Shell Oil Co. v. Amoco Corp.
| Decision Date | 28 July 1992 |
| Docket Number | No. 91-1364,91-1364 |
| Citation | 23 USPQ2d 1627,970 F.2d 885 |
| Parties | SHELL OIL COMPANY, Plaintiff-Appellant, v. AMOCO CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Albert M.T. Finch, Jr., of Shell Oil Co., Houston, Tex., argued for plaintiff-appellant. Of counsel was Keith M. Tackett.
Roland N. Smoot, of Lyon & Lyon, Los Angeles, Cal., argued for defendant-appellee.
Before ARCHER, Circuit Judge, SMITH, Senior Circuit Judge, and LOURIE, Circuit Judge.
Shell Oil Company appeals the judgment of the United States District Court for the Southern District of Texas, No. H-90-3949 (May 16, 1991), dismissing its action under the Declaratory Judgment Act, 28 U.S.C. § 2201 (1988), against Amoco Corporation, for lack of a justiciable controversy. We affirm.
Amoco owns U.S. Patent 4,540,679 entitled "Magnesium Hydrocarbyl Carbonate On March 14, 1990, before beginning production, Shell initiated a meeting between two patent attorneys for Shell, Douglas Baldwin and Dean Vance, and one Amoco attorney, Wallace Oliver, regarding its commercialization of the catalysts. At that meeting, Baldwin stated that Shell would shortly begin manufacturing the catalyst, that it had strong views that it did not infringe the '679 patent, but that it also wanted to resolve any potential uncertainty, either by an agreement or in court. Vance stated, inter alia, that Shell's product did not infringe the '679 patent because it had no magnesium hydrocarbyl carbonate support and the '679 patent was invalid. Shell's attorneys left with Amoco a copy of Shell's briefing note on its new catalyst and a proposed agreement, in which Amoco would agree not to assert the '679 patent against Shell's catalysts produced from spray-dried magnesium hydrocarbyl carbonate and Shell would pay $100,000 for a paid-up license.
Supports," which claims a composition, and a method of preparing the composition, comprising a transition metal component and a magnesium hydrocarbyl carbonate support. Shell manufactures catalysts for making polyolefins such as polypropylene, including the SHAC TM 206 catalyst, which is commercially produced by reacting titanium tetrachloride (a transition metal component) with spray-dried particles of magnesium hydrocarbyl carbonate. Shell began commercial production of its SHAC TM 206 catalyst in the United States in May 1990
In response to the March meeting, Oliver wrote to Shell on April 4, 1990, stating that the proposed royalty was inadequate. Amoco counter-offered to license its entire patent for a royalty of 1% of polypropylene polymer net sales. On April 9, 1990, Shell responded by letter, stating that it did not want a general, unlimited license because it believed the patent was invalid and not infringed. Shell then offered to pay Amoco $10.00 per pound of catalyst sold, with a $500,000 cap, in which case royalty payments would be limited to sales of the first 50,000 pounds.
On May 4, 1990, Amoco responded to Shell's April 9 offer and rejected the concept of a cap. Its letter stated in relevant part:
It is our understanding form [sic] our previous discussion that the catalyst falling within the Amoco patent would be used in one plant in Europe and one non-Unipol plant in the U.S.
(Emphasis added). Shell contends that this was Amoco's first charge of infringement, arguing that the language "falling within" constituted a threat of infringement. 1 Amoco also requested a meeting with Shell to discuss a new licensing proposal.
During April and May, Oliver and Vance had numerous telephone conversations. In one of those conversations, Oliver allegedly stated that Shell's catalyst would infringe even if it had no magnesium hydrocarbyl carbonate in it, as long as it was made from magnesium hydrocarbyl carbonate. According to Shell, this constituted Amoco's second charge of infringement.
On May 18, 1990, representatives for Shell and Amoco met again. At that meeting, Oliver stated that he was not going to debate the validity or infringement of the patent, but indicated that he would not accept Shell's position. Shell stated that it had three options: (1) obtain a license from Amoco, (2) litigate by filing a declaratory judgment action, or (3) find alternative catalysts. Then Shell offered to pay a stated running royalty with a $750,000 cap for its proposed catalyst and double that rate for any other infringing catalyst. Amoco rejected the offer, stating that Shell would never make an "other" licensed catalyst if Amoco accepted such a low royalty for the proposed catalyst. Amoco countered with a "no cap" royalty, which Shell rejected. Amoco then suggested that the parties consider a technology exchange, involving Shell's catalyst technology in return for a license under the '679 patent. Subsequently, the parties explored this option.
In a November 1990 telephone conversation, Oliver told Vance that Amoco was no longer interested in a technology exchange, and suggested that their respective vice-presidents meet to discuss the catalyst matter. Vance stated that it appeared that the parties were at an impasse, but Oliver indicated that he felt progress could be made, and they agreed to meet on December 20, 1990. They did so without any resolution.
On December 21, Shell received a letter summarizing the December 20 meeting. In this letter, Amoco referred to the discussions as "regarding Shell's operations under Amoco's U.S. Patent." Amoco also wrote that "although Shell disagrees that Amoco's patent covers Shell's operations, it recognizes that the claims of such patent may be read to do so." Shell considers these comments to be the third charge of infringement by Amoco since they reflect that Amoco did not accept Shell's position; they also indicate that the '679 patent covered Shell's operations. Additionally, Amoco wrote that Oliver proposed a limited license wherein
Shell would obtain a right to manufacture its specific catalyst but not a general right to manufacture any other catalyst which may be covered under the patent.
(Emphasis added). This, according to Shell, was the fourth charge of infringement by Amoco.
Before the meeting ended, offers were again made and rejected. Shell indicated that the parties were at an impasse and that litigation appeared likely. Oliver questioned whether Shell could file a declaratory judgment action since Shell was not manufacturing its catalyst. Vance responded that Shell was manufacturing the catalyst and asked, "I assume you will enforce your patent?" A representative of Amoco replied, "Yes," and the meeting ended.
After the December 20 meeting, Shell filed a declaratory judgment action for a declaration of non-infringement and invalidity of the '679 patent, based on its asserted apprehension that Amoco would eventually file an infringement action. Amoco filed a motion to dismiss under Fed.R.Civ.P. 12(b)(1), asserting the absence of an actual case or controversy. The district court granted Amoco's motion, stating that
[t]he Court's review of the submissions of the parties and the exhibits attached to those submissions does not reveal that Amoco ever caused Shell to reasonably apprehend a patent infringement suit related to Shell's production, use, and sale of the polypropylene catalyst at issue.
(Citations omitted).
[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, whether or not further relief is or could be sought.
An actual controversy must be present before a declaratory judgment action is ripe for adjudication. See Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-41, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937). To constitute an actual controversy, the plaintiff has the burden of establishing by a preponderance of the evidence, inter alia, that it has a reasonable apprehension that it will be sued. 2 See Jervis B. Webb Co. v. Southern Sys., Inc., 742 F.2d 1388, 1398, 222 USPQ The general course of activities between the parties is not disputed. 3 The legal effect of the parties' conduct, in particular, whether it was sufficient to create an actual controversy, is a question of law which we review de novo. Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d at 735, 6 USPQ2d at 1688. However, the "district court's view of the legal effect of the fact pattern before it is not to be lightly disregarded." 4 Id.
943, 949 (Fed.Cir.1984). The test is an objective one, which in this case focuses on whether
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