Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-03057/USCOURTS-ca8-14-03057-0/pdf.json

Parties Involved:
ChemTreat, Inc.
Appellee
Global Process Technologies, Inc.
Appellant
Roy Johnson
Appellant
U.S. Water Services, Inc.
Appellant

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-3057

___________________________

U.S. Water Services, Inc.

lllllllllllllllllllll Plaintiff - Appellant

Global Process Technologies, Inc.; Roy Johnson

lllllllllllllllllllllCounter Defendants - Appellants

v.

ChemTreat, Inc.

lllllllllllllllllllll Defendant - Appellee

____________

Appeal from United States District Court 

for the District of Minnesota - Minneapolis

____________

 Submitted: May 13, 2015

 Filed: July 24, 2015

____________

Before RILEY, Chief Judge, MURPHY and MELLOY, Circuit Judges.

____________

RILEY, Chief Judge.

In April 2011, while its patent application was pending with the United States

Patent and Trademark Office (USPTO), U.S. Water Services, Inc.sued its competitor,

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ChemTreat, Inc. for misappropriation of trade secrets. On October 18, 2011, the

USPTO issued U.S. Patent No. 8,039,244 (’244 patent). Three days before U.S.

Water and ChemTreat settled the misappropriation claim, ChemTreat filed

counterclaims against U.S. Water, Global Process Technologies, Inc. and Roy

Johnson (collectively, counterclaimdefendants) requesting declaratory judgments of

noninfringement and invalidity of the ’244 patent. The counterclaim defendants

1

moved to dismiss the counterclaims for lack of subject matter jurisdiction, and

ChemTreat moved for summary judgment of noninfringement. The district court

2

denied the counterclaimdefendants’ motion to dismiss and later granted ChemTreat’s

subsequent motion for summary judgment as to the noninfringement counterclaim

and dismissed the invalidity counterclaim. The counterclaim defendants appeal. We

affirm the district court’s well-reasoned judgment. 

I. BACKGROUND

A. Facts

In its second amended complaint (complaint), U.S. Water stated it “sell[s]

water treatment and purification equipment, materials, and services,” especially “to

ethanol process technologies.” U.S. Water claimed it “developed a method to reduce

the formation of insoluble scale deposits during the production of ethanol” using an

The cover page of the ’244 patent lists Roy Johnson and Paul Young as 1

inventors and Global Process Technologies, Inc. as an assignee. Although the parties

do not cite to a license agreement in the record, the parties agree U.S. Water is the

“exclusive licensee” of the ’244 patent, and the counterclaim defendants “own[]

and/or control[]” the ’244 patent. The counterclaim defendants explained to the

district court, “During the application process, Dr. Young assigned his ownership of

the patent to U.S. Water, which in turn assigned its interest to its corporate parent,

Global Process Technologies, Inc. Mr. Johnson retains his one-half undivided

ownership interest in the ’244 Patent.”

The Honorable Patrick J. Schiltz, United States District Judge for the District 2

of Minnesota. 

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enzyme, phytase, in its “pHytOUT® system.” U.S. Water alleged, among other

things, ChemTreat persuaded one of U.S. Water’s business acquaintances to breach

a non-disclosure agreement and disclose U.S. Water’s “pHytOUT® Trade Secrets”

such that ChemTreat was able to begin selling its own phytase product, PE1000,

modeled on U.S. Water’s product, to U.S. Water’s ethanol industry customers.

At the time U.S. Water filed the complaint, the application for what would

become the ’244 patent was pending with the USPTO. U.S. Water attached the

application to the complaint and described its scientific claims in some detail. The

complaint explained, “U.S. Water adopted the brand ‘pHytOUT®’ to use in

connection with the sale and offer for sale to its customers and the trade of the system

described in the pHytOUT® [patent] Application.” The complaint alleged

ChemTreat “misappropriat[ed] the pHytOUT®Trade Secrets,” which, together with

“the pHytOUT® invention” disclosed in the patent application, form “the

pHytOUT system.” TM 3

In April 2011, Johnson, Chief Innovation Officer at U.S. Water, sent an email

to a customer who had also been approached by ChemTreat, remarking, 

I need to speak with you later today about the ChemTreat ‘offering’ and

what has happened. They are on very thin ice & are putting people at

risk. While [U.S. Water’s European Patent Office] patent application

has been allowed, the USPTO patent prosecution remains painfully slow

in an underfunded agency. The consequences gets [sic] too many

attorneys involved. 

