Benitec Australia, Ltd. v. Nucleonics, Inc.

United States Court of Appeals for the Federal Circuit

06-1122

BENITEC AUSTRALIA, LTD.,

Plaintiff-Appellee,

v.

NUCLEONICS, INC.,

Defendant-Appellant.

Scott A.M. Chambers, Patton Boggs, LLP, of McLean, Virginia, argued for plaintiff-
appellee. On the brief were Marc R. Labgold, Kevin M. Bell, and Richard J. Oparil, of
Washington, DC.

Jason A. Lief, McDermott, Will & Emery, of New York, New York, argued for
defendant-appellant. With him on the brief were Dennis J. Mondolino, and Christine A.
Pepe.

Appealed from: United States District Court for the District of Delaware

Judge Joseph J. Farnan, Jr.
 United States Court of Appeals for the Federal Circuit
06-1122

BENITEC AUSTRALIA, LTD.,

Plaintiff-Appellee,

v.

NUCLEONICS, INC.,

Defendant-Appellant.

__________________________

DECIDED: July 20, 2007
__________________________

Before RADER and DYK, Circuit Judges, and WHYTE, District Judge * .

Opinion for the court filed by District Judge WHYTE. Dissenting opinion filed by Circuit
Judge DYK.

WHYTE, District Judge.

Nucleonics, Inc. (“Nucleonics”) appeals from the judgment of dismissal for lack of

subject matter jurisdiction entered by the United States District Court for the District of

Delaware on Nucleonics’s declaratory judgment counterclaims against Benitec

Australia, Ltd. (“Benitec”). We affirm.

*
Honorable Ronald M. Whyte, District Judge, United States District Court
for the Northern District of California, sitting by designation.
 I. BACKGROUND

On March 22, 2004, Benitec sued Nucleonics for infringing U.S. Patent No.

6,573,099 (“’099 patent”), which relates to RNA-based disease therapy. Both parties

are biotechnology companies that are engaged in gene silencing, which involves

silencing the expression of disease-causing genes. A cell is exposed to a piece of

foreign DNA that is specifically engineered to contain certain portions or copies of the

target gene to be silenced. The foreign DNA then produces other molecules (double-

stranded RNA) that shut down the expression of the target gene. This technology is

known as RNA interference (“RNAi”) gene silencing.

Nucleonics filed a timely answer to the complaint on March 24, 2004. On July

13, 2004, Nucleonics moved to dismiss Benitec’s complaint and argued:

Nucleonics now moves to dismiss Benitec’s complaint for lack of
jurisdiction and failure to state a claim upon which relief can be
granted. . . . Simply stated, Benitec has shot before there is even a target.
Nucleonics’ accused activities are directed to developing and submitting
information to the U.S. Food and Drug Administration . . . and are
therefore exempt from infringement under 35 U.S.C. § 271(e)(1). . . .

Further, Nucleonics contended that:

it [would] not be ready to file a New Drug Application to manufacture and
market a new drug product until at least 2010-2012, if ever, depending on
the progress of its clinical trials. . . . As a result, Benitec lacks a statutory
basis to sue for infringement at this time, and it is premature for this Court
even to entertain such a claim.

The court denied the motion, but without prejudice to reconsideration depending

upon the outcome of the Supreme Court’s review of Integra Lifesciences I, Ltd. v. Merck

KGaA, 331 F.3d 860 (Fed. Cir. 2003).

06-1122 2
 On October 4, 2004, Nucleonics filed a request with the U.S. Patent and

Trademark Office (“PTO”) for reexamination of the ’099 patent. 1

In 2005, Benitec encountered a pair of obstacles. First, Nucleonics received

evidence indicating that the inventor named in the ’099 patent may have

misappropriated the idea for the invention from others, or at least should have named

others as co-inventors on the patent application. On February 16, 2005, Nucleonics

sought leave of court to amend its answer and add declaratory relief counterclaims of

invalidity and unenforceability based upon alleged inventorship fraud. After some

discovery skirmishes, Nucleonics obtained testimony in June 2005 from Australian

scientists Peter Waterhouse and Ming-Bo Wang that they had contributed to the subject

matter of the ’099 patent. Neither, however, is named as an inventor in the ’099 patent.

Second, and in the same month, the Supreme Court decided Merck KGaA v.

Integra Lifesciences I, Ltd., reading expansively the pharmaceutical research exception

of § 271(e)(1). 545 U.S. 193 (2005).

On August 1, 2005, Benitec moved to dismiss its complaint without prejudice

under Federal Rule of Civil Procedure 41(a)(2). Benitec claims it sought dismissal only

because the Merck decision indicated that it had no presently viable infringement claim

against Nucleonics. Nucleonics, on the other hand, claims Benitec sought dismissal in

an attempt to prevent the district court from declaring the ’099 patent invalid.

1
Nucleonics filed a second request for reexamination on May 18, 2006. In
both instances, the PTO ordered reexamination of the ’099 patent. The PTO recently
merged the two proceedings. Benitec canceled claims 1, 2, and 8 during the
reexamination. In April 2006, the examiner rejected all other claims of the patent in a
non-final office action. In June 2006, Benitec submitted argument in an attempt to
overcome the rejection, to which the examiner had not substantively responded as of
December 13, 2006.

06-1122 3
 The district court granted Nucleonics’s motion to amend its answer on

September 14, 2005. Two weeks later, however, the court granted Benitec’s motion to

dismiss its complaint without prejudice and dismissed Nucleonics’s counterclaims for

lack of jurisdiction under the Declaratory Judgment Act, 28 U.S.C. §§ 2201-02.

