Spectronics Corp. v. H.B. Fuller Co., Inc.

• Decision Date: 29 July 1991
• Docket Number: No. 91-1041,91-1041
• Citation: 940 F.2d 631,19 USPQ2d 1545
• Parties: SPECTRONICS CORPORATION, Plaintiff-Appellant, v. H.B. FULLER COMPANY, INC., and H.B. Fuller Automotive Products, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 631

940 F.2d 631

19 U.S.P.Q.2d 1545

SPECTRONICS CORPORATION, Plaintiff-Appellant, v. H.B. FULLER COMPANY, INC., and H.B. Fuller Automotive

Products, Inc., Defendants-Appellees.

No. 91-1041.

United States Court of Appeals, Federal Circuit.

July 29, 1991.

Arthur H. Seidel, Seidel, Gonda, Lavorgna and Monaco, P.C., of Philadelphia, Pa., argued for plaintiff-appellant. With him on the brief were Per-Otto L. Erichsen and Paul S. Chirgott.

Mark D. Schuman, Merchant, Gould, Smith, Edell, Welter & Schmidt, P.A., Minneapolis, Minn., argued for defendants-appellees. With him on the brief was Alan G. Carlson.

Before MICHEL and CLEVENGER, Circuit Judges, and BENNETT, Senior Circuit Judge.

CLEVENGER, Circuit Judge.

Spectronics Corporation (Spectronics) appeals the judgment of the United States District Court for the Eastern District of New York dismissing its action under the Declaratory Judgment Act, 28 U.S.C. Sec. 2201 (1988), against H.B. Fuller Company, Inc., and H.B. Fuller Automotive Products, Inc., (collectively Fuller), for lack of an actual controversy. We affirm.

I

Spectronics manufactures and sells DYGLO-12, a fluorescent leak detection additive used in automotive air conditioning systems. United States Patent No. 4,758,366 (the '366 patent), assigned to Fuller, claims certain fluorescent dyes used to detect leaks in air conditioning and refrigeration systems. Fuller sent letters to the industry in 1988 announcing the addition of the '366 patent to its growing family of patents and its developing "patent strategy" with respect to its tracer dye line of products. The letters did not refer to Spectronics' DYGLO-12 or any other competing products. Spectronics filed suit alleging that "an actual controversy exists" as to whether it was infringing the '366 patent claims, and that the purpose of Fuller's letters to the industry "was to intimidate both [Spectronics] and [Spectronics'] customers in that anyone making, using or selling 'DYGLO-12' would be liable for such activities under [the '366 patent]."

In its complaint, Spectronics asserted three causes of action: (1) entitlement to a declaratory judgment of invalidity or non-infringement of the claims of the '366 patent under the Declaratory Judgment Act, 28 U.S.C. Sec. 2201 (1988); (2) federal antitrust violations under the Sherman Act, 15 U.S.C. Sec. 2 (1988); and (3) tortious interference with business relations. Before filing its answer, Fuller moved to dismiss all three counts under Fed.R.Civ.P. 12. Fuller's motion was granted in part insofar as the parties stipulated to dismissal without prejudice of the antitrust and tortious interference counts, leaving at issue only the declaratory judgment count. Fuller then answered, filing a contingent counterclaim of patent infringement, and thereafter filed a second motion to dismiss the declaratory judgment action for lack of an actual controversy. During a hearing on that motion, Fuller presented the District Court with a declaration that the '366 patent had been submitted to the Patent and Trademark Office (PTO) for reissue. The District Court denied the second motion.

Eight days later, Fuller filed in the District Court a covenant not to sue Spectronics for infringement of the '366 patent claims. The covenant, styled a "Statement of Non Liability," provides:

Defendant, H.B. Fuller Company, Inc., has filed a reissue application to reissue U.S. Patent No. 4,758,366 cancelling claims 1-18 and seeking new claims.

Spectronics has no liability to Defendants or any successors-in-interest to U.S. Patent No. 4,758,366 for infringement of claims 1-18 of U.S. Patent No. 4,758,366, and Defendants and any successors-in-interest to U.S. Patent No. 4,758,366 will not sue Spectronics for infringement of claims 1-18 of U.S. Patent No. 4,758,366.

Fuller filed a third motion to dismiss for lack of an actual controversy, which was granted in a memorandum opinion and order that incorporated "the [District] Court's extensive discussions with counsel on the record at oral argument on August 17, 1990," as permitted by Fed.R.Civ.P. 52(a). Spectronics Corp v. H.B. Fuller Co., CV 88-3803, slip op. at 1 (E.D.N.Y. Aug. 17, 1990) (incorporated oral argument and colloquy hereinafter cited as "Hearing Transcript"). In granting the third motion to dismiss, the District Court explained that:

[a]lthough this Court found on two previous occasions that a case or controversy existed in that plaintiff had shown the existence of facts underlying a "reasonable apprehension" that it would be sued for infringement of [the '366 patent claims], defendants' June 5, 1990 filing with the Patent and Trademark Office of a Reissue Application for this patent, taken in concert with its June 15, 1990, filing with this Court of a "Statement of Non-Liability," operate to divest this Court of jurisdiction over this matter. Although plaintiff Spectronics Corporation may be charged with infringement of the claims that may result from the reissue application, plaintiff cannot, on the record before this Court, demonstrate an objectively reasonable apprehension that it will face an infringement suit on the '366 patent.