A week later, U.S. Water sent an email to its phytase supplier, who was also

supplying phytase to ChemTreat, declaring, 

The complaint refers both to a “pHytOUT system” and a “pHytOUT® 3 TM

system.”

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We have been granted an EU patent and anticipate the USPTO patent

soon. . . . Now we have a competitor going around our patent

application buying your . . . product in violation of our supply agreement

and what would appear to be a much lower price. . . . This is a very

serious issue to us and we are not seeing much openness or response

from you . . . . We have filed a lawsuit against this competitor regarding

misappropriation of trade secrets, and misrepresenting our product. We

are filing additional actions against them today.

4

After receiving the email, the phytase supplier told U.S. Water it would “walk[] away

fromChemTreat” and told ChemTreat it “will not be able to supply [ChemTreat] with

phytase” because “doing so would lead to possible infringements in [U.S. Water’s]

patented propositions to the market place.” 

In a deposition, one of ChemTreat’s customerstestified that a particular person

at U.S. Water had told him about the ’244 patent application at an industry trade

workshop. The customer responded it was “probably fair” to say “the only reason”

his employer stopped a trial run of ChemTreat’s phytase product, PE1000, was

because U.S. Water told the customer that U.S. Water “had a patent on that

application” of phytase. 

B. Procedural History

U.S. Water, a citizen of Minnesota, sued ChemTreat, a citizen of Virginia, in

the district court, asserting Minnesota state law claims of misappropriation of trade

secrets, among other things, and invoking diversity jurisdiction under 28 U.S.C.

§ 1332(a)(1).

At oral argument, the counterclaim defendants alleged the additional action

4

to be filed “today” was merely the first amended complaint in the trade secret case,

filed four days later. 

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On the day the ’244 patent issued, ChemTreat moved to amend its answer to

add counterclaims, which U.S. Water initially opposed. The district court eventually

granted ChemTreat’s new, unopposed motion to file counterclaims. Three days

before U.S. Water and ChemTreatsettled the misappropriation claim, which disposed

of all claims in U.S. Water’s complaint, ChemTreat filed the counterclaims requesting

declaratory judgments of noninfringement and invalidity of the ’244 patent.

The counterclaim defendants moved to dismiss the counterclaims for lack of

subject matter jurisdiction, and ChemTreat moved for summary judgment of

noninfringement. The district court heard argument on the motions. Finding subject

matter jurisdiction existed, the district court denied the counterclaim defendants’

motion to dismiss and denied without prejudice ChemTreat’s motion for summary

judgment. After additional limited discovery, the district court granted ChemTreat’s

motion for summary declaratory judgment as to noninfringement and dismissed

without prejudice ChemTreat’s invalidity counterclaim. 

C. Appellate Jurisdiction 

The counterclaim defendants appealed to the United States Court of Appeals

for the Federal Circuit. After full briefing and argument, the Federal Circuit

concluded it lacked appellate jurisdiction because U.S. Water’s initial complaint did

not state a cause of action arising under the patent laws. See 28 U.S.C. §§ 1295(a)(1),

1338(a) (2011). 

While ChemTreat’s counterclaims do allege patent law claims, U.S. Water

initiated the action on April 12, 2011, before the Leahy-Smith America Invents Act,

125 Stat. 284 (2011) (AIA), took effect, so the counterclaims independently did not

establish appellate jurisdiction for the FederalCircuit. See Wawrzynski v. H.J. Heinz

Co., 728 F.3d 1374, 1378-79 (Fed. Cir. 2013) (determining the AIA confers appellate

jurisdiction on the Federal Circuit for compulsory counterclaims filed in actions

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commenced after September 16, 2011). The Federal Circuit transferred the appeal to

the Eighth Circuit. This court has appellate jurisdiction under 28 U.S.C. § 1291. 

