Danisco U.S. Inc. v. Novozymes A/S , 744 F.3d 1325 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
DANISCO US INC.,
Plaintiff-Appellant,
v.
NOVOZYMES A/S AND NOVOZYMES NORTH
AMERICA, INC.,
Defendants-Appellees.
______________________
2013-1214
______________________
Appeal from the United States District Court for the
Northern District of California in No. 12-CV-04502,
Magistrate Judge Richard G. Seeborg.
______________________
Decided: March 11, 2014
______________________
THOMAS G. HUNGAR, Gibson, Dunn & Crutcher LLP,
of Washington, DC, argued for plaintiff-appellant. With
him on the brief were TRACEY B. DAVIES, MICHAEL A.
VALEK, and JASON C. MCKENNEY, of Dallas, Texas.
DAVID K. TELLEKSON, Fenwick & West, LLP, of Seat-
tle, Washington, argued for defendants-appellees. With
him on the brief were VIRGINIA K. DEMARCHI and EWA M.
DAVISON.
______________________
2 DANISCO US INC. v. NOVOZYMES A/S
Before LOURIE, PROST, and O’MALLEY, Circuit Judges.
LOURIE, Circuit Judge.
Danisco US Inc. (“Danisco”) appeals from the decision
of the United States District Court for the Northern
District of California dismissing Danisco’s declaratory
judgment action against Novozymes A/S and Novozymes
North America, Inc. (collectively “Novozymes”) for lack of
subject matter jurisdiction. See Danisco US Inc. v. Novo-
zymes A/S, No. 12-4502, 2013 WL 2351723 (N.D. Cal.
Jan. 8, 2013) (unpublished). Because we conclude that
the totality of the circumstances establishes a justiciable
controversy, we reverse and remand.
BACKGROUND
Danisco and Novozymes compete to develop and
supply Rapid Starch Liquefaction (“RSL”) products, which
are genetically modified industrial enzymes used for
converting corn and other plant-based material into
ethanol. Danisco and Novozymes have patents that claim
α-amylase enzymes, which have been genetically
engineered through substitution of amino acids in the
peptide sequence in order to improve their performance in
the liquefaction process.
Since about 2001, Novozymes has sued Danisco or
Danisco’s predecessors in interest for infringement
numerous times. In one instance, Novozymes amended
an application then pending at the United States Patent
and Trademark Office (“PTO”) to claim one of Danisco’s
new products and then sued Danisco in the United States
District Court for the Western District of Wisconsin on
the same day that the patent issued. The Wisconsin court
invalidated Novozymes’s patent because the newly added
claim was not supported by the written description, and
we affirmed. Novozymes A/S v. DuPont Nutrition
Biosciences APS, 723 F.3d 1336, 1346 (Fed. Cir. 2013).
DANISCO US INC. v. NOVOZYMES A/S 3
Danisco owns U.S. Patent 8,084,240 (the “’240
patent”), issued December 27, 2011 and claiming the
benefit of priority from a provisional application filed
June 6, 2008. The ’240 patent claims a truncated
Geobacillus stearothermophilus (“BSG”) α-amylase
variant polypeptide with a substitution from glutamic
acid (“E”) to proline (“P”) at sequence position 188, a so-
called “E188P substitution,” that exhibits increased
viscosity reduction in a starch liquefaction assay
compared to the parental α-amylase polypeptide. ’240
patent col. 275 l. 25–col. 276 l. 29. The claimed enzyme is
the active ingredient in Danisco’s RSL products.
Shortly after the PTO issued a Notice of Allowance of
the application that matured into Danisco’s ’240 patent,
Novozymes again amended one of its own then-pending
patent applications to claim a BSG α-amylase variant
polypeptide with an E188P substitution, and
subsequently requested an interference contesting
entitlement to priority of the invention. J.A. 445–53.
