DYK, Circuit Judge.
Defendant Honeywell International, Inc. ("Honeywell") and plaintiffs Arkema Inc. and Arkema France ("Arkema") compete in the manufacture and sale of automotive refrigerants. Honeywell owns United States Patent No. 8,033,120 ("the '120 patent") and United States Patent No. 8,065,882 ("the '882 patent"). Arkema sought a declaratory judgment that by entering into contracts to supply HFO-1234yf ("1234yf"), a next-generation automotive refrigerant, to automobile manufacturers for use in automobile air conditioning systems, it would not incur liability as an indirect infringer under the '120 and '882 patents, which cover methods of using 1234yf in automobile air conditioning systems.
The district court refused to entertain Arkema's request for declaratory judgment, denying Arkema's motion to supplement its complaint to add declaratory claims with respect to the '120 and '882 patents on the grounds that there was no justiciable controversy.
We find that the district court erred in its determination that there is no justiciable controversy, and reverse the district court's denial of Arkema's motion to supplement.
Before the mid-2000s, automobile manufacturers used a refrigerant called R-134a for automobile air conditioners. In 2006, global warming concerns prompted the European Union to enact new regulations requiring automobiles to use refrigerants with low "global warming potential." The regulations apply to all new automobile platforms beginning in 2013 and to all new automobiles by 2017. The United States has not yet adopted similar regulations, but U.S. and foreign automobile manufacturers are both transitioning to 1234yf, which has a low global warming potential, and has become "remarkably successful," according to Honeywell's expert, Thomas R. Varner.
Honeywell owns a number of patents relating to 1234yf. United States Patent No. 7,534,366 ("the '366 patent") claims a heat transfer composition combining 1234yf with a polyalkylene glycol lubricant. Claim 1 reads:
'366 patent col. 13 ll. 37-45. Polyalkylene glycol lubricants are part of the heat transfer composition in almost all automobile air conditioning systems. Similarly, United States Patent No. 7,279,451 ("the '451 patent") claims a heat transfer composition including 1234yf with a sufficiently low global warming potential.
Most pertinent here, Honeywell also owns U.S. patents directed to methods of using 1234yf. The '120 patent, which claims priority to the '366 patent, is directed to a method of cooling air using 1234yf combined with a lubricant.
'120 patent col. 13 ll. 14-34. Similarly, the '882 patent claims priority to the '451 and '366 patents, and covers methods of cooling air in an automobile with 1234yf. Claim 1 reads:
'882 patent col. 17 ll. 33-56. Honeywell also owns European Patent No. 1,716,216, which is a counterpart to Honeywell's U.S. patents on 1234yf and includes method claims.
In November 2009, Honeywell filed suit against Arkema for infringement of the European patent based on Arkema's offers to sell 1234yf in Germany. In June 2010, Arkema brought suit against Honeywell in the United States District Court for the Eastern District of Pennsylvania, seeking declaratory judgment that the '451 and '366 composition patents were invalid and not infringed by Arkema's plans to supply U.S. automobile manufacturers with 1234yf.
On February 3, 2012, the district court denied Arkema's motion to supplement. Arkema, Inc. v. Honeywell Int'l, Inc., No. 10-CV-2886, 2012 WL 360189, at *1 (E.D.Pa. Feb. 3, 2012). Although the district court found that there would be no undue prejudice to Honeywell if Arkema were permitted to supplement its complaint, the district court found that Arkema's new claims did not present an Article III case or controversy. Id. at *2 n. 5. As a result, the district court concluded that those claims could not survive a motion to dismiss and that supplementation would therefore be futile. Id. at *3. The district court concluded that Arkema could not be charged with directly infringing the '120
On March 8, 2012, with the agreement of both parties, the district court certified its order denying Arkema's motion to supplement as a final judgment appealable under Fed.R.Civ.P. 54(b). Order, Arkema, Inc. v. Honeywell Int'l, Inc., No. 10-CV-2886 (E.D.Pa. Mar. 8, 2012), ECF No. 80. Arkema timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
The district court's denial of Arkema's motion to supplement its complaint was based on its conclusion that Arkema's supplemental claims were not justiciable. We review that legal conclusion de novo. Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., 482 F.3d 1330, 1335-36 (Fed.Cir.2007). Arkema bears the burden of proving the existence of an Article III case or controversy. See Arris Grp., Inc. v. British Telecommc'ns PLC, 639 F.3d 1368, 1373 (Fed.Cir.2011).
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). In authorizing this procedure, Congress recognized that declaratory judgment is "especially useful in avoiding the necessity ... of having to act at one's peril or to act on one's own interpretation of his rights, or abandon one's rights because of a fear of incurring damages." S.Rep. No. 73-1005, at 2-3 (1934). Thus, the Supreme Court has held that Article III does not require that a landowner "bet the farm" by risking forfeiture of his land before challenging the constitutionality of a state anti-alien land law. See Terrace v. Thompson, 263 U.S. 197, 216, 44 S.Ct. 15, 68 L.Ed. 255 (1923). Nor does Article III require an individual to risk prosecution under state criminal trespass laws before seeking declaratory judgment of his rights. Steffel v. Thompson, 415 U.S. 452, 454 & n. 1, 459, 94 S.Ct. 1209, 39 L.Ed.2d 505 (1974).
