Declaratory Judgment Jurisdiction Standards now same in Trademark Cases as in Patent Cases

Tenth Circuit Court of Appeals: Declaratory Judgment Jurisdiction Standards now same in Trademark Cases as in Patent Cases

1/7/2009
By: Jeremy J. Klobucar, John A. Artz The Declaratory Judgment Act provides federal courts with subject matter jurisdiction over an action to declare the rights or legal obligations of parties upon the existence of an actual case or controversy. The Declaratory Judgment Act is often utilized in patent and trademark cases by an entity that has received infringement threats, and allows the threatened entity to file suit and seek an immediate declaration from the court as to its rights without having to wait for the party that issued the threat to file suit. Jurisdiction under this Act often turns on whether an actual case or controversy exists between the parties such that the federal court has subject matter jurisdiction over the action. In the recent MedImmune, Inc. v. Genetech, Inc. case, the Supreme Court created a new standard for determining whether a case or controversy exists in patent matters. The Supreme Court expressly rejected the previous "reasonable apprehension of imminent suit" test on the ground that it imposed an additional hurdle inconsistent with the Court's constitutional authority. Under MedImmune, the Supreme Court found that a declaratory judgment plaintiff in a patent case is only required to 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." In that case, a patent licensee filed a declaratory judgment action seeking a declaration of its rights under a license agreement despite the fact that it continued to pay royalties to the licensor. The Supreme Court stated that it would not require the licensee to terminate the license and expose itself to further penalty in order for the court to invoke its jurisdiction over their dispute. In Surefoot LC v. Sure Foot Corp., the Tenth Circuit Court of Appeals addressed whether it had subject matter jurisdiction over a trademark declaratory judgment action. In evaluating whether the court had jurisdiction, the Tenth Circuit rejected the "reasonable apprehension of suit" standard previously applied by the court and determined that it had been supplanted by the MedImmune standard. Between 1998 and 1999, Sure Foot Corp. had repeatedly accused Surefoot LC, of infringing on its trademark, and had threatened litigation if Surefoot LC failed to change its name. In August 2002, Sure Foot Corp. filed five administrative proceedings in the Patent and Trademark Office, opposing Surefoot LC's attempts to obtain trademark registrations. Surefoot LC's right to use its marks was not directly at issue. Yet, Surefoot LC filed a declaratory judgment suit against Sure Foot Corp. seeking a declaration from the district court that it was not infringing Sure Foot Corp.'s trademark rights. The district court dismissed the suit, applying the then-governing Tenth Circuit precedent, for failing to present a justifiable case or controversy because it found Surefoot LC had no reasonable apprehension of an imminent lawsuit from Sure Foot Corp. However, the Tenth Circuit reversed and found in accordance with MedImmune that jurisdiction under the Declaratory Judgment Act is satisfied so long as there is a substantial controversy between parties having adverse interests. Thus, the same standard now applies to declaratory judgment actions premised under either the patent laws or the trademark laws. This change in the law will make it much easier in courts located in the Tenth Circuit, and perhaps other jurisdictions as well, for parties to initiate a lawsuit to resolve their trademark rights. It also provides a cautionary note to parties to be careful when they send out cease and desist letters, enter into license agreements or take other steps adverse to another party that they may be subjecting themselves to a lawsuit in a foreign jurisdiction despite the absence of any overt threat of trademark infringement, filing suit or other action.
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