During the time between the filing of Nucleonics’s motion to amend to assert its

counterclaims and the court’s dismissal of those counterclaims, Nucleonics allegedly

began discussing expanding its efforts beyond human health to animal husbandry and

veterinary products.

Nucleonics appeals the dismissal of its declaratory judgment counterclaims. In

its appellee’s brief, Benitec “covenants and promises not to sue Nucleonics for patent

infringement arising from activities and/or products occurring on or before the date

dismissal was entered in this action—September 29, 2005.”

The critical question on appeal is whether, in light of the circumstances, the court

at this time has declaratory judgment jurisdiction over Nucleonics’s counterclaims

seeking declarations of invalidity and unenforceability of Benitec’s ’099 patent.

II. ANALYSIS

A. Developments Following Notice of Appeal

Subsequent to the oral argument in this case, the Supreme Court decided

MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007). In view of that decision,

particularly footnote 11 expressing disapproval of our previously used “reasonable

apprehension of imminent suit” test for determining declaratory judgment jurisdiction, 2

2
The MedImmune Court noted that the “reasonable apprehension of
imminent suit” test is an evolved form of the “reasonable apprehension of suit” test,
which the Court also rejected.

06-1122 4
we requested further briefing. The court has considered that briefing and is now also

informed by this court’s recent decisions in Teva Pharmaceuticals USA, Inc. v. Novartis

Pharmaceuticals Corp., 482 F.3d 1330 (Fed. Cir. 2007), and Sandisk Corp. v.

STMicroelectronics NV, 480 F.3d 1372 (Fed. Cir. 2007), both of which involve the

application of the standards set forth in MedImmune for determining declaratory

judgment jurisdiction.

B. Standard for Determining Declaratory Relief Jurisdiction

A party seeking to base jurisdiction on the Declaratory Judgment Act bears the

burden of proving that the facts alleged, “‘under all the circumstances, show that there is

a substantial controversy, between the parties having adverse legal interests, of

sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’”

MedImmune, 127 S. Ct. at 771 (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S.

270, 273 (1941)). Prior to MedImmune, our case law required that there be “both (1) an

explicit threat or other action by the patentee, which creates a reasonable apprehension

on the part of the declaratory plaintiff that it will face an infringement suit, and (2)

present activity which could constitute infringement or concrete steps taken with the

intent to conduct such activity.” See, e.g., BP Chems. Ltd. v. Union Carbide Corp., 4

F.3d 975, 978 (Fed. Cir. 1993). However, “[t]he Supreme Court’s opinion in

MedImmune represents a rejection of our reasonable apprehension of suit test.”

Sandisk, 480 F.3d at 1380; see also Teva, 482 F.3d at 1339. In MedImmune, the

Supreme Court held that in order for a court to have jurisdiction over a declaratory

judgment action:

the dispute be definite and concrete, touching the legal relations of parties
having adverse legal interests; and that it be real and substantial and

06-1122 5
 admit of specific relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be upon a
hypothetical state of facts. Basically, the question in each case 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.

127 S. Ct. at 771 (internal citation and quotations omitted).

In Sandisk, we further explain:

Article III jurisdiction may be met where the patentee takes a position that
puts the declaratory judgment plaintiff in the position of either pursuing
arguably illegal behavior or abandoning that which he claims a right to do.
. . . We hold only that where a patentee asserts rights under a patent
based on certain identified ongoing or planned activity of another party,
and where that party contends that it has the right to engage in the
accused activity without license, an Article III case or controversy will arise
and the party need not risk a suit for infringement by engaging in the
identified activity before seeking a declaration of its legal rights.

Sandisk, 480 F.3d at 1381. A useful question to ask in determining whether an actual

controversy exists is what, if any, cause of action the declaratory judgment defendant

may have against the declaratory judgment plaintiff:

The concepts of “adverse legal rights” and “legal risk,” used in [prior]
cases to describe the standard for jurisdiction require that there be an
underlying legal cause of action that the declaratory defendant could have
brought or threatened to bring, if not for the fact that the declaratory
plaintiff has preempted it. Without an underlying legal cause of action, any
adverse economic interest that the declaratory plaintiff may have against
the declaratory defendant is not a legally cognizable interest sufficient to
confer declaratory judgment jurisdiction.

Microchip Tech. Inc. v. Chamberlain Group, Inc., 441 F.3d 936, 943 (Fed. Cir. 2006).

The burden is on the party claiming declaratory judgment jurisdiction to establish

that such jurisdiction existed at the time the claim for declaratory relief was filed and that

it has continued since. See Steffel v. Thompson, 415 U.S. 452, 459 n.10 (1974); Super

Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995); Int’l

06-1122 6
Med. Prosthetics Research Assocs., Inc. v. Gore Enter. Holdings, Inc., 787 F.2d 572,

575 (Fed. Cir. 1986). “If . . . a party has actually been charged with infringement of the

patent, there is, necessarily, a case or controversy adequate to support jurisdiction” at

that time. Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 96 (1993). Further,

once that burden has been met, absent further information, that jurisdiction continues.

