Magistrate Judge Burke: No Declaratory Judgment Jurisdiction Over Only-Somewhat-Related Patents, Requirements of Twombly and Iqbal Apply to Invalidity Counterclaims

In the case of Idenix Pharms., Inc., et al. v. Gilead Scis., Inc., et al., Chief Judge Stark referred a motion to dismiss counterclaims to Magistrate Judge Burke on May 20, 2014. Judge Burke heard oral argument on the motion on August 14, 2014 and issued his decision on August 25, 2014. Judge Burke’s report and recommendation considered plaintiff Idenix’s motion to dismiss certain of defendant Gilead’s counterclaims for non-infringement, invalidity, and patent interference with claims of one of the Gilead’s patents. Idenix Pharms., Inc., et al. v. Gilead Scis., Inc., et al., C.A. No. 13-1987-LPS, Report and Recommendation at 1-3 (D. Del. Aug. 25, 2014).

Idenix first challenged Gilead’s declaratory judgment counterclaims of non-infringement and invalidity for lack of subject matter jurisdiction. Calling the issue “a close one,” Judge Burke nevertheless concluded that Gilead did not meet its burden of establishing the existence of a case or controversy. Id. at 5. As Judge Burke explained, there are “a number of facts that raise understandable concern as to whether [Defendants] might face further suit from Plaintiff . . . [including] that ‘the parties have plainly been at war over patents involving [the same general subject matter implicated by the declaratory judgment claims] and are likely to be for the foreseeable future’ [and] the fact that there are a number of undeniable similarities between the [declaratory judgment] patents on the one hand, and the patents Plaintiffs have asserted in [their complaint] on the other.” Id. at 5-6.

Judge Burke found all of these facts were outweighed by Idenix’s countervailing facts indicating that it had “never taken any steps to threaten Defendants with litigation” and there were “noticeable differences” between the declaratory judgment patents and the patents asserted in the complaint. Id. at 8-9. “In the end,” Judge Burke concluded, “this close decision is swung by two primary factors. The first is that in nearly all of the key patent cases cited by the parties in which courts have found subject matter jurisdiction to exist regarding a declaratory judgment claim, the patent holder took far clearer, hostile action related to the patent at issue than have Plaintiffs here. And the second is the nature of the burden – it is Defendants’ burden to convince the Court why, though they have never been threatened with litigation over these two patents, circumstances suggest an imminent and real threat in the future.” Id. at 10-11.

Interestingly, Judge Burke also explained that under Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329 (Fed. Cir. 2008) and Microsoft Corp. v. Datatern, Inc., 755 F.3d 899 (Fed. Cir. 2014), “since the Court’s ultimate decision here is that Defendants have not demonstrated that subject matter jurisdiction existed as to [the declaratory judgment counterclaims] at the time of the filing of the counterclaims, the post-filing, covenant-related activity between the parties does not affect the Court’s calculus.” Id. at 7-8 n.3.

Also at issue were certain counts seeking a declaration of invalidity, which Idenix argued were insufficiently pled under Twombly and Iqbal. Judge Burke found that the Twombly standard had not been met by Gilead’s “bare-bones legal conclusions.” Id. at 14. In doing so, Judge Burke decided between divergent authority in the District of Delaware on the question of whether patent counterclaims are subject to the Twombly pleading standard. Compare Bayer CropScience AG v. Dow AgroSciences LLC, Civil No. 10-1045 RMB/JS, 2011WL6934557, at *2-3 (D. Del. Dec. 30, 2011) with Senju Pharm. Co., Ltd. v. Apotex, Inc., 921 F. Supp. 2d 297 (D. Del. 2013). Id. at 11-14.

Finally, Idenix moved to dismiss Gilead’s counterclaim of interference, which did not allege that Gilead believed the two patents at issue were interfering, but that Idenix had asserted that they are interfering. Id. at 17-18. Judge Burke found that this did not meet the pleading standard because Gilead had not alleged that the two patents claim the same or substantially the same subject matter, and “[t]he Court cannot conceive of a circumstance in which a party could be said to have met its burden to state a claim-not by affirmatively asserting that facts exist that would plausibly satisfy a claim element-but instead by contending only that someone else thinks that they do.” Id. at 18-19.

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