You Show Me Your . . . Patent and I’ll Show You My . . . DJ

SanDisk Corp v. STMicroElectronics, Inc.

What's a patent holder to do?  First, in MedImmune, Inc. v. Genentech, the Supreme Court allows declaratory judgment (DJ) actions by patent licensees in good standing, thereby significantly lowering the ante for such litigation.  Now, in SanDisk Corp v. STMicroElectronics, Inc., the Federal Circuit has ushered in another patent law sea-change.  At stake this time?  The rules of the dance for patent licensing with potential infringers.

It appears the SanDisk court had no choice.  Prior to MedImmune, patent holders had a roadmap for such discussion-the Federal Circuit's "reasonable apprehension of suit" test.  Under that test a patentee kept its licensing options open with the use of careful draftsmanship.  By using certain prescribed language, patentees could initiate licensing discussions without triggering a DJ action.  They could also put potential infringers on notice of the existence of the patent, commence the accrual of damages, lay the groundwork for a claim of willful infringement, and/or cut off a potential laches defense.  Savvy players in the patent licensing arena understand how, when and where such communications need to take place.

No more.  In a little footnote (where, as we've learned, a lot of the action takes place) the MedImmune court rejected the reasonable apprehension of suit test.  Too bad for the patent holder in SanDisk.  The Federal Circuit found that, under the facts presented, its conduct showed a willingness to enforce its patent rights.  According to the SanDisk court that, along with the decision in MedImmune, gave the potential infringer sufficient standing to bring a DJ action.  (See Case Summaries for a complete explanation of the specific facts and holdings.)

In a concurrence, Judge Bryson addressed the logical consequences of the decision beyond the specifics of the case at hand.  After MedImmune, he wrote that any invitation by a patent holder to open licensing discussions could lead to a DJ action.  All the potential infringer has to do is send what he calls a "put up or shut up" letter asking whether the patent holder believes infringement exists.  The answer either ends licensing negotiations or triggers a DJ action.

Trying to classify licensing discussions as inadmissible settlement discussions under Federal Rule of Evidence 408 won't work-the court shot down that argument in SanDisk.  Patent holders may try a generic letter and then attempt to enter into both a confidentiality agreement and covenant not to sue-but that method will probably only work with those that want the license in the first place.  Otherwise, patent holders will quickly end up with a Bryson "put up or shut up" response in their hands.

Patent holders will tread carefully as the ramifications of the SanDisk decision get sorted out.  For the time being, we see patent holders investing more upfront time, diligence and potential trial preparation before initiating licensing negotiations with potential infringers.  Patent holders may need to consider actually filing an action without serving the complaint in order to enter into licensing discussions.  Doing so will allow them to keep their status as plaintiff and choose the forum for the lawsuit.

As more infringement/licensing issues inevitably head for the courts, we wonder whether multi-patent holders and multi-patent infringers would benefit from the use of alternative forums, such as the one exemplified below, to resolve the vagaries of patent infringement and licensing.

Personals - Other

MPH seeks MPI for mutually beneficial crossing-licensing relationship.  No DJs please. 

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