By Audrey Millemann

In Prasco, LLC v. Medicis Pharmaceutical Corp., 2008 WL 3546217 (Fed. Cir. 2008), the Federal Circuit Court of Appeals has further limited the test for subject matter jurisdiction in declaratory judgment actions. The court held that the test, previously expanded by the Supreme Court in MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007), requires affirmative actions by the patent owner to establish a case or controversy satisfying Article III. 

The plantiff, Prasco, manufactured a generic cleansing product which it intended to market in competition with the patented products of the defendants, Medicis and Imaginative Research Associates. The defendants’ products were marked with the numbers of the defendants’ four patents pursuant to 35 U.S.C. § 287.

Prasco filed suit against the defendants for a declaratory judgment of noninfringement of the four patents. Prasco alleged that it had prepared marketing plans for the sale of its product and was ready to begin marketing. It based subject matter jurisdiction on Medicis’ marking of its products with its four patent numbers and on the fact that Medicis had previously sued Prasco and another company over a different product covered by a different patent. 


The defendants moved to dismiss the case for lack of subject matter jurisdiction on the grounds that there was no Article III case or controversy. Prasco then sent a sample of its new product to the defendants and asked them for covenants not to sue. The defendants declined to sign the covenants not to sue. Prasco then filed an amended complaint, adding the allegation that it had begun to market its product and that the defendants had refused to agree to covenants not to sue. The defendants renewed their motion to dismiss.


The district court granted the motion to dismiss. The court applied the Federal Circuit’s “reasonable apprehension of suit” test and held that Prasco had failed to satisfy the test because it had not shown that the defendants had created a reasonable apprehension of suit on Prasco’s part. The court also held that even if MedImmune had overruled the reasonable apprehension of suit test, the decision would be the same. The district court later reconsidered its decision after the Federal Circuit had clarified that MedImmune had overruled the reasonable apprehension of suit test, but concluded that there was still no case or controversy under Article III.


The Federal Circuit affirmed. The court emphasized that in MedImmune, the Supreme Court had held that there is no “bright-line rule” for determining whether there is Article III jurisdiction. According to the Supreme Court, the test is whether “the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, supra, 127 S.Ct. at 771. The doctrines of standing, ripeness, and a lack of mootness are all relevant to the inquiry. The Federal Circuit noted that the reasonable apprehension of suit test remains viable as one way in which a plaintiff may satisfy the broader MedImmune test. 


Prasco contended that jurisdiction existed because Medicis had actually harmed Prasco by causing its “paralyzing uncertainty” due to the fear of being sued. The court disagreed, noting that Prasco was not paralyzed as it had gone ahead and begun marketing its product, as alleged in the amended complaint. Moreover, a subjective fear of suit is not sufficient to establish a case or controversy. The court stated:


“Although MedImmune clarified that an injury-in-fact sufficient to create an actual controversy can exist even if there is no apprehension of suit, it did not change the bedrock rule that a case or controversy must be based on a real and immediate injury or threat of future injury that is caused by the defendants – an objective standard that cannot be met by a purely subjective or speculative fear of future harm. Thus as we explained post-MedImmune, ‘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. [Citation omitted]’ ”


The court explained that the patent owner must take some action, such as demanding royalties, creating a regulatory barrier, or using scare tactics against potential customers in the marketplace. A case or controversy is met if there has been the claim of infringement, if the patent owner challenges the patent infringer’s planned conduct, or if the two sides have taken adverse positions regarding specific rights. 


The court found that the defendants had not asserted a concrete adverse position and had not taken any affirmative steps with respect to Prasco’s product. Defendants had not accused Prasco of infringement nor had they asserted rights to Prasco’s product. 


The court held that the facts relied upon by Prasco were not sufficient to create a case or controversy. The court found that the defendants’ marking of the products with the patent numbers, before they knew of Prasco’s product, was irrelevant to the issue of whether the defendants intended to enforce their patents against Prasco. Marking of patented products serves as public notice of the patents, but is not a circumstance demonstrating an imminent threat of harm to Prasco.


Second, the court found that Medicis’ prior suit for patent infringement against Prasco and another company was a relevant circumstance, but was entitled to little weight. The prior suit involved a different product and a different patent and it did not indicate that the defendants were more likely to sue Prasco over this product.


Third, the court found that the defendants’ failure to sign covenants not to sue was a relevant circumstance, but was not dispositive. The defendants were not required to analyze infringement on the plaintiff’s schedule and their silence did not demonstrate an imminent threat to Prasco.

Because there was no affirmative action by the defendants, the court held that there was no case or controversy.  Any decision of the district court in the declaratory judgment action would be only advisory. Accordingly, there was no Article III jurisdiction and the district court’s decision was affirmed.