12(b)(6) for failure to state a cause of action. Plaintiffs
Oral argument was heard on January 12, 2001, in Utica, New
York. Decision was reserved. For the reasons that follow, the
motion will be denied.
This action arises out of an alleged threat by ERBE's CEO,
Christian Erbe, to seek an injunction to halt the marketing of a
flexible argon probe by Conmed. The following are the undisputed
facts in this case, and — where noted — the disputed facts as
alleged by the nonmoving plaintiffs.
Conmed and ERBE are rival manufacturers of surgical devices,
accessories, and support equipment. Each sells a comparable argon
gas-assisted gastrointestinal coagulation probe in the United
States. Conmed's product line is known as the "Argon Beam
Coagulation" ("ABC®") series of products. The principal product
in this series is the Conmed System 7500TM Electrosurgical
Generator with ABC® technology (the "ABC generator"), which is
manufactured by Aspen. The ABC generator is fully protected under
patents owned by the plaintiffs. This generator has various
attachable accessories for use in different surgical procedures.
These attachments are generally not compatible with other units.
One such accessory, which is the specific product at issue in
this lawsuit, is the ABC® Flex Gl Probe (the "Gl probe").
ERBE manufactures and markets a rival system — the ERBE
APC300TM "Argon Plasma Coagulator" (the "APC 300"). Just as with
Conmed's system, the ERBE APC 300 system offers an argon
gas-assisted Gl probe as an accessory. Defendants' probe is
protected by United States Patent No. 5,720,745 (the "'745
patent"). The availability of such a probe is an important factor
to customers considering the purchase of either Conmed's or
ERBE's electrosurgical generators. In addition, the probes are
disposable attachments, and are not intended to be reused.
Because the probes are disposable, their continued availability
is a relevant consideration to potential customers.
The complaint alleges that in the fall of 1999, the parties
were engaged in settlement negotiations over an unrelated
litigation when ERBE suggested that Conmed needed to take a
license of the '745 patent in order to continue selling its Gl
probe. Conmed responded to this request with a detailed response
from its patent counsel, setting forth the reasons why the Gl
probe did not infringe the defendants' '745 patent. At that time,
plaintiffs believed that the defendants were satisfied with this
response, and that the matter was resolved.
Conmed alleges that in February 2000, it subsequently learned
from a sales representative in California that ERBE was implying
in written marketing materials that plaintiffs' Gl probe
infringed the '745 patent. These materials contained a
head-to-head comparison of the argon gas-assisted Gl probes of
the two companies, and emphasized the superiority of the ERBE
probe through material misrepresentations and falsehoods —
including a purported advantage based on ERBE's superior patent
protection. Conmed received similar reports from other sources
over the next several months.
This course of deceptive and unlawful marketing culminated in
the above-referenced statement of Christian Erbe, which
predicated the instant lawsuit. This statement — that defendants
were moving rapidly to halt plaintiffs' manufacturing of flexible
argon probe devices — was repeated to a potential customer of
plaintiffs in a letter written by Steve Cramton, an authorized
dealer of ERBE products (the "Cramton letter").
The Cramton letter, which was sent to Dr. Richard Curtis ("Dr.
Curtis") of Newton Wellesley Hospital in Massachusetts, attempted
to discourage Dr. Curtis from purchasing the Conmed unit by
claiming that "[t]here are significant considerations
regarding instrumentation, patent issues, and compatibility with
endoscopes." The letter then stated that "Christian Erbe has
indicated that ERBE, with its patents covering (10) claims and
(48) drawings, is moving rapidly to cease Conmed's marketing of
flexible Argon probes." Conmed alleges that this statement, and
ERBE's course of false and misleading marketing practices have
poisoned the market for plaintiffs' products because customers
will not buy plaintiffs' ABC generator if they believe that the
Gl probe will become unavailable as a result of litigation
threatened by defendants.
Conmed also alleges that it learned of the Cramton letter — and
Christian Erbe's threat of patent litigation — when a customer
asked one of its sales representative if the parties were
currently engaged in patent litigation. In addition, plaintiffs
assert that ERBE's provision of competitive patent-related
information to a sales representative is consistent with industry
practice because "[i]n the medical device industry, distributors
and sales representatives for manufacturers typically do not have
familiarity with patents and generally rely on statements and
materials provided by manufacturers on such issues." See
Plaintiffs' Opposition at 5 n. 3. This practice, in plaintiffs'
view, made the purported threat by Christian Erbe more credible,
and led to the development of an apprehension by plaintiffs that
patent litigation was imminent.
Shortly after learning of the contents of the Cramton letter,
Conmed commenced the instant action. A letter from plaintiffs'
general counsel, Daniel S. Jonas ("Jonas"), accompanied service
of the complaint upon the defendants. This letter stated, in
It appears to us at this time, however, that ERBE
either believes that CONMED and Aspen infringe
ERBE's United States Patent 5,720,745, or ERBE
believes that it is acceptable in ERBE's commercial
marketing, to imply that CONMED's products may become
unavailable as a result of patent litigation that
ERBE has no intention of commencing.
