KASHIWA, Circuit Judge.
This case on appeal from the United States District Court for the District of New Jersey raises two important issues. First, we must decide whether we have jurisdiction under The Federal Courts Improvement Act of 1982, Pub.L. No. 97-164, § 127, 96 Stat. 25, 37 (28 U.S.C. § 1295) to decide whether a federal district court has jurisdiction of a case under 28 U.S.C. § 1338(a) (1976). If we have jurisdiction, we must then decide whether a patent licensee may bring a federal declaratory judgment action to declare a patent subject to a license invalid while that license is still in effect. We hold that we have jurisdiction of this case under § 1295(a) and that a patent license need not be terminated before a patent licensee may bring a federal declaratory judgment action.
On August 17, 1971, Boris Schwartz, the appellee, was granted U.S. Patent No. 3,559,637 (hereinafter the Schwartz patent) for an intravenous catheter assembly. On January 3, 1972, C.R. Bard, Inc., the appellant, and appellee Schwartz entered into a license agreement. Under that agreement, appellant was granted an exclusive worldwide license by appellee to make, use, and sell the catheter assembly. Bard paid Schwartz $5,000 for the licensing agreement and agreed to make subsequent royalty payments to Schwartz. From 1972 to the present, Bard and its sublicensee, Delmed, Inc., have made and sold the catheter assembly in the United States. Bard paid Schwartz some royalties pursuant to the license agreement but ceased making these payments prior to commencement of this federal suit.
Schwartz filed an action in the Law Division of the Superior Court of the State of New Jersey, Passaic County, on January 25, 1982. The state complaint and summons were served on Bard on March 12, 1982. That complaint made five allegations:
Schwartz requested compensatory and punitive damages, an accounting, interest, and costs. Bard maintains that it took no action with respect to the state action because it believed the Schwartz patent to be invalid and unenforceable.
On March 25, 1982, Bard filed a complaint in federal district court seeking, among other relief, a judgment declaring that defendant's patent is invalid and unenforceable, that the license agreement between the parties is void and unenforceable as against federal law and policy, and that no royalties are payable to Schwartz under the license. Bard further sought judgment against Schwartz for all royalties paid under the agreement and for its litigation costs. In addition, Bard sought to enjoin Schwartz both from asserting his patent against Bard and from proceeding with his state action against Bard. Bard alleged it was vulnerable to a federal claim of patent infringement due to Schwartz's institution of the New Jersey state action, his present ability to terminate the license agreement at any time or to assert its completed termination by its own terms, and Bard's failure to pay royalties. Bard asserted that its action for declaratory judgment raises a defense in anticipation of an impending federal action, and that federal "arising under" jurisdiction is present under 28 U.S.C. § 1338(a) (1976).
The district court held, however, that it did not have jurisdiction of the case under § 1338(a). The court first found that the license agreement had not been terminated.
Appellee contends that it is not within this court's jurisdiction to decide whether a federal court has jurisdiction under § 1338(a) over a controversy where a licensee alleges that the patent subject to a continuing license agreement is invalid. Appellee argues that
Appellee's Brief at 11. We disagree.
This court has inherent jurisdiction to determine its own jurisdiction. United States v. United Mine Workers of America, 330 U.S. 258, 67 S.Ct. 677, 91 L.Ed. 884 (1947). 28 U.S.C. § 1295 governs this court's jurisdiction. It provides in pertinent part:
Under § 1295 this court is granted exclusive jurisdiction to review a district court's final decision where that court's jurisdiction was based in whole or in part on § 1338. Thus, by the very terms of the statute, in order to determine the scope of our own jurisdiction we must decide whether the jurisdiction of a district court whose decision is before us is based on § 1338. In the instant case the sole issue decided by the district court was whether it had jurisdiction under § 1338 and that is the issue raised on appeal. Therefore, in order to decide whether we have jurisdiction over the instant appeal, we must determine whether the district court had jurisdiction under § 1338, the issue on appeal.
Any other conclusion would cause our jurisdiction to turn on the decision reached by the lower tribunal. Under the terms of § 1295, if the district court had found its jurisdiction was based on § 1338 the appeal of that decision would come to this court. We would have exclusive jurisdiction of that appeal under § 1295. To say, however, that where a district court holds it lacks jurisdiction under § 1338(a) the appeal of that issue should go to the regional circuit court, is an absurd result. As the arbiter of our own jurisdiction, we necessarily have the power to decide the threshold question whether the district court has jurisdiction under § 1338 independent of the conclusion reached by the district court.
Furthermore, Congress intended that the "jurisdictional language [of § 1295] be construed in accordance with the objectives of
Thus, we reject appellee's contention that the appeal of jurisdictional questions under § 1338 must be heard by the regional circuit courts, whereas only the merits of a patent case are within the jurisdiction of this court. Congress intended this court to have the exclusive authority under § 1295 to decide the issue, necessarily an integral part of a case, whether a district court has jurisdiction to entertain a case under § 1338. Our holding is consistent with the framework set by Congress to provide one national Court of Appeals to hear all appeals from district courts in cases arising under the patent laws. Thus, in consideration of the statutory language, the legislative history and intent of the statutory scheme, we hold that we have jurisdiction to decide whether the district court had jurisdiction under § 1338.
In 1969, the Supreme Court decided the landmark case of Lear v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969). Lear held that a licensee to a patent license agreement may not be estopped from asserting that the patent subject to the license is invalid. Lear changed the prior law in this regard on the basis of public policy. The Court said:
395 U.S. at 668-71, 89 S.Ct. at 1910-11. [Footnote omitted.] Lear, however, left unresolved the question when a federal court has jurisdiction of a licensee's claim of patent invalidity.
