977 F.3d 1224
Fed. Cir.2020Background
- Medtronic and Dr. Rick Sasso contracted (Facet Screw Agreement, Dec. 1, 1999) to pay royalties through the later of patent expiration or seven years from first sale; payments required coverage by a "valid claim."
- Two patents issued from the original application: U.S. Patent Nos. 6,287,313 and 6,562,046; Medtronic paid royalties from 2002–2018 but dispute arose over additional devices not listed in contract schedules.
- Sasso sued in Indiana state court for breach of contract; the state court ruled that issuance (not validity) controls the Agreement term, excluded evidence of patent invalidity, and a jury awarded Sasso damages; that judgment is on appeal.
- Medtronic sued in federal district court for declaratory judgment that it did not breach because the asserted patents/claims do not validly cover the disputed products or are invalid; the PTO later canceled many of the claims in reexamination.
- The district court dismissed Medtronic’s federal declaratory action without prejudice under Wilton/Brillhart abstention, reasoning the state-court contract judgment made federal relief unnecessary (appeal pending); Medtronic appealed.
- The Federal Circuit held it had jurisdiction, found the district court had discretion under Wilton/Brillhart, and affirmed dismissal as not an abuse of discretion on these facts.
Issues
| Issue | Plaintiff's Argument (Medtronic) | Defendant's Argument (Sasso) | Held |
|---|---|---|---|
| 1) Was dismissal/abstention an abuse of discretion? | Dismissal was improper because federal courts have exclusive patent jurisdiction and patent validity is central to the contract claim. | District court properly exercised Wilton/Brillhart discretion because state case produced a final judgment on the contract and appeal is pending. | Affirmed: district court did not abuse discretion in dismissing without prejudice under Wilton/Brillhart given the state-court judgment and posture. |
| 2) Does the declaratory complaint "arise under" patent law so federal courts/Federal Circuit have jurisdiction? | Counts necessarily raise patent validity and claim scope, so federal-question jurisdiction (28 U.S.C. § 1338) and Federal Circuit review apply. | State-law contract governs royalties; issuance vs. validity is a state-law contract interpretation, so no federal "arising under." | Federal jurisdiction exists for the declaratory claims; the Federal Circuit had appellate jurisdiction to review the abstention decision. |
| 3) Did the state court’s exclusion of patent-invalidity defenses deprive Medtronic of an adequate forum, requiring federal adjudication? | State court excluded invalidity evidence, producing an unfair result and leaving Medtronic unable to resolve federal patent-based defenses. | Contract disputes are principally state-law matters; state process and appellate review can address errors. | Abstention was still proper here—district court reasonably declined to entertain declaratory relief given the state judgment and ongoing state appeal. |
| 4) Do PTO reexamination cancellations of claims change the need for federal adjudication? | Reexamination cancelled the claims covering disputed devices, bearing on the Agreement’s "valid claim coverage" term and supporting federal resolution. | District court deemed the PTO action not dispositive to the abstention decision at that time. | PTO cancellations were noted but did not make dismissal an abuse of discretion under the circumstances; dismissal was without prejudice. |
Key Cases Cited
- Wilton v. Seven Falls Co., 515 U.S. 277 (1995) (Declaratory Judgment Act confers discretionary authority to decline declaratory relief)
- Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942) (federal courts may abstain when parallel state proceedings can better resolve the dispute)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) (abstention is an extraordinary exception appropriate only in exceptional circumstances)
- Gunn v. Minton, 568 U.S. 251 (2013) (limits on when state-law claims that implicate patent questions "arise under" federal patent law)
- Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005) (federal-question jurisdiction over state-law claim requires a substantial federal issue)
- NeuroRepair, Inc. v. Nath Law Group, 781 F.3d 1340 (Fed. Cir. 2015) (analyzing when patent issues are necessarily raised for federal jurisdiction)
- Capo, Inc. v. Dioptics Med. Prods., Inc., 387 F.3d 1352 (Fed. Cir. 2004) (abuse of discretion to dismiss declaratory action when dismissal leaves accused infringer unable to resolve liability)
- Jang v. Boston Sci. Corp., 767 F.3d 1334 (Fed. Cir. 2014) (dismissal improper where contract resolution requires resolving infringement or validity and could produce divergent future judgments)
- Envision Healthcare, Inc. v. PreferredOne Ins. Co., 604 F.3d 983 (7th Cir. 2010) (Wilton/Brillhart abstention doctrine explained and applied)
- Sony Elecs., Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271 (Fed. Cir. 2007) (abuse-of-discretion standard for appellate review of Wilton/Brillhart dismissals)