Asia Vital Components Co. v. Asetek Danmark A/S

United States Court of Appeals
for the Federal Circuit
______________________
ASIA VITAL COMPONENTS CO., LTD.,
Plaintiff-Appellant
v.
ASETEK DANMARK A/S,
Defendant-Appellee
______________________
2015-1597
______________________
Appeal from the United States District Court for the
Eastern District of Virginia in No. 1:14-cv-01293-LO-TCB,
Judge Liam O'Grady.
______________________
Decided: September 8, 2016
______________________
ANDREW C. AITKEN, Aitken Law Offices, Wheaton,
MD, and CAMERON H. TOUSI, IP Law Leaders PLLC,
Washington, DC, argued for plaintiff-appellant. Also
represented by RAYMOND HO.
ROBERT F. MCCAULEY, Finnegan, Henderson, Fara-
bow, Garrett & Dunner, LLP, Palo Alto, CA, argued for
defendant-appellee. Also represented by C. BRANDON
RASH, Washington, DC.
______________________
2 ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S
Before PROST, Chief Judge, LINN and TARANTO, Circuit
Judges.
PROST, Chief Judge.
Asia Vital Components Co., Ltd. (“AVC”) filed a de-
claratory judgment action against Asetek Danmark A/S
(“Asetek”) seeking a declaration that AVC did not infringe
U.S. Patent Nos. 8,240,362 (“’362 patent”) and 8,245,764
(“’764 patent”) (collectively, “the asserted patents”) and
that those patents are invalid. The United States District
Court for the Eastern District of Virginia dismissed the
case for lack of subject matter jurisdiction, concluding
that AVC’s complaint did not plead sufficient facts to
show that there is a substantial controversy between the
parties. For the reasons stated below, we reverse the
district court’s ruling and remand for further proceedings.
BACKGROUND
AVC is a Taiwanese corporation that manufactures
cooling systems for integrated circuits. Asetek is the
assignee of the ’362 and ’764 patents, which are generally
directed toward liquid cooling systems that are used in
connection with computers to cool integrated circuits.
Beginning in 2012, Asetek brought lawsuits against
other competitors that make and sell liquid cooling sys-
tems, alleging infringement of the ’362 and ’764 patents.
In April 2014, Asetek sent AVC a letter accusing AVC of
infringing the ’362 and ’764 patents. That letter, howev-
er, was based on Asetek’s mistaken belief that AVC
manufactured a particular product, the Liqmax 120s. In
the letter, Asetek specifically referenced the Liqmax 120s
product and provided an exemplary infringement claim
chart for that product.
In response, AVC told Asetek that it did not manufac-
ture the Liqmax 120s. Nonetheless, AVC requested a
meeting with Asetek “to discuss various related matters,”
ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S 3
which AVC considered “of importance concerning future
cooperation” with Asetek. J.A. 105. Asetek responded in
an email dated August 2, 2014, that if AVC was not
making the Liqmax 120s then there did not appear to be a
reason to meet. Also in the email, Asetek referenced the
fact that it had tried to cooperate with AVC previously
“and the experience went very poorly and sowed distrust
in Asetek for AVC.” J.A. 207. Asetek further noted that
it does not license its patents and said that “although that
option may have previously been available to AVC when
it was manufacturing Asetek’s products, that option is no
longer available to AVC (based in large part on AVC’s
prior behavior toward Asetek).” Id. Finally, Asetek
stated,
Please be advised that Asetek believes that AVC
is likely selling other infringing products in the
United States. We are sure you are aware that
Asetek enforced its IP, as it has in pending litiga-
tions against CoolIT and Cooler Master. Asetek
has also been allowed a patent in the European
Union with claims similar to the US ’362 and ’764
patents, with priority in 2003, and also has simi-
lar claims pending in China.
Id.
A meeting did ultimately take place between AVC and
Asetek in August 2014. At the meeting, AVC expressed a
desire to license the asserted patents, and Asetek initially
declined. After further discussion, Asetek did offer AVC a
license at a royalty rate of 16% or at a reduced rate if
AVC would provide preferential pricing on components.
AVC representatives at the meeting said they would
consider that possibility and bring it to the attention of
AVC management. There was no specific discussion of
AVC products potentially infringing the asserted patents
at the meeting.
