Matthews Int'l Corp. v. Biosafe Eng'g, LLC

• Decision Date: 25 September 2012
• Docket Number: No. 2012–1044.,2012–1044.
• Citation: 695 F.3d 1322
• Parties: MATTHEWS INTERNATIONAL CORPORATION, Plaintiff–Appellant, v. BIOSAFE ENGINEERING, LLC and Digestor, LLC, Defendants–Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

695 F.3d 1322

MATTHEWS INTERNATIONAL CORPORATION, Plaintiff–Appellant,

v.BIOSAFE ENGINEERING, LLC and Digestor, LLC, Defendants–Appellees.

No. 2012–1044.

United States Court of Appeals,Federal Circuit.

Sept. 25, 2012.

Kevin P. Allen, Thorp, Reed & Armstrong, LLP, of Pittsburgh, Pennsylvania, argued for plaintiff-appellant. With him on the brief was David W. Engstrom. Of counsel on the brief was John W. McIlvaine, III, The Webb Law Firm, Pittsburgh, Pennsylvania.

Spiro Bereveskos, Woodard, Emhardt, Moriarty McNett & Henry, LLP, of Indianapolis, Indiana, argued for defendants-appellees.

Before RADER, Chief Circuit Judge, MAYER and SCHALL, Circuit Judges.

MAYER, Circuit Judge.

Matthews International Corporation (“Matthews”) appeals from the final order of the United States District Court for the Western District of Pennsylvania dismissing its claims for declaratory and injunctive relief. See Matthews Int'l Corp. v. BioSafe Eng'g, LLC, No. 11–CV–0269, 2011 WL 4498935 (W.D.Pa. Sept. 27, 2011) (“District Court Decision ”). Because we conclude that the district court correctly determined that Matthews' claims lacked sufficient immediacy and reality to support the exercise of declaratory judgment jurisdiction, we affirm.

I. Background

Matthews is a leader in the “death care” industry. It manufactures cremation equipment, caskets, and bronze memorials and sells them to funeral homes. Matthews is currently marketing a Bio Cremation?? product, which uses an alkaline hydrolysis ¹ process, rather than incineration, to cremate human remains. According to Matthews, the Bio Cremation??>> equipment offers an “environmentally friendly” alternative to traditional flame-based cremation.

Resomation Ltd. (“Resomation”) is a Scottish company that manufactures and licenses equipment that employs an alkaline hydrolysis process to dispose of human remains. Resomation has granted Matthews an exclusive license to market and sell its alkaline hydrolysis equipment in the United States.

In 2007, Biosafe Engineering, LLC and Digestor, LLC (collectively “Biosafe”) were formed to operate the business acquired from a bankrupt company, Waste Reduction by Waste Reduction, Inc. (“WR2”), and to hold the patents acquired from WR2. Biosafe ultimately acquired several patents related to the application of alkaline hydrolysis to the disposal of various types of waste, such as medical waste, infectious agents, and hazardous materials. These patents include five method patents, U.S. Patent Nos. 5,332,532,6,437,211, 6,472,580, 7,183,453, and 7,829,755 (collectively the “Method Patents”), and one system patent, U.S. Patent No. 7,910,788 (the “System Patent”).

On February 28, 2011, Matthews filed suit against Biosafe, seeking a declaratory judgment of noninfringement, invalidity, and unenforceability of the Method Patents. Matthews also asserted state-law claims of trade libel, defamation, and tortious interference with contractual relations. On March 22, 2011, the System Patent issued. On May 13, 2011, Matthews filed an amended complaint, which included a request that the System Patent be declared invalid and unenforceable. At the time it filed its amended complaint, Matthews had sold three Bio Cremation?? units, but none of these units had been installed in customers' facilities.

In its amended complaint, Matthews alleged that Biosafe had “wrongly accused Matthews of patent infringement, and ha[d] made false accusations about Matthews to [Matthews'] customers, potential customers, and employees.” Matthews asserted that during a December 2008 telephone conversation, Biosafe's president, Bradley Crain, told Steven Schaal, an official at Matthews' cremation division, “that [Matthews'] sale of Resomation/Bio Cremation??>> equipment would infringe [Biosafe's] alleged intellectual property rights.” Matthews' attorney thereafter sent Biosafe a letter, dated December 31, 2008, requesting that Biosafe “detail [its] concerns in writing” regarding possible patent infringement by Matthews' cremation products.

