Foreign Patent Owners Safe From Declaratory Judgment

In a decision that is simply painful to read, the United States Court of Appeals for the Federal Circuit yesterday decided in Autogenomics v. Oxford Gene Technology that a foreign patent owner cannot be made a defendant to a lawsuit seeking a declaratory judgment of invalidity, unenforceability and noninfringement.  According to the majority opinion, Oxford is a British biotechnology company organized under the laws of England and Wales, and despite being the owner of US Patent No. 6,054,270, which relates to oligonucleotide microarrays for analysis of polynucleotides, could not be hauled into court in California because personal jurisdiction could not be exercised.  This leaves Autogenomics, Inc.,  a biotechnology company organized under the laws of California, unable to proceed against Oxford in California despite the fact that they could be sued for infringement in California should Oxford choose to move against them.  How is this fair?  It is not!  It is absurd, and for the majority to point to the Federal District Court in the District of Columbia as a potentially appropriate venue for Autogenomics is disingenuous.  Oxford never argued for transfer or an alternative jurisdiction, they simply maintained that they could not be sued.  Score a major victory for foreign patent owners over US corporations!  How ridiculous!

Autogenomics uses microarray technology in its business, which is headquartered in Carlsbad, California. On July 23, 2007, Autogenomics filed a declaratory judgment action against Oxford in the United States District Court for the Central District of California. Autogenomics asked the court to find that claims 9 and 10 of the ‘270 patent are invalid or unenforceable, and that Autogenomics did not infringe the same claims. On November 27, 2007, Oxford filed a motion to dismiss, arguing that the district court lacked either general or specific personal jurisdiction over it.

On January 17, 2008, the district court ruled that it lacked general jurisdiction because Oxford’s contacts with California were insufficient to be the equivalent of having a physical presence within the state. The district court further ruled that it lacked specific jurisdiction because the declaratory judgment action did not arise from or relate to most of the contacts alleged by Autogenomics.  Finally, the district court denied Autogenomics the opportunity to conduct jurisdictional discovery because Autogenomics failed to make a formal motion and failed to show that discovery would demonstrate facts sufficient to constitute a basis for jurisdiction.

The Federal circuit per Judge Moore and with District Court Judge Robert Gettleman of the Norther District of Illinois sitting by designation ruled that because the district court possessed neither general nor specific personal jurisdiction over Oxford, and because the court did not abuse its discretion by denying jurisdictional discovery, the ruling of the district court needed to be affirmed.  Thankfully, Judge Newman was also on this panel and understood the gravity of the majority ruling and issued a dissent.  Judge Newman explained:

The Federal Circuit again restricts United States parties from access to our courts when a United States patent is owned by a foreign entity. The court rules that the foreign patent owner is not subject to suit in California despite its commercial presence in California including the grant of at least ten patent licenses to companies in California; despite a manufacturing venture of the patent owner with a California-based company to produce and sell microarrays designed by the patent owner; despite participation by the patent owner with respect to the patented technology in trade shows and scientific meetings in California; and despite the patent owner’s threats of infringement against Autogenomics, a California company whose accused activities are conducted in California. On the entirety of these contacts, jurisdiction of this declaratory judgment action was proper in the Central District of California. From my colleagues’ contrary ruling, I respectfully dissent.

In reality, there was not much respectful of Judge Newman’s dissent.  She was, as always, professional but hard hitting.  In addition to simply disagreeing with Judges Moore and Gettleman on the facts and finding plenty of contacts sufficient to support the exercise of personal jurisdiction, Judge Newman also went on for page after page explaining (and correctly so if you ask me) that this ruling is contrary to the precedent established by the Federal Circuit, not to mention the precedent established by the Supreme Court.  Notwithstanding, the most persuasive part of Judge Newman’s decision was her pointing out that if the Federal Circuit is going to rule this way American businesses are going to be at a severe disadvantage given that over half of all US patents are issued to foreign corporations.  Judge Newman explained:

This is not a trivial question. The PTO reports that 50.3% of the patents granted in 2008 were issued to foreign patentees. See USPTO, Extended Year Set-Historic Patents By Country, State, and Year-All Patent Types (December 2008), available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cst_allh.htm. Thus restriction on the availability of declaratory judgment actions against foreign-owned patents is of economic significance. As this court stated in Viam, it cannot have been contemplated that activities otherwise subject to federal jurisdiction, are always immunized from adjudication when the patent owner’s address is offshore.

Hopefully the Federal Circuit will rehear this case en banc and right this wrong.  It seems that I am saying that a lot any more, which itself is a sad commentary about the state and predictability of the patent laws, which the Federal Circuit was formed to ensure would be uniform and stable.  Instead of bickering in Congress about reforms that will benefit only one industry reform should be undertaken that will help the patent system, US inventors and US businesses.  On top of the badly needed inequitable conduct reform and codification of Rule 56 so as to force the Federal Circuit to defer to the Patent Office, Congress should statutorily mandate that by the acceptance of a US patent the patent owner is consenting to jurisdiction if and when declaratory judgment actions are otherwise properly brought.  It is indeed a shame that we need such a common sense and obvious reform, but apparently we do.