Declaratory judgment

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A declaratory judgment is a judgment of a court in a civil case which declares the rights, duties, or obligations of each party in a dispute. A declaratory judgment is binding as to the duties, rights and obligations of the parties. However, a declaratory judgment does not order any action or result in any award of damages to any party to the case. Unlike an advisory opinion, a declaratory judgment requires an actual case or controversy.

A declaratory judgment is typically requested when a party is threatened with lawsuit and the threatened lawsuit is not yet filed; or when it is thought by one of two (or more) parties that their rights under law and/or contract might conflict; or as part of a counterclaim to prevent further, similar lawsuits from the same plaintiff (for example, when only a contract claim is filed, but a copyright claim might also be applicable). It may also be sought in administrative law instead of prerogative writs such as certiorari or prohibitions.

In the United States, the federal government and most states have enacted statutes authorizing their courts to issue declaratory judgments. In some common law jurisdictions, declaratory judgement is a form of equitable relief.

1 Cease and desist
2 Declaratory Judgment Actions in Patent Litigation
3 Patent Pitfalls and Strategy
4 External links

[edit] Cease and desist

Declaratory judgment is common when one party sends another a cease and desist letter. A case or controversy arises when the cease and desist letter places the recipient in "reasonable apprehension" of litigation. Cease and desist letters allow the recipient to file for declaratory judgment in their own jurisdiction, which requires the sender to appear in a distant court, at their own expense.

In determining whether a cease and desist letter creates a "reasonable apprehension" of litigation, courts will look to the totality of the circumstances.

In the patent law context, a court will find a "reasonable apprehension" when a letter expressly charges infringement. However, a cease and desist letter may make "an oblique suggestion of possible infringement" without creating a "reasonable apprehension" of litigation. Letters stating that a particular "use" "appear[] to be covered" by a patent or offering the recipient a license have been held to be merely an "oblique suggestion." Nevertheless, a court may find a "reasonable apprehension" of litigation if there are "additional indicia of the potential for litigation."

[edit] Declaratory Judgment Actions in Patent Litigation

Declaratory judgments are common in patent litigation - as well as in other areas of intellectual property litigation - because declaratory judgments allow an alleged infringer to "clear the air" with regard to a product or service which may be the focal point of a business. Take for example a typical claim of patent infringement. When a patent owner becomes aware of an infringer, the owner can simply wait until he pleases to bring a suit for infringement (subject to the six year statute of limitations). Meanwhile, the monetary damages continuously accrue - with no effort expended by the patent owner. On the other hand, the alleged infringer could do nothing to rectify the situation if no declaratory judgment existed. The alleged infringer would be forced to continue to operate his business with the cloud of a lawsuit over his head. Fortunately, the declaratory judgment procedure allows the alleged infringer to proactively bring suit to resolve the situation and eliminate the cloud of uncertainty looming overhead.

Common claims for declaratory judgment in patent cases are non-infringement and patent invalidity. In order to bring a claim for declaratory judgment, the claimant must (1) have a basis in federal subject matter jurisdidction in the claim and (2) establish that an actual controversy exists. In patent cases it is clear that federal subject matter exists, because patent law is exclusively determined by the federal court system. To determine if an actual controversy exits, the claimant must (1) establish that an objectively reasonable apprehension of suit exists and (2) show that the claimant is actually making, using, selling, offering to sell or importing or is prepared to actually make, use or sell, offer to sell or import an allegedly infringing device or method.

An express threat of litigation is not needed to establish a reasonable apprehension of suit. Rather, the totality of the circumstances is utilized. Factors courts have considered in this analysis are whether a patent owner has asserted its rights against an alleged infringer in a royalty dispute, whether the owner has sued a customer of an alleged infringer, or whether an owner has made statements regarding its patents in trade magazines.

[edit] Patent Pitfalls and Strategy

The patent owner must be very careful when communicating with possible infringers. If a patent owner does communicate an objectively reasonable apprehension of suit, the alleged infringer may bring suit. The alleged infringer - as plaintiff in the suit - can choose the venue of the suit subject to constitutional restrictions and the state long-arm statute of the forum in question. The suit can be brought in any forum in which the local federal district court can properly obtain personal jurisdiction over the alleged infringer. The patent owner who has been sued for a declaratory judgment has created a situation where he has lost the "home field advantage." Travel costs to a distant courthouse can be substantial, and a party that is litigating in a distant forum will have to hire a local attorney (in addition to its regular patent litigation counsel) at significant expense. Further, distant juries sometime prefer the "home town" guy over the foreigner.

Defendants in infringement cases should also not forget the utility of a declaratory judgment as a counterclaim. If a defendant brings a declaratory judgment counterclaim, the defendant can now force the plaintiff to stay in the suit. The plaintiff can no longer simply drop the suit if the outcome begins to look dismal. By bringing a counterclaim of non-infringement - as well as the affirmative defense - the defendant is assured that the issue of infringement will be resolved by the case. The fees expended on the defense are now guaranteed to be of value towards a final resolution with respect to infringement.

Patent owners should also be aware that a counterclaim of infringement is a compulsory counterclaim to a claim for declaratory judgment of non-infringement. c.f. Vivid Techs., Inc. v. Am. Sci. & Eng'g Inc., 200 F.3d 795, 802 (Fed. Cir. 1999). If a patent owner fails to assert an infringement counterclaim in a declaratory judgment non-infringement suit, the patent infringement claim will be deemed waived.