailed Asia Vital, (1) stating that there was “distrust in Asetek for [Asia Vital],” (2) stating that it would not license the patent to Asia Vital because of previous conflict between the parties, (3) accusing Asia Vital of likely selling other infringing products in the U.S., (4) warning Asia Vital that it “enforced its IP” and noting its other pending litigations, and (5) emphasizing that it had been allowed a similar patent in the E.U., and that it had a pending patent in China. Such a response “demonstrates an intent to enforce a patent,” and is thus sufficient to show a substantial controversy at the time of the complaint.
Further interactions between the parties supported this conclusion. Asetek agreed to meet with Asia Vital, and they discussed potential licenses. Further, Asetek allegedly threatened Asia Vital’s customers regarding Asia Vital’s infringement of the patents. Such threats constitute “affirmative actions by Asetek to impede and frustrate” Asia Vital’s attempts to participate in the relevant market. It’s irrelevant that Asetek never referenced Asia Vital’s particular products or product line as potentially infringing. “The question of jurisdiction does not turn on Asetek’s knowledge of the specific [Asia Vital’s] products;” “instead, the question is whether, under all the circumstances, Asetek’s actions can be reasonably inferred as demonstrating intent to enforce a patent.”
The Federal Circuit held that the threat of suit was “real and immediate to establish jurisdiction.” To obtain a declaratory judgment of non-infringement, there must be “a showing of meaningful preparation for making or using” the product. This was neither a case where “at the time the complaint was filed, the accused products were far from being complete or operational and were susceptible to design changes” (making it impossible to compare them against the asserted patents); nor where an intent to take action was unaccompanied by specific plans or steps that show immediacy. Asia Vital satisfied the real and immediate test: (1) it completed designs of the products; (2) it manufactured sample prototype products (confirmed by photographs); (3) it intended to market and sell the products in the U.S.; and (4) its products would compete directly with Asetek’s products. Further, there was some evidence that Asia Vital’s customers had submitted, or were prepared to submit, purchase orders for the product.
The Federal Circuit thus reversed the district court’s dismissal for lack of subject matter jurisdiction.
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