Matthews International Corp. manufactures and sells a Bio Cremation™ product that uses a hydrolysis process to accelerate the natural decomposition of the body to cremate human remains.  In 2011, Matthews filed suit against our client, Biosafe Engineering, LLC, seeking a declaratory judgment of non-infringement, invalidity and unenforceability of five method patents related to using alkaline hydrolysis to dispose of hazardous organic materials.  Matthews also asserted state law claims of trade libel, defamation, and tortuous interference with contractual relations alleging that Biosafe had wrongly accused Matthews of patent infringement to Matthew’s customers, potential customers and employees.

Biosafe moved to dismiss all counts for lack of declaratory judgment jurisdiction and failure to adequately plead state law claims. The United States District Court of Western Pennsylvania granted Biosafe’s motion to dismiss all counts for lack of declaratory judgment jurisdiction and failure to adequately plead state law claims.  Matthews appealed.

On appeal, the Federal Circuit upheld the district court’s holding that Matthews’ dispute with Biosafe lacked the requisite immediacy and reality to support the existence of declaratory judgment jurisdiction.  The Federal Circuit noted that there was no evidence as to when the Bio Cremation™ equipment might be used in a manner that could infringe Biosafe’s method patents and that the Bio Cremation™ equipment could be operated outside of the parameters specified in Biosafe’s method patents.  In addition, while Matthews sold the cremation equipment, it did not practice any of the claimed methods and could not be liable for direct infringement.

Immediacy

“A party may not obtain a declaratory judgment merely because it would like an advisory opinion on whether it would be liable for patent infringement if it were to initiate some merely contemplated activity.”  The Federal Circuit held that it would be premature to determine infringement of Biosafe’s patents at least until there was specific and concrete evidence regarding how Matthews’ customers planned to use the Bio Cremation™ equipment.

The Federal Circuit noted that a showing of actual infringement is not required to support declaratory judgment jurisdiction but the absence of any arguable infringing activity showed the dispute lacked the immediacy necessary to support declaratory judgment jurisdiction.

Reality

“In the context of patent litigation, the reality requirement is often related to the extent to which the technology in question is ‘substantially fixed’ as opposed to ‘fluid and indeterminate’ at the time declaratory relief is sought.” Because the Bio Cremation™ equipment could be operated using process parameters that would not infringe the method patents and because Matthews did not specify any operating parameters, the Court considered it impossible to determine whether the operation of the Bio Cremation™ equipment infringed the method patents. The Federal Circuit affirmed the district court’s characterization of Matthews’ Bio Cremation™ equipment as “fluid and indeterminate.” A party has no right to obtain declaratory relief when it provides insufficient information for a court to assess whether its future activities would be infringing.

Finally, the Federal Circuit affirmed the district court holding that Matthews failed to plead the bad faith element of the state law trade libel, defamation, and tortuous interference claims. The court stated that the state law claims would not be ripe for review even if Matthews had pled the required bad faith element. Until some specific evidence regarding the operating parameters for the Bio Cremation™ equipment is produced, any determination of whether Biosafe acted unreasonably in asserting that Matthews infringed the patents would be premature.

The full decision is hyperlinked Matthews International Corporation v. Biosafe Engineering, LLC, September 25, 2012, Mayer, H.

We congratulate Spiro Bereveskos for his successful argument at the Federal Circuit. We also congratulate Steve Zlatos and William McKenna for writing the successful appeal brief.