Id.

II

The Declaratory Judgment Act provides, in pertinent part:

In 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.

28 U.S.C. Sec. 2201(a) (1988) (emphasis added).

The existence of an actual controversy is an absolute predicate for declaratory judgment jurisdiction. Grain Processing Corp. v. American Maize-Products Co., 840 F.2d 902, 905, 5 USPQ2d 1788, 1791 (Fed.Cir.1988). When there is no actual controversy, the court has no discretion to decide the case. When there is an actual controversy and thus jurisdiction, the exercise of that jurisdiction is discretionary. Public Serv. Comm'n v. Wycoff Co., 344 U.S. 237, 241, 73 S.Ct. 236, 239, 97 L.Ed. 291 (1952); Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735 n. 6, 6 USPQ2d 1685, 1688 n. 6 (Fed.Cir.1988). Dismissal in this case was not based on a discretionary decision not to exercise jurisdiction, but was compelled by the District Court's conclusion that an actual controversy, and therefore jurisdiction, was altogether lacking.

Spectronics disputes none of the facts in the record, but argues the legal proposition that those facts established an actual controversy under the patent laws. In these circumstances, we review dismissal as a matter of law, keeping in mind that the District Court's "view of the legal effect of the fact pattern before it is not to be lightly disregarded." Arrowhead, 846 F.2d at 735, 6 USPQ2d at 1688.

The long established rule of law is that a declaratory judgment plaintiff must establish an actual controversy on the "totality of the circumstances." Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 272, 61 S.Ct. 510, 511, 85 L.Ed. 826 (1941); International Medical Prosthetics Research Assocs. v. Gore Enter. Holdings, Inc., 787 F.2d 572, 575, 229 USPQ 278, 280 (Fed.Cir.1986); C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 880, 219 USPQ 197, 203 (Fed.Cir.1983). In cases involving a declaratory judgment of patent non-infringement or invalidity, the test for determining whether an actual controversy exists is two-pronged. First, the accused infringer must have actually produced or prepared to produce an allegedly infringing product. Jervis B. Webb Co. v. Southern Sys., Inc., 742 F.2d 1388, 1398-99, 222 USPQ 943, 949 (Fed.Cir.1984). The first prong "looks to the accused infringer's conduct and ensures that the controversy is sufficiently real and substantial." Lang v. Pacific Marine and Supply Co., 895 F.2d 761, 764, 13 USPQ2d 1820, 1822 (Fed.Cir.1990) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241, 57 S.Ct. 461, 464, 81 L.Ed. 617 reh'g denied, 300 U.S. 687, 57 S.Ct. 667, 81 L.Ed. 889 (1937)). Second, the patent holder's conduct must create an objectively reasonable apprehension on the part of the accused infringer that the patent holder will initiate suit if the allegedly infringing activity continues. Arrowhead, 846 F.2d at 736, 6 USPQ2d at 1689; Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953, 955, 3 USPQ2d 1310, 1311 (Fed.Cir.1987); Indium Corp. v. Semi-Alloys, Inc., 781 F.2d 879, 228 USPQ 845 (Fed.Cir.1985), cert. denied, 479 U.S. 820, 107 S.Ct. 84, 93 L.Ed.2d 37 (1986).

On appeal, Spectronics assigns error to the District Court's conclusion that Spectronics did not demonstrate an objectively reasonable apprehension of suit, asserting first that such apprehension should be measured at the time of filing of its complaint, and second, that the potential grant of a reissue patent manifestly places Spectronics at risk of further litigation on the subject matter contained in the specification of the '366 patent.

III

We first address the contention that dismissal was improper because declaratory judgment jurisdiction must be determined solely on the facts as they existed at the time the complaint was filed. Spectronics relies on Arrowhead, 846 F.2d at 734, 6 USPQ2d at 1687, which addresses the well-established rule that a party seeking a declaratory judgment must plead facts initially sufficient to establish the existence of an actual controversy. ¹ In Arrowhead a declaratory judgment plaintiff argued that a letter sent after the complaint was filed supported jurisdiction even if the original pleaded facts did not. This Court stated that "[t]he presence or absence of jurisdiction must be determined on the facts existing at the time the complaint under consideration was filed." Arrowhead, 846 F.2d at 734 n. 2, 6 USPQ2d at 1687 n. 2.

We agree wholeheartedly that in personam and subject matter jurisdictional facts must be pleaded, and proved when challenged, and that later...