no. 11-11315 in the united states court of …ipls/mootcourt/2012 fiddle.pdf · fiddle’s actions...

No. 11-11315

_______________________________________________________________

IN THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

_______________________________________________________________

WART-HOG WANDS, INC.,

Defendant-Appellant

v.

T. FIDDLE, INC.,

Plaintiff-Appellee,

_______________________________________________________________

Appeal from the United States District Court

For The District of Little Whinging

_______________________________________________________________

BRIEF OF PLAINTIFF-APPELLEE,

T. FIDDLE, INC.

RACHEL L. SCHWEERS

NICHOLAS A. RESTAURI

Counsel for the Plaintiff-Appellee

SCHWEERS & RESTAURI, P.C.

123 Platform 9-3/4

King’s Cross Station

London, Illinois 90001

i

CERTIFICATE OF INTEREST

Counsel for appellee certifies the following:

1. We represent T. Fiddle, Inc.

2. T. Fiddle, Inc. is the real party in interest.

3. T. Fiddle, Inc is an incorporated company.

4. The names of all law firms and the partners or associates that appeared for T. Fiddle, Inc. in the

District Court or are expected to appear in this Court

are: Rachel L. Schweers and Nicholas Restauri.

February 3, 2012 By:____________________

Rachel L. Schweers

Attorney

ii

TABLE OF CONTENTS

TABLE OF AUTHORITIES......................................... iv

STATEMENT OF RELATED CASES.................................... 1

JURISDICTIONAL STATEMENT...................................... 1

STATEMENT OF THE ISSUES....................................... 1

STATEMENT OF THE CASE......................................... 1

STATEMENT OF FACTS............................................ 3

SUMMARY OF THE ARGUMENT....................................... 6

STANDARDS OF REVIEW........................................... 7

ARGUMENT...................................................... 8

I. A Substantial Controversy Exists Between Fiddle and Wands,

Establishing Declaratory Jurisdiction. ...................... 8

A. Wands’ objective actions have created a real controversy

with respect to Fiddle’s potential infringement of the ‘543

patent. .................................................. 10

B. Wands “implied assertion” of enforcing its patent against

Fiddle creates a justiciable controversy. ................ 15

C. The dispute between the parties is “real and immediate”

and the parties’ adverse legal positions are not based on a

hypothetical set of facts. ............................... 19

II. Fiddle Has Not Induced Infringement of the ‘543 Patent

Under 35 U.S.C. § 271(b). .................................. 21

A. Fiddle did not have actual knowledge of the '543 patent.

...................................................... 23

B. Fiddle was not willfully blind to the existence of the

‘543 patent. ............................................. 24

1. Fiddle did not have the “subjective belief” that the

‘543 patent existed, let alone that it was likely

infringed by the use of Fiddle’s products............... 26

iii

2. Fiddle’s actions were not deliberate attempts to avoid

learning about the existence of the ‘543 patent or

attempts to avoid learning that the use of the Magician’s

Assistant might infringe the ‘543 patent................ 27

CONCLUSION................................................... 30

iv

TABLE OF AUTHORITIES

CASES

ABB Inc. v. Cooper Indus., LLC,

635 F.3d 1345 (Fed. Cir. 2011) ..........................15, 17

Cat Tech LLC v. Tube Master, Inc.,

528 F.3d 871 (Fed. Cir. 2008) ............................8, 20

Celetex Corp. v. Catrett,

477 U.S. 317 (1986) .........................................27

Crown Operations Int’l v. Solutia Inc.,

289 F.3d 1367 (Fed. Cir. 2002) ...............................8

Global-Tech Appliances, Inc. v. SEB S.A.,

___ U.S. ___, 131 S. Ct. 2060 (2011) ....................Passim

Hewlett-Packard Co. v. Acceleron LLC,

587 F.3d 1358 (Fed. Cir. 2009) ..........................Passim

Maryland Cas. Co. v. Pac. Coal & Oil Co.,

312 U.S. 270 (1941) ..........................................8

MedImmune, Inc. v. Genentech, Inc.,

549 U.S. 118 (2007) .....................................Passim

Micron Tech., Inc. v. Mosaid Techs., Inc.,

518 F.3d 897 (Fed. Cir. 2008) ................................9

Micron Technologies, Inc. v. Mosaid Technologies, Inc.,

518 F.3d at 899-901 (Fed. Cir. 2008) .....................12-13

Panavise Products, Inc. v. National Products, Inc.,

306 Fed. Appx. 570, 573 (Fed. Circ. 2009) ................17-19

Prasco, LLC v. Medicis Pharm. Corp.,

537 F.3d 1329 (Fed. Cir. 2008) ....................7, 9, 13, 20

SanDisk Corp. v. STMicroelectronics., Inc.,

480 F.3d 1372 (Fed. Cir. 2007) ..........................10, 12

Versata Software Inc. v. SAP America, Inc.,

No. 2:07–CV–153 CE, 2011 WL 4017952 (E.D. Tex. Sept. 9,

2011) ...................................................24, 29

v

Water, Inc. v. Ecolochem, Inc.,

846 F.2d 731 (Fed. Cir. 1988) ...............................20

STATUTES

28 U.S.C. § 1295(a)(1)..........................................1

28 U.S.C. §§ 1331, 1338(a), and 2201(a).........................1

28 U.S.C. § 2201................................................2

35 U.S.C. § 271(b)..........................................21-22

1

STATEMENT OF RELATED CASES

No appeal from this case is or has previously been taken

before this Court or any other appellate court. To the best of

counsel’s knowledge, no other pending cases will directly

affect this Court’s decision in this case.

