GAF Building Materials Corp. v. Elk Corp. of Dallas

• Citation: 90 F.3d 479,39 U.S.P.Q.2d 1463
• Decision Date: 18 July 1996
• Docket Number: No. 95-1549,95-1549
• Parties: GAF BUILDING MATERIALS CORPORATION, Plaintiff-Appellant, v. ELK CORPORATION OF DALLAS, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 479

90 F.3d 479

39 U.S.P.Q.2d 1463

GAF BUILDING MATERIALS CORPORATION, Plaintiff-Appellant, v. ELK CORPORATION OF DALLAS, Defendant-Appellee.

No. 95-1549.

United States Court of Appeals Federal Circuit.

July 18, 1996.

Samuel D. Rosen, Paul, Hastings, Janofsky & Walker, New York City, argued, for plaintiff-appellant.

Larry D. Carlson, Baker & Botts, L.L.P., Dallas, Texas, argued, for defendant-appellee.

Before PLAGER, LOURIE and BRYSON, Circuit Judges.

LOURIE, Circuit Judge.

GAF Building Materials Corporation appeals from the decision of the United States District Court for the Northern District of Texas dismissing its declaratory judgment action for lack of subject matter jurisdiction. GAF Bldg. Materials Corp. v. Elk Corp., No. 3:94-2517 (N.D.Tex. Aug. 29, 1995). Because no actual case or controversy existed when GAF filed its action, we affirm.

BACKGROUND

In October 1993, Elk Corporation of Dallas received a Notice of Allowance from the United States Patent and Trademark Office ("PTO") for its pending design patent application directed to a laminated asphalt roofing shingle. Elk paid the issue fee on November 17, 1993. On December 8, 1993, Elk sent GAF a letter asserting that GAF's sales of its roofing shingle would "constitute an infringement of Elk Corporation's forthcoming United States design patent." In its letter, Elk demanded that GAF "cease and desist from all infringing activities with respect to this United States design patent when issued." In response, on January 13, 1994, GAF filed a civil action in the District of New Jersey alleging that Elk's design patent was "about to issue" and seeking, inter alia, a declaratory judgment that the "patent" was invalid and not infringed.

The relevant Design Patent 344,144 issued on February 8, 1994. That same morning Elk sued GAF for patent infringement in the Northern District of Texas. Later that day, GAF amended its complaint in the District of New Jersey to allege that Elk's design patent had issued. GAF did not move for permission to file this supplemental pleading as required by Fed.R.Civ.P. 15(d).

In December 1994, Elk counterclaimed in the New Jersey action for infringement of the '144 patent. In addition, Elk moved to dismiss GAF's declaratory judgment action for lack of subject matter jurisdiction. GAF responded that jurisdiction was proper under 28 U.S.C. § 1338 (1994). The court granted Elk's motion, holding that there was no actual case or controversy, and thus no subject matter jurisdiction, because the '144 patent had not issued when the suit was commenced. The court further held that the subsequent issuance of the patent after the filing of the complaint did not cure the jurisdictional defect. Rather than dismiss the case, however, the court transferred it to the Northern District of Texas.

Following the transfer, the United States District Court for the Northern District of Texas severed Elk's infringement counterclaim and consolidated it with Elk's separately filed infringement action. The court then entered a final decision dismissing GAF's declaratory judgment action for lack of subject matter jurisdiction, based on the law of the case doctrine. GAF appeals from that final decision.

DISCUSSION

We have jurisdiction to determine whether the district court ¹ correctly held that it lacked subject matter jurisdiction over GAF's declaratory judgment action. See 28 U.S.C. § 1295(a)(1) (1994); C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 219 USPQ 197 (Fed.Cir.1983). We review de novo the district court's decision concerning jurisdiction. Benderson Dev. Co. v. United States Postal Serv., 998 F.2d 959, 962 (Fed.Cir.1993).

As the district court recognized, "[t]he existence of an actual controversy is an absolute predicate for declaratory judgment jurisdiction." Spectronics Corp. v. H.B. Fuller Co., 940 F.2d 631, 633-34, 19 USPQ2d 1545, 1547 (Fed.Cir.), cert. denied, 502 U.S. 1013, 112 S.Ct. 658, 116 L.Ed.2d 749 (1991); see 28 U.S.C. § 2201(a) (district court may grant declaratory relief "[i]n a case of actual controversy within its jurisdiction"). ² The "actual controversy" requirement is met only if there is a justiciable case or controversy in the constitutional sense. Jervis B. Webb Co. v. Southern Sys., Inc., 742 F.2d 1388, 1398, 222 USPQ 943, 949 (Fed.Cir.1984) ("[T]he case or controversy requirement for declaratory judgment jurisdiction has been defined to be the same as the case or controversy requirement in the constitutional sense."); see Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937).