II. DISCUSSION

In the realm of patent law, we rely on the Federal Circuit’s precedent for

persuasive guidance. See, e.g., Schinzing v. Mid-States Stainless, Inc., 415 F.3d 807,

811 (8th Cir. 2005).

A. Subject Matter Jurisdiction

“The threshold issue is whether the district court had subject matter

jurisdiction. This court reviews subject matter jurisdiction de novo.” Cascades Dev.

of Minn., LLC v. Nat’l Specialty Ins., 675 F.3d 1095, 1098 (8th Cir. 2012); see also

Vanguard Research, Inc. v. PEAT, Inc., 304 F.3d 1249, 1254 (Fed. Cir. 2002) (“The

determination of whether an actual controversy exists under the Declaratory

Judgment Act in a patent case is a question of law that we review de novo.”). “If the

district court resolves disputed factual issues, its findings are reviewed for clear

error.” ABF Freight Sys., Inc. v. Int’l Bhd. of Teamsters, 645 F.3d 954, 958 (8th Cir.

2011); accord Vanguard, 304 F.3d at 1254. ChemTreat bears the burden to show

subject matter jurisdiction existed when it filed its counterclaims. See, e.g., ABF

Freight, 645 F.3d at 958; accord Powertech Tech. Inc. v. Tessera, Inc., 660 F.3d 1301,

1306 (Fed. Cir. 2011). 

The Declaratory Judgment Act provides, “In a case of actual controversywithin

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.” 28 U.S.C. § 2201(a). “The phrase ‘case of actual

controversy’ in § 2201 ‘refers to the type of Cases and Controversies that are

justiciable under Article III.’” Maytag Corp. v. Int’l Union, United Auto., Aerospace

& Agric. Implement Workers, 687 F.3d 1076, 1081 (8th Cir. 2012) (quoting

MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). 

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1. Reasonable Apprehension of Suit

The counterclaim defendants moved to dismiss ChemTreat’s counterclaims,

arguing the district court “lack[ed] subject-matter jurisdiction over ChemTreat’s

claim for a declaratory judgment of non-infringement because the Counterclaim

Defendants have not asserted the ’244 Patent against ChemTreat or its customers.”

The district court concluded subject matter jurisdiction exists and denied the motion,

relying principally on two cases from the Federal Circuit, both of which address the

relationship between trade secrets and patents.

5

First, in Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953 (Fed.

Cir. 1987), after Releasomers filed suit in state court alleging Goodyear had

misappropriated trade secrets, the USPTO issued two patents to Releasomers based

on the same technology involved in the state action. See id. at 954. Goodyear then

filed a complaint in federal court seeking a declaratory judgment of invalidity and

noninfringement of Releasomers’s patents. See id. The federal district court

dismissed Goodyear’s suitfor lack ofsubject matterjurisdiction and granted summary

judgment to Releasomers. See id. Goodyear appealed to the Federal Circuit. See id.

See AvidAir Helicopter Supply, Inc. v. Rolls-Royce Corp., 663 F.3d 966, 972- 5

73 (8th Cir. 2011) (“[E]xistence of a trade secret is determined by the value of a

secret, not the merit of its technical improvements. Unlike patent law, which

predicates protection on novelty and nonobviousness, trade secret laws are meant to

govern commercial ethics.”);see also Accent Packaging, Inc. v. Leggett & Platt, Inc.,

707 F.3d 1318, 1329 (Fed. Cir. 2013) (“As a matter of law, any specifications and

tolerances disclosed in or ascertainable from the asserted patents became publicly

available . . . when the . . . patent application was published and, as such, could not

constitute a trade secret [a few months later] when [the defendant] is alleged to have

engaged in misappropriation.”); On-LineTechs.,Inc. v. Bodenseewerk Perkin-Elmer,

386 F.3d 1133, 1141 (Fed. Cir. 2004) (“After a patent has issued, the information

contained within it is ordinarily regarded as public and not subject to protection as a

trade secret.”).

