3M Co. v. Avery Dennison Corp.

• Decision Date: 26 March 2012
• Docket Number: No. 2011–1339.,2011–1339.
• Citation: 673 F.3d 1372,102 U.S.P.Q.2d 1130
• Parties: 3M COMPANY, Plaintiff–Appellant, v. AVERY DENNISON CORPORATION, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

102 U.S.P.Q.2d 1130

673 F.3d 1372

3M COMPANY, Plaintiff–Appellant,

v.AVERY DENNISON CORPORATION, Defendant–Appellee.

No. 2011–1339.

United States Court of Appeals, Federal Circuit.

March 26, 2012.

John A. Dragseth, Fish & Richardson, P.C., of Minneapolis, MN, argued for plaintiff-appellant. With him on the brief were John C. Adkisson and Deanna J. Reichel. Of counsel on the brief was Kevin H. Rhodes, 3M Innovative Properties Company, of St. Paul, MN.

David L. Bilsker, Quinn Emanuel Urquhart & Sullivan, LLP, of San Francisco, CA, argued for defendant-appellee. With him on the brief were Charles K. Verhoeven, Christopher E. Stretch, Emily C. O'Brien; and James E. Baker, of New York, NY.

Before RADER, Chief Judge, and LOURIE and LINN, Circuit Judges.

LOURIE, Circuit Judge.

3M Company (“3M”) appeals from the district court's dismissal of its declaratory judgment action against Avery Dennison Corporation (“Avery”) for lack of a case or controversy. See 3M Co. v. Avery Dennison Corp., No. 0:10–CV–3849, 2011 WL 1193382 (D.Minn. Mar. 29, 2011) (“ DJ Op.”). Because we hold that the district court erred in determining that it would not have jurisdiction under the facts as alleged by 3M, and the district court did not resolve the parties' factual disputes necessary to determine if jurisdiction was proper, we vacate the district court's judgment and remand for further proceedings.

Background

I.

This patent case relates to retroreflective sheeting technology, which is used in a variety of applications, such as road signs. Complaint, 3M Co. v. Avery Dennison Corp., No. 0:10–CV–3849 (D.Minn. Sept. 3, 2010) (“ Complaint ”). ¹ 3M and Avery are direct competitors in the retroreflective sheeting product market. Id. at 2–3. Since 2005, 3M has manufactured and sold retroreflective sheeting under the Diamond Grade DG ³ product line. Id. at 3. Avery sells a competing product sold under the OmniCube brand. Id. 3M's declaratory judgment action puts at issue two patents that relate to retroreflective sheeting technology, specifically U.S. Patents RE40,455 and RE40,700 (collectively, the “Heenan patents”). Id. at 4, 6; see also id. at Ex. 1 and Ex. 2.

The parties have a history of patent litigation, starting in 2001. That year, Avery sued 3M and alleged that a prior version of the Diamond Grade DG ³ product infringed two patents not at issue here. Id. at 4. In addition to retroreflective sheeting, the parties were engaged in a series of litigations relating to structured adhesive products and closure tape tab laminates in the United States and Europe. Id. at 4–5.

Those litigations settled by 2008. Id. In the course of settling those cases, 3M and Avery engaged in confidential settlement discussions. Id. at 7. 3M alleges that those confidential discussions did not relate to the Heenan patents or any retroreflective sheeting products. Id.

It was during the settlement discussions relating to the structured adhesive products and closure tab tape laminates disputes that 3M became aware that Avery was prosecuting reissue applications for the Heenan patents before the U.S. Patent and Trademark Office (“PTO”). Id. at 6. According to 3M, “Avery sought reissuance of the Heenan patents in an effort to correct errors in the patents and to better position the patents for litigation.” Id.

The parties' discussions regarding the Heenan patents began in 2009. ² On March 31, 2009, Avery's Chief Intellectual Property Counsel, Raj Sardesai, telephoned 3M's Chief Intellectual Property Counsel, Kevin Rhodes. Id. at 7. In that conversation, Sardesai stated that 3M's Diamond Grade DG ³ sheeting products “may infringe” the Heenan patents and that “licenses are available.” Id.