Id. at 98. The burden of bringing forth such further information may logically rest with

the party challenging jurisdiction, see id. at 98, but the actual burden of proof remains

with the party seeking to invoke jurisdiction. See Super Sack, 57 F.3d at 1058; Int’l

Med. Prosthetics Research Assocs., 787 F.2d at 575. “The rule in federal cases is that

an actual controversy must be extant at all stages of review, not merely at the time the

complaint [was] filed.” Steffel, 415 U.S. at 459 n.10.

The dissent’s view that Cardinal Chemical holds that “the burden shifts to the

party seeking to divest the court of jurisdiction to prove there is no longer a current case

or controversy” reads more into the language of Cardinal Chemical than is justified.

First, the Supreme Court makes clear at the outset of its opinion that “[the] practice [the

Federal Circuit’s uniform practice of declaring the issue of validity moot if it affirms the

district court’s finding of noninfringement], and the issue before us, therefore concern

the jurisdiction of an intermediate appellate court—not the jurisdiction of either a trial

court or this Court. In the trial court, of course, a party seeking a declaratory judgment

has the burden of establishing the existence of an actual case or controversy.” 508

U.S. at 95. Further, the Court only said that “[i]f a party to an appeal suggests that the

controversy has, since the rendering of the judgment below, become moot, that party

bears the burden of coming forward with subsequent events that have produced that

06-1122 7
alleged result.” Id. at 98 (emphasis added). The Court did not hold that the ultimate

burden of proof in the trial court was on other than the party seeking to invoke

declaratory judgment jurisdiction.

With the basic principles for determining declaratory judgment jurisdiction in

mind, we analyze the question of whether the court currently has declaratory judgment

jurisdiction over Nucleonics’s counterclaims.

C. Application of Standard for Declaratory Judgment Jurisdiction

1. Declaratory Judgment Jurisdiction Existed at the Time Nucleonics
Filed it Counterclaims

At the time Nucleonics filed its counterclaims for declarations of invalidity and

unenforceability, Benitec’s patent infringement claims were pending. Because

Nucleonics had been charged with infringement of the ’099 patent, there was, as

dictated by Cardinal Chemical, necessarily a case or controversy adequate to support

jurisdiction at that time. See id.

2. Declaratory Judgment Jurisdiction at the Present Time

a. Human Application of RNAi

Cardinal Chemical, however, does not address whether subsequent events can

divest the district court of jurisdiction, specifically here, over Nucleonics’s counterclaims.

This court has rejected the argument that subsequent events cannot divest the trial

court of jurisdiction, noting that Cardinal Chemical dealt primarily with this court’s

previous practice of vacating findings of patent invalidity as moot in light of non-

infringement. Super Sack, 57 F.3d at 1060; see also Amana Refrigeration, Inc. v.

Quadlux, Inc., 172 F.3d 852, 855 (Fed. Cir. 1999).

06-1122 8
 In Super Sack, we found that Super Sack’s unconditional agreement “not to sue

Chase for infringement as to any claim of the patents-in-suit based upon the products

currently manufactured and sold by Chase” was sufficient to divest the court of

jurisdiction over Chase’s counterclaims for non-infringement, invalidity and

unenforceability because Chase was engaged in no “present activity” placing it at risk of

an infringement suit and Chase did not claim it was planning to make any new infringing

product. 57 F.3d at 1059-60 (quoting BP Chems., 4 F.3d at 978). We further explained

that “[t]he residual possibility of a future infringement suit based on Chase’s future acts

is simply too speculative a basis for jurisdiction over Chase’s counterclaim for

declaratory judgments of invalidity.” Id. at 1060.

In Amana Refrigeration, Amana sued Quadlux for “declaratory judgments of

patent invalidity and noninfringement.” 172 F.3d at 855. Quadlux responded with a

promise not to sue Amana for patent infringement based on the patent-in-suit “as it

presently reads, with respect to any product currently advertised, manufactured,

marketed or sold by Amana, or any product which was advertised, manufactured,

marketed or sold by Amana prior to the date of” the promise. Id. We held that this

promise divested the district court of jurisdiction, notwithstanding that at some indefinite

point in the future, Amana might develop new products or the PTO might reissue the

patent-in-suit with altered claims. Id. at 855-56.

Although neither Super Sack nor Amana has been expressly overruled, both

applied the disapproved “reasonable apprehension of imminent suit” test. Therefore,

although the holdings in both cases are not necessarily dependent on the “reasonable

apprehension of imminent suit” requirement, we nevertheless base our analysis of

06-1122 9
whether jurisdiction currently exists over Nucleonics’s declaratory judgment

counterclaims strictly on the framework of MedImmune.

Nucleonics is currently researching applications of RNAi with an eye to treating

human diseases, such as hepatitis B. Section 271(e)(1) of Title 35 of the United States

Code provides:

It shall not be an act of infringement to make, use, offer to sell, or sell
within the United States or import into the United States a patented
invention (other than a new animal drug or veterinary biological product
(as those terms are used in the Federal Food, Drug, and Cosmetic Act
and the Act of March 4, 1913) which is primarily manufactured using
recombinant DNA, recombinant RNA, hybridoma technology, or other
processes involving site specific genetic manipulation techniques) solely
for uses reasonably related to the development and submission of
information under a Federal law which regulates the manufacture, use, or
sale of drugs or veterinary biological products.

