It was bound to happen. A federal trial court has held that the Supreme Court’s decision in MedImmune, especially footnote 11 thereof, abrogates the Federal Circuit’s longstanding, two-part “reasonable apprehension” test for declaratory judgment jurisdiction over patent infringement cases. (I stated the same conclusion the day after MedImmune issued.)

The case is Highway Equipment Co. v. Cives Corp., No. 04-147, 2007 WL 689766 (N.D. Iowa March 7, 2007). (I’ve included it on my post-MedImmune declaratory judgment case tracking page.)

Here’s the sum total of Judge Reade’s analysis of the jurisdictional question in Highway Equipment:

Neither party questions whether the court has subject-matter jurisdiction. However, the court has a special obligation to determine whether subject-matter jurisdiction exists. See United States v. Corrick, 298 U.S. 435, 440 (1936) (holding that “the lack of jurisdiction of a federal court touching the subject-matter of the litigation cannot be waived by the parties, and the District Court should, therefore, have declined sua sponte to proceed in the cause”).

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 appropriate 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). Until 2007, the Federal Circuit Court of Appeals stated that subject-matter jurisdiction is a question of Federal Circuit Court of Appeals law and developed a two-prong test to determine whether an “actual controversy” exists in a patent case. See, e.g., Gen-Probe Inc. v. Vysis, Inc., 359 F.3d 1376, 1380 (citing BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed.Cir.1993)). Under the so-called “reasonable-apprehension” test, there is an “actual controversy” if there is

(1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory judgment plaintiff that it will face an infringement suit and

(2) present activity [by the declaratory judgment plaintiff] which could constitute infringement, or concrete steps taken with the intent to conduct such activity.

Id. (citations and internal quotation marks omitted).

In MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007), the Supreme Court abrogated the Federal Circuit Court of Appeals’ reasonable-apprehension test. See, e.g., MedImmune, 127 S.Ct. at 774 n. 11 (explaining how the reasonable-apprehension test runs afoul of numerous Supreme Court precedents).FN10 [FN10: The Federal Circuit Court of Appeals has not specifically addressed the scope of MedImmune. See, e.g., Hydril Co. v. Grant Prideco LP, 474 F.3d 1344 (Fed. Cir. Jan. 25, 2007) (”This case does not present an occasion to address [MedImmune], which dealt with the standard for determining whether a declaratory judgment action satisfies the case-or-controversy requirement of the Declaratory Judgment Act.”).] “[T]he phrase ‘case of actual controversy’ in the [Declaratory Judgment] Act refers to the type of ‘Cases’ and ‘Controversies’ that are justiciable under Article III” of the Constitution. MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764, 771 (2007) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937)). “‘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 interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’” Id. (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)). HECO, as the declaratory judgment plaintiff, bears the burden to prove subject-matter jurisdiction exists. Cardinal Chem. Co. v. Morton Int’l Inc., 508 U.S. 83, 95 (1993).

The court finds that there is an “actual controversy” between HECO and Cives and Monroe regarding the four patents-in-suit. HECO makes and sells the XT3. In June of 2004, counsel for Cives and Monroe wrote a letter to HECO and stated that their patents covered the XT3 and any effort by HECO to make or sell the XT3 would constitute patent infringement. HECO denied any infringement. There is no evidence that, before HECO filed this action, Cives or Monroe promised or otherwise represented to HECO that they would not sue HECO over such patents. Cf. Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed.Cir.1995) (recognizing that “a patentee defending against an action for a declaratory judgment of invalidity can divest the trial court of jurisdiction over the case by filing a covenant not to assert the patent at issue against the putative infringer”) (citations omitted).

Even though the court finds that there is an “actual controversy” between HECO and Cives and Monroe as to the four patents-in-suit, the court must still determine whether it should exercise its jurisdiction. The Declaratory Judgment Act confers “unique and substantial discretion” upon district courts “in deciding whether to declare the rights of litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). The Act “provides that a court ‘may declare the rights and other legal relations of any interested party,’ 28 U.S.C. § 2201(a), not that it must do so.” MedImmune, 127 S.Ct. at 776 (emphasis in MedImmune). “When all is said and done … ‘the propriety of declaratory relief in a particular case will depend upon a circumspect sense of its fitness informed by the teachings and experience concerning the functions and extent of federal judicial power.’” Wilton, 515 U.S. at 287 (quoting Pub. Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 243 (1952)). Considering the totality of the circumstances, the court accepts subject-matter jurisdiction over the case.

Good times!