Opinion
CIVIL ACTION NO. 06-2237.
December 29, 2006
MEMORANDUM ORDER
Presently' before the Court is Defendants' Motion To Dismiss (Doc. No. 7). For the following reasons, Defendants' Motion will be granted.
I. BACKGROUND
Peregrine Surgical, Ltd. ("Peregrine") and Synergetics, USA, Inc. and Synergetics, Inc. ("Synergetics") are competitors in the field of surgical products for ophthalmic surgery. (Doc. No. 4 at 2.) Synergetics is the holder of U.S. Patent No. 5,921,998 ("the `998 Patent") for the product, the Diamond Dusted Membrane Scraper ("DDMS"). (Doc. No. 7 at 2.) Synergetics acquired the rights to the `998 Patent on October 1, 1999. (Id.) The DDMS is a surgical instrument that separates and removes proliferative membranes from the retina while reducing the risk of damaging the retina or forming a retinal tear. (Id.) Peregrine is engaged, and alleges that it was, at the time of the filing of the Complaint in this case, engaged in the manufacturing and marketing of a product it calls "SOS," which shares certain physical characteristics with the DDMS. (Doc. No. 4 at 2.) On May 26, 2006, Peregrine filed a Complaint in this Court seeking a Declaratory Judgment against Synergetics. Peregrine seeks a judgment declaring that it has not committed any act of infringement with regard to the `998 Patent and an order permanently enjoining Synergetics from asserting any claims under the `998 Patent against Peregrine for any activity relating to Peregrine's SOS product. (Doc. No. 1.) Peregrine filed an Amended Complaint on June 19, 2006. (Doc. No. 4.)
Synergetics and Peregrine engaged in prior litigation involving patent infringement actions for products not related to the `998 Patent. In 2004, Synergetics sued Peregrine in the Eastern District of Pennsylvania for patent infringement on two Synergetics patents for a connector/adapter system, patents which are not in dispute in the instant matter. (Doc. No. 11 at 3; Synergetics Inc. v. Peregrine Surgical Ltd., et al., Civ. A. No. 04-CV-4939.) On January 1, 2006, Synergetics sued Peregrine for patent infringement in this district for patents and products not at issue in the 2004 suit or in the instant litigation. (See Synergetics, Inc. v. Peregrine Surgical, Ltd., et al., Civ. A. No. 06-CV-107; Doc. No. 27 at 1.) The 2004 case settled after mediation with the presiding judge, the Honorable Norma L. Shapiro. (Doc. No. 11 at 3-4.) On June 15, 2006, counsel for both parties met with Judge Shapiro to discuss the terms of a possible settlement. (Id. at 4.) Among the terms discussed was the notion that Peregrine would not manufacture or sell its SOS product for a period of two years. (Id.) Peregrine's Board of Directors rejected this term and proposed an abstention of one year on the production and sale of the SOS. (Id.) Ultimately, the parties settled that litigation without any restrictions on the manufacture or sale of the SOS membrane scraper. (Id. at 4-5.) There were no discussions between the parties regarding the SOS product prior to the filing of the Complaint on May 26, 2006. (See id. at 5.) Moreover, at oral argument on the Motion to Dismiss, held on December 14, 2006, counsel for Synergetics stated, and counsel for Peregrine agreed, that Synergetics had no knowledge of the SOS product prior to Peregrine's filing of the instant Complaint seeking a declaratory judgment. (Hr'g Tr. at 6, 9, 10.)
On November 12, 2006, Plaintiff filed a Motion for Leave to File a Surreply in Opposition to Motion to Dismiss Case (Doc. No. 27) in which it sought to file a surreply in the form of a Certification of Robert J. Basil. We will grant this Motion and consider the Certification to be Plaintiff's Surreply.
On August 17, 2006, Defendants moved, pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, to dismiss Plaintiff's Complaint, arguing that there was no actual controversy when the Complaint was filed and hence that the Court lacks subject matter jurisdiction over the case. (Doc. No. 7.) On November 8, 2006 Synergetics filed suit against Peregrine in the United States District Court for the District of Missouri, claiming that Peregrine's SOS product infringes Synergetics's `998 Patent. (Synergetics v. Peregrine Surgical Ltd., Civ. A. No. 06-CV-1632; Doc. No. 27 at 2.) On November 15, 2006, Plaintiff filed a Motion for Preliminary Injunction in this Court seeking an order barring Synergetics from taking any action in furtherance of the Missouri action until the declaratory judgment action in this Court is resolved. (Doc. No. 28.) As mentioned above, oral argument was held on the Motion to Dismiss on December 14, 2006. (Doc. No. 33.)