The parties have now both taken the position that Nucleonics’s present activities related

to the human medical application of RNAi are, in light of § 271 and the Supreme Court’s

decision in Merck, not infringing and cannot become infringing until after Nucleonics

files a new drug application (“NDA”) with the U.S. Food and Drug Administration

(“FDA”). Nucleonics took this position, which the dissent does not mention, even before

the decision in Merck. Benitec acknowledged lack of infringement later when it moved

to dismiss its infringement claims. Nucleonics does not even anticipate filing an NDA

before “at least 2010-2012, if ever.” Therefore, Nucleonics’s activities of developing and

submitting information to the FDA related to human application of RNAi does not

present a case or controversy of sufficient immediacy and reality to warrant declaratory

judgment jurisdiction over the enforceability of the ’099 patent. The fact that Nucleonics

may file an NDA in a few years does not provide the immediacy and reality required for

a declaratory judgment. The situation is analogous to that in Telectronics Pacing

06-1122 10
Systems, Inc. v. Ventritex, Inc., 982 F.2d 1520, 1527 (Fed. Cir. 1992), where we

affirmed the district court finding that a defibrillator component manufacturer’s claim for

future patent infringement lacked a sufficient allegation of immediacy to support a

declaratory judgment action since the potentially infringing defibrillator had only recently

begun clinical trials and was years away from possible FDA approval.

Nucleonics argues that Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1342

(Fed. Cir. 2005), supports its position that the court has jurisdiction. In Fort James, the

plaintiff sued Solo Cup for infringement of three patents. Solo Cup “counterclaimed for

declarations that the patents were invalid, unenforceable, and not infringed.” Id. at

1343. The district court bifurcated the proceedings; all issues were to be tried to a jury

first, except Solo Cup’s unenforceability counterclaim, which was to be tried by the court

following the jury trial. Id. at 1344. The jury found that one of the patents-in-suit was

neither invalid nor infringed. Id. at 1345. Fort James then promised not to sue Solo

Cup on any of the three patents for any product Solo Cup currently or previously

manufactured and to “not seek to overturn the jury’s verdict.” Id. Solo Cup nonetheless

wished to press forward with its declaratory claim for invalidity of one of the patents. Id.

We held that there was still declaratory judgment jurisdiction over Solo Cup’s

counterclaim. Id. at 1349. The majority stated that Fort James’s promise not to sue

“had no effect on Fort James’s claim for infringement, because that controversy had

already been resolved by the jury’s verdict.” Id. at 1348. The majority concluded that

“the jury verdict holding that Solo Cup did not infringe Fort James’s patents did not moot

Solo Cup’s counterclaim for unenforceability nor did it act to divest the district court of

jurisdiction to hear that unlitigated counterclaim.” Id.

06-1122 11
 Contrary to Nucleonic’s assertions, Fort James does not compel jurisdiction here.

The instant setting is different because no trial of the infringement issue has taken

place. Benitec instead had its claims dismissed at its request before a trial and the

considerable effort connected therewith had taken place. The court in Fort James

distinguished Super Sack on this “unique procedural posture”:

In Super Sack and its progeny, the patentee’s covenant not to sue was
filed prior to consideration or resolution of the underlying infringement
claim. In such circumstances, the promise not to sue obviated any
reasonable apprehension that the declaratory judgment plaintiff might
have of being held liable for its acts of infringement. . . . Here, however,
the Post-Verdict Covenant had no effect on Fort James’s claim for
infringement, because that controversy had already been resolved by the
jury’s verdict.

Id. at 1348.

In SanDisk, we did hold that the statement of STMicroelectronics NV’s (“ST”) vice

president of intellectual property and licensing that “ST has absolutely no plan

whatsoever to sue SanDisk” did not eliminate the justiciable controversy created by

ST’s actions. 480 F.3d at 1382. However, ST’s statement was made when ST had

engaged in a course of conduct that showed a willingness to enforce its patent rights

despite its vice-president’s statement. ST had approached SanDisk having made a

studied and considered determination of infringement by SanDisk and having

communicated that determination to SanDisk. It then only stated that it did not intend to

sue SanDisk; it did not say it would not sue SanDisk in the future for its alleged

infringement. Id. at 1382-83. In the instant case, Benitec made its covenant and sought

dismissal of its infringement claim after it concluded that the Merck decision precluded

an infringement claim based upon the activities of Nucleonics on which it, Benitec, had

instituted its suit. Under these circumstances, there is no controversy between the

06-1122 12
parties concerning infringement by Nucleonics in its development of human applications

of RNAi technology.

b. Animal Application of RNAi

Nucleonics now states, however, that it wishes to expand into animal RNAi

products. Such products presumably would not be protected from infringement by

§ 271(e)(1) because they would appear to fall within its parenthetical exception to the

safe harbor that excepts from infringement protection any “new animal drug or

veterinary biological product . . . which is primarily manufactured using recombinant

DNA, recombinant RNA, hybridoma technology, or other processes involving site

specific genetic manipulation techniques.”

Nucleonics submitted to the district court the declaration of its president 3 who

stated:

Nucleonics wishes to expand its efforts beyond human health to animal
husbandry and veterinary products. To this end, Nucleonics has entered
into discussion with a large supplier of breeding stock for a variety of
livestock food species regarding their needs and how RNA interference
might be utilized to provide them a competitive advantage. These
discussions began around May 25 of 2005; a meeting was held in
Nashville on July 27. Nucleonics has executed a confidentiality
agreement between the parties, which is a prerequisite to detailed
technical discussions. Nucleonics expects work and research involving
RNAi technology will commence shortly.

