the dispute without waiting for commencement of litigation by the patent owner. BP Chemicals Lid.
y. Union Carbide Corp., 4 F.3d 975, 977 (Fed. Cir. 1993).

The Federal Circuit has established a two prong test for determining whether a case of actual
controversy exists in patent cases. First, a defendant's conduct must have created a “reasonable
apprehension on the part of the declaratory plaintiff that it will face an infringement suit.” BP
Chemicals Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1992) (emphasis supplied).
Second, the declaratory plaintiff must show “present activity which could constitute infringement
or concrete steps taken with the intent to conduct such activity.” fd.

T. Reasonable Apprehension of Suit

Amsted claims that it is impossible for Mendian to have any reasonable apprehension of suit
when Amsted is not actually aware of the methods used by Meridian in their manufacturing process.
This prong of the case of actual controversy test, however, deals with the reasonable apprehension
of the declaratory plainti{f’ Thus, we are instructed to look only at Meridian's apprehension of
Amsted's intentions. Amsted's argument turns this premise on its head: it claims that since it does
not have any actual knowledge of the manufacturing methods used by Meridian it, Amsted, cannot
reasonably intend to bring suit. We are, however, not concerned with Amsted's reasonableness.
Rather, we are concerned about the objective reasonableness of Meridian's apprehension that
Amsted intends to bring a patent infringement suit.

Meridian's apprehension of an impending suit from Amsted is clearly reasonable. Paragraph
nine of Meridian's complaint and a supporting declaration by John Waite, Vice-Chairman of

Meridian, demonstrate that Amsted, through its representatives, “uncquivocally stated it intends to

sue Meridian for patent infringement immediately upon Meridian’s manufacture and sale of its newly



As an alternative basis for its motion to dismiss, Amsted urges us to dismiss this case until
the bankruptcy proceedings regarding ABC-NACO are complete. Thereafter, argues Amsted, the
ABC-NACO patent litigation before Judge Conlon and the present litigation can be joined. We
decline to exercise our discretion in this manner. While the patents at issuc in the two suits are
identical, there is no reason to believe that the cases could somehow be joined at a later date. The
parties in each case are different. Moreover, the case before Judge Conlon has already been
dismissed (with leave to reinstate upon completion of the bankruptcy proceedings). It would be non-
sensible for us to dismiss the present case based upon the possibility that it could one day be
consolidated with another dismissed suit when and if the other suit is ever reinstated. If Amsted is
concerned about conflicting judicial determinations regarding its 564 Patent and 114 Patent, it can
rest assured that such conflict is best address through the principles of collateral estoppel and res
judicata.

CONCLUSION
For the foregoing reasons, Amsted's motion to dismjst is denied. It is so ordered.
C
VN7 |,
ST MARVIN ED ASPEN
United States District Judge

Dated eliglo L-



Presently before us is Amsted's motion to dismiss Meridian’s complaint. Amsted argues that

Meridian's complaint fails to properly state a claim in that it does not identify the manufacturing
method by which Meridian seeks to manufacture its sideframes and bolsters and that, therefore,
Meridian cannot invoke declaratory judgment jurisdiction.!

ANALYSIS

Tn considering a motion to dismiss under Rule 12(b)(1), we tust accept all well-pleaded
allegations in the complaint as true and draw all reasonable inferences in the plaintiff’s favor.
Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999). The issue “is not whether a plaintiff will
ultimately prevail but whether he is entitled to offer evidence to support the claims.” Jd. [lowever,
the presumption of correctness that attaches to the allegations of the complaint falls away once the
Defendant offers evidence to call the correctness of jurisdiction into question. Therefore, the
Plaintiffbears the burden of establishing the existence of subject matter jurisdiction. Furthermore,
when a defendant challenges subject matter jurisdiction, we may properly look beyond the complaint
and consider any evidence submitted on the issue.