4 ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S
On September 30, 2014, AVC filed a complaint
against Asetek alleging that AVC had designed and built
liquid cooling products, identified as the K7 and K9
products, and seeking a declaration that its products did
not infringe the ’362 and ’764 patents and that those
patents are invalid. AVC contends that it had completed
prototype products of the K7 and K9 products and that
those products have a number of similarities to the CoolIT
and Cooler Master products that Asetek did accuse of
infringement. Asetek responds that it never accused the
K7 or K9 products of infringement, and, in fact, contends
it did not even know that those products existed before
AVC’s complaint.
The district court agreed with Asetek and dismissed
the complaint for lack of subject matter jurisdiction. The
district court held that the “complaint does not plead
sufficient facts to show that there is a substantial contro-
versy under the totality of the circumstances.” J.A. 2.
The district court did not explain its reasons in the writ-
ten decision, but instead referred to the reasons stated
during a hearing the court held on the question of juris-
diction. At the hearing, the district court emphasized
that there was never any discussion between the parties
as to whether AVC’s products were infringing and credit-
ed Asetek’s declarations that it was unaware of the exist-
ence of those products. AVC timely appealed to us. We
have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
We review a district court’s dismissal for lack of sub-
ject matter jurisdiction de novo. Powertech Tech. Inc. v.
Tessera, Inc., 660 F.3d 1301, 1306 (Fed. Cir. 2011). We
review factual findings underlying the jurisdiction deter-
mination for clear error. See SanDisk Corp. v. STMicroe-
lecs., Inc., 480 F.3d 1372, 1377 (Fed. Cir. 2007). The
burden is on the party claiming declaratory judgment
jurisdiction to establish that such jurisdiction existed at
ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S 5
the time the claim for declaratory relief was filed. Power-
tech Tech., 660 F.3d at 1306.
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 appropri-
ate pleading, may declare the rights and other legal
relations of any interested party seeking such declara-
tion.” 28 U.S.C. § 2201(a). In MedImmune, Inc. v. Genen-
tech, Inc., the Supreme Court stated that the test for
whether an “actual controversy” exists 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 judg-
ment.” 549 U.S. 118, 127 (2007) (internal quotation
marks omitted). 1
Although it relaxed the test for establishing jurisdic-
tion, MedImmune “did not change the bedrock rule that a
case or controversy must be based on a real and immedi-
ate injury or threat of future injury that is caused by the
defendants—an objective standard that cannot be met by
a purely subjective or speculative fear of future harm.”
Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329, 1339
1 In so doing, the Supreme Court in MedImmune
disagreed with the stricter “reasonable apprehension of
imminent suit” test that our court had previously applied
and thus lowered the bar to establish jurisdiction. Teva
Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d
1330, 1339 (Fed. Cir. 2007). Nonetheless, the reasonable
apprehension test is still a factor and “one of many ways a
patentee can satisfy the Supreme Court’s more general
all-the-circumstances test to establish that an action
presents a justiciable Article III controversy.” Caraco
Pharm. Labs., Ltd. v. Forest Labs., Inc., 527 F.3d 1278,
1291 (Fed. Cir. 2008).
6 ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S
(Fed. Cir. 2008). Thus, we have explained post-
MedImmune that “jurisdiction generally will not arise
merely on the basis that a party learns of the existence of
a patent owned by another or even perceives such a
patent to pose a risk of infringement, without some af-
firmative act by the patentee.” SanDisk, 480 F.3d at
1381. Instead, we have required “conduct that can be
reasonably inferred as demonstrating intent to enforce a
patent.” Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d
1358, 1363 (Fed. Cir. 2009).
Here, AVC alleges that, under the totality of circum-
stances, a substantial controversy of sufficient immediacy
and reality exists between it and Asetek to warrant
jurisdiction. It contends that the district court improperly
focused on Asetek’s contention that it did not specifically
accuse AVC’s K7 and K9 products of infringement in
finding no jurisdiction. Asetek responds that, at most,
AVC’s allegations amount to “a purely subjective appre-
hension of a future infringement suit involving the K7
and K9 prototypes” and thus are insufficient to satisfy the
actual controversy test. Appellee’s Br. 11.
We agree with AVC that the totality of circumstances
indicates that an actual controversy existed between the
parties at the time of the declaratory judgment complaint.
