BP Chemicals Ltd. v. Union Carbide Corp., 91-1256

• Citation: 4 F.3d 975,28 USPQ2d 1124
• Decision Date: 15 September 1993
• Docket Number: No. 91-1256,91-1256
• Parties: BP CHEMICALS LIMITED, Plaintiff-Appellant, v. UNION CARBIDE CORPORATION, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 975

4 F.3d 975

28 U.S.P.Q.2d 1124

BP CHEMICALS LIMITED, Plaintiff-Appellant, v. UNION CARBIDE CORPORATION, Defendant-Appellee.

No. 91-1256.

United States Court of Appeals Federal Circuit.

Sept. 15, 1993.

Ford F. Farabow, Jr., Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, argued for plaintiff-appellant. With him on the brief were Michael C. Elmer, J. Michael Jakes and Joann M. Neth. Also on the brief were Harold Haidt, G. Thomas Delahunty and Charles G. Mueller, Brooks, Haidt, Haffner & Delahunty, New York City, of counsel.

Nicholas M. Cannella, Fitzpatrick, Cella, Harper & Scinto, New York City, argued for defendant-appellee. With him on the brief were Joseph M. Fitzpatrick, Scott K. Reed and Steven C. Kline. Also on the brief were Norman L. Balmer and Robert C. Brown, Union Carbide Chemicals, Danbury, CT.

Before NEWMAN, LOURIE, and RADER, Circuit Judges.

PAULINE NEWMAN, Circuit Judge.

BP Chemicals Limited filed a declaratory judgment action against Union Carbide Corporation in the United States District Court for the Southern District of New York, seeking a declaration that Union Carbide's United States Patent No. 4,543,399, issued September 24, 1985, is invalid, unenforceable, and not infringed by BP Chemicals' process for the production of certain polymers. The district court dismissed the action for lack of a justiciable controversy. ¹ We affirm.

Background

BP Chemicals and Union Carbide are competitors in the business of licensing technology for the manufacture of polymers of ethylene. The licensed technology includes process steps and plant design. The processes of both BP Chemicals and Union Carbide employ gas phase fluidized bed technology.

Union Carbide's Patent No. 4,543,399 (the '399 patent) relates to a step in the process called the "condensing mode". The condensing mode is said to improve the yield of polymer over that realized in a conventional fluidized bed, thereby providing savings in capital expenditure and production costs. The technology that is offered by BP Chemicals includes operation in the condensing mode. Union Carbide, in its competitive offerings to potential licensees, has stressed that the condensing mode is a patented advantage of the Carbide process technology.

BP Chemicals filed a declaratory judgment action, seeking declaration of invalidity or unenforceability of the '399 patent, and declaration that the '399 patent is not infringed by the condensing mode process step as licensed by BP Chemicals and potentially practiced by BP Chemicals' licensees. Union Carbide moved to dismiss the action for lack of a justiciable controversy. Union Carbide alternatively asked the district court to decline to exercise jurisdiction as a matter of judicial discretion.

After conducting an evidentiary hearing on the threshold question of whether the declaratory action should be entertained, the district court dismissed the action, finding that Union Carbide had not threatened to sue either BP Chemicals or any of its licensees for patent infringement.

BP Chemicals states on appeal that on the totality of the circumstances the requirements of a declaratory action have been met. BP Chemicals points to the commercial competition between the parties, and observes that Federal Circuit precedent has not treated the situation wherein a licensor's business is undermined by threats directed to it through its actual or potential licensees. BP Chemicals also points to its potential liability for contributory infringement or inducement to infringe, as well as its contractual obligations to indemnify its licensees.

Union Carbide responds that it did not threaten either BP Chemicals or any licensee with suit; that the '399 patent was not infringed and still has not been infringed; and that BP Chemicals is simply seeking an opportunity to litigate Union Carbide's patent prospectively, in order to obtain an advisory opinion on its validity and scope. Union Carbide states that any remarks it made about the '399 patent in the course of licensing negotiations were made in support of its attempts to license the Union Carbide process, and not to threaten or intimidate.

