By Dennis Crouch
Cisco Systems, Inc. v. Alberta Telecom (d/b/a TR Tech) (Fed. Cir. 2013)
In a non-precedential opinion, the Federal Circuit has extended the Supreme Court's recent holding in Nike v. Already with reference to patent cases. The result here is that Cisco customers continue to face patent infringement liability for using Cisco products, but that Cisco cannot file a declaratory judgment lawsuit to clear its distribution chain from litigation threats. Although ostensibly following MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), the appellate court here retreats at least from more liberal interpretations of that decision. The case is interesting because it appears that the holding here is substantially based upon an offered covenant-not-to-sue seemingly made by TR Tech's counsel during oral arguments on appeal. This parallels the court's recent decision in Organic Growers v. Monsanto where the court also relied upon statements made during oral arguments in order to make its decision. It is unclear whether this strategy is the proper way for the court to handle appeals especially because the law is not well settled with regard to the binding effect of unprepared oral statements made during appellate oral arguments. In the Monsanto case, the court wrote:
If we rely on Monsanto's representations to defeat the appellants' declaratory judgment claims (as we do), those representations are binding as a matter of judicial estoppel. It is well-established that a party who successfully argues one position is estopped from later adopting a contrary position in a case involving the same patent.
In reality, I don't believe that the notion of judicial estoppel is quite a clear-cut as the judges appear to believe here.
The basic setup in this case is that Cisco's routers form an integral part of most computer networks. And, TR Tech's patents cover a particular network configuration facilitated by Cisco routers. TR sued various Cisco customers for infringement and alleged that the infringement was based upon those defendants' use of Cisco routers. In response, Cisco filed a declaratory judgment lawsuit against TR – seeking judgments of patent invalidity and noninfringement. The district court dismissed the case – finding it "difficult to tell from the record [of the customer lawsuits] whether a justiciable controversy yet existed between Cisco and TR Labs." In the appellate oral arguments, TR Tech stated that the company had ""no basis for suing [Cisco] either for direct or indirect infringement;" that Cisco's routers have substantial non-infringing uses; and that TR Labs would be "happy" to give Cisco a covenant-not-to-sue Cisco for infringement of any of the asserted patents. (To be clear, it does not appear that any covenant-not-to-sue has been effectuated). The court writes:
It is understandable that Cisco may have an interest in saving its customers from infringement contentions premised, even in part, on their use of Cisco products. In the circumstances presented here, that interest is simply insufficient to give rise to a current, justiciable case or controversy upon which federal declaratory judgment jurisdiction may be predicated.
In writing the opinion, Judge O'Malley is somewhat careful to distinguish two recent Federal Circuit opinions: Arkema Inc. v. Honeywell International, Inc., 706 F.3d 1351 (Fed. Cir. 2013) and Arris Group, Inc. v. British Telecommunications PLC, 639 F.3d 1368 (Fed. Cir. 2011). In Arkema, the Federal Circuit allowed the DJ-plaintiff to add newly-issued patents to the DJ action and in Arris Group, the court found DJ-jurisdiction based upon patent lawsuits against customers that included indemnification claims against the DJ-plaintiff as well as pre-litigation allegations of infringement by the patentee against the DJ-plaintiff. None of those factors existed here.