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The FederalCircuit laid out its two-pronged testfor determining subject matter

jurisdiction in a declaratory judgment patent case, as follows: 

First, the defendant’s conduct must have created on the part of the

plaintiff a reasonable apprehension that the defendant will initiate suit

if the plaintiff continues the allegedly infringing activity. Second, the

plaintiff must actually have either produced the device or have prepared

to produce that device. 

Id. at 955. The Goodyear court found Releasomers’s misappropriation suit created

such reasonable apprehension for Goodyear, deciding that the fact the state court

misappropriation claim did not name the patents at issue wasirrelevant because “that

proceeding involvestrade secret misappropriation ofthe same technology covered by

the Releasomers’ . . . patents. Accordingly, the [litigious] conduct of Releasomers,

in itself, is sufficient to give Goodyear an objective inference of an impending

infringement suit now that the patents have issued” and “shows a willingness to

protect that technology.” Id. at 955-56. The Federal Circuit decided “an express

threat of litigation” was not essential “to meet the requirements of an actual case or

controversy. Such a requirement would utterly defeat the purpose of the Declaratory

Judgment Act, which in patent casesisto provide the allegedly infringing party relief

from uncertainty and delay regarding its legal rights.” Id. at 956.

Similarly, in Vanguard, after being sued for misappropriation of trade secrets

in the Northern District of Alabama, Vanguard brought an action seeking a

declaratory judgment of invalidity and noninfringement of PEAT’s patent. See

Vanguard, 304 F.3d at 1252. The district court in the declaratory action granted

PEAT’s motion to dismiss for lack of subject matter jurisdiction. See id. at 1252-53. 

Vanguard appealed to the Federal Circuit. See id. at 1253.

The Federal Circuit addressed the “reasonable apprehension” declaratory

judgment prong, asin Goodyear. See id. at 1254-55. The court reiterated, “Although

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the best evidence of a reasonable apprehension of suit comes in the form of an

express threat of litigation, an express threat is not required.” Id. at 1254. Finding

the case “indistinguishable from . . . Goodyear,” the Federal Circuit stated, “PEAT

sued Vanguard for . . . misappropriation of trade secrets regarding the same

technology in the same district court. The . . . district court found no actual

controversy based on PEAT’s repeated statement that it does not intend to sue

Vanguard for patent infringement and its ongoing failure to bring such a suit.” Id. at

1255 (quotation omitted). But the Federal Circuit emphasized an objective standard,

stating, “[A] patentee’s present intentions do not control whether a case or

controversy exists. The appropriate inquiry asks whether Vanguard had a reasonable

apprehension that PEAT would sue it for patent infringement in the future.” Id.

(internal citation omitted). Of particular importance was the patentee’s

communications not to the potential infringer, but to the potential infringer’s

customers: “By filing the earlier lawsuit and informing Vanguard’s clients that

Vanguard is using the PEAT technology without a license, PEAT has shown ‘a

willingness to protect that technology.’ Filing a lawsuit for patent infringement

would be just another logical step in its quest to protect its technology.” Id. (quoting

Goodyear, 824 F.2d at 956).