Nucleonics argues that the evidence offered by its president shows a justiciable

case or controversy that supports declaratory judgment jurisdiction over its potential

expansion to animal husbandry and veterinary products. To be liable as an infringer,

Nucleonics must be one who “without authority makes, uses, offers to sell, or sells” a

3
Benitec did not raise evidentiary objections to the declaration before the
district court and therefore will not be heard to object now.

06-1122 13
product that infringes the ’099 patent. See 35 U.S.C. § 271(a). There was no evidence

before the district court that Nucleonics had made or sold any infringing product. 4

The meaning of “offer to sell” in § 271(a) is the offer of common law contracts.

Rotec Indus. v. Mitsubishi Corp., 215 F.3d 1246, 1254-55 (Fed. Cir. 2000). The

declaration of Nucleonics’s president does not indicate that Nucleonics’s desire to

expand into animal markets has yet produced any definite offer which the unnamed

“supplier of breeding stock” could accept. Nucleonics has not shown that it is engaged

in any “use” of the patented invention that could subject it to an infringement suit by

Benitec. Nucleonics has therefore not met its burden of showing that it is engaged in

any present activity that could subject it to a claim of infringement by Benitec. See

Microchip Tech., 441 F.3d at 943. In other words, Nucleonics has not shown that its

discussions regarding expansion into animal husbandry and veterinary products meet

the immediacy and reality requirement of MedImmune. See MedImmune, 127 S. Ct. at

771.

Nucleonics has also failed to show that its future plans meet the immediacy and

reality requirement of MedImmune necessary to support a justiciable controversy.

Three reasons compel the conclusion that Nucleonics has not done so.

First, Nucleonics’s only steps toward potentially-infringing animal research are

discussions with an unnamed potential customer and execution of an undescribed

confidentiality agreement. Nucleonics merely “expects” to begin work “shortly.” We do

not doubt the veracity of Nucleonics’s president’s statements—indeed, there is no

4
In fact, when Nucleonics moved for leave to file its counterclaims of
invalidity and unenforceability on January 16, 2005, it apparently had not even begun
discussions about expanding into animal husbandry and veterinary products.

06-1122 14
evidence to the contrary. However, to allow such a scant showing to provoke a

declaratory judgment suit would be to allow nearly anyone who so desired to challenge

a patent.

Second, and particularly given the uncertain contours of § 271(e)(1), see Merck,

545 U.S. at 202, Nucleonics has provided insufficient information for a court to assess

whether Nucleonics’s possible future animal work would be infringing or not. The

Supreme Court in Merck held that § 271(e)(1) “exempted from infringement all uses of

patented compounds ‘reasonably related’ to the process of developing information for

submission under any federal law regulating the manufacture, use, or distribution of

drugs.” 545 U.S. at 206 (emphases in original). Although the allegedly infringing

activity at issue in Merck did not implicate § 271(e)(1)’s parenthetical exception for

animal drugs, here, based on the evidence Nucleonics has presented, one cannot tell if

Nucleonics intends to undertake activity that would fall within § 271(e)(1)’s parenthetical

exception or would otherwise be infringing.

Third, although Benitec originally argued that animal testing for human use was

infringing activity, it has now concluded that such testing falls within § 271(e)(1)’s

protection. Benitec has never challenged use of the technology in testing in animals for

animal use and claims another company owns any right to do so. In any event, there is

no evidence of a justiciable controversy between Benitec and Nucleonics over

Nucleonics’s vaguely defined potential expansion to animal husbandry and veterinary

products.

We recognize that Nucleonics would like to remove any concerns it or its

potential investors might have over possible infringement of the Benitec patent. We do

06-1122 15
not express an opinion on whether Nucleonics’s animal work could ever be the subject

of an infringement suit. We merely hold that Nucleonics did not carry its burden of

showing an existing justiciable controversy. As we observed in Teva:

federal courts are to decide only actual controversies by judgment which
can be carried into effect, and not to give opinions on moot questions or
abstract propositions. . . . Although there can be a fine line between
declaratory judgments and advisory opinions, the Supreme Court
maintains the necessity of avoiding issuing advisory opinions on
hypothetical facts.

482 F.3d at 1338-39 (internal quotations and citation omitted). We also recognize that

Nucleonics wishes to receive the benefit of a ruling on the validity and scope of

Benitec’s patent now, while Nucleonics undertakes any nascent animal work. There is

currently, however, no “substantial controversy, between [Benitec and Nucleonics], of

sufficient immediacy and reality to warrant the issusance of a declaratory judgment.”

MedImmune, 127 S. Ct. at 771. And there may never be.

III. CONCLUSION

Nucleonics has not made a showing of “sufficient immediacy and reality” to

support declaratory judgment jurisdiction. The district court’s judgment of dismissal for

lack of jurisdiction is affirmed.

AFFIRMED

06-1122 16
 United States Court of Appeals for the Federal Circuit

06-1122

BENITEC AUSTRALIA, LTD.,

Plaintiff-Appellee,

v.

NUCLEONICS, INC.,

Defendant-Appellant.

DYK, Circuit Judge, dissenting.

If this declaratory judgment action were filed today, I would agree with the

majority that the required case or controversy had not been established. I also agree

that there must be a case or controversy at all stages of the litigation. See Steffel v.

Thompson, 415 U.S. 452, 459 n.10 (1974). However, in my view, a different test for

determining whether there is a case or controversy applies when the allegation of

infringement is withdrawn during the course of litigation. Supreme Court precedent

requires that, if a patentee files an infringement lawsuit and the particular claim of

infringement is mooted, a counterclaim for invalidity should not be dismissed unless the

patentee demonstrates that there is no possibility of a future controversy with respect to

invalidity. See Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 98 (1993). In my

view, Benitec made no such showing.