A CASE OF ACTUAL CONTROVERSY

A declaratory judgment action may be brought in order to resolve an "actual controversy" between "interested" parties:

28 U.S.C. Sec. 2201. In a case of actual controversy within its jurisdiction, except with respect to Federal taxes other than actions brought under section 7428 of the Internal Revenue Code of 1954 or a proceeding under section 505 or 1146 of title 11, 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, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

The purpose of the Act is to enable a person who is reasonably at legal risk because of an unresolved dispute, to obtain judicial resolution of that dispute without having to await the commencement of legal action by the other side. It accommodates the practical situation wherein the interests of one side to the dispute may be served by delay in taking legal action. However, the controversy must be actual, not hypothetical or of uncertain prospective occurrence. The requirement of actual controversy encompasses concepts such as ripeness, standing, and the prohibition against advisory judicial rulings--all raised in this case.

There must be a "definite and concrete" dispute between adverse parties, appropriate to immediate and definitive determination of their legal rights. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937). The obverse of a definite and concrete dispute may be described as an advisory opinion on a situation not ripe for litigation. See id. at 240-41, 57 S.Ct. at 463-64. The difference "is necessarily one of degree", Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941), and is determined on the totality of the circumstances. Id.; C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 880, 219 USPQ 197, 203 (Fed.Cir.1983). There is no simple rule that addresses all shades of relationships between disputants. Maryland Casualty Co., 312 U.S. at 273, 61 S.Ct. at 512; see Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735, 6 USPQ2d 1685, 1688 (Fed.Cir.1988) (the sole jurisdictional requirement is that there be a real and immediate conflict); Telectronics Pacing Sys., Inc., v. Ventritex, Inc., 982 F.2d 1520, 1526, 25 USPQ2d 1196, 1201 (Fed.Cir.1992); Lang v. Pacific Marine and Supply Co., 895 F.2d 761, 764, 13 USPQ2d 1820, 1821 (Fed.Cir.1990).

As applied to declarations of patent rights and relationships, for an actual controversy more is required than the existence of an adversely held patent. Thus in patent litigation there has evolved a pragmatic two-part test for determining declaratory justiciability. There must be both (1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity. Jervis B. Webb Co. v. Southern Sys., Inc., 742 F.2d 1388, 1398-99, 222 USPQ 943, 949 (Fed.Cir.1984). The element of threat or reasonable apprehension of suit turns on the conduct of the patentee, while the infringement element depends on the conduct of the asserted infringer. Arrowhead, 846 F.2d at 736, 6 USPQ2d at 1689. The purpose of the two-part test is to determine whether the need for judicial attention is real and immediate, see Aetna Life Insurance Co., 300 U.S. at 239-41, 57 S.Ct. at 463-64, or is prospective and uncertain of occurrence.

Whether an actual controversy exists upon particular facts is a question of law, and is subject to plenary appellate review. Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 888, 23 USPQ2d 1627, 1630 (Fed.Cir.1992). The district court's factual findings pertinent thereto are reviewed for clear error, in accordance with Fed.R.Civ.P. 52(a). See Arrowhead, 846 F.2d at 735, 6 USPQ2d at 1688.

A

The district court found that Union Carbide did not threaten BP Chemicals or its licensees with suit for patent infringement, or place BP Chemicals or any licensee in reasonable apprehension of suit. BP Chemicals assigns reversible error to this finding.

The district court held an evidentiary hearing wherein witnesses testified as to what was said, what was intended, and what was perceived. When there were differences, the district court made credibility determinations. Witnesses for BP Chemicals stated that Union Carbide, in the course of attempting to license its own process technology, made clear to BP Chemicals and the potential licensees that Union Carbide would enforce the condensing mode patent against infringers. The Union Carbide witnesses stated that they did not threaten anyone, and that comments made in emphasizing the advantages of Union Carbide's patented technology were not threats of suit. Union Carbide stated that its practice is not to threaten its customers and business partners. BP Chemicals argued that the absence of infringement by its licensees evidences the intimidation successfully achieved by the direct and indirect threats of Union Carbide, and the adverse commercial effect on BP Chemicals as well as on its licensees.

Both sides relied on testimony, documents, and depositions. We outline the relationships between Union Carbide and the licensees of BP Chemicals:

1. Quantum Chemicals, Inc.

Quantum Chemicals, through predecessor companies, became licensed under BP Chemicals technology for a polyethylene plant at Port Arthur, Texas, and under Union Carbide technology for a plant in Illinois....