After Goodyear and Vanguard, the United States Supreme Court in

MedImmune “rejected [the Federal Circuit’s] prior, more stringent standard for

declaratory judgment standing insofar as it required a ‘reasonable apprehension of

imminent suit.’” Arris Grp., Inc. v. British Telecommc’ns PLC, 639 F.3d 1368, 1373

(Fed. Cir. 2011) (quoting MedImmune, 549 U.S. at 132 n.11). “Under the [Supreme]

Court’s new standard, an Article III case or controversy exists when ‘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 1373 (quoting MedImmune,

549 U.S. at 127). 

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“While the Supreme Court rejected the reasonable apprehension of suit test as

the sole test for jurisdiction, it did not completely do away with the relevance of a

reasonable apprehension of suit.” Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d

1329, 1336 (Fed. Cir. 2008). The test is still relevant because, “following

MedImmune, proving a reasonable apprehension of suit is one of multiple ways that

a declaratory judgment plaintiff can satisfy the more general all-the-circumstances

test to establish that an action presents a justiciable Article III controversy.” Id. 

“Priorlitigious conduct is one circumstance to be considered in assessing whether the

totality of circumstances creates an actual controversy.” Id. at 1341. 

A recent post-MedImmune FederalCircuit case, issued after the district court’s

decision in this case, confirms that “a showing [of reasonable apprehension of suit]

remains sufficient to establish jurisdiction.” Arkema Inc. v. Honeywell Int’l, Inc.,

706 F.3d 1351, 1358 n.5 (Fed. Cir. 2013). Arkema approvingly cites Goodyear and

Vanguard and states the declaratory judgment defendant need not “directly

accuse[ the declaratory judgment plaintiff] of potential indirect infringement. Even

under the now-discarded reasonable apprehension ofsuit test, it was well established

that a sufficient controversy existed for declaratory judgment jurisdiction where the

patentee had accused the declaratory judgment plaintiff of misappropriating the same

technology in related litigation.” Id. at 1358 (footnote omitted)(citing Goodyear, 824

F.2d at 955, and Vanguard, 304 F.3d at 1255); see also Danisco U.S. Inc. v.

Novozymes A/S, 744 F.3d 1325, 1330 (Fed. Cir. 2014) (concluding “the standard for

finding a justiciable controversy [wa]s satisfied” even though the patent holder “had

not affirmatively accused [the declaratory judgment plaintiff’s] products ofinfringing

the issued . . . patent,” because “that fact alone is not dispositive of whether an actual

controversy exists,” “and the Supreme Court has repeatedly found the existence of an

actual case or controversy even in situationsin which there was no indication that the

declaratory judgment defendant was preparing to enforce its legal rights”); cf. Teva

Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1344 (Fed. Cir. 2007)

(“[R]elated litigation involving the same technology and the same parties is relevant

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in determining whether a justiciable declaratory judgment controversy exists on other

related patents.”).

6

In this case, the district court, relying on Goodyear and Vanguard, concluded

U.S. Water’s suit alleging misappropriation of trade secrets, filed one month after

ChemTreat began selling its phytase product, was an important factor in determining

whether ChemTreat had a reasonable apprehension of suit. On appeal, the

counterclaim defendants argue the misappropriation claim should not be considered

in the evaluation of subject matter jurisdiction because U.S. Water “was asserting

different legal rights—contractual rights with prospective customers, active

customers, and its phytase supplier.” The counterclaim defendants contend, “The

presumption is erroneous that prior litigation of any kind between the same parties

that involves the same technology is sufficient to establish declaratory judgment

jurisdiction.” (Emphasis added). But U.S. Water’s complaint does not equal “prior

litigation of any kind”—U.S. Water pled a misappropriation of trade secrets claim,

which is the same claim brought in Goodyear and Vanguard. See Arkema, 706 F.3d

at 1358.

The counterclaim defendants also argue the misappropriation claim was not

based on the same technology as the invention taught by the ’244 patent. They

maintain U.S. Water’s “references to the ’244 Patent in its trade secrets complaint

explicitly differentiated the patented method from the claimed trade secrets.” U.S.

The counterclaim defendants submitted a letter to this court pursuant to 6

Federal Rule of Appellate Procedure 28(j) citing a case issued a year before, 

Microsoft Corp. v. DataTern, Inc., 755 F.3d 899 (Fed. Cir. 2014), where the Federal

Circuit found it lacked jurisdiction over Microsoft’s challenge to one of DataTern’s

patents. See id. at 903. Microsoft is inapposite here, because the patent holder,

DataTern, did not sue Microsoft for misappropriation of trade secrets before

Microsoft filed motions for declaratory judgment of noninfringement and invalidity. 

