Declaratory Judgment Jurisdiction Found Where Patent License Negotiations Reached an Impasse and NDA Did Not Preclude a Lawsuit

July 31, 2013

Plaintiff Biomet, Inc. ("Biomet") filed a complaint for Declaratory Judgment against Bonutti Skeletal Innovations, LLC ("Bonutti") seeking a declaration that the manufacture, use, or sale of Biomet's products does not infringe on Bonutti's patents. Bonutti filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Fed. R. Civ.P. 12(b)(1), arguing that, at the time the complaint was filed, there was no case or controversy as defined by the Declaratory Judgment Act, 28 U.S.C. § 2201(a).

The district court explained the facts as follows. In June 2012, Acacia Research Group (ARG), Bonutti's parent company, contacted Biomet about a new licensing agreement. Shortly afterwards, Plaintiff and ARG began negotiating the terms of the licensing agreement. The bargaining process included the signing of a Non-Disclosure Agreement ("NDA"). The NDA's purpose was to facilitate the licensing of patents to avoid litigation. There was nothing in the NDA that prevented the parties from filing a lawsuit against each other at any point, for any reason.

The negotiations continued with several emails and phone conferences between the parties. In September 2012, Bonutti advised Biomet that it had filed "multiple patent infringement suits involving at least some of the patents-in-suit against a number of medical device manufacturers." Bonutti further advised Biomet that they believed some of Biomet's products were infringing upon Bonutti's patents, including suture anchors, uni-condylar knees, and other instruments and surgical methods.

In January 2012, Bonutti sent Biomet, at Biomet's request, a chart that identified Bonutti's patents and the specific products of Bonutti that Biomet believed were infringing upon Bonutti's patents. Shortly afterwards, Bonutti sent Biomet a list of Bonutti's lawsuits against Biomet's competitors.

Bonutti sent Biomet an email with a final offer to license the patent portfolio, which stated in part: "we request that you accept our offer or make a counter offer by Friday March 8 . . . I would personally like to see a deal occur with Biomet, but must emphasize the urgency of this matter." On March 8, 2013, Biomet responded to the offer stating it thought that a license was unnecessary and that Biomet would not be making a counter-offer. Two hours after this email was sent, the complaint was filed in this action.

After reciting the factual background, the district court then analyzed the relevant legal standard. "To decide if a dispute has reached a definite and concrete controversy, courts must look to all the circumstances. Id. at 771. However, a ripe declaratory judgment claim does not arise simply because a party perceives there to be a risk of patent infringement 'without some affirmative act by the patentee.' SanDisk v. STMicroElectornics, Inc., 480 F.3d 1372, 1381 (Fed. Cir. 2007). But the affirmative act does not need to be directly addressed at the Plaintiff. The case or controversy boiling point is where the 'patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.' Id. When a patent holder informs a declaratory judgment Plaintiff that it believes it has rights against that party, and that party informs the patent holder that it believes that it has a right to engage in that activity without a patent, declaratory judgment jurisdiction exists."

Having reviewed the legal standards, the district court then found that it had jurisdiction over the Declaratory Judgment action. "Under all of the circumstances involved in this case, the Court finds that there is a substantial controversy that warrants jurisdiction under the Declaratory Judgment Act. The case has reached a point where this Court can rule on a real dispute, as opposed to one based on a hypothetical state of facts. The parties have adverse legal interests, and the Court should not force Plaintiff to wait for Defendant to file a lawsuit to declare their rights."

Indeed, the district court found that Bonutti had admitted it could have filed a lawsuit against the plaintiff at any time. "The Defendant even admits that it could have filed a lawsuit against Plaintiff at any time. (Def. Br. 15.) Defendant provided Plaintiff with a list of the patents upon which it thought Plaintiff was infringing. (Compl. ¶ 17.) Defendant has a history of asserting their patent rights in lawsuits against many of Plaintiff's competitors. And Defendant was put on notice that the negotiations had reached an impasse and should have known that Plaintiff had the right to seek a declaratory judgment."

Biomet, Inc. v. Bonutti Skeletal Innovations, LLC., Case No. 3:13-CV-176 (N.D. Ind. July 24, 2013)


The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.