The perils of enforcing US patent rights: Developments in declaratory judgment jurisprudence

The US Federal Circuit recently held that when seeking a declaratory judgment in relation to a patent held by a foreign entity, specific personal jurisdiction is only appropriate where that entity has sufficient contacts with the jurisdiction in which the judgment is pursued.  

The rationale for this is found in the due process requirements in the US Constitution.  Essentially, jurisdiction is appropriate over an entity when it would be fair to haul it before courts in that forum.  Fairness, in turn, can be established where:

  • (general personal jurisdiction) the entity’s general business contacts are continuous and systematic; or
  • (specific personal jurisdiction) the entity purposefully engages in activities in the forum that relate to the cause of action.

In Autogenomics v. Oxford Gene Tech (Fed. Cir. 2009), the Federal Circuit reaffirmed the principle that efforts to commercially benefit from a patented technology are not relevant to establishing specific personal jurisdiction.  The reason is simple:  efforts to commercialise a technology are not related to the cause of action (e.g., a request that the court declare a patent invalid).  By the same token, attempts to enforce the patent in the forum jurisdiction should be taken into account, and do generally support a claim of specific jurisdiction. 
The Autogenomics case is yet another instance of a relatively stable trend in Federal Circuit jurisprudence in relation to declaratory judgment claims.  That trend is to allow considerable weight to be afforded to efforts to enforce – rather than commercialise – a patent when determining whether specific personal jurisdiction would be fair.  Of course, where a foreign patent holder has entered into an exclusive licence with an entity in the forum state, especially a competitor of the plaintiff, specific personal jurisdiction is more likely to be appropriate.  The general principle, then, is to allow declaratory judgment jurisdiction in cases where the plaintiff faces a real risk of infringement liability in light of the foreign patentee’s enforcement efforts or exclusive licensing relationships in the forum state.
In light of this general principle, Australian entities keen to capitalise on their US patent holdings should be mindful that the declaratory judgment is becoming a very powerful tool in US courts.  By aggressively policing patents or entering into exclusive licensing deals, Australian patent holders face a very real risk of finding themselves incurring significant costs defending their patents before US courts.  This is not a welcome development, since the US Supreme Court holding in KSR v. Teleflex has made it easier to invalidate patents on obviousness grounds.  Therefore, whenever possible, Australian companies should:

  • consider the costs of defending a declaratory judgment action before entering into licensing negotiations – friendly or otherwise – with US companies; and
  • review their patent portfolios very carefully before commencing enforcement efforts in US jurisdictions to evaluate the probability of prevailing against a validity challenge.   

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