The settlement didn't work. After the first year's payment, the parties were unable to continue operating under the agreement. PFS sued Foliar a couple of times, trying to collect the money that Foliar didn't pay, but those cases didn't last. Eventually, PFS gave up on filing lawsuits against Foliar. Foliar, however, filed suit for patent infringement, asserting a number of its patents against PFS.
PFS sought dismissal, arguing that there was no subject matter jurisdiction because of the covenant not to sue. Specifically, PFS relied on Super Sack and its progeny. See Super Sack Manufacturing Corp. v. Chase Packaging Corp., 57 F.3d 1054 (Fed. Cir. 1995). I have previously written about Super Sack a few times.
The typical circumstances are a patent owner asserts its patent and the defendant challenges validity of the patent. For whatever reason, the patent owner decides it doesn't wish to pursue the patent infringement case, but it must also dispose of the counterclaim dealing with non-infringement and invalidity. One solution to this issue is for the patent owner to covenant not to sue the defendant for infringement of the patent. By doing this, the defendant's counterclaims for invalidity and non-infringement are no longer justiciable. There is no longer a threat that the defendant can be sued for infringing the patent, so it can't ask the Court for a declaration that it does not infringe the patent and it has no basis to pursue a declaration that the patent is invalid. Makes sense.
But what about when the patent owner changes its mind and wants to sue on the patent. Does the covenant not to sue deprive the Court of subject matter jurisdiction to resolve that dispute?
"There is no authority for the proposition that a covenant not to sue stands as a jurisdictional bar to bringing a subsequent infringement claim." Samsung Elecs. Co. v. Rambus, Inc., 440 F. Supp. 2d 495, 504 (E.D. Va. 2006). PFS' argument to the contrary overextends the U.S. Court of Appeals for the Federal Circuit's precedent regarding invalidity claims, which are brought pursuant to the Declaratory Judgment Act and require the continuous presence of a real and immediate controversy between the litigants in order to remain justiciable. See MedImmune v. Genentech, Inc., 549 U.S. 118, 127 (2007). Under Super Sack and its progeny, where the case or controversy underlying a patent-invalidity action is the threat that the patentee will press an allegedly invalid patent against the invalidity claimant, the patentee can unilaterally divest the court of subject matter jurisdiction over the invalidity claim by extinguishing the immediacy and reality of that threat. See Super Sack, 57 F.3d at 1058-60; Revolution Eyewear v. Aspex Eyewear, Inc., 556 F.3d 1294 (Fed. Cir. 2009). One way to do so is by issuing a sufficiently broad covenant not to assert the patents-in-suit against the invalidity claimant. Super Sack, 57 F.3d 1058. Additionally, if the patentee has any infringement claims pending against the invalidity claimant at the time of the covenant's execution, the patentee must move to dismiss those claims under Federal Rule of Civil Procedure 41. See Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027, 1033 (Fed. Cir. 2006); cf. Already, LLC v. Nike, Inc., 133 S.Ct. 721, 726-28 (2013) (addressing this procedure in the trademark context). If the combination of the covenant not to sue and the Rule 41 dismissal sufficiently diminishes the controversy underlying an invalidity claim, the invalidity claim is rendered nonjusticiable and the Court is divested of subject matter jurisdiction over it.But that logic does not extent to a plaintiff's claim of patent infringement:
Significantly though, the holdings in the Super Sack line of cases do not extend to patent-infringement claims, which are not brought pursuant to the Declaratory Judgment Act and are therefore not subject to its unique justiciability requirements. See 35 U.S.C. 271 (Providing an independent statutory basis for patent infringement claims). To the contrary, the Federal Circuit has clarified that a patentee's covenant not to sue does not divest a district court of subject matter jurisdiction over infringement claims -- even those that remain pending at the time of the covenant's execution. Highway Equip., 469 F.3d at 1033 n.1 (observing that, in situations where a patentee unilaterally secures a Super Sack dismissal, the patentee's "covenant does not deprive the district court of jurisdiction to determine the disposition of the patent infringement claims raised in the Complaint under Rule 41"); Cooper Notification, Inc. v. Twitter, Inc., 545 F. App'x 959, 966-67 (Fed. Cir. 2013) (same).Thus, PFS's motion to dismiss Foliar's patent infringement claim, for lack of subject matter jurisdiction, was denied.
Foliar Nutrients, Inc. v. Plant Food Systems, Inc., Case No. 6:13-CV-748 (M.D. Fla. July 14, 2014) (J. Dalton)
[NOTE: GrayRobinson, PA is involved in the above-captioned matter]