Future Plans for (Potentially) Infringing Activity Not Sufficient for DJ Jurisdiction

Benitec v. Nucleonics, Inc. (06-1122), July 20, 2007

Benitec sued Nucleonics on a patent related to RNA-based disease therapy. During litigation, Benitec's efforts hit two snags: (1) Nucleonics obtained testimony that supported allegations of inventorship fraud, and (2) the Supreme Court decided Merck v. Integra Lifesciences, which expanded the pharmaceutical research exception of 37 U.S.C. § 271(e)(1).

Regarding the alleged inventorship fraud, Nucleonics counterclaimed for a declaratory judgment seeking invalidity and unenforceability of Benitec's patent.

Realizing the Merck decision limited the chances of success, Benitec successfully argued to dismiss the complaint without prejudice. As a result, the district court also dismissed Nucleonic's counterclaims, which spared Benitec the trouble of defending the validity of the patent.

Benitec provided a covenant not to sue Nucleonics on the patent. However, Nucleonics was also interested in expanding its business efforts beyond human health to animal husbandry and veterinary products (which are not covered under the safe harbor provision of § 271(e)(1) ). Thus, Nucleonics appealed the dismissal to the CAFC.

Under Medimmune (which was decided after oral arguments in this case), 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.'"

While Medimmune addressed DJ jurisdiction directly, this case was different in that the DJ jurisdiction arose in a counterclaim setting. Since Nucleonics was already charged with infringement, there was a clear case or controversy adequate to support jurisdiction at that time.

But since the safe harbor provision negated Benitec's ability to sue Nucleonics, and considering that Nucleonics had no near-term plans to file an NDA, the CAFC found that DJ jurisdiction was divested in this case:

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.

With regard to Nucleonic's expansion into animal testing, again, the CAFC found that DJ jurisdiction was not warranted, since there was little evidence that showed (a) what exactly Nucleonics was doing, and (b) that Nucleonics was capable of infringing Benitec's patent.

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 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 . . . 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.

Judge Dyk's dissent:

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 . . . 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 . . . 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." . . . Benitec has not satisfied its burden to eliminate any future controversy concerning infringement of the ’099 patent.

AFFIRMED