II. LEGAL STANDARD
A motion to dismiss will be granted under Federal Rule of Civil Procedure 12(b)(1) when the court lacks subject matter jurisdiction over a claim. EEOC v. Creative Playthings, Ltd., 375 F. Supp. 2d 427, 431 (E.D. Pa. 2005) (citing Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005)). When ruling on a 12(b)(1) motion, courts distinguish between "facial" attacks and factual attacks on a court's subject matter jurisdiction. Id. Courts review a "facial" attack based on the parties' pleadings but may look beyond the pleadings to determine jurisdiction in reviewing a factual attack. Id; In re Kaiser Group Int'l Inc., 399 F.3d 558, 561 (3d Cir. 2005). In either case, the plaintiff bears the burden of demonstrating that the court has proper jurisdiction over the claim. Mash Enterprises, Inc. v. Prolease Atl. Corp., 199 F. Supp. 2d 254, 256 (E.D. Pa. 2002). When considering a "facial" challenge, we must accept all of the allegations in the Complaint as true and construe them in the light most favorable to the plaintiff. In re Kaiser Group Int'l, 399 F.3d at 561. We may also consider exhibits attached to the Complaint, matters of public record, and "undisputedly authentic" documents that a defendant attaches to the motion to dismiss. EEOC v. Equicredit Corp. of Am., Civ. No. 02-844, 2002 WL 31371968, at *2 n. 1 (E.D. Pa. Oct. 8, 2002) (citing Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993)).
Defendants do not specify whether they bring a facial or factual attack on the Court's subject matter jurisdiction. In assessing this Motion, we have considered the pleadings as well as the parties' statements at oral argument.
III. DISCUSSION
A. Standard for Declaratory Judgment Actions in Patent Cases
Declaratory Judgment actions may only be brought when an "actual controversy" exists between "interested parties." 28 U.S.C. § 2201(a); B.P. Chems., Ltd. v. Union Carbide Corp., 4 F.3d 975, 977 (Fed. Cir. 1993). When courts are asked to make declaratory judgments where patent rights are involved, courts apply a two-prong test to determine whether an actual controversy exists. Id. at 978. The test requires the existence of 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." Id.; see also Interdynamics, Inc. v. Firma Wolf, 698 F.2d 157, 166 (3d Cir. 1983) (citing Int'l Harvester Co. v. Deere Co., 623 F.2d 1207, 1210-11 (7th Cir. 1980)).
We note that "the question of what test to apply to determine the justiciability under the Declaratory Judgment Act in a patent case `pertains to patent law'" and, as a result, "Federal Circuit jurisprudence controls." Institut Pasteur v. Simon, 332 F. Supp. 2d 755, 757 n. 2 (E.D. Pa. 2004) (citing Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362, 1365 (Fed. Cir. 2001)).
B. Reasonable Apprehension
The Complaint alleges and Plaintiff confirmed during oral argument that Peregrine is, and was at the time the Complaint was filed, engaged in the manufacture and marketing of its SOS product. (Doc. No. 1 at 2; Hr'g Tr. at 9.) The Complaint alleges that Peregrine has already produced this product for sale and has accepted purchase orders for it. (Doc. No. 1 at 2.) The Complaint also alleges that the product shares certain characteristics with Synergetics's DDMS product such that its production and sale of the SOS product could constitute infringement of the `998 Patent. (Id.) The fact that Synergetics has now filed suit in Missouri alleging that the SOS product infringes the `998 Patent certainly supports this allegation. Clearly, Plaintiff has established the second prong of the two-prong test — that it is engaged in activity that could constitute infringement. The first prong, whether Synergetics created a reasonable apprehension on the part of Peregrine that Peregrine would face an infringement suit based on its SOS product, is more problematic.
Defendants claim, and Plaintiff does not disagree, that Synergetics had no knowledge of the SOS product until Plaintiff filed its Complaint for declaratory relief on May 26, 2006. (Hr'g Tr. at 6, 9, 10.) Plaintiff points to two events, both of which occurred after the Complaint was filed, in support of its contention that an actual controversy exists. First, Peregrine points to the June 15, 2006 settlement conference with Judge Shapiro in the separate litigation between the parties, during which the SOS product was discussed. At this conference, Defendants proposed, as a part of the settlement, that Plaintiff abstain from manufacturing and marketing its SOS product for two years. Plaintiff proposed a one year moratorium, which Defendants rejected. The matter was settled without agreement on the SOS product. Plaintiff asserts that these negotiations demonstrate that Synergetics had a significant amount of information about the SOS product by June 15, 2006, enough to demand a two-year moratorium and reject a proposed one-year moratorium. (Doc. No. 11 at 5.) In addition to the settlement negotiations in June 2006, Plaintiff points to the November 2006 filing of the Missouri patent infringement case, the realization of Peregrine's concerns that its SOS product would bring a patent infringement suit by Synergetics. (Doc. No. 27 at Certification ¶ 4.)