Exhibit "A" to Defendants' Motion to Dismiss the Complaint (the
"Jonas letter") (emphasis added). This letter was marked "For
Settlement Purposes Only" and contained an invitation by Jonas to
contact him to discuss settlement of this action. The instant
A. 12(b)(1) Motion to Dismiss
1. Standard of Review
If challenged, a plaintiff asserting subject matter
jurisdiction has the burden of proving by a preponderance of the
evidence that it exists. See Malik v. Meissner, 82 F.3d 560,
562 (2d Cir. 1996). When a defendant moves to dismiss a cause of
action pursuant to Fed.R.Civ.P. 12(b)(1), "the movant is deemed
to be challenging the factual basis for the court's subject
matter jurisdiction." Cedars-Sinai Medical Center v. Watkins,
11 F.3d 1573, 1583 (Fed.Cir. 1993). For purposes of such a
motion, "the allegations in the complaint are not controlling . .
. and only uncontroverted factual allegations are accepted as
true." Id. "All other facts underlying the controverted
jurisdictional allegations are in dispute and are subject to
fact-finding by the district court." Id. at 1584. On such a
motion, both the movant and the pleader are permitted to "use
affidavits and other pleading materials to support and oppose
such motions." Kamen v. American Telephone and Telegraph Co.,
791 F.2d 1006, 1011 (2d Cir. 1986).
2. Existence of Subject-Matter Jurisdiction
With regard to plaintiffs' first, second, and third causes
of action for a declaratory judgment of patent noninfringement,
invalidity, and unenforceability, this court has subject matter
jurisdiction under the Declaratory Judgment Act,
28 U.S.C. § 2201, only if a case of actual controversy
existed between the parties at the time the complaint was filed.
A party may not "obtain a declaratory judgment merely because it
would like an advisory opinion on whether it would be liable for
patent infringement if it were to initiate some merely
contemplated activity." Arrowhead Industrial Water, Inc. v.
Ecolochem, Inc., 846 F.2d 731, 736 (Fed.Cir. 1988). In order for
subject matter jurisdiction to lie, "the conflict must be real
and immediate." Id. at 735.
There is a two-part test for determining whether an actual
controversy exists in a declaratory judgment action for patent
noninfringement, invalidity, or unenforceability. First, courts
look at the conduct of the defendant to see if there is "an
explicit threat or other action by the patentee, which creates a
reasonable apprehension on the part of the plaintiff that it will
face an infringement suit." Second, "there must be conduct on the
part of the plaintiff which could constitute infringement or
concrete steps taken with the intent to conduct such activity."
BP Chemicals Ltd. v. Union Carbide Corp., 4 F.3d 975, 978
(Fed.Cir. 1993).*fn1 The first element turns on the conduct of
the defendants, while the infringement element depends on the
conduct of the asserted infringers. Id. The "purpose of the
two-part test is to determine whether the need for judicial
attention is real and immediate or is prospective and uncertain
of occurrence." Id. (Citations omitted.)
Application of the first prong of the test is not limited to
express charges of infringement or threat of suit. A reasonable
apprehension of patent litigation "may be induced by subtler
conduct if that conduct rises `to a level sufficient to indicate
an intent [on the part of the patentee] to enforce its patent,'
i.e. to initiate an infringement action." EMC Corp. v. Norand
Corp., 89 F.3d 807, 811 (Fed.Cir. 1996) (quoting Shell Oil Co.
v. Amoco Corp., 970 F.2d 885, 887 (Fed.Cir. 1992)). In making
this determination, the court must consider the "totality of the
circumstances." Arrowhead, 846 F.2d at 736. See also EMC, 89
F.3d at 812 (the "inquiry does not turn on whether the parties
have used particular `magic words'"). The test requires an
objective evaluation of the facts as they existed and were known
to the plaintiffs as of the date the complaint was filed.
Arrowhead, 846 F.2d at 736.*fn2
One of the underlying purposes of the Declaratory Judgment Act
is to prevent the scenario where, in the colorful words of the
A patent owner engages in a danse macabre,
brandishing a Damoclean threat with a sheathed sword.
Guerrilla-like, the patent owner attempts
extra-judicial patent enforcement with
tactics that infect the competitive environment of
the business community with uncertainty and
Arrowhead, 846 F.2d at 734-735 (internal citation omitted).
Stated more directly, the purpose of a declaratory judgment
action such as this is to permit a business to stop its
competitor from harming it by claiming legal rights which it does
not, in fact, possess. Where, as here, the mere claim of such
rights by a competitor causes injury by poisoning the market for
a party's product or service, the aggrieved party has the right
to seek a declaratory judgment.