See id. at 902-03.

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Water’s complaint does not support this conclusion. First, U.S. Water attached to the

complaint the application for what would become the ’244 patent and described its

claims in detail. 

Second, the complaint states, “U.S. Water adopted the brand ‘pHytOUT®’ to

use in connection with the sale and offer for sale to its customers and the trade of the

system described in the pHytOUT® [patent] Application.” The complaint alleges

ChemTreat misappropriated “the pHytOUT®Trade Secrets,” which U.S. Water was

obliged to distinguish from “the pHytOUT® invention” disclosed in its patent

application, since the patent application is publicly available and thus could not

contain a trade secret. See Minn. Stat. § 325C.01, subd. 5(i) (defining a “trade secret”

as “information” that “derives independent economic value, actual or potential, from

not being generally known to, and not being readily ascertainable by proper means

by, other persons who can obtain economic value from its disclosure or use”). As the

district court recognized, the declaratory judgment defendants in Goodyear and

Vanguard would have had to make the same distinction, yet the Federal Circuit still

found the same technology was involved in both the misappropriation claim and

asserted patent infringement claims in those cases. 

At the same time, U.S. Water defines “the pHytOUT® system” to include both

“the pHytOUT® Trade Secrets” and “the pHytOUT® invention.” The complaint

connects ChemTreat with the whole system, not just the trade secrets, contending,

“ChemTreat does not have the ability or expertise to support the pHytOUT® system

at[a U.S. Water customer’s] ethanol plant and would not have understood the specific

benefits and consequences of the pHytOUT® process if ChemTreat had not obtained

unlawful access to the pHytOUT® Trade Secrets,” and “[b]y obtaining access to the

pHytOUT® Trade Secrets, ChemTreat on information and belief acquired in

approximately fourmonths orless know-how and expertise in the pHytOUT® system

that is virtually identical to U.S. Water’s and that could not have been acquired by

proper means.” 

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In its originally filed complaint, U.S. Water declared that the pHytOUT

TM

system—which would also include the trade secrets—would be protected when its

pending patent issued: “In October of 2007, U.S. Water filed Application No.

11/873,630 with the [USPTO] seeking a patent to protect the system its employees

have invented for the reduction ofscale deposits.” U.S. Water implies as much in the

operative second amended complaint at issue: “The pHytOUT® Application

describes a system for the reduction of scale deposits. . . . U.S. Water adopted the

brand ‘pHytOUT®’ to use in connection with the sale and offer for sale to its

customers and the trade of the system described in the pHytOUT® Application.”

U.S. Water proposes, “The claims in the patent were only relevant to the case

because they were not among the trade secrets that [U.S. Water] accused ChemTreat

of misappropriating,” and its complaint was “carefully drafted to underscore that

[U.S. Water] was accusing ChemTreat of the misappropriation of trade secrets and

to distinguish [U.S. Water]’s secret and confidential information from publicly

available information in the patent application or the file wrapper.” We reject U.S.

Water’s attempt to distance itself from the connections it pointedly made in its

complaint about the elements of its “pHytOUT® system.” We conclude, as

ChemTreat states it, that the complaint “expressly noted the close interrelationship

between U.S. Water’s purported trade secret and patent rights,” and “U.S. Water

expressly equated its pHytOUT® ‘system’ with its trade secrets and patent rights.”

The district court did not err by finding the misappropriation claim involved the same

technology as the ’244 patent. 

In its jurisdiction order,issued before Arkema, the district court was not willing

to go as far as Goodyear and Vanguard might suggest—that is, to conclude a prior

misappropriation claim categorically establishes a reasonable apprehension of an

infringement suit after a patent on the same technology has issued. See Goodyear,

824 F.2d at 955; Vanguard, 304 F.3d at 1255. Yet the district court found that when

combined with the counterclaimdefendants’ other actions, a reasonable apprehension

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was present. Specifically, these include (1) Johnson’s April 2011 email to U.S.