While Plaintiff is correct that the June 2006 negotiations and the Missouri suit filed in November 2006 together demonstrate that there is currently an actual controversy, neither of these events is dispositive on the issue of subject matter jurisdiction in this case. "An objective standard governs whether a party is under a reasonable apprehension of suit." Black Decker, Inc. v. Robert Bosch Tool Corp., 371 F. Supp. 2d 965, 968 (N.D. Ill. 2005). In order to find that subject matter jurisdiction is proper, we must find that Plaintiff had a reasonable apprehension that it would face a patent infringement suit at the time it filed its Complaint. West Interactive Corp. v. First Data Res., Inc., 972 F.2d 1295, 1297 (Fed. Cir. 1992) (court applies test for reasonable apprehension "at the time the complaint is filed"); Indium Corp. of Am. v. Semi-Alloys, Inc., 781 F.2d 879, 883 (Fed. Cir. 1985) ("The test is an objective one — reasonable apprehension, like other jurisdictional prerequisites, must exist at the time suit is filed."); Holley Performance Prods., Inc. v. Barry Grant, Inc., No. 04 C 5758, 2004 WL 3119017, at *2 (N.D. Ill. Dec. 20, 2004). As a result, events that occurred after the filing of the Complaint cannot control. See Fairplay Elec. Cars, LLC v. Textron Innovations, Inc., 431 F. Supp. 2d 491, 493 (D. Del. 2006) (holding that plaintiff cannot rely on a letter to establish reasonable apprehension because it was sent after the lawsuit was filed). Under the circumstances, neither the settlement negotiations before Judge Shapiro nor the subsequently filed Missouri action can be relied upon to demonstrate that reasonable apprehension existed at the time that Peregrine filed its Complaint in this case on May 26, 2006.
In addition to its attempt to rely on the two subsequent events to demonstrate reasonable apprehension of suit, at oral argument Peregrine also suggested that we may find that it has met the first prong of the actual controversy test by looking to the totality of circumstances in existence at the time the Complaint was filed. In particular, Peregrine points to three factors, which led it to file the declaratory judgment action: (1) the history of litigiousness between these two parties; (2) the similarity of the products; and (3) Defendants' competitive nature in this field. (Hr'g Tr. at 15.) Plaintiff is correct that "courts must examine the totality of circumstances in determining whether a controversy exists." Black Decker, Inc., 371 F. Supp 2d at 968 (citing C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 880 (Fed. Cir. 1983)). In addition, Plaintiff correctly points to language in Interdynamics, Inc. v. Firma Wolf, in which the Third Circuit commented that in applying the actual controversy test to fact situations, "`courts should make a pragmatic judgment, aware of the business realities that are involved.'" Interdynamics, Inc., 698 F.2d at 168 (quoting Sherwood Med. Indus., Inc. v. Deknatel, Inc., 512 F.2d 724, 728 (8th Cir. 1975)). Nevertheless, we are compelled to conclude that under the totality of circumstances present in this case, Plaintiff has failed to demonstrate a reasonable apprehension of suit at the time the Complaint was filed.
A review of the case law on this issue makes clear that the mere history of litigiousness coupled with Plaintiff's perception of Defendants' competitive nature and the similarity of the products at issue is not sufficient. First, a prior history of litigation is not necessarily relevant to the determination at all. The fact that a company has engaged in prior litigation over other patents does not produce a reasonable apprehension of suit in the instant case. See Glaxo Group, Ltd. v. Dr. Reddy's Labs., Ltd., 325 F. Supp. 2d 502, 507 (D.N.J. 2004) ("[T]he fact that Glaxo has previously exhibited litigious tendencies with respect to other patents does not produce a reasonable apprehension of litigation in this case."); see also Fairplay Elec. Cars, LLC, 431 F. Supp. 2d at 493 (distinguishing case from one where reasonable apprehension found because prior litigation involved different product than the one at issue in instant litigation); cf. Sherwood Med. Indus., Inc., 512 F.2d at 728 (finding prior litigation, along with other factors, to create reasonable apprehension when prior litigation involved same patent). While some courts have found prior litigation to be relevant to this determination, they do so in cases where the prior litigation involves the same product, technology, or patent that is at issue in the declaratory judgment action. See Sherwood Med. Indus., Inc., 512 F.2d at 728; Interdynamics, Inc., 698 F.2d at 168, 168 n. 12 (finding reasonable apprehension when prior and instant litigation arose in context of contempt proceedings for violation of consent decree on same patent). In the instant case, Plaintiff can point to no suits on the `998 Patent by Synergetics against any party before Peregrine filed its declaratory judgment action. The two prior suits between Peregrine and Synergetics involved unrelated patents and unrelated products. The fact that two companies that are both engaged in the production of ophthalmic surgical devices have a history of patent infringement litigation involving other products does not create an objectively reasonable apprehension of suit in this case.
