Last Thursday the Federal Circuit issued an opinion in Asia Vital Components Co. v. Asetek Danmark A/S (opinion here), reversing the district court's dismissal, for lack of subject matter jurisdiction, of an action for a declaratory judgment of noninfringement and invalidity. DJ plaintiff Asia Vital Components (AVC) makes cooling systems for integrated circuits. In 2014, patent owner Asetek sent AVC a letter accusing AVC of infringing two patents relating to liquid cooling systems, but (as AVC explained to Asetek's apparent satisfaction) the accused product was one that AVC didn't make. AVC nevertheless sought a meeting with Asetek, which the latter initially rebuffed. Asetek followed up with a letter stating its belief that AVC likely was selling infringing products, and a meeting was eventually held at which the parties discussed a possible license. A few weeks later AVC filed suit for a declaratory judgment that two products it had designed and built, the K7 and K9, did not infringe. The district court dismissed the action on the ground that Asetek had never accused those two products of infringing.
In an opinion by Chief Judge Pratt (joined by Judges Linn and Taranto), the Federal Circuit reverses, finding that the complaint alleged facts making out a justiciable case or controversy:
. . . we have explained post-MedImmune that “jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee.” SanDisk, 480 F.3d at 1381. Instead, we have required “conduct that can be reasonably inferred as demonstrating intent to enforce a patent.” Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1363 (Fed. Cir. 2009). . . .
We agree with AVC that the totality of circumstances indicates that an actual controversy existed between the parties at the time of the declaratory judgment complaint. Although the April 30, 2014 letter incorrectly accused AVC of manufacturing the Liqmax 120s, it was still a demand letter that referenced a product that AVC contends is similar to its own K7 and K9 products. Upon receiving the letter, AVC contacted Asetek, saying that it did not manufacture the Liqmax 120s, and then, in a follow-up email, AVC requested a meeting with Asetek “to discuss the related matter.” J.A. 105. Instead of simply responding that it had made a mistake with respect to the Liqmax 120s, Asetek’s August 2, 2014 email contained a number of statements that indicate that an actual controversy between the parties existed. For example, Asetek (1) rehashed the volatile relationship between the parties, saying that poor experiences with AVC in the past have “sown distrust in Asetek for AVC”; (2) stated that it “does not license its patents” generally and, more specifically, that it would not license them to AVC due to the previous conflicts between the parties; (3) accused AVC of “likely selling other infringing products in the United States”; (4) warned AVC that it “enforced its IP” and noted its “pending litigations against CoolIT and Cooler Master”—companies that AVC alleges sell products similar to the K7 and K9; and (5) emphasized that it has been allowed a patent in the European Union with claims similar to the asserted patents and also has similar claims pending in China. J.A. 207. Such a response by Asetek clearly “demonstrate[s] intent to enforce a patent,” Hewlett-Packard, 587 F.3d at 1363, and is thus sufficient to conclude that a substantial controversy between the parties existed at the time of the complaint.
The further interactions between the parties only confirm our conclusion. Despite recognizing that AVC does not manufacture the Liqmax 120s, Asetek still agreed to a meeting with AVC where they discussed potential licensing of the asserted patents. Moreover, AVC alleges that Asetek made threats to its customers regarding AVC’s infringement of the asserted patents. Specifically, AVC alleges that “AVC’s customers for the K7 and K9 products have expressed concern that [they will be subject] to liability under the Asserted Patents and AVC has withheld accepting purchase order out of fear of possible liability based upon the Asserted Patents.” . . . Such threats constitute affirmative actions by Asetek to impede and frustrate AVC’s attempts to meaningfully participate in the liquid cooling market and further support our conclusion that a substantial controversy existed between the parties.
Asetek relies heavily on the fact that it never referenced AVC’s particular products or product line as potentially infringing, and, in fact, did not even know of AVC’s products at the time of the complaint. But we have not required such specific facts to find jurisdiction. . . .
In addition to an affirmative act by Asetek, AVC must also show that the threat of suit is real and immediate to establish jurisdiction. MedImmune, 549 U.S. at 127. . . . Here, AVC has made the requisite showing. AVC alleged that (1) it has completed designs of the K7 and K9 products; (2) it has manufactured sample prototype products of the K7 and K9 (as confirmed by photographs of the products presented to the district court below); (3) it intends to market and sell the products in the United States; and (4) its K7 and K9 products “are positioned to directly compete in the market against Cooler Master, Coolit Systems and Enermax as well as the Asetek’s products.” J.A. 67. AVC’s allegation regarding the concerns of its customers and that it has “withheld accepting purchase order[s]” indicates that AVC has customers lined up for its products that have submitted, or, at the very least, are prepared to submit purchase orders for the products. Id.
Although my initial instinct was that the district court got it right, by the time I finished reading the opinion I was convinced by Chief Judge Pratt's analysis. The case shows the importance, after MedImmune, of considering all the relevant facts and circumstances. Clearly, the fact that Asetek had not accused the specific products at issue wasn't enough to defeat jurisdiction.