Neutralizing Actual Controversy: How Patent Holders Can Reduce the Risk of Declaratory Judgment in Patent Disputes

Alleged patent infringers may bring declaratory judgment actions against patentees when actual controversies exist over infringement or validity. Such declaratory judgment actions are important strategic tools because they allow alleged infringers to take initiative and bring actions, thereby eliminating the risk of doing business without knowing whether continued product use would constitute infringement. Declaratory judgment actions also provide alleged infringers an opportunity to choose the forum in which to bring their suits. In order to bring such an action, however, there must be an actual controversy between the parties to establish standing. The United States Supreme Court’s 2007 decision in MedImmune v. Genentech made it easier for alleged infringers to obtain declaratory judgments without actually terminating or breaching license agreements. The Court held that all circumstances should be considered when determining whether an actual controversy exists. The United States Court of Appeals for the Federal Circuit, relying on MedImmune, has since considered what communication between parties is sufficient to establish the existence of such a controversy. This Article analyzes those decisions, discusses possible implications, and describes how the Federal Circuit has finally embraced the “all circumstances” test for determining whether a sufficient controversy exists to sustain a declaratory judgment action