Thursday, April 01, 2010

Innovative Therapies loses DJ appeal against KCI at CAFC

This case involves a company (Innovative Therapies, ITI ) comprised of employees of the other company (KCI): "The declaratory plaintiff ITI was established in 2006 by several former employees of KCI, in conjunction with Dr. Paul Svedman, a surgeon who had worked in the field of negative pressure wound therapy. "

ITI invoked the the liberalized criteria for declaratory actions as established
by the Supreme Court in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007).

The district court had denied DJ: the district court observed that the mere existence of an
adversely held patent does not suffice to establish adverse legal interests, and that the
circumstances cited by ITI did not establish declaratory jurisdiction at the time the complaint
was filed.

The issue of apparent authority arose: KCI stated that neither Girouard nor Burke had authority to
decide on his own whether KCI would conduct infringement litigation, although ITI disputed
this point. (...) KCI responds that Tumey phoned his ex-colleagues under cover of friendship,
without revealing his true purpose and without knowing whether those persons had knowledge of the structure of the
ITI device and any basis for threatening an infringement suit.

Of MedImmune: However, MedImmune did not hold that a patent can always
be challenged whenever it appears to pose a risk of infringement. See SanDisk, 480 F.3d
at 1380-81 (“In the context of conduct prior to the existence of a license, declaratory
judgment 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.”).

What happens AFTER the DJ filing doesn't help (subsequent events):

ITI pointed to events that occurred after its declaratory judgment complaint was filed
but before the district court’s decision on the motion to dismiss, and argued that the
presence of a controversy at the time of filing was confirmed by KCI’s later suits against ITI,
after KCI had inspected the Svedman device. On December 4, 2007 ITI permitted KCI to
inspect the Svedman device and provided KCI with copies of the User Manual and
Instructions. On January 2, 2008 KCI filed suit in Texas state court against ITI and three of
its employees who had previously been employed by KCI, with counts including breach of
confidentiality agreements and misappropriation of trade secrets
. On January 10, 2008
KCI and Wake Forest University filed a patent infringement suit in the Middle District of
North Carolina, based on acts of alleged infringement that occurred in High Point, North
Carolina. (...)

The court observed
that the existence of justiciable controversy is determined as of the time of the filing of the
complaint, citing GAF Building Materials Corp. v. Elk Corp. of Dallas, 90 F.3d 479, 483
(Fed. Cir. 1996) (“[L]ater events may not create jurisdiction where none existed at the time
of filing.”). See Benitec Austl., Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1344 (Fed. Cir.
2007) (“The burden is on the party claiming declaratory judgment jurisdiction to establish
that such jurisdiction existed at the time the claim for declaratory relief was filed and that it
has continued since.”).

The amended complaint had more causes of action:

The Amended Complaint
included new counts for false advertising and unfair competition in violation of the Lanham
Act, based on KCI’s criticism of the Svedman device to potential customers, and requesting
a declaration of ITI’s unencumbered right to use and sell the Svedman device.

See previous IPBiz post

Subject matter jurisdiction: KCI and Innovative


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