Specifically, Novozymes asserted that its amended claim
encompassed the same invention as Danisco’s claim
because both claims: (i) are directed to an isolated BSG
α-amylase variant, (ii) specify 99% sequence identity to
the parental enzyme, and (iii) require the same E188P
substitution. Id. at 448. In other words, Novozymes
contended that its amended claim covered the same
invention as Danisco’s ’240 patent, namely a BSG
α-amylase variant with an E188P mutation, which is the
active ingredient in Danisco’s RSL products. The PTO
examiner rejected Novozymes’s interference request on
the ground that the truncated BSG α-amylase variant in
Danisco’s then-pending claim did not meet the specific
sequence identity limitations of Novozymes’s amended
claim. Id. at 449–50.
After Danisco’s ’240 patent issued, Novozymes filed a
request for continued examination, challenging the
examiner’s conclusions and again arguing for priority over
4 DANISCO US INC. v. NOVOZYMES A/S
what it described as Danisco’s “interfering ’240 patent.”
Id. at 457, 462. Novozymes maintained that Danisco’s
’240 patent covered the same subject matter as
Novozymes’s amended claim and, in effect, once more
represented that its amended claim read on the active
ingredient in Danisco’s RSL products. Id. Novozymes
asserted that the examiner had “mistakenly concluded”
that Danisco’s ’240 patent directed to a BSG E188P
mutation “d[id] not fall within the scope of” Novozymes’s
then-pending application. Id. The examiner rejected
Novozymes’s request. Id. at 461–67.
Although under no regulatory obligation to do so,
Novozymes then submitted public comments to the PTO
“in order to clarify [for] the record” its belief that the
α-amylase variant claimed by Danisco’s ’240 patent
“fall[s] within the scope” of its own claim, which later
issued to Novozymes as the sole claim of U.S. Patent
8,252,573 (the “’573 patent”) on August 28, 2012, claiming
the benefit of priority from a provisional application filed
June 7, 2001. Id. at 456–59. Novozymes further
commented that it refused to “acquiesce” to or otherwise
be “estopped” by what it deemed to be the examiner’s
erroneous and “overly narrow” view of Novozymes’s claim
scope, which consequently did not allow Novozymes to
invalidate Danisco’s ’240 patent or to claim priority over
the ownership of the BSG E188P α-amylase variant
invention. Id.
Upon issuance of Novozymes’s ’573 patent, Danisco
filed concurrent actions in the United States District
Courts for both the Northern District of Iowa and the
Northern District of California seeking declaratory
judgments that its RSL products did not infringe
Novozymes’s ’573 patent (Count 1) and that the ’573
patent was invalid (Count 2), or alternatively that
Danisco’s ’240 patent had priority over Novozymes’s ’573
patent pursuant to 35 U.S.C. § 291 (Count 3). J.A. 259–
63, 728–32. Following the parties’ stipulated dismissal of
DANISCO US INC. v. NOVOZYMES A/S 5
the Iowa action in favor of the California action,
Novozymes moved to dismiss Danisco’s complaint for lack
of jurisdiction under Federal Rule of Civil Procedure
12(b)(1) and for failure to state a claim under Rule
12(b)(6). J.A. 468–84, 735–36.
The district court granted Novozymes’s motion and
dismissed Danisco’s declaratory judgment claims, holding
as a matter of law that the facts as alleged did not create
a justiciable Article III case or controversy as to Counts 1
and 2. Danisco, 2013 WL 2351723, at *2. The court
acknowledged that Novozymes’s ’573 patent presented a
substantial risk to Danisco, but found that a justiciable
controversy did not exist because Danisco had challenged
Novozymes’s ’573 patent on the day that it issued, and
thus that Danisco’s action “was filed prior to the time
Novozymes took, or even could have taken, any
affirmative action to enforce its patent rights.” Id. at *1.
The court stated that “[w]hile matters such as a prior
litigation history and statements made during
prosecutions sometimes support a conclusion that an
actual controversy exists, there is no precedent for finding
jurisdiction based on such pre-patent issuance events
alone . . . .” Id. at *2 (emphasis in original). The court
determined that Danisco was missing “an affirmative act
of enforcement” or “some implied or express enforcement
threat” by Novozymes because “pre-issuance conduct”
could not satisfy that requirement. Id. at *3–4.
