Chinta & Fratangelo LLP

Claim to breach of “have made” rights a federal question if enforcement is a question of patent infringement

In ABB Inc. v. Cooper Indus. LLC, No. 2010-1227 (Fed. Cir. 2/17/2010), ABB took a license to a group of Cooper patents pertaining to a vegetable oil-based dialectric fluid called “Biotemp.”  The license purported to contain a “have made” provision prohibiting 3rd parties from manufacturing the claimed material.  ABB then outsourced manufacturing to Dow Chemical. Cooper wrote threatening letters to ABB and Dow.  ABB filed a DJ action.  After amendments to the complaints, ABB sought a declaratory judgement in federal court that it was permitted to outsource under the license, and that the patent claims were not infringed or invalid.  Cooper sued in Texas state court asking for a DJ that the license did not permit outsourcing.

The Federal court dismissed ABB’s suit for lack of subject matter jurisdiction, stating that there were no articulated defenses of invalidity or nonenforceability, and that the license claim was a state court question only. ABB appealed the dismissal.  The Federal Circuit reversed.

On appeal, the Fed. Cir. holds there is a federal question here, because Cooper would have to rely on hypothetical claim of patent infringement to enforce the license. “When the declaratory defendant’s hypothetical suit arises under federal law, “[w]hat is litigated in such a situation is ‘the precise issue which could have been litigated in federal court in a coercive action brought by’ the declaratory defendant.” Slip op. 8–9. Thus, the hypothetical suit in this case would be patent infringement, a federal question.

There was a discussion of jurisdiction where there is a federal claim (patent) but a state law (contract) defense.   Bottom line: if patents are involved, and a defense or litigation claim asserts substantive patent law, it’s a federal question and can’t be dismissed.