In addition, the history of litigation coupled with the fact that Peregrine considers Synergetics to be a fierce competitor and the fact that the products are similar do not, by themselves, create a reasonable apprehension of suit. More is required. For example, in Sherwood Medical Industries, the Eighth Circuit found a reasonable apprehension of suit based on the totality of circumstances where the plaintiff pointed to four separate actions on the part of the defendant that led to its reasonable apprehension. The court considered the following circumstances:
First, [defendant] had brought an action for infringement of these patents against another competitor in this field around 1969. Second, [defendant]'s patent attorney wrote [a], letter to [plaintiff], subtly pointing out that [defendant] had sued in the past to protect its patents and that it wished to determine whether or not [plaintiff]'s device might also infringe the patents. Third, even after [plaintiff] refused to send a sample, [defendant] went to some effort to obtain some of [plaintiff]'s units for examination. Fourth, a high ranking employee of [defendant], its director of new products, told [plaintiff]'s project manager that [plaintiff's] devices infringed the patents and that this was the opinion of [defendant]'s attorneys also.Sherwood Med. Indus., Inc., 512 F.2d at 728.
In contrast, in Indium, the Federal Circuit upheld the district court's dismissal of declaratory judgment claims despite evidence of prior litigation by the patent holder and a letter by the patent holder to the declaratory judgment plaintiff offering the plaintiff an opportunity to license the patent at issue on a non-exclusive basis. Indium Corp. of Am, 781 F.2d at 883. Similarly, in West Interactive, the Federal Circuit rejected the notion that a meeting between third parties could constitute sufficient evidence of reasonable apprehension of suit. At the meeting between a licensee of the patent at issue and a third party, the licensee commented that both the plaintiff and the third party had infringed the patents at issue. While the third party communicated this conversation to the plaintiff, the court did not consider these third party communications to be sufficient evidence of reasonable apprehension. West Interactive Corp., 972 F.2d at 1297-98.
In this case, Plaintiffs have failed to present sufficient evidence to satisfy the objective actual controversy test. Plaintiffs can point to no communication at all between the parties about this patent prior to the filing of the declaratory judgment action. The only communication between the parties came in June 2006, after the Complaint had been filed. In addition, Plaintiff concedes that Defendants did not even have any knowledge of its SOS product prior to the commencement of the instant litigation. The only prior litigation between the two parties involved patents that are not at issue in the instant litigation. This history cannot, on its own, support a finding of reasonable apprehension. The fact that Plaintiff considers Defendant to be a fierce competitor is certainly not sufficient for the Court to conclude that there was an objectively reasonable apprehension of suit. We acknowledge that Plaintiff's conclusion that it would face a patent infringement suit by Synergetics ultimately proved true. However, this suggests merely that Peregrine made an astute prediction based on the circumstances, not that there was sufficient evidence to satisfy the burden of the objective actual controversy test. "[A]lthough the apprehension may have been real, we do not agree that it was reasonable on the present record." Indium Corp. of Am., 781 F.2d at 883.
In reviewing all of the facts and circumstances, we are compelled to conclude that Peregrine has failed to carry its burden of establishing that it had a reasonable apprehension of suit under the `998 Patent at the time it filed the declaratory judgment action. Accordingly, we will grant Defendants' Motion to Dismiss for lack of subject matter jurisdiction.
An appropriate Order follows.
ORDER
AND NOW, this 29th day of December, 2006, upon consideration of Defendants' Motion To Dismiss (Doc. No. 7) and all papers submitted in support thereof and in opposition thereto, and after oral argument, it is ORDERED as follows:
1. Plaintiff's Motion for Leave to File a Surreply in Opposition to Motion to Dismiss Case (Doc. No. 27) is GRANTED.
2. Defendants' Motion to Dismiss (Doc. No. 7) is GRANTED. Plaintiff's Complaint is DISMISSED with prejudice.
IT IS SO ORDERED.