The U.S. Court of Appeals for the Federal Circuit affirmed the dismissal of Nucleonics’ declaratory judgment counterclaims for patent invalidity and unenforceability since no legal threat existed where Benitec voluntarily dismissed its patent infringement claims and granted a covenant not to sue Nucleonics. Benitec Australia, Ltd. v. Nucleonics, Inc., Case No. 06-1122 (Fed. Cir., July 20, 2007) (Whyte, Dist. J.(sitting by designation), Dyk, J., dissenting).
Benitec’s infringement action involved U.S. Patent No. 6,573,099 (the ’099 patent) for RNA-interference technology that prevents expression of disease-causing genes. Nucleonics answered and moved to dismiss Benitec’s premature complaint. Nucleonics’ allegedly infringing conduct involved clinical testing for FDA submission on human disease treatment—exempt from infringement under 35 U.S.C. §271(e)(1). Nucleonics later amended its counterclaims to allege invalidity and unenforceability of the ’099 Patent.
Benitec’s infringement action against Nucleonics dissipated largely due to the Supreme Court’s recent decision in Merck v. Integra Lifesciences, which expanded the pharmaceutical research exception of § 271(e)(1). Consequently, Benitec voluntarily dismissed the infringement action and, in its appellee’s brief, granted Nucleonics a covenant not to sue for its accused human health activities arising before the dismissal. Although no longer faced with an infringement challenge, Nucleonics sought to litigate the invalidity and enforceability of the ’099 patent to remove concerns regarding future activities in animal applications of RNAi technology—not exempt under § 271(e)(1). Consequently, Nucleonics appealed the dismissal of its counterclaims.
The Court found Benitec’s voluntary dismissal of the infringement action and covenant not to sue rendered the existing controversy between the parties resolved. According to the Supreme Court’s recent MedImmune decision, declaratory judgment jurisdiction persists only where the party invoking jurisdiction shows "a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality... ." Applying MedImmune, the panel majority found Nucleonics’ discussions with a third party relating to expansion of RNAi technology into animal husbandry and veterinary products did not meet the "immediacy and reality" requirements, since there had been no manufacture, use, sale or offer to sell patented technology triggering an infringement claim.
In dissent, Judge Dyk argued that 1993 Supreme Court precedent in Cardinal Chemistry permits a counterclaim for invalidity to stand even when the underlying claim of infringement is mooted, unless the patentee demonstrates that there is no possibility of a future controversy with respect to invalidity. Judge Dyk believed the burden was on Benitec to overcome the presumption of an ongoing controversy and that Benitec failed to do so. Interestingly, this is the only Federal Circuit case in which a circuit judge has dissented from an opinion written by a district court judge sitting by designation.
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