Although the April 30, 2014 letter incorrectly accused
AVC of manufacturing the Liqmax 120s, it was still a
demand letter that referenced a product that AVC con-
tends is similar to its own K7 and K9 products. Upon
receiving the letter, AVC contacted Asetek, saying that it
did not manufacture the Liqmax 120s, and then, in a
follow-up email, AVC requested a meeting with Asetek “to
discuss the related matter.” J.A. 105. Instead of simply
responding that it had made a mistake with respect to the
Liqmax 120s, Asetek’s August 2, 2014 email contained a
number of statements that indicate that an actual contro-
versy between the parties existed. For example, Asetek
(1) rehashed the volatile relationship between the parties,
ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S 7
saying that poor experiences with AVC in the past have
“sown distrust in Asetek for AVC”; (2) stated that it “does
not license its patents” generally and, more specifically,
that it would not license them to AVC due to the previous
conflicts between the parties; (3) accused AVC of “likely
selling other infringing products in the United States”; (4)
warned AVC that it “enforced its IP” and noted its “pend-
ing litigations against CoolIT and Cooler Master”—
companies that AVC alleges sell products similar to the
K7 and K9; and (5) emphasized that it has been allowed a
patent in the European Union with claims similar to the
asserted patents and also has similar claims pending in
China. J.A. 207. Such a response by Asetek clearly
“demonstrate[s] intent to enforce a patent,” Hewlett-
Packard, 587 F.3d at 1363, and is thus sufficient to con-
clude that a substantial controversy between the parties
existed at the time of the complaint.
The further interactions between the parties only con-
firm our conclusion. Despite recognizing that AVC does
not manufacture the Liqmax 120s, Asetek still agreed to a
meeting with AVC where they discussed potential licens-
ing of the asserted patents. Moreover, AVC alleges that
Asetek made threats to its customers regarding AVC’s
infringement of the asserted patents. Specifically, AVC
alleges that “AVC’s customers for the K7 and K9 products
have expressed concern that [they will be subject] to
liability under the Asserted Patents and AVC has with-
held accepting purchase order out of fear of possible
liability based upon the Asserted Patents.” J.A. 67. To
support its allegation, AVC submitted a declaration from
its Chief Corporation Officer, David Wang, stating:
From discussions with representatives of two AVC
customers, these representatives informed AVC
that Asetek has expressed to them that AVC has
infringed Asetek’s U.S. Patents, and that if these
customers use AVC’s products, then lawsuit will
follow. These customers are: Thermaltake (a
8 ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S
Taiwanese company) and IBuyPower (a U.S. com-
pany).
J.A. 213. 2 Such threats constitute affirmative actions by
Asetek to impede and frustrate AVC’s attempts to mean-
ingfully participate in the liquid cooling market and
further support our conclusion that a substantial contro-
versy existed between the parties.
Asetek relies heavily on the fact that it never refer-
enced AVC’s particular products or product line as poten-
tially infringing, and, in fact, did not even know of AVC’s
products at the time of the complaint. But we have not
required such specific facts to find jurisdiction. See 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.”).
Indeed, in Arrowhead Industrial Water, Inc. v. Ecolochem,
2 Asetek contends that we should not look beyond
the allegation in the complaint and thus should not
consider the declaration. But we have said that “[i]n
establishing the predicate jurisdictional facts, a court . . .
may review evidence extrinsic to the pleadings, including
affidavits and deposition testimony.” Cedars-Sinai Med.
Ctr. v. Watkins, 11 F.3d 1573, 1584 (Fed. Cir. 1993).
Asetek also denies making any such threat to AVC’s
customers and thus says that the disputed allegation is
“subject to fact-finding by the district court.” Id. Here,
both the Wang declaration from AVC and Asetek’s decla-
ration denying the allegation were before the district
court and, although it did not make any explicit fact
findings, the district court appears to have assumed that
the allegation was true. We have no reason to conclude
otherwise. Moreover, even if we were to discount the
allegation, the August 2, 2014 email itself is sufficient to
demonstrate that an actual controversy existed between
the parties at the time of the complaint.
ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S 9
Inc., applying the stricter reasonable apprehension test,
we stated that “a court may find a clear basis for a rea-
sonable apprehension in all the circumstances, even when
a patentee first learns of plaintiff’s conduct upon receipt
of the complaint.” 846 F.2d 731, 738 (Fed. Cir. 1988).
The question of jurisdiction does not turn on Asetek’s
knowledge of the specific AVC products or whether Asetek
specifically alleged that the K7 and K9 products infringed
the asserted patents; instead, the question is whether,
under all the circumstances, Asetek’s actions “can be
reasonably inferred as demonstrating intent to enforce a
patent.” Hewlett-Packard, 587 F.3d at 1363. We conclude
that Asetek’s conduct demonstrates just that.