Water’s customer; (2) U.S. Water’s email to its phytase supplier; and (3) U.S. Water

informingChemTreat’s customer about U.S. Water’s patent, leading to the customer’s

decision not to continue a trial of ChemTreat’s PE1000 phytase product. 

The counterclaim defendants assert these communications show they merely

were trying to protect their contractual rights with their customers and phytase

supplier. But the cited exchanges, while sometimes alluding to contractual

relationships, invoke what the counterclaim defendants hoped would evolve into

patent rights, even though the counterclaim defendants did not explicitly threaten

patent litigation. See Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362

(Fed. Cir. 2009) (“The purpose of a declaratory judgment action cannot be defeated

simply by the stratagem of a correspondence that avoids the magic words such as

‘litigation’ or‘infringement.’ . . . [I]t isimplausible (especially after MedImmune and

several post MedImmune decisions fromthis court) to expect that a competent lawyer

drafting such correspondence for a patent owner would identify specific claims,

present claim charts, and explicitly allege infringement.”). As the magistrate judge

in this case wrote three years ago, addressing the same issue, “U.S. Water . . . has

7

done more than just communicate with ChemTreat’s . . . customers without directly

accusing ChemTreat of infringement. U.S. Water’s litigation activities reveal both

its hostile stance to ChemTreat’s competing product and its willingness to protect

aggressively its technology, making patent litigation the next logical, if not inevitable,

step.” See Vanguard, 304 F.3d at 1255. 

Before the district court, the counterclaim defendants stated that if the district

court were to “construe[] the ’244 Patent in the manner” suggested by the ’244

patent’s attorney prosecutor, then “ChemTreat would be a contributory infringer, and

The Honorable TonyN. Leung, United States Magistrate Judge for the District 7

of Minnesota.

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its customers direct infringers, of the ’244 Patent, under the doctrine of equivalents”

and “ChemTreat may be inducing infringement.” See 35 U.S.C. § 271(a)-(c). In

addition, as the district court reasoned,

Notably, in its brief in opposition to ChemTreat’s motion for leave to

assert its counterclaims, U.S. Water stated that it might bring a patent

action against ChemTreat if U.S. Water were to discover that an ethanol

plant was using PE1000. In other words, U.S. Water has admitted that,

as soon as ChemTreat is successful in finding a customer for PE1000,

U.S. Water may sue ChemTreat. U.S. Water cannot have its cake and

eat it too. It cannot, on the one hand, scare off ChemTreat customers by

wafting allusions to patents and litigation into conversations about

PE1000, and then, on the other hand, argue that ChemTreat cannot bring

a declaratory-judgment action because ChemTreat does not have any

customers.

(Internal citation omitted). ChemTreat responds, and offers evidence in support,

“This confirmed ChemTreat’s apprehension of suit because ChemTreat was already

offering for sale and selling PE1000 at that time.” 

Evaluating the “totality of [the] circumstances,” Prasco, 537 F.3d at 1341, we

conclude the district court did not err in finding the misappropriation action, together

with U.S. Water’s statements to its customers and supplier, produced an objective,

“reasonable apprehension ofsuit,” Vanguard, 304 F.3d at 1254, and therefore did not

err in concluding declaratory judgment subject matter jurisdiction existed in this

action, see Arkema, 706 F.3d at 1358 n.5.

2. Advisory Opinion

In the district court, the counterclaim defendants “t[oo]k[] no position in

response to ChemTreat’s requested motion for summary judgment of

noninfringement,” only repeating their argument that the district court lacked subject

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matter jurisdiction over ChemTreat’s counterclaims. Here, the counterclaim

8

defendants argue the district court’s summary judgment opinion is a prohibited

advisory opinion because ChemTreat cannot establish it directly or indirectly

infringes the ’244 patent.

