Nicole Galli and James Singer of Pepper Hamilton provided an Intellectual Property Alert today, March 30, 2007:
On Monday, March 26, 2007, the Federal Circuit issued a decision that has fundamentally changed the standard for bringing a declaratory judgment action in patent cases. SanDisk Corp. v. STMicroelectronics, Inc. (Civ. No. 05-1300). Under the new standard, declaratory judgment cases can be brought much more easily, even in the context of ongoing negotiations and promises not to sue. As a result, patentees seeking to enforce their rights through either licensing offers or cease-and-desist letters face a heightened risk that the accused infringer will be able to strike first and file suit.
However, it remains to be seen how much of an impact this admittedly “sweeping” change in the law (to quote Judge Bryson’s concurring option) will have on patent disputes, as many accused infringers may continue to be deterred from bringing suit, as a practical matter, by the costs of patent litigation and the benefits of amicable resolution of disputes.
While the full implications and scope of this change in the declaratory judgment standard remain to be seen, this change presents new risks to patentees seeking to enforce their patent rights, whether by proffering a license to an accused infringer, as in the situation in SanDisk, or even simply by issuing a cease-and-desist letter. Thus, patent holders are well advised to seriously weigh the possibility of immediate potential litigation before sending a cease-and-desist letter, offering a license or engaging in specific discussions with accused infringers about infringing activity.
Read the full text of the alert here.