The basis for Amsted's jurisdictional argument is that Meridian has failed to plead sufficient
facts to demonstrate the existence of a case of actual controversy. The Declaratory Judgment Act,
28 U.S.C. § 2201, provides that a district court may declare the rights and legal obligations of an
interested party only "[i]n a case of actual controversy.” The Act cnables an accused infringer who

reasonably anticipates a Icgal risk because of an unresolved dispute to obtain judicial resolution of

'While Amsted has filed this motion to dismiss under Rule 12(b)(6), its argument actually pertains solely
to subject matter jurisdiction. As such, Amsted's motion is more properly charactcrized as being under
Rule 12(b)(1) and we shall consider it as such, This characterization, however, docs not alter the
outcome of this opinion.



designed lightweight sideframes and bolsters.” Compl. {{ 9; Pla. Brief Ex. A. Amsted does not
dispute that it made these statements. While it is true that Meridian's complaint does not literally
use the words “reasonable apprehension of suit,” there is no authority to suggest that such literalness
is required. Meridian's apprehension of an impending suit from Amstcd is a legitimate, obvious,
and reasonable inference from the complaint's allegations.

Amsted has a misplaced reliance on our decision in Field Container Company., L.P. v.
Somerville Packaging Corporation, 842 F.Supp. 338, 341 N.3 (N.D. IIL. 1994)(Aspen, J.). In Field
Container, in dicta, we found that a number of factors weighed against finding that the plaintiffhad
a reasonable apprehension of impending suit. Those factors included the absence of an express
threat to sue and the absence of contact between the defendant and the declaratory plaintiffs
customers. Perhaps most importantly, however, we noted that the plaintiff failed to alleged such
apprehension in the complaint. Each of those factors is not present in the instant suit. First, in the
instant case there was an expressed and unequivocal threat to sue. Second, Mendian has alleged that
Amsted has contacted Meridian’s customers about Amsted's intent to sue. Finally, unlike the
plaintiff in Field Container, Meridian has made these allegations in its complaint and not merely in
its response to the motion to dismiss. As such, Field Container is easily distinguishable.
fl. Activity Potentially Constituting Infringement

‘The next step in determining the existence of a case of actual controversy requires Meridian
to show “present activity which could constitute infringement or concrete steps taken with the intent
to conduct such activity.” BP Chemicals Ltd., 4 F.3d at 978. Amsted argues that Meridian's
complaint is deficient because it does not describe the specific manufacturing method it uses to

produce its products. Without identifying these methods, according to Amsted, it is impossible to



Minute Order Farm (06/97)

United States District Court, Northern District of Mlinois

Name of Assigned Judge ri Sitting Judge If Other
or Magistrate Judge Marvin Aspen than Assigned Judge
CASE NUMBER 02 C 3708 DATE 9/17/2002
CASE Meridian Rail Products vs. Amsted Industries, Inc.
TITLE
[In the following box (a) indicate the party filing the motion, c.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presentcd.]
DOCKET ENTRY:
(0) a Filed motion of [ use listing in “Motion” box above.]
(2) Oo Bricf in support of motion due
3) Oo Answer brief to motion due_____- Reply to answer bricf duc.
(a) oO Ruling/Hearing on set for at
(5) Qo Status hearing[held/continued to] [set for/re-set for} on set for at
(6) o Pretrial conference[held/continued to] [set for/re-set for] on setfor
(7) oO Trial[sct for/re-set for] on at
(8) Qo (Bench/Jury trial] [Hearing] held/continued to___—_—_att
(9) Qo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) (O Local Rule 41.1 OOFRCP41(a(1) C1 FRCP41(a)(2).
(jo [Other docket entry] Enter Memorandum Opinion and Order: Amsted’s motion to dismiss (4-1)
is denied.
qi) ff [For further detail see order attached to the original minute order.]

No notices requited, advised in open court,

No notices required.

wv | Notices mailed by judge's staff.

Notified counsel by telephone.

Docketing to mail notices.

Mail AO 450 form.

Copy to judge/magistrate judge.

courtroom
deputy’s
initials

CL.

uinbor of noriges

SEP 18 2002

dare docketed

= —| |

line .
C Sen dockering deputy initials

sn72002

Ph dato nied nonce

Gi.

Date/time received in + ->

contrat Clerk’s Office ‘mailing depury initials



discern whether or not Meridian is using potentially infringing methods. Meridian counters that it
will identify its manufacturing methods during discovery and after the entry of a protective order,
In the meantime, Meridian claims that nothing in the Federal Rules or the Declaratory Judgment Act
requires it to disclose its proprietary manufacturing methods in a publicly available complaint. We
agree with Meridian.