It is well settled that a case cannot "arise under" federal law where the claim is merely a defense to a state court action. Public Service Commission v. Wycoff Co., 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952); Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 70 S.Ct. 876, 94 L.Ed. 1194 (1950). In the instant case, this means there can be no federal jurisdiction if Bard is merely asserting a patent invalidity defense to the state court contract action brought by Schwartz.
In addition, the suit brought by Bard must also meet the constitutional requirement that there be a justiciable case or controversy. This requires a real and substantial dispute affecting the legal rights and obligations of parties having adverse interests. Golden v. Zwickler, 394 U.S. 103, 89 S.Ct. 956, 22 L.Ed.2d 113 (1969); Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 57 S.Ct. 461, 81 L.Ed. 617 (1937). Courts have interpreted the controversy requirement in the patent field to generally mean that the declaratory plaintiff has sufficient interest in the controversy and that there is a reasonable threat that the patentee or licensor will bring an infringement suit against the alleged infringer. Smith, Foreclosure of Licensee Validity Challenges with Procedural Barriers: Federal Jurisdiction, 61 JPOS 690, 697 (1979). See, e.g., Japan Gas Lighter Association v. Ronson Corp., 257 F.Supp. 219, 150 USPQ 589 (D.N.J.1966).
The courts of appeals have split over whether absent diversity jurisdiction a licensee may bring a declaratory judgment action to declare the patent subject to the licensee invalid while the license is in effect. In Thiokol Chemical Corp., 448 F.2d 1328, the Third Circuit held that while a license agreement is in effect, no threat of infringement is possible. In those circumstances the patent validity issue may only arise as a defense to a state contract action, over which federal courts have no jurisdiction. Once the license agreement was terminated, however, the Thiokol court held that the district court had jurisdiction under § 1338(a).
The Second Circuit, on the other hand, has taken an opposing view. In Warner-Jenkinson, 567 F.2d 184, the court held that repudiation of a license agreement should not be a precondition to suit. The court said:
Id. at 187-88. The court held that although the licensee had not ceased payment of royalties under the license agreement, there was still a federal controversy. The court said that nonpayment of royalties by the licensees would subject them to federal claims. It stated:
Id. at 187 n. 4. See also Precision Shooting Equipment Co. v. Allen, 646 F.2d 313, 210 USPQ 184 (7th Cir.1981); Geni-Chlor International, 580 F.2d 981; Hanes, 531 F.2d 585; Medtronic, Inc. v. American Optical Corp., 327 F.Supp. 1327, 170 USPQ 252 (D.Minn.1970).
We must choose the better view. We reject the blanket approach of Thiokol that there can never be an apprehension of a federal infringement suit and thus no controversy when a license is still in effect. To always require the termination of a license agreement as a precondition to suit would mean that a licensee must then bear the risk of liability of infringement. This would discourage licensees from contesting patent validity and would be contrary to the policies expressed in Lear. As stated in Lear, licensees are often the only ones with sufficient interest in a patent to contest its validity. For declaratory relief to be appropriate, the Supreme Court in Wycoff simply required that:
344 U.S. at 244, 73 S.Ct. at 240. These conditions may be met where there is a license agreement in effect. We therefore hold that an examination of the totality of the circumstances must be made to determine whether there is a controversy arising under the patent laws. We hold that appellant Bard, under the facts of this case, had a reasonable apprehension of an infringement suit even though the license agreement was still in effect. Thus, there was federal "arising under" jurisdiction under § 1338(a) and an actual controversy.
As stated, whether there is a federal controversy in the instant case can only be determined by an examination of the totality of the circumstances. Bard, the licensee, had ceased payment of royalties under the
Furthermore, after Bard ceased payment of royalties, Schwartz filed suit in state court for recovery of the royalties and for greater royalties it claims are due under the agreement on account of the alleged assignment of the license to Delmed. Involvement in that litigation shows a willingness by Schwartz to enforce his patent rights. This is a factor to be considered in determining whether there is a threat of an infringement suit. See, e.g., Components, 318 F.Supp. 959; Sargent Industries, Inc. v. Lear Siegler, Inc., 200 USPQ 251 (C.D.Cal.1977). Demand for future royalty payments, as was made in this case, is also a factor indicative of a reasonable apprehension of an infringement suit.
Appellee argues these factors are negligible in light of the affidavit he signed and submitted with his motion to dismiss the declaratory judgment action. An examination of the affidavit shows that its words were carefully chosen and did not negate the possibility of an infringement action. That affidavit said Schwartz had and has no intention of terminating the license agreement or suing for infringement. Intentions, however, may change over time. Schwartz did not say that he would not terminate the agreement and would not bring an infringement suit. Thus, under the terms of his own affidavit Schwartz was free to terminate the agreement at a time of his choosing and institute an infringement action. At oral argument appellee's attorney was asked whether he would affirmatively state that he would not bring an infringement suit. He would only say that on the facts presently known to him he would not sue. The facts presently known to appellee and his attorney are not indicated anywhere. Thus, Bard has a reasonable apprehension that Schwartz may bring an infringement action against it. Cf. Wallace & Tiernan Inc. v. General Electric Co., 291 F.Supp. 217, 160 USPQ 663 (S.D.N.Y.1968). (Although defendant attested he would never sue plaintiff for infringement, actual controversy was found. Plaintiff's business was hurt by conduct and asserted legal claims of defendant, and other parties were unwilling or unable to bring suit.)
In conclusion, we hold that a patent licensee may bring a federal declaratory judgment action to declare the patent subject to the license invalid without prior termination of the license. We hold that there is a federal controversy in the instant case and that the district court therefore has jurisdiction over this case under 28 U.S.C. § 1338(a). This case is remanded to the district court for further proceedings in accord with this decision.
REVERSED AND REMANDED.
That issue is not raised on appeal.