In a footnote, the district court also summarily
dismissed Danisco’s § 291 claim, concluding that
Danisco’s third count requesting a determination of
priority of invention was not ripe because it could not
stand alone in the absence of the primary
noninfringement and invalidity declaratory judgment
claims. Id. at *4 n.2.
Danisco timely appealed. We have jurisdiction
pursuant to 28 U.S.C. § 1295(a)(1).
6 DANISCO US INC. v. NOVOZYMES A/S
DISCUSSION
A district court’s decision to dismiss a declaratory
judgment action for lack of subject matter jurisdiction is a
question of law that we review without deference. Teva
Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d
1330, 1335–36 (Fed. Cir. 2007); SanDisk Corp. v.
STMicroelectronics, Inc., 480 F.3d 1372, 1377 (Fed. Cir.
2007). We review the district court’s underlying factual
findings for clear error. Id.The Declaratory Judgment Act provides that, “[i]n a
case of actual controversy within its jurisdiction . . . any
court of the United States, upon the filing of an appropri-
ate pleading, may declare the rights and other legal
relations of any interested party seeking such declaration,
whether or not further relief is or could be sought.” 28
U.S.C. § 2201(a). The phrase “case of actual controversy”
“refers to the type of ‘Cases’ and ‘Controversies’ that are
justiciable under Article III.” Sony Elecs., Inc. v. Guardi-
an Media Techs., Ltd., 497 F.3d 1271, 1283 (Fed. Cir.
2007) (quoting MedImmune, Inc. v. Genentech, Inc., 549
U.S. 118, 127 (2007)). The burden is on the party claim-
ing declaratory judgment jurisdiction, here Danisco, to
establish that an Article III case or controversy existed at
the time that the claim for declaratory relief was filed and
that it has continued since. Benitec Austl., Ltd. v. Nucle-
onics, Inc., 495 F.3d 1340, 1344 (Fed. Cir. 2007) (citing
Steffel v. Thompson, 415 U.S. 452, 459 n.10 (1974)).
Danisco argues that the standard required for estab-
lishing Article III jurisdiction is satisfied by the facts of
its case and that the district court therefore erred in
dismissing Danisco’s complaint for declaratory judgment
because there is a substantial controversy implicating
adverse legal interests in a manner that is sufficiently
definite and concrete to be capable of conclusive judicial
resolution.
DANISCO US INC. v. NOVOZYMES A/S 7
Novozymes responds that Article III is not satisfied
because Danisco’s declaratory judgment claims are based
on nothing more than speculation and a subjective fear of
Novozymes’s purported enforcement of its patent rights
and not on any real and immediate injury or threat of
future injury caused by Novozymes. Novozymes asserts
that there is no justiciable controversy because there is no
objective evidence that it intends to enforce those rights
and that it has not taken any affirmative action from
which such an inference can be made. Novozymes seeks a
bright line rule that its activity prior to issuance of the
’573 patent cannot give rise to a justiciable controversy
and thus that a declaratory judgment defendant must
first threaten suit on an issued patent or otherwise take
action to enforce its rights in an issued patent.
We agree with Danisco that the standard for finding a
justiciable controversy is satisfied here. Both Novo-
zymes’s argument and the district court’s decision rely on
the fact that Novozymes had not affirmatively accused
Danisco’s RSL products of infringing the issued ’573
patent, but that fact alone is not dispositive of whether an
actual controversy exists, and the district court erred in
holding that it was. See, e.g., Arkema Inc. v. Honeywell
Int’l, Inc., 706 F.3d 1351, 1357 (Fed. Cir. 2013) (holding
that it is not “necessary that a patent holder make specif-
ic accusations” of infringement against the declaratory
judgment plaintiff); SanDisk, 480 F.3d at 1383. The
question instead is whether Danisco has demonstrated a
“substantial risk” that the harm will occur. Organic Seed
Growers & Trade Ass’n v. Monsanto Co., 718 F.3d 1350,
1355 (Fed. Cir. 2013), cert. denied, 187 L. Ed. 2d 776(2014) (citing Clapper v. Amnesty Int’l USA, 568 U.S. __,