Biosafe's counsel responded by letter dated February 2, 2009. This letter raised possible false advertising and copyright infringement claims, asserting that Matthews was distributing sales literature marketing the Resomation alkaline hydrolysis equipment using a picture that actually depicted one of Biosafe's units instead of one of the Resomation units. The letter further stated that Biosafe could pursue “a variety of remedies for disputes involving intellectual property rights,” including a claim for patent infringement if it were “determined that a new installation by Resomation [was] operated in a manner covered by any of Biosafe's patents.” Matthews responded by stating that while Biosafe's letter made “vague, general references to certain patent claims and process parameters, [its] allegations [were] so vague and incomplete” that Matthews was “at a loss to respond.”

Matthews' amended complaint further alleged that Biosafe had “launched a bad faith whispering campaign in the funeral home marketplace, by making accusations and veiled threats to potential customers that [Matthews'] Bio Cremation?? equipment” infringed Biosafe's patents. Matthews asserted, moreover, that one of its customers, Stewart Enterprises, Inc., told Matthews that it was reluctant to buy the Bio Cremation?? equipment because of the accusations made by Biosafe.

On May 27, 2011, Biosafe moved to dismiss all counts of Matthews' amended complaint for lack of declaratory judgment jurisdiction and for failure to adequately plead state-law claims. On September 27, 2011, the district court granted Biosafe's motion to dismiss. The court concluded that Matthews had not made “meaningful preparation” to conduct potentially infringing activity, District Court Decision, 2011 WL 4498935, at *6 (citations and internal quotation marks omitted), since the “parameters used in the operation of Matthews' devices [were] not settled” and those devices could “be operated with parameters outside of the various ones specified” in the Method Patents, id. at *8 (citations and internal quotation marks omitted). Because the potentially infringing features of the Bio Cremation?? system were “fluid and indeterminate,” Matthews' claim “lack[ed] the necessary reality to satisfy the constitutional requirements for declaratory judgment jurisdiction.” Id. (citations and internal quotation marks omitted). Given that it had no information regarding the operating parameters of Matthews' Bio Cremation?? equipment, the district court declined to provide “an advisory opinion specifying what combinations of parameters are infringing and what combinations of parameters are noninfringing.” Id. at *9.

The court likewise dismissed, pursuant to Federal Rule of Civil Procedure 12(b)(6), Matthews' state-law claims alleging trade libel, defamation, and tortious interference with contractual relations. It noted that “bad faith” was a required element of Matthews' state-law claims, but that Matthews had failed to adequately plead the bad faith element. The court concluded that a finding of bad faith could not be premised on the dissemination of information that was “objectively accurate,” and that Matthews' “bald assertions” were insufficient to support its claim that Biosafe's infringement allegations were made in bad faith. District Court Decision, 2011 WL 4498935, at *11–12 (citations and internal quotation marks omitted).

Matthews then filed a timely appeal with this court. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

II. Discussion

A. Standard of Review

“Whether an actual controversy exists under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), is a question of law that is subject to plenary appellate review.” Cat Tech LLC v. TubeMaster, Inc., 528 F.3d 871, 878 (Fed.Cir.2008). Review of the dismissal of Matthews' state-law claims for failure to state a claim upon which relief could be granted is likewise subject to de novo appellate review. Xechem Int'l, Inc. v. Univ. of Tex. M.D. Anderson Cancer Ctr., 382 F.3d 1324, 1326 (Fed.Cir.2004); Boyle v. United States, 200 F.3d 1369, 1372 (Fed.Cir.2000).

B. The Declaratory Judgment Act

The Declaratory Judgment Act does not provide an independent basis of subject matter jurisdiction.²Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671–72, 70 S.Ct. 876, 94 L.Ed. 1194 (1950). Instead, “[i]ts remedy may lie only if the court has jurisdiction from some other source.” Cat Tech, 528 F.3d at 879;see Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617 (1937). The party seeking to establish declaratory judgment jurisdiction bears the burden of demonstrating that an Article III case or controversy exists at the time the claim for declaratory relief is filed.³Arris Grp., Inc. v. British Telecomms., PLC, 639 F.3d 1368, 1373 (Fed.Cir.2011).

Because Article III of the Constitution restricts the judicial power to the adjudication of “Cases” or “Controversies,” U.S. Const. Art. III, § 2, a court may not adjudicate “a difference or dispute of a hypothetical or abstract character” or “one that is academic or moot.” Aetna, 300 U.S. at 240, 57 S.Ct. 461. Instead, a justiciable controversy exists only where a dispute is “definite and concrete, touching the legal relations of parties having adverse legal interests,” and will “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.” Id. at 240–41, 57 S.Ct. 461;see MedImmune, 549 U.S. at 127, 127 S.Ct. 764.

“There is ... no facile, all-purpose standard to police the line between declaratory judgment actions which satisfy the case or controversy requirement and those that do not.” Cat Tech, 528 F.3d at 879. Accordingly, in determining whether a justiciable controversy is present, the analysis must be calibrated to the particular facts of each case, with the fundamental inquiry being “whether...