I

There is a strong public interest in permitting accused infringers to challenge

invalid or unenforceable patents. See Cardinal Chem., 508 U.S. at 100; Blonder-
Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 345-47 (1971); Lear, Inc. v.

Adkins, 395 U.S. 653, 663-64 (1969); Altvater v. Freeman, 319 U.S. 359, 364-65

(1943). The Declaratory Judgment Act, 28 U.S.C. §§ 2201-02 (1934), plays an

important role in facilitating such challenges, in particular by preventing patent holders

from threatening enforcement while avoiding litigation that might render the patent

invalid or unenforceable. See Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846

F.2d 731, 734-35 (Fed. Cir. 1988). The Supreme Court in MedImmune, Inc. v.

Genentech, Inc., 127 S. Ct. 764 (2007), has recently emphasized the importance the

Declaratory Judgment Act plays in protecting against the Hobson’s choice of

abandoning lawful endeavors or risking liability for infringement. 1 Id. at 772-73.

Here Benitec sued Nucleonics for infringement of Benitec’s patent, broadly

alleging that Nucleonics is “engaged in making, using, offering to sell, and selling gene

silencing technologies that are the same or equivalent to the technologies claimed in the

Benitec patent.” J.A. at 71. Nucleonics timely answered the complaint, denying

infringement and, nearly ten months later, moved to add declaratory judgment

counterclaims asserting invalidity and unenforceability. At the time of Nucleonics’s

counterclaim filing, it was clear that there was declaratory jurisdiction because “[i]f . . . a

party has actually been charged with infringement of the patent, there is, necessarily, a

1
The Advisory Committee Notes accompanying the 1937 adoption of
Federal Rule of Civil Procedure 57 explain that

[t]he controversy must necessarily be of a justiciable nature, thus
excluding an advisory decree upon a hypothetical state of facts. . . . The
existence or non-existence of any right, duty, power, liability, privilege,
disability, or immunity or of any fact upon which such legal relations
depend, or of a status, may be declared.

(internal quotation marks and citations omitted).

06-1122 2
case or controversy adequate to support jurisdiction of a complaint, or a counterclaim,

under the Act.” Cardinal Chem., 508 U.S. at 96 (emphasis in original); see also

Arrowhead, 846 F.2d at 736.

Nonetheless, the majority holds that when the accused infringer has been sued

“[t]he burden is on the party claiming declaratory judgment jurisdiction to establish that

such jurisdiction existed at the time the claim for declaratory relief was filed and that it

has continued since.” Slip op. at 6. In my view, the majority’s approach erroneously

applies the same standard for judging continuing declaratory jurisdiction as for judging

original declaratory jurisdiction.

II

Here the patentee’s manipulative efforts to defeat declaratory jurisdiction are

clear enough. After Nucleonics moved to add the counterclaims, the Supreme Court

decided Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005), which

addressed the 35 U.S.C. § 271(e)(1) safe harbor for research. 2 In Merck, the Supreme

Court clarified that the safe harbor protects any research using a patented compound

where the “drugmaker has a reasonable basis for believing that [the] patented

compound may work . . . to produce a particular physiological effect, and uses the

2
Section 271(e)(1) provides:

It shall not be an act of infringement to make, use, offer to sell, or sell
within the United States or import into the United States a patented
invention (other than a new animal drug or veterinary biological product . .
. which is primarily manufactured using recombinant DNA, recombinant
RNA, hybridoma technology, or other processes involving site specific
genetic manipulation techniques) solely for uses reasonably related to the
development and submission of information under a Federal law which
regulates the manufacture, use, or sale of drugs or veterinary biological
products.

06-1122 3
compound in research that, if successful, would be appropriate to include in a

submission to the FDA.” Merck, 545 U.S. at 207. The patentee does not claim that

Merck provides any protection for commercial production of compounds for humans or

production of or, even research for, animal compounds.

Following the Merck decision, Benitec, suggesting that it was unlikely to prevail

on infringement claims directed to research on medical compounds for humans, filed a

motion to dismiss the case without prejudice under Federal Rule of Civil Procedure

41(a)(2), asserting that there was no longer a continuing case or controversy. As the

majority appears to recognize, slip op. at 3, the motion may well have been motivated

by a desire to avoid a patent invalidity determination.

Benitec did not offer a formal covenant not to sue before the district court.

Rather, it stated in its motion to dismiss that it “could only bring new claims if Nucleonics

is ultimately successful in obtaining FDA approval for its infringing products or otherwise

engages in infringing activities not otherwise permitted under the § 271(e) exemption.”

J.A. at 1379. Nucleonics opposed the motion to dismiss on several grounds, including

that there was a continuing controversy because it had taken “concrete steps . . . with

the intent to conduct” allegedly infringing activity, including research on drugs for

animals. BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993). 3

3
Nucleonics submitted the declaration of Robert J. Towarnicki,
Nucleonics’s president and CEO, stating that:

Nucleonics wishes to expand its efforts beyond human health to animal
husbandry and veterinary products. To this end, Nucleonics has entered
into discussion with a large supplier of breeding stock for a variety of
livestock food species regarding their needs and how RNA interference
might be utilized to provide them a competitive advantage. These
discussions began around May 25 of 2005; a meeting was held in

06-1122 4
The district court granted the motion to dismiss without prejudice finding that, although

“Nucleonics has demonstrated a reasonable apprehension of suit,” it “has not

demonstrated that it has produced or has prepared to produce a product that would be

the target of an infringement lawsuit by Benitec.” Benitec Austl. Ltd. v. Nucleonics, Inc.,

No. 04-0174, slip op. at 6-8 (D. Del. Sept. 29, 2005).