Two days later, Rhodes telephoned Sardesai and informed him that 3M had rejected Avery's offer to license the Heenan patents. Id. Rhodes also inquired if Avery had any new information that would cause 3M to revisit its decision. Id. Sardesai responded that Avery had performed an analysis of 3M's Diamond Grade DG ³ product with reference to the Heenan patents and that Avery would “send claim charts.” Id. Avery, however, never provided 3M with claim charts. Id. The Heenan patents emerged from reissue proceedings by April 2009. Id. at Ex. 1 and Ex. 2.

II.

In 2010, 3M became aware that Avery planned to launch a competing retroreflective sheeting product, the OmniCube T–11500. Id. at 8. That same year, Avery filed another patent infringement suit against 3M, alleging that an unrelated product, 3M's label sheets, infringed an Avery patent not at issue in this case. Id. On June 25, 2010, 3M filed a patent infringement suit against Avery, alleging that the OmniCube T–11500, in addition to other products, infringed thirteen 3M patents. Id. at 9. Included in the complaint were counts for a declaratory judgment of noninfringement, invalidity, and intervening rights concerning the Heenan patents. Id. That same day, Rhodes telephoned Sardesai and stated that 3M would dismiss its declaratory judgment claims if Avery provided 3M with a covenant not to sue. Id. Avery did not respond. Id. 3M's outside litigation counsel also inquired if Avery planned to sue 3M for infringement of the Heenan patents. Id. Avery's counsel did not answer 3M's question. Id.

In September, 3M amended its complaint and cancelled its declaratory judgment claims. Id. at 10. At the same time, 3M filed its declaratory judgment claims as a new complaint in a separate action. Id. It is from that separate action that 3M appeals.

Early in the case, Avery moved under Federal Rule of Civil Procedure 12(b)(1) to dismiss 3M's declaratory judgment claims for lack of subject matter jurisdiction. In its motion, Avery asserted a factual challenge to 3M's declaratory judgment complaint. DJ Op., 2011 WL 1193382, at *3; see also Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583–84 (Fed.Cir.1993) (discussing facial challenges and factual challenges to subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1)). The district court granted Avery's motion but, instead of resolving the disputed facts, concluded that “even accepting the facts as set forth by 3M,” subject matter jurisdiction did not exist at the time 3M filed its declaratory judgment complaint. DJ Op., 2011 WL 1193382, at *4.

In dismissing 3M's declaratory judgment action, the district court gave a number of reasons why 3M failed to allege a justiciable controversy. First, the court concluded that “3M's subjective belief as to Avery's motives for instituting reissue proceedings concerning the Heenan patents is immaterial” because the jurisdictional inquiry is objective. Id. at *5. Second, the court concluded that the prior litigation between the parties did not support declaratory judgment jurisdiction because it concerned “unrelated patents and products.” Id. Third, the court concluded that the discussions between Rhodes and Sardesai did not create “ ‘a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’ ” Id. (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007)). The court arrived at that conclusion because the parties engaged only in informal discussions and Avery did not provide a detailed infringement analysis or propose deadlines for 3M to respond. Id. Finally, the court concluded that the passage of time between 3M's discussions with Avery and when 3M filed its declaratory judgment action counseled against holding that the parties' dispute was of sufficient immediacy to warrant a declaratory judgment. Id. at *6.

The district court thereafter entered judgment against 3M, from which it timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

Discussion

I.

The Declaratory Judgment Act provides that, “In a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). The phrase “a case of actual controversy” in the Act refers to the types of “cases” and “controversies” that are justiciable under Article III of the U.S. Constitution. Aetna Life Ins. v. Haworth, 300 U.S. 227, 239–40, 57 S.Ct. 461, 81 L.Ed. 617 (1937).

Although there is no bright line rule to determine whether a declaratory judgment action satisfies Article III's case-or-controversy requirements, the dispute must be “definite and concrete, touching the legal relations of parties having adverse legal interests,” “real and substantial,” and “admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” MedImmune, 549 U.S. at 127, 127 S.Ct. 764 (quoting Aetna Life, 300 U.S. at 240–41, 57 S.Ct. 461). “Basically, the question in each case is 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.” Id. (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941)).

Even if there is a case or controversy, “district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites.” Wilton v. Seven Falls Co., 515 U.S. 277, 282, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995). In this case, having concluded that jurisdiction was lacking, the district court did not reach the issue of whether it would exercise its discretion to hear or dismiss 3M's declaratory judgment claims.

In determining if an action presents a justiciable Article III controversy, one typically employs the...