In addition to an affirmative act by Asetek, AVC must
also show that the threat of suit is real and immediate to
establish jurisdiction. MedImmune, 549 U.S. at 127.
“[A]lthough a party need not have engaged in the actual
manufacture or sale of a potentially infringing product to
obtain a declaratory judgment of non-infringement, there
must be a showing of ‘meaningful preparation’ for making
or using that product.” Cat Tech LLC v. TubeMaster, Inc.,
528 F.3d 871, 881 (Fed. Cir. 2008). Here, AVC has made
the requisite showing. AVC alleged that (1) it has com-
pleted designs of the K7 and K9 products; (2) it has manu-
factured sample prototype products of the K7 and K9 (as
confirmed by photographs of the products presented to the
district court below); (3) it intends to market and sell the
products in the United States; and (4) its K7 and K9
products “are positioned to directly compete in the market
against Cooler Master, Coolit Systems and Enermax as
well as the Asetek’s products.” J.A. 67. AVC’s allegation
regarding the concerns of its customers and that it has
“withheld accepting purchase order[s]” indicates that AVC
has customers lined up for its products that have submit-
ted, or, at the very least, are prepared to submit purchase
orders for the products. Id.
10 ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S
Asetek does not dispute these allegations but instead
contends that they do not demonstrate “concrete plans” to
engage in potentially infringing activities. We disagree.
This is not the type of case where, at the time the com-
plaint was filed, the accused products were far from being
complete or operational and were susceptible to design
changes, making it impossible to compare them against
the asserted patents. See, e.g., Sierra Applied Scis., Inc.
v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1380
(Fed. Cir. 2004) (finding no real or immediate controversy
where the alleged infringer testified that it had no intent
to market the accused product and “the design [of the
accused product] was fluid on the date the complaint was
filed” making it “impossible to determine—on that date—
whether any eventual design of the [accused product]
would infringe [the asserted] patents”); Int’l Harvester Co.
v. Deere & Co., 623 F.2d 1207, 1216 (7th Cir. 1980) (find-
ing no real and immediate controversy where, as of the
date of the complaint, the alleged infringer “anticipated
further, fairly extensive testing of the [accused product]
including construction of more test models, and anticipat-
ed design changes where necessary in response to the
testing”). This is also not a case like Lujan v. Defenders of
Wildlife, 504 U.S. 555 (1992), or Matthews International
Corp. v. Biosafe Engineering, LLC, 695 F.3d 1322 (Fed.
Cir 2012), in which an intent to take action was unaccom-
panied by any specific plans or steps that might satisfy
the MedImmune “immediacy” requirement. MedImmune,
549 U.S. at 127. Instead, AVC provided undisputed
allegations that it has manufactured prototypes, has
potential customers, and has a sufficiently immediate
interest to request a license to clear the path for its in-
tended entrance into the U.S. market. That is sufficient
to meet the real and immediate test.
We similarly disagree with Asetek that AVC’s allega-
tions provide insufficient information about whether the
K7 and K9 products would infringe the asserted patents.
ASIA VITAL COMPONENTS CO. v. ASETEK DANMARK A/S 11
AVC specifically stated that its products “may have a
number of structural similarities to the accused products
sold by Coolit Systems, Inc. and Cooler Master Co.,
Ltd.”—products which Asetek has alleged infringe the
asserted patents—and that its products “are positioned to
directly compete in the market” against those of Cooler
Master, Coolit Systems, Enermax, and even Asetek. J.A.
67. Moreover, AVC provided photographs depicting the
similarities between the K9 product and the Liqmax
120s—the product that Asetek initially accused of in-
fringement in its demand letter to AVC. AVC was not
required, as Asetek contends, to specifically allege that
the structural similarities between its products and the
competitor products are relevant to the claims of the
asserted patents; such an allegation is implicit in the
complaint when read as a whole. Indeed, to require more
from AVC would precipitate the anomalous result where-
by a party seeking a declaration of noninfringement must
show that its product is the same as the patented product
in relevant respects. As is clear from our case law—and
from common sense—that is not the test for jurisdiction.
See Arrowhead, 846 F.2d at 738 (“It is at best incongruous
to require that one seeking a declaration of noninfringe-
ment prove its process or product is the ‘same as’ or ‘iden-
tical’ to the patented process or product.”).
Thus, we conclude that AVC alleged sufficient facts
that, “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.”
MedImmune, 549 U.S. at 127.
CONCLUSION
For the foregoing reasons, we reverse the ruling of the
district court and remand for further proceedings.
REVERSED AND REMANDED