This client alert explains some recent changes in US patent law (see also Cease & Desist Letters — Declaratory Judgment Lawsuits). Under previous law, if a patentee threatens to sue you with patent infringement, you had a “reasonable apprehension” of being sued, so instead of waiting around for years for this to happen, you could institute a “declaratory judgment” (DJ) suit yourself, to have the issue resolved. But the patentee had to have a “reasonabl apprenhension” of facing an infringement suit to justify a DJ. This generally meant that a company that took out a license from a patentee could no longer file a DJ once a license agreement was reached. It also meant that if a patentee merely approached a potential infringer for licensing negotiations, e.g. by notifying them of a given patent and inviting licensing discussions, while avoiding making it a “cease and desist” letter, then you didn’t give the competitor “reasonable apprehension of immediate suit.” So approaching someone to take a license out on your patent didn’t permit the recipient to file a DJ action--even though the premise behind all such negotiations is the implicit threat that if you don’t take out a license, we might sue you.
Recently the Supreme Court and the Court of Appeals for the Federal Circuit, following the Supreme Court, changed the standard for filing the DJ action by abandoning the “reasonable apprehension” requirement. This makes it easier to file DJ actions when one is worried about infringing someone’s patent. The CAFC said:
where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.
Now, what I found noteworthy about this case was this lawyers’ analysis in the client alert noted above: “Another menas that may be necesssary in order to avoid the chilling effect that SanDisk might have on patent licensing is for Congress to...” This is kind of amusing: a “chilling effect” usually refers to the effect some laws have on individuals exercising their free speech. Yet here, these lawyers use it in the context of what are basically threats of extortion. When a patent holder sends a letter to someone and invites discussions as to taking out a license, this is an implicit threat to sue unless money is paid. This is commonly called extortion, but it is made legal by the patent statute. In any event, if the making of extortionate demands like this gives the victim the right to file a declaratory judgment in court to defend himself, it’s hard to see how this exerts any meaningful “chilling effect”.