The Supreme Court's most pertinent decision is MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007). There, the Court held that Article III did not require a patent licensee to cease payment under the license in order to seek declaratory judgment of the patent's invalidity. Id. at 128, 137, 127 S.Ct. 764. The Court reiterated that the proper test of when an action for declaratory judgment presents a justiciable controversy 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. at 127, 127 S.Ct. 764 (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941)). The Court also made clear that this test is satisfied when the declaratory judgment plaintiff is put "to the choice between abandoning his rights or risking prosecution." Id. at 129, 127 S.Ct. 764. Thus, the Court held that "[t]he rule that a plaintiff must destroy a large building, bet the farm, or ... risk treble damages ... before seeking a declaration of its actively contested legal rights finds no support in Article III." Id. at 134, 127 S.Ct. 764. In
On its face, this is a quintessential example of a situation in which declaratory relief is warranted. The relevant facts are not in dispute. Arkema has concrete plans for offering 1234yf to automobile manufacturers for use in automobile air conditioning systems and now desires to enter into contracts with automobile manufacturers to supply 1234yf. However, if Honeywell's view of its patent coverage prevails, then proceeding with its plans would expose Arkema to significant liability. Indeed, Honeywell has made it clear that it will protect its patent rights against any such activity by Arkema. Honeywell has already asserted claims against Arkema in the United States for infringement of other patents covering the same technology and in Germany relating to Arkema's activities involving 1234yf and automobile air conditioning systems. There is far more here than a mere showing of "economic injury." Rather, Arkema is seeking a determination of a legal right under the method patents covering its own activities. There is a controversy between Arkema and Honeywell as to legal rights in the 1234yf technology.
The district court nevertheless concluded that there was no justiciable controversy. We disagree. First, the district court determined that "Arkema has neither alleged nor offered evidence that an Arkema customer has committed an act of direct infringement," relying on our decision in Arris. Arkema, 2012 WL 360189, at *5. To the extent that the district court suggests that there must actually be acts of direct infringement the district court is mistaken. While Arris found such accusations sufficient for declaratory judgment jurisdiction in a suit brought by a supplier, Arris did not set forth an overarching test for a supplier's standing to seek a declaratory judgment regarding its potential indirect infringement liability; rather, it identified circumstances that have been held sufficient (rather than necessary) for declaratory judgment jurisdiction. 639 F.3d at 1375. Nor is it necessary that a patent holder make specific accusations against either the potential direct infringers or Arkema. Id. at 1379; ABB Inc. v. Cooper Indus., LLC, 635 F.3d 1345, 1348 (Fed.Cir. 2011) ("A specific threat of infringement litigation by the patentee is not required to establish jurisdiction.").
Even the district court appeared to agree that actual direct infringement is not required. The court concluded that:
Arkema, 2012 WL 360189, at *6 (citation omitted). The level of specificity required by the district court does not comport with our cases. There is no question that automobile manufacturers install air conditioners in the automobiles that they sell, that
Nor is it necessary that Honeywell have directly accused Arkema of potential indirect infringement. Even under the now-discarded reasonable apprehension of suit test,
Second, the district court found that Arkema did not allege an adequate "specific planned activity" because "there are methods for using [1234yf] in an automobile air-conditioning system that will not infringe the method patents." Arkema, 2012 WL 360189, at *6. On their face the method patents cover any use of 1234yf in an automobile air conditioner as part of a heat transfer composition (i.e., combined with a lubricant). See '120 patent col. 13 ll. 14-34; '882 patent col. 19 ll. 42-62. And at oral argument, Honeywell conceded that some claims of the '120 and '882 patents do not require a specific lubricant and that all known uses of 1234yf in an automobile air conditioning system require a lubricant. Thus, Honeywell admits that there are no known methods of using 1234yf in an automobile air conditioning system that do not at least arguably infringe its patents.
Third, the district court found that any "threshold acts of direct infringement are not sufficiently immediate to create a justiciable controversy" because "the first predicted commercial launch of any product using [1234yf] is at least one year away." Arkema, 2012 WL 360189, at *6. Honeywell does not dispute that long-term supply contracts are already being signed. Indeed, Honeywell's expert Thomas R. Varner testified that Honeywell and other suppliers of 1234yf have already entered into numerous long-term contracts to supply 1234yf to automobile manufacturers. Such circumstances have put Arkema in a present position of either committing to contracts that could expose it to liability for indirect infringement or abandoning its plans to supply 1234yf to automobile manufacturers in the United States. Therefore, Arkema's need for a declaratory judgment clarifying its rights is sufficiently immediate under Article III. See MedImmune, 549 U.S. at 134, 127 S.Ct. 764.
This is not a case where the declaratory judgment plaintiff alleged only that it would "consider" potentially infringing activities.
Finally, the district court concluded that Arkema had not satisfied the "`reality' requirement" under MedImmune because it "has not demonstrated that the design of its customers' products... is sufficiently fixed." Arkema, 2012 WL 360189, at *6. As discussed above, however, Arkema's relevant plans are clear. It intends to offer 1234yf for use in automobile air conditioning systems. Honeywell's expert Dr. Varner testified that "[b]oth Arkema and Honeywell provided quotes to supply [1234yf] to automobile manufacturers for use as the refrigerant component of heat transfer compositions for automobile air conditioning systems." J.A. 376 (emphasis added). Dr. Varner also repeatedly emphasized the "high demand for [1234yf] in heat transfer compositions in air conditioning systems." J.A. 381 (emphasis added). This is not a situation in which there is uncertainty about whether the supplier's product is going to be used in a way that might or might not infringe the patentee's rights.
Accordingly, we conclude that the controversy between Arkema and Honeywell regarding the '120 and '882 patents is "of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." MedImmune, 549 U.S. at 127, 127 S.Ct. 764.
We hold that the district court erred in denying Arkema leave to supplement its complaint by adding declaratory judgment claims regarding the '120 and '882 patents. There is an Article III case or controversy between Arkema and Honeywell regarding the infringement and validity of those patents. We reverse the district court's denial of Arkema's motion to supplement its complaint, and remand for further proceedings consistent with this opinion.
Costs to Arkema.