Nucleonics filed this appeal, arguing that Benitec’s statement was insufficient to

eliminate declaratory jurisdiction. In an effort to defeat jurisdiction, Benitec expanded its

representation, stating that its argument to the district court included—and was intended

to include—a promise “not to sue Nucleonics for patent infringement arising from

activities and/or products occurring on or before the date dismissal was entered in this

action—September 29, 2005.” Appellee’s Br. 45. At oral argument, Benitec again

purported to clarify its covenant. Benitec stated that it would not sue “for any research

that was going on prior to the dismissal” or “for animal research that was done at the

time of the dismissal.” Notably, Benitec offered no covenant with respect to future

human or animal products or animal research.

The majority holds that Nucleonics has the burden of demonstrating a continuing

case or controversy as narrowed by Benitec’s promises. Slip op. at 6. It concludes that

Nucleonics has not met this burden as to either its human application of RNAi or its

animal application of RNAi. Slip op. at 12, 15. In my view, the majority applies an

erroneous test.

Nashville on July 27. Nucleonics has executed a confidentiality
agreement between the parties, which is a prerequisite to detailed
technical discussions. Nucleonics expects work and research involving
RNAi technology will commence shortly.

J.A. at 1412.

06-1122 5
 III

The Supreme Court has clearly established that once declaratory jurisdiction has

been established, the burden shifts to the party seeking to divest the court of jurisdiction

to prove that there is no longer a current case or controversy. See Cardinal Chem., 508

U.S. at 98. In Cardinal Chemical, we initially held that a finding of non-infringement

moots a declaratory counterclaim for invalidity. Id. at 87. The Supreme Court reversed

finding that “it is perfectly clear that the District Court had jurisdiction to entertain

Cardinal’s counterclaim” because “if . . . a party has actually been charged with

infringement of the patent, there is, necessarily, a case or controversy adequate to

support jurisdiction of a complaint, or a counterclaim, under the Act.” Id. at 96

(emphasis in original). The Court explained that while the initial burden of establishing

declaratory judgment jurisdiction rests on the party seeking a declaratory judgment,

“once that burden has been met courts are entitled to presume, absent further

information, that jurisdiction continues.” Id. at 98.

In explaining the policy reasons for shifting the burden, the Court stated that “[a]

company once charged with infringement must remain concerned about the risk of

similar charges if it develops and markets similar products in the future.” Id. at 99-100.

Moreover, declining jurisdiction over invalidity counterclaims “creates [the] potential for

relitigation and imposes ongoing burdens on competitors who are convinced that a

patent [is] invalid.” Id. at 101; see also Textron Lycoming Reciprocating Engine Div.,

Avco Corp. v. United Auto., Aerospace and Agric. Implement Workers of Am., 523 U.S.

653, 660 (1998) (“[T]he only question is whether the parties had any concrete dispute

over the contract’s voidability at the time the suit was filed.” (emphasis added)). Nothing

06-1122 6
in the Supreme Court’s recent MedImmune decision, 127 S. Ct. 764, suggests that the

same test for determining whether a case or controversy exists applies throughout the

lawsuit.

The majority distinguishes Cardinal Chemical as resting on the fact that at the

time of the alleged mootness the case was on appeal after a judgment of non-

infringement, but there is nothing in the Supreme Court’s decision that restricts its

burden-shifting holding to that limited context. Slip op. at 7. Contrary to the majority,

Cardinal Chemical cannot be limited to mootness at the court of appeals level. If a case

is not moot when the case is on appeal, it can hardly be moot in identical circumstances

at the district court level. Our decisions holding that Cardinal Chemical does not compel

a district court to decide an invalidity counterclaim after entering a judgment of non-

infringement are best understood as recognizing district court discretion under the

Declaratory Judgment Act. 4 Indeed, in repeatedly recognizing that a district court may

decide the invalidity issue after a judgment of non-infringement, we have confirmed that

such cases are not moot in the Article III sense of the term.

In any event, this is not a case in which the patentee suffered an adverse

judgment, but rather one in which it voluntarily abandoned its infringement suit in the

light of unfavorable developments. It is particularly inappropriate to place the burden of

establishing continuing jurisdiction on declaratory plaintiffs where, as here, the claim of

4
See, e.g., Liquid Dynamics v. Vaughan Co., Inc., 355 F.3d 1361, 1371
(Fed. Cir. 2004) (“A district court judge faced with an invalidity counterclaim challenging
a patent that it concludes was not infringed may either hear the claim or dismiss it
without prejudice, subject to review only for abuse of discretion.”); see also Cardinal
Chemical, 508 U.S. at 95 n.17 (“[T]he Declaratory Judgment Act affords the district
court some discretion in determining whether or not to exercise that jurisdiction, even
when it has been established.”).