We normally apply a two-part test to determine whether an "actual controversy" exists in an action for declaratory judgment of patent invalidity or noninfringement:

First, the defendant in such an action must have engaged in conduct that created on the part of the declaratory plaintiff a reasonable apprehension that it will face an infringement suit if it commences or continues the activity in question. Next, the plaintiff ... must have actually produced the accused device or have actually prepared to produce such a device.

Jervis B. Webb, 742 F.2d at 1398-99, 222 USPQ at 949 (citations omitted).

GAF argues that these requirements were satisfied when it filed its declaratory judgment action. GAF had a reasonable apprehension of suit, it contends, because Elk's December 1993 letter asserted that GAF's sales of its product would "constitute an infringement of Elk Corporation's forthcoming United States design patent" and demanded that GAF "cease and desist from all infringing activities." GAF points out that Elk had received a Notice of Allowance from the PTO and had paid the issue fee; thus, all that remained was the issuance of the patent. Furthermore, there is no dispute that GAF was manufacturing and marketing the accused product and apparently continues to do so now.

We agree that when GAF commenced the declaratory judgment action it had a reasonable apprehension that it would be sued for patent infringement. Elk's December 1993 letter unmistakably notified GAF that Elk intended to sue GAF for infringement if GAF did not stop marketing the accused product. A demand to cease and desist is a threat. Furthermore, GAF had reason to believe that the PTO had allowed Elk's design patent application and that Elk had paid the issue fee. Thus, it was likely that a patent would issue. ³ In addition, the parties do not dispute that GAF was (and is) manufacturing and marketing the accused product. Therefore, we agree that the two established criteria for an "actual controversy" described in Jervis B. Webb and other cases were satisfied under the facts of this case. However, the cases which have discussed only these two requirements have involved a granted patent, such that further issues which arise in the absence of a patent were not discussed. A broader inquiry than our two-part "test" is required here because no patent had issued when the complaint was filed.

The Supreme Court has articulated basic principles for determining whether a dispute presents a justiciable case or controversy:

A "controversy" in this sense must be one that is appropriate for judicial determination. A justiciable controversy is thus distinguished from a difference or dispute of a hypothetical or abstract character; from one that is academic or moot. The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests. It must be a real and substantial controversy admitting 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.

Aetna Life Ins., 300 U.S. at 240-41, 57 S.Ct. at 464 (citations omitted).

Using these guidelines, it is clear that GAF's complaint did not present a justiciable case or controversy under Article III and § 2201 when it was filed. The complaint alleged a dispute over the validity and infringement of a possible future patent not then in existence. The district court did not know with certainty whether a patent would issue or, if so, what legal rights it would confer upon Elk. ⁴ Thus, the dispute was purely hypothetical and called for an impermissible advisory opinion. Furthermore, the court could not have provided "specific relief through a decree of a conclusive character," 300 U.S. at 241, 57 S.Ct. at 464, since there was no issued patent for the court to declare "invalid" or "not infringed." A declaratory judgment of "invalidity" or "noninfringement" with respect to Elk's pending patent application would have had no legal meaning or effect. The fact that the patent was about to issue and would have been granted before the court reached the merits of the case is of no moment. Justiciability must be judged as of the time of filing, not as of some indeterminate future date when the court might reach the merits and the patent has issued.

We therefore hold that a threat is not sufficient to create a case or controversy unless it is made with respect to a patent that has issued before a complaint is filed. Thus, the district court correctly held that there was no justiciable case or controversy in this case at the time the complaint was filed. See Spectronics, 940 F.2d at 636, 19 USPQ2d at 1549 ("[T]he existence of issued patent claims, presently enforceable against [the declaratory judgment plaintiff], are a requisite to litigation of a declaratory judgment action."); Muskegon Piston Ring Co. v. Olsen, 307 F.2d 85, 89, 134 USPQ 471, 474 (6th Cir.1962) (If there is no issued patent, "no controversy under the patent laws exists, upon which [the accused infringer] can bring an action for declaratory judgment."), cert. denied, 371 U.S. 952, 83 S.Ct. 508, 9 L.Ed.2d 500 (1963).

GAF contends, however, that the issuance of the '144 patent cured any jurisdictional defect. We disagree. "[L]ater events may not create jurisdiction where none...