The Supreme Court cautions against “‘an opinion advising what the law would

be upon a hypotheticalstate of facts.’” MedImmune, 549 U.S. at 127 (quoting Aetna

Life Ins. Co. v. Haworth, 300 U.S. 227, 241 (1937)). Rather, “[t]he dispute must be

‘definite and concrete, touching the legal relations of parties having adverse legal

interests.’” Arris, 639 F.3d at 1373 (quoting MedImmune, 549 U.S. at 127). In Arris,

as here, the declaratory judgment defendant “surprisingly appear[ed] to contend that

. . . the declaratory judgment plaintiff[’s burden] includes the burden of presenting

evidence that [its] actions indirectly infringe the patents-in-suit.” Id. at 1380. As

explained by the Federal Circuit, “Ironically, [the declaratory judgment defendant]

overlook[ed] the fact that the very purpose for an accused infringer to bring a

declaratory judgment action is to seek a judicial determination that a coercive claim

by the patent holder would not succeed on the merits.” Id. (internal marks and

citation omitted). Here, to establish standing, ChemTreat must show “an actual case

or controversy exists,” but “that burden does not extend to showing that the

[declaratory judgment] defendant holds meritorious positions on the issues in

controversy.” Id. (internal marks and citation omitted). “To require declaratory

judgment plaintiffs to allege or show that their products or processes are

infringements would limit the judgments they seek to declarations of invalidity or

unenforceability. The Declaratory Judgment Act is not so limited.” Id. (internal

marks and citation omitted).

The district court stated, “U.S. Water’s decision not to contest ChemTreat’s 8

motion on the merits is wise, as it is absolutely clear that ChemTreat neither directly

infringes, nor induces nor contributes to infringement, of the ’244 patent.” 

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The Arris court also noted that where, as here, the declaratory judgment

defendant “refus[es] to grant [the declaratory judgment plaintiff] a covenant not to

sue, this provides a level of additional support for [the] finding that an actual

controversy exists.” Id. at 1381; cf. Already, LLC v. Nike, Inc., 568 U.S. ___, ___,

133 S. Ct. 721, 725, 732 (2013) (holding “a covenant not to enforce a trademark

against a competitor’s existing products and any future ‘colorable imitations’ moots

the competitor’s action to have the trademark declared invalid”); Cisco Sys., Inc. v.

Alberta Telecommc’ns Research Ctr., 538 F. App’x 894, 898 (Fed. Cir. 2013)

(unpublished) (finding that the fact the declaratory judgment defendant had offered

to the declaratory plaintiff—albeit not to the plaintiff’s customers—a covenant not

to sue for patent infringement further evidence of a lack of a justiciable case or

controversy).

We conclude the district court issued no advisory opinion here.

B. Attorney Fees

ChemTreat filed a motion for attorney fees with this court, claiming the

counterclaimdefendants’ appeal wasfrivolous. “If a court of appeals determinesthat

an appeal is frivolous, it may, after a separately filed motion or notice from the court

and reasonable opportunity to respond, award just damages and single or double costs

to the appellee.” Fed. R. App. P. 38. “Under Rule 38, an appeal is frivolous ‘when

the result is obvious or when the appellant’s argument is wholly without merit.’” 

Misischia v. St. John’s Mercy Health Sys., 457 F.3d 800, 806 (8th Cir. 2006) (quoting

Newhouse v. McCormick & Co., 130 F.3d 302, 305 (8th Cir. 1997) (order)).

The result here was not obvious, and the counterclaim defendants’ arguments

on appeal were not wholly without merit. Even considering the fact Arkema, which

arguably strengthened ChemTreat’s case, wasissued after the district court’s opinion

but before briefing had begun in this appeal, the counterclaim defendants still had a

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nonfrivolous, if unsuccessful, argument. We deny ChemTreat’s motion for attorney

fees.

III. CONCLUSION

We affirm the judgment of the district court for the reasons stated in its wellreasoned opinion. 

_____________________________

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