SCt Patent Case re Art. III jurisdiction
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The Supreme Court’s decision in a patent case has some language that could be useful for enforcing federal rights in other contexts. The case involved whether a company that believed it did not owe royalties had to stop paying royalties in order to create a case or controversy to challenge the validity of the patent under which it allegedly owed royalties. If the company stopped paying royalties, it risked treble damages if the court ultimately held that the patent validly required the payment of royalties. Therefore, there was great financial risk to the company from withholding royalties. The company continued paying the royalties and sought a declaratory judgment under the Declaratory Judgment Act that it did not owe the royalties. The Court of Appeals for the Federal Circuit held that since the payment of royalties eliminated any risk of damages, there was no case or controversy. The Supreme Court reversed, holding that the company did not have to assume such great risk to get a declaratory judgment. Medimmune, Inc. v. Genentech, Inc., 2007 WL 43797 (Jan. 9, 2007). Justice Thomas was the sole dissenter.
The Court opinion, written by Justice Scalia, states:
Our analysis must begin with the recognition that, where threatened action by government is concerned, we do not require a plaintiff to expose himself to liability before bringing suit to challenge the basis for the threat-for example, the constitutionality of a law threatened to be enforced. The plaintiff's own action (or inaction) in failing to violate the law eliminates the imminent threat of prosecution, but nonetheless does not eliminate Article III jurisdiction….
The dilemma posed by that coercion-putting the challenger to the choice between abandoning his rights or risking prosecution-is “a dilemma that it was the very purpose of the Declaratory Judgment Act to ameliorate.” Abbott Laboratories v. Gardner, 387 U.S. 136, 152, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967).
Supreme Court jurisprudence is more rare regarding application of the Declaratory Judgment Act to situations in which the plaintiff's self-avoidance of imminent injury is coerced by threatened enforcement action of a private party rather than the government….
The rule that a plaintiff must destroy a large building, bet the farm, or (as here) risk treble damages and the loss of 80 percent of its business, before seeking a declaration of its actively contested legal rights finds no support in Article III….
Of course even if respondents were correct that the licensing agreement or the common-law rule precludes this suit, the consequence would be that respondents win this case on the merits-not that the very genuine contract dispute disappears, so that Article III jurisdiction is somehow defeated. In short, Article III jurisdiction has nothing to do with this “insurance-policy” contention.
The dicta regarding the threat of government enforcement and the elimination of an imminent threat might be helpful in cases like Elizabeth M. v. Montenez, 458 F.3d 779 (8th Cir. 2006), wherein the Eighth Circuit held that claims of former residents of an inpatient mental hospital were moot and not viable to obtain declaratory and injunctive relief, despite the claim that these repeat patients were likely to be readmitted. While the Supreme Court dicta will certainly not overrule the Eighth Circuit’s holding, it could be helpful to be able to quote from a decision written by Scalia.
Also, the case could be helpful to individuals challenging private parties, such as hospitals, landlords, etc. when people have taken steps to protect themselves but seek a declaratory judgment regarding their rights for the future.