Threats of Patent Litigation Against Customers Did Not Establish Actual Controversy for Declaratory Judgment Action In Absence of Legal Risk

Case: Microchip Tech. Inc. v. Chamberlain Group, No. 05-1339 (Fed Cir. 3/15/06)

The One Sentence Summary: Threats of patent litigation against customers did not establish declaratory judgment jurisdiction when there was no legal risk to declaratory judgment plaintiff.


What They Were Fighting About: Declaratory judgment plaintiff Microchip sold microprocessors used in garage door openers, along with software that could learn garage door opener codes. Chamberlain had patents on technology that learned garage door codes without requiring manual input of the codes. In the settlement of earlier patent litigation, Chamberlain promised not to sue Microchip. In this litigation, Microchip brought declaratory judgment claims, claiming that an actual controversy existed because of Chamberlain's threats of claims against Microchip's customers. The district court found jurisdiction, and ruled on summary judgment that the patents were invalid.

Federal Circuit Holdings:

• The district court erred in finding jurisdiction under the Declaratory Judgment Act.
• Microchip did not have a reasonable apprehension of suit. Its apprehension of suit against its customers was not adequate to establish an actual controversy.
• There must be an underlying legal cause of action threatening the declaratory judgment plaintiff. The practical threat to Microchip's customers was not a legal cause of action.
• Microchip was not threatened with a direct or contributory patent claim, nor did it have any agreement to indemnify its customers. Therefore, it was not subject to the legal risk necessary for declaratory judgment.