133 S. Ct. 1138, 1150 n.5 (2013)).
Article III does not mandate that the declaratory
judgment defendant have threatened litigation or other-
wise taken action to enforce its rights before a justiciable
controversy can arise, and the Supreme Court has repeat-
8 DANISCO US INC. v. NOVOZYMES A/S
edly found the existence of an actual case or controversy
even in situations in which there was no indication that
the declaratory judgment defendant was preparing to
enforce its legal rights. See MedImmune, 549 U.S. at 132
n.11 (describing its holdings in Md. Cas. Co. v. Pac. Coal
& Oil Co., 312 U.S. 270, 273 (1941) and Aetna Life Ins.
Co. v. Haworth, 300 U.S. 227, 239 (1937) in which declar-
atory judgment jurisdiction was held to exist over an
insurance coverage dispute “even though the very reason
the insurer sought declaratory relief was that the insured
had given no indication that he would file suit”).
The Court has instead only “required that the dispute
be ‘definite and concrete, touching the legal relations of
parties having adverse legal interests’; and that it be ‘real
and substantial’ and ‘admi[t] of specific relief through a
decree of a conclusive character, as distinguished from an
opinion advising what the law would be upon a hypothet-
ical state of facts.’” MedImmune, 549 U.S. at
127 (quoting Aetna, 300 U.S. at 240–41). “‘Basically, the
question in each case is whether the facts alleged, under
all the circumstances, show that there is a substantial
controversy, between parties having adverse legal inter-
ests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.’” Id. (quoting Md.
Cas., 312 U.S. at 273); see also Teva, 482 F.3d at 1337(“[I]n a declaratory judgment action, all the circumstances
must demonstrate that a justiciable Article III controver-
sy exists.”) (internal quotations omitted); C.R. Bard, Inc.
v. Schwartz, 716 F.2d 874, 880 (Fed. Cir. 1983) (holding
that “an examination of the totality of the circumstances
must be made to determine whether there is a controver-
sy” in a patent declaratory judgment action). That stand-
ard is satisfied here.
The record demonstrates that a definite and concrete
patent dispute exists between the parties. Novozymes’s
E188P α-amylase variant claim issued as the sole claim of
its ’573 patent and is the same claim that Novozymes
DANISCO US INC. v. NOVOZYMES A/S 9
described as interfering with the claim in Danisco’s ’240
patent. Novozymes has insisted on multiple occasions
that its ’573 patent claim reads on the BSG α-amylase
with an E188P mutation, which is the active compound in
Danisco’s RSL products and is claimed in Novozymes’s
patent. The record shows that Novozymes sought its
patent because it believed that Danisco’s products would
infringe once the claim issued. Novozymes twice asserted
that Danisco’s ’240 patent was invalid and that Novo-
zymes, not Danisco, is entitled to a patent on the claimed
BSG E188P α-amylase invention. Danisco has taken a
legal position that is entirely opposed to the position
taken by Novozymes, viz., that Danisco successfully
prosecuted and obtained the ’240 patent, that it is the
rightful owner of the claimed invention, and that its RSL
products do not infringe the claim of Novozymes’s ’573
patent. Novozymes has twice sued Danisco or its prede-
cessors in interest for patent infringement regarding
related liquefaction products. The parties have plainly
been at war over patents involving genetically modified
α-amylase enzymes and are likely to be for the foreseeable
future. They thus have adverse legal interests over a
dispute of sufficient reality that is capable of conclusive
resolution through a declaratory judgment.
Novozymes has never withdrawn its allegation that
Danisco’s α-amylase variant is encompassed by and would
infringe the claim that issued in Novozymes’s ’573 patent.
Nor has Novozymes offered any assurance, such as with a
covenant not to sue, that it will not accuse Danisco’s RSL
products of infringement, which could potentially moot a
controversy between the parties. See Already, LLC v.