The second prong of the case of actual controversy requirement should be read, along with
the first, as limiting the availability of declaratory relief to only the most ripe cases — that is, only
those cases in which a declaratory plaintiff has acted in some way that might bring imminent
litigation. There is simply no reason to assume (and no precedential authority to require) that the
second prong should instead be read to establish a heightened pleading requirement on the plaintiff
over and above the notice pleading requirements of the Federal Rules of Civil Procedure. ‘The focus
of the second prong is in identifying the present activity of the declaratory plaintiff. It is not, as
Amsted would haye us believe, a requirement that the declaratory plaintiff divulge its (potentially
non-infringing) manufacturing processes on the face of the complaint.

The present activity by Meridian which could constitute infringement is clearly identified in
its complaint: “Meridian currently manufactures and sells lightweight sideframes and bolsters.”
Compl. 4 10. It is with regard to this specific activity that Amsted allegedly threatened Meridian
with a patent infringement suit. Compl. 9. Meridian need not specify its precise manufacturing

methods at this early stage in the htigation?

?We note in passing that not one of the cases cited by Amsted (or cited cxcerpts therein) in support of
its interpretation of the second prong is directly on point. In each case, the cited language fails to
directly support the narrow rcading Amstcd espouses. See, e, ¥., International Harvester Co. v. Deere
& Co., 623 F.2d 1207, 1215 (7th Cir, 1980); Evans Med. Lid. v. American Cyanamid Co., 980 F.Supp.
132, 138 (S.D.N.Y. 1997).



UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

MERIDIAN RAIL PRODUCTS CORP.,
Plaintiff,

v.

AMSTED INDUSTRIES, INC.,

aes eee Oe ee ee eee

Defendant.

MEMORANDUM OPINION AND ORDER
MARVIN E. ASPEN, Judge:

Meridian Rail Products Corp. (“Meridian”) filed a complaint seeking a declaratory judgment
that it had not infringed two patents held by Amsted Industries, Inc. (“Amsted”), or, in the
alternative, that the patents are invalid. Presently before us is Amsted’s motion to dismiss the
complaint for failure to state a claim upon which relicf may be granted. For the reasons set forth
below, the motion to dismiss is denied.

BACKGROUND

Unless otherwise noted, the following facts from the complaint are assumed to be true for
the purpose of deciding this motion to dismiss. Amsted is the current assignee of U.S. Patent No.
5,752,564 (“564 Patent”) and U.S. Patent No. 5,954,114 (“114 Patent”). Both patents involve
methods used to manufacture railway truck castings. The 564 Patent, issued on May 19, 1998 and
entitled “Railway Truck Castings and Methods and Cores for Making Castings,” covers the

manufacturing of castings, sideframes, and bolsters (which together are used to fashion a railway

No. 02 C3708 POCKETED

SEP 1 8 2002

/|



truck). The 114 Patent, issued on September 21, 1999, is entitled “Method of Making Railway
Truck Bolsters.”

As described by the parties in their briefs, this case has its origin in a previous litigation
between Amsted and a different party, On November 13, 2000, Amsted filed a complaint im the
Northern District of Mlinois against ABC-NACO, Inc. (*ABC-NACO”) for infringement of the 564
and 14 Patents. On August 23, 2001, Judge Conlon in the Northern District of Illinois held that
ABC-NACO’s bolster manufacturing methods infringed Amsted’s 114 Patent, and she denied
ABC-NACO’s motion for summary judgment on the issue of patent invalidity. The 564 Patent
infringement case was scheduled for trial on January 7, 2002. However, on October 18, 2001,
ABC-NACO filed for bankruptcy. On November 2, 2001, Judge Conlon dismissed Amsted’s
complaint without prejudice with leave to reinstate upon disposition of ABC-NACO’s bankruptcy
proceedings.

In December 2001, newly-formed Meridian purchased certain assets of ABC-NACO in a
bankruptcy sale.

On May 21, 2002, during a mecting between Amsted and Meridian executives, Amsted
unequivocally stated its intention to sue Meridian for patent infringement should Mcridian undertake
the manufacture and sale of Meridian's newly designed lightweight sideframes and bolsters. Compl.
4,9. Furthermore, Amsted has informed Mcridian's customers of its intention to sue for patent
infringement. /d. Thereafter, Meridian filed the present four count complaint sccking a declaratory
judgment that it has not infringed the 564 Patent or the 114 Patent and that the two patents arc

invalid.