06-1122 7
mootness is the result of the opposing party’s acts designed, at least in part, to defeat

declaratory jurisdiction. “[T]here is an important public interest in protecting the legal

system against manipulation by parties, especially those prone to involvement in repeat

litigation, who might contrive to moot cases that otherwise would be likely to produce

unfavorable precedents.” Hart and Wechsler, The Federal Courts and the Federal

System 204 (5th ed. 2003); see also Phillips Plastics Corp. v. Kato Hatsujou Kabushiki

Kaisha, 57 F.3d 1051, 1053 (Fed. Cir. 1995) (“[O]ne who may become liable for

infringement should not be subject to manipulation by a patentee who uses careful

phrases in order to avoid explicit threats, thus denying recourse to the courts while

damages accrue.”).

In the closely related injunction context, the Supreme Court has repeatedly held

that the defendant carries a heavy burden of demonstrating that a case is moot when it

voluntarily ceases the accused conduct. As the Supreme Court noted in Iron Arrow

Honor Society v. Heckler, 464 U.S. 67, 72 (1983), “[d]efendants face a heavy burden to

establish mootness in such cases because otherwise they would simply be free to

‘return to [their] old ways’ after the threat of a lawsuit had passed. . . . Thus they must

establish that ‘there is no reasonable likelihood that the wrong will be repeated.’”

(quoting United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953)); see also Public

Serv. Co. of Colo. v. Shoshone-Bannock Tribes, 30 F.3d 1203, 1206 n.3 (9th Cir. 1994).

Similarly in Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc.,

528 U.S. 167, 189 (2000), the Supreme Court again concluded that “[t]he heavy burden

of persuading the court that the challenged conduct cannot reasonably be expected to

start up again lies with the party asserting mootness.” (internal quotation marks

06-1122 8
omitted). 5 Cardinal Chemical confirms that the same rule governs in the declaratory

context and requires a showing by the patentee that there is no reasonable likelihood

that the controversy over the patent’s validity and enforceability will recur.

IV

In my view, the patentee here has not come close to meeting its burden to show

that there will be no future controversy. Even if we were to assume that there is no

longer any possible controversy concerning Nucleonics’s research on human drugs,

there is a possibility that Nucleonics may in the future make human drugs that Benitec

would challenge as infringing. Nucleonics has also stated that it intends to pursue

animal research. While I agree with the majority that the future controversy would not

satisfy the sufficient immediacy and reality test for the filing of a new suit today, Benitec

has made no effort to demonstrate that the controversy between the parties will not

recur. In fact, when asked at oral argument whether Benitec was “promising not to sue

[Nucleonics] for animal product research that they begin” the day after argument,

Benitec’s counsel responded, “We have not made that statement that we would

forebear suing them.” Here Benitec’s success in defeating declaratory jurisdiction will

have the effect of inhibiting Nucleonics’s ability to raise funds and conduct research and

development. Nucleonics has stated that the threat of litigation has “hampered its

efforts to obtain funding and to continue its business activities.” Appellant’s Br. 45 n.19.

5
See also Buckhannon Bd. & Care Home v. West Virginia Dep’t Health and
Human Res., 532 U.S. 598, 609 (2001) (stating that “[i]t is well settled that a defendant’s
voluntary cessation of a challenged practice does not deprive a federal court of its
power to determine the legality of the practice” unless it is “absolutely clear that the
allegedly wrongful behavior could not reasonably be expected to recur”).

06-1122 9
Benitec has not satisfied its burden to eliminate any future controversy concerning

infringement of the ’099 patent.

V

The majority’s decision here is not only inconsistent with the Supreme Court

precedent; it exposes an inconsistency in this court’s own jurisprudence. We have

twice previously addressed the question of continuing declaratory jurisdiction in suits for

infringement where the patent holder has attempted to defeat continuing jurisdiction by

a covenant not to sue. See Fort James Corp. v. Solo Cup Co., 412 F.3d 1340 (Fed. Cir.

2005); Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054 (Fed. Cir.

1995). As the majority recognizes, slip op. at 9, those cases rested on our now-rejected

reasonable apprehension test, and may no longer be good law after MedImmune. 127

S. Ct. at 774 n.11. But assuming that they are still good law, they in fact conflict with

each other.

In Super Sack, 57 F.3d 1054, we held that a covenant not to sue defeated

jurisdiction, though we noted that the accused infringer “never contended that it ha[d]

taken meaningful preparatory steps toward an infringing activity by planning to make a

new product that may later be said to infringe,” and that “[t]he residual possibility of a

future infringement suit based on [the accused infringer’s] future acts is simply too

speculative a basis for jurisdiction over [the] counterclaim for declaratory judgments of

invalidity.” Id. at 1059-60. 6 In Fort James, 412 F.3d 1340, even though the accused

infringer did not prove a controversy that would satisfy the sufficient immediacy and

6
In Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 855 (Fed. Cir.
1999), we applied the same test to a covenant not to sue filed after the commencement
of a declaratory action where no infringement action had been commenced.

06-1122 10
reality test, we held the opposite—that a covenant not to sue for existing products did

not render the declaratory claim moot, even though there was no evidence of a future

controversy. Id. at 1348. While the majority here attempts to reconcile the two cases

on the ground that the covenant in Super Sack came before a judgment of non-

infringement, whereas in Fort James it came after a judgment of non-infringement, I fail

to see why this should make any difference, nor did the dissent in Fort James itself.

See id. at 1354 (Schall, J., dissenting).

VI

The effect of today’s decision is to limit the availability of declaratory jurisdiction

to challenge invalid and unenforceable patents by allowing patentees to moot such

controversies by dismissing the original infringement action and covenanting not to

bring suit on existing products, without any showing that the controversy will not recur in

the future. I respectfully dissent.

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