Nike, Inc., 568 U.S. __, 133 S. Ct. 721, 732 (2013); Organic
Seed Growers, 718 F.3d at 1357–58 (holding that patent-
ee’s “representations unequivocally disclaim[ing] any
intent to sue appellant” were “binding as a matter of
judicial estoppel”); Arris Grp., Inc. v. British Telecomms.
PLC, 639 F.3d 1368, 1381 (Fed. Cir. 2011) (“BT’s refusal
10 DANISCO US INC. v. NOVOZYMES A/S
to grant Arris a covenant not to sue provides a level of
additional support for our finding that an actual contro-
versy exists” in a patent declaratory judgment action.).
Moreover, as we have previously noted, and the district
court correctly observed, a history of patent litigation
between the same parties involving related technologies,
products, and patents is another circumstance to be
considered, which may weigh in favor of the existence of
subject matter jurisdiction, as it does here. See Arkema,
706 F.3d at 1357; 3M Co. v. Avery Dennison Corp., 673
F.3d 1372, 1380 (Fed. Cir. 2012); Micron Tech., Inc. v.
Mosaid Techs., Inc., 518 F.3d 897 (Fed. Cir. 2008);
Teva, 482 F.3d at 1344–45 (Fed. Cir. 2007). We see no
reason why we should not similarly consider a pattern of
administrative challenges in analyzing the totality of the
circumstances.
The district court’s categorical distinction between
pre- and post-issuance conduct is therefore irreconcilable
with the Supreme Court’s insistence on applying a flexible
totality of the circumstances test, its rejection of technical
bright line rules in the context of justiciability, and our
own precedent. See, e.g., Matthews Int’l Corp. v. Biosafe
Eng’g, LLC, 695 F.3d 1322, 1328 (Fed. Cir. 2012) (“In
determining whether a justiciable controversy is present,
the analysis must be calibrated to the particular facts of
each case.”). Contrary to the district court’s stated view,
we have never held that “pre-issuance conduct” cannot
constitute an affirmative act, nor have we held that the
only affirmative acts sufficient to create justiciable con-
troversies are “implied or express enforcement threat[s].”
Danisco, 2013 WL 2351723, at *3–4. Even the district
court itself acknowledged that Danisco showed that it was
“reasonable to infer that Novozymes obtained the ’573
patent with the hopes of asserting it against Danisco’s
products, and there may even be a probability that it will
someday do so.” Id. at *1. The court also determined that
the facts plausibly “support a reasonable inference that
DANISCO US INC. v. NOVOZYMES A/S 11
Novozymes pursued the E188P claim in the ’573 patent
with the hopes of wielding it against [Danisco’s] RSL
products, and even that Novozymes may still be harboring
the intent to pursue infringement claims at the time of its
own choosing.” Id. at *2 (emphasis in original). The court
likewise recognized that “the prosecution history may
strongly support an inference that Novozymes sought to
obtain this patent for the purpose of potentially asserting
it against Danisco’s products . . . .” Id. at *3 n.1. Thus,
applying a mechanical distinction to the totality of the
circumstances inquiry between pre- and post-issuance
events is unsound.
Furthermore, the Supreme Court has not articulated
a bright line rule for distinguishing those cases that
satisfy the Article III case or controversy requirement as
it relates to the Declaratory Judgment Act from those
that do not. Indeed, the Court has stated that “[t]he
difference between an abstract question and a ‘controver-
sy’ contemplated by the Declaratory Judgment Act is
necessarily one of degree, and it would be difficult, if it
would be possible, to fashion a precise test for determin-
ing in every case whether there is such a controver-
sy.” Md. Cas., 312 U.S. at 273. We are likewise not
inclined to do so now.
