SanDisk v. STMicroelectronics: The Federal Circuit Announces A New Test For Declaratory Judgment Jurisdiction

On January 9, 2007, the Supreme Court decided MedImmune, Inc. v. Genentech, Inc.,127 S. Ct. 764 (2007), holding that a patent licensee need not breach its license agreement in order to file a declaratory judgment action regarding the licensed patent. In addition to resolving the issue directly presented, the Court broadly called the Federal Circuit's entire declaratory judgment jurisprudence into question, stating that the Federal Circuit's "reasonable-apprehension-of-suit test" conflicted with several Supreme Court precedents.1

On March 26, 2007, the Federal Circuit concluded that the Supreme Court had effectively rejected the "reasonable-apprehension-of-suit test." The Federal Circuit then articulated a new legal test. The effect of this significant change in the law is that the threshold "case or controversy" necessary for declaratory judgment jurisdiction in cases of alleged patent infringement has been substantially lowered, making it possible for parties receiving license offers from patent holders to file actions in circumstances where previously they could not.

Before MedImmune, the Federal Circuit had developed an extensive body of case law regarding the circumstances that would create declaratory judgment jurisdiction in patent cases. The Federal Circuit had adopted a two part test that required "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." Sierra Applied Scis., Inc. v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1373 (Fed. Cir. 2004) (quoting BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993)).

The Federal Circuit had also developed numerous guidelines for lower courts. For example, it had concluded that declaratory judgment jurisdiction does not exist "when a patentee does nothing more than exercise its lawful commercial prerogatives and, in so doing, puts a competitor in the position of having to choose between abandoning a particular business venture or bringing matters to a head by engaging in arguably infringing activity." Cygnus Therapeutics Sys. v. ALZA Corp., 92 F.3d 1153, 1160 (Fed. Cir. 1996). Similarly, the Court had stated that "[t]he offer of a patent license does not create an actual controversy... When there are proposed or ongoing license negotiations, a litigation controversy normally does not arise until the negotiations have broken down." Phillips Plastics Corp. v. Kato Hatsujou Kabushiki Kaisha, 57 F.3d 1051, 1053 (Fed. Cir. 1995). Additionally, under Federal Circuit law it was possible...