Hewlett-Packard v. Acceleron: “Case or Controversy” and “Patent Trolls”

In Hewlett-Packard Company v. Acceleron, LLC, 587 F.3d 1358 (Fed. Cir. 2009), the Federal Circuit appears to have imposed a more lenient standard for finding a "case or controversy" when a "patent troll" initiates communications.

Acceleron, LLC describes itself as a company dedicated to "accelerating the value of intellectual property." The District Court described it as a "patent troll." In 2007 Acceleron wrote to Hewlett-Packard ("HP") to call attention to a particular patent held by Acceleron which relates to "Blade Servers" manufactured by HP. Acceleron offered to share information with HP, but asked that the parties agree that no case or controversy would arise from their communications. HP responded that HP would agree to discuss the issue if Acceleron would agree to a 120 day standstill agreement. Acceleron countered that a standstill agreement was not necessary, because HP had no basis to sue, and Acceleron once again requested that HP agree no case or controversy would arise from the parties’ discussions. HP then sued Acceleron, seeking a declaratory judgment.

Acceleron filed a motion to dismiss HP’s complaint, arguing there was no case or actual controversy between the parties. The District Court concluded that, in such a case, one of the following is required for jurisdiction: 1) a direct statement regarding infringement; 2) the identification of a claim under a patent that had been infringed; or, 3) licensing discussions between the parties that would support a conclusion that plaintiff believed infringement was occurring. The District Court found no history of litigation by Acceleron regarding the specific patent at issue (despite having characterized Acceleron as a "patent troll"). Further, the District Court found no statement of infringement, no identification of specific claims allegedly infringed, no claim charts, and no identification of other licensees. As a result, the District Court granted Acceleron’s motion to dismiss.

On appeal by HP, Acceleron argued that it never asserted its rights under the specific patent at issue because its correspondence with HP did not contain language threatening to sue for infringement or demanding a license. In response to this point, the Federal Circuit wrote that "it is implausible . . . to expect that a competent lawyer drafting such correspondence for a patent owner would identify specific claims, present claim charts, and explicitly allege infringement."

Acceleron also argued that a patent owner might contact another "to suggest incorporating the patented technology into the other party’s product, or to attempt to sell the patent to the other party." The Federal Circuit found this argument disingenuous, under the circumstances, because Acceleron claimed its patent was "relevant," imposed a short deadline for response, and repeatedly insisted the other party not file suit.

Ultimately, the Federal Circuit concluded that it was "not unreasonable" to interpret Acceleron’s letters as implicitly asserting its rights under the patent at issue, because Acceleron was not a competitor but rather a patent holding company. In effect, the Federal Circuit concluded that receipt of a letter inquiring about a particular product from a competitor differs from receipt of the same letter from a patent troll.

On these grounds, the Federal Circuit reversed the District Court’s ruling.

As the Federal Circuit stated in this case, "conduct that can be reasonably inferred as demonstrating intent to enforce a patent can create declaratory judgment jurisdiction." The Federal Circuit also held, however, that it was "not unreasonable" for HP to interpret Acceleron’s letters as implicitly asserting rights a particular patent. It is not entirely clear whether the Federal Circuit intended to create a "not unreasonable" standard in cases involving disputes over whether a "case or controversy" exits.

Under Hewlett-Packard v. Acceleron, companies can argue that even facially mild communications from a patent troll may suffice to create a case or controversy, for purposes of declaratory judgment jurisdiction. Such jurisdiction may not be defeated simply by avoiding the use of magic words like "infringement," "litigation" or "license."