Taken together, Novozymes’s activities thus demon-
strate that it has “engaged in a course of conduct that
shows a preparedness and a willingness to enforce its
patent rights.” SanDisk, 480 F.3d at 1383. That is
enough to establish subject matter jurisdiction. Novo-
zymes’s behavior validates that Danisco, quite reasona-
bly, is more than a “nervous . . . possible infringer,” even
if Novozymes is not currently “poised on the courthouse
steps” to sue Danisco for infringement of the ’573 pa-
tent. Vanguard Research, Inc. v. PEAT, Inc., 304 F.3d
1249, 1254–55 (Fed. Cir. 2002) (quoting Phillips Plastics
Corp. v. Kato Hatsujou Kabushiki Kaisha, 57 F.3d 1051,
12 DANISCO US INC. v. NOVOZYMES A/S
1053–54 (Fed. Cir. 1995)); accord Prasco, LLC v. Medicis
Pharm. Corp., 537 F.3d 1329, 1336 (Fed. Cir. 2008).
At bottom, Danisco is in the position of either aban-
doning its RSL products or running the risk of being sued
for infringement, which is precisely the type of situation
that the Declaratory Judgment Act was intended to
remedy. MedImmune, 549 U.S. at 129 (“[P]utting 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.’”
(quoting Abbott Labs. v. Gardner, 387 U.S. 136, 152
(1967))); accord Medtronic, Inc. v. Mirowski Family Ven-
tures LLC, 571 U.S. __, 134 S. Ct. 843, 850 (2014).
Accordingly, because a totality of the circumstances
shows that Novozymes’s posturing put Danisco in a
position of either pursuing arguably illegal behavior, i.e.,
infringement, or abandoning that which it claims a right
to do, i.e., make and sell the RSL products that are the
embodiments of its ’240 patent, we conclude that the
district court erred as a matter of law in dismissing
Counts 1 and 2 of Danisco’s complaint for lack of subject
matter jurisdiction. Arkema, 706 F.3d at 1357; SanDisk,
480 F.3d at 1381.
Finally, because the district court’s dismissal of Dan-
isco’s third count seeking a declaration of priority pursu-
ant to 35 U.S.C. § 291 was expressly premised on the
erroneous dismissal of Counts 1 and 2 as nonjusticiable,
we vacate that judgment and remand, reinstating Count 3
as filed in Danisco’s complaint in view of our reversal of
the court’s declaratory judgment jurisdiction as set forth
above. The district court dismissed Danisco’s § 291 claim
for lack of ripeness, which does not preclude a second
action after ripeness is found. Dodd v. Hood River Cnty.,
59 F.3d 852, 864 (9th Cir. 1995). Following the law of the
circuit in which the district court sits, here the Ninth
Circuit, we decline to reach the merits of Danisco’s claim
DANISCO US INC. v. NOVOZYMES A/S 13
or Novozymes’s alternative challenges to it because doing
so would grant relief more extensive than that which was
initially received from the district court. Id.; accord
Digital-Vending Servs., Int’l v. Univ. of Phx., Inc., 672
F.3d 1270, 1278 (Fed. Cir. 2012) (“As a general rule, a
federal appellate court does not consider an issue not
passed upon below.”); see also Applied Med. Res. Corp. v.
U.S. Surgical Corp., 435 F.3d 1356, 1360 (Fed. Cir. 2006)
(deferring to regional circuit law in matters not within our
exclusive jurisdiction); Biodex Corp. v. Loredan Biomedi-
cal, Inc., 946 F.2d 850, 857–58 (Fed. Cir. 1991) (“[O]ur
practice has been to defer to regional circuit law when the
precise issue involves an interpretation of the Federal
Rules of Civil Procedure or the local rules of the district
court.”).
CONCLUSION
In view of the foregoing, we conclude that the district
court erred as a matter of law and that the totality of the
circumstances presented here establishes a justiciable
controversy. The judgment of the district court dismiss-
ing Counts 1 and 2 of Danisco’s complaint for lack of
subject matter jurisdiction is therefore reversed and the
case is remanded for further proceedings. In addition, the
district court’s dismissal of Danisco’s third count for a
determination of priority of invention pursuant to 35
U.S.C. § 291 is vacated and remanded.
REVERSED and REMANDED