JURISDICTIONAL STATEMENT

This Court has jurisdiction under 28 U.S.C. § 1295(a)(1)

because the appeal is from the final judgment of a district

court in a declaratory judgment action with regard to a patent

infringement suit. The District Court had subject-matter

jurisdiction under 28 U.S.C. §§ 1331, 1338(a), and 2201(a).

STATEMENT OF THE ISSUES

1. Whether there is a justiciable controversy when a

company halts production of a device and delays its release in

the face of a patentee’s litigious conduct against multiple

competitors selling similar devices.

2. Whether a company induces infringement when it

improves a competitor’s unmarked device, has no actual or

constructive knowledge of the competitor’s patent, and

immediately seeks a determination of their rights upon learning

of the patent.

STATEMENT OF THE CASE

Plaintiff-appellee, T. Fiddle, Inc. (“Fiddle”) filed suit

against Defendant-appellant, Wart-Hog Wands, Inc. (“Wands”)

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seeking a declaratory judgment of non-infringement against U.S.

Patent No. 9,876,543 (“the ‘543 patent”) owned by Wands. R. at

¶ 27. Subsequently, Wands filed a motion to dismiss for lack

of jurisdiction under 28 U.S.C. § 2201 and a motion for limited

discovery. R. at ¶ 1. The District Court denied Wands’

motion to dismiss finding that Wands’ aggressive litigation

actions enforcing the ‘543 patent against products similar to

Fiddle’s created a substantial controversy between the parties

under a totality of the circumstances test. R. at ¶ 40. The

District Court also found that Fiddle suffered an injury

because of having to delay the release of its second generation

product. Id. As such, the District Court granted Wands’

motion for limited discovery. R. at ¶ 1.

Wands filed a cross-complaint alleging Fiddle induced

infringement of claim 1 of the ‘543 patent via consumer

purchase and use of the Magician’s Assistant wand which Fiddle

manufactured and sold. Id. At the close of discovery, Fiddle

filed a motion for summary judgment of no liability for induced

infringement. Id. The District Court granted Fiddle’s motion

for summary judgment finding Fiddle’s actions did not meet the

willful blindness standard. R. at ¶ 41. Even considering the

facts in favor of Wands, the District Court found the evidence

insufficient to show Fiddle actually intended for the ‘543

patent to be infringed by Fiddle’s users as they were unaware

3

of the existence of ‘543 patent and did nothing to deliberately

avoid learning of the ‘543 patent. Id.

Fiddle did not challenge the validity of the ‘543 patent.

Id. Wands timely filed a notice of appeal to this Court. Id.

STATEMENT OF FACTS

Fiddle is the manufacturer and seller of magical devices,

including the “Magician’s Assistant” automatic wand. R. at ¶

18. During a meeting with Herman Ranger (“Mr. Ranger”), a

magic company colleague, Fiddle’s CEO, Mr. Mortimer Volda (“Mr.

Volda”), learned that Mr. Ranger received a letter from Wands

asserting Mr. Ranger’s product infringed the ‘543 patent. R.

at ¶¶ 18, 27. Mr. Volda, conscious of the multiple

similarities between the Magician’s Assistant and Mr. Ranger’s

wand, filed this lawsuit on June 22, 2011, requesting a

declaration that its Magician’s Assistant wand does not induce

infringement of the ‘543 patent. R. at ¶¶ 27, 33.

The ‘543 patent was acquired on July 20, 2008 by Wands,

manufacturer of the Shrink-O-Matic device, after it

successfully outbid competitors at a patent auction. R. at ¶¶

1, 5-7. Wands, which controls 80% of the wand market share,

purchased the ‘543 patent in order to “strengthen its patent

portfolio.” R. at ¶ 7. The patent, directed to a method for

shrinking a person, was originally promoted to all wand

manufacturers in a brochure in early 2007, which included a

4

chart mapping the patent’s claims to current devices on the

market. R. at ¶¶ 5-7. Mr. Volda vaguely recalled receiving

the brochure; however, he immediately disposed of the brochure

as he had yet to develop a competing wand at the time, and

therefore, had no any interest in acquiring patents. R. at ¶¶

18-19, 23. Moreover, Mr. Volda’s copy of the brochure, which

he received two years before he developed the Magician’s

Assistant, did not reference the patent by number as the front

(and only) page containing full patent identification

information was missing. Id.

After acquiring the ‘543 patent, Wands repeatedly asserted

in trade publications its intentions to “vigorously” enforce

its patent rights against “any party we identify as infringing

our patents.” R. at ¶¶ 7, 8. None of these articles referred

to the ‘543 patent by number. R. at ¶ 7. Between 2008 and

2009, Wands proceeded to file three lawsuits against wand

manufacturers, obtaining a favorable jury verdict with damages

in the first lawsuit in 2011 and settlements in the latter two.

R. at ¶¶ 10, 11. Wands CEO, A. L. Umble Door, admitted he

“sued every one of his potential competitors and continuously

monitored the market.” R. at ¶ 28. Wands continues to assert

the ‘543 patent against manufacturers of products similar to

Fiddle’s Magician’s Assistant. See R. at ¶ 27.

In early 2009, Mr. Volda developed his Magician’s

5

Assistant wand, based in part, on a version “B” Shrink-O-Matic

he purchased which bore no U.S. patent markings. R. at ¶¶ 18,

19. Mr. Volda specifically selected the version “B” Shrink-O-

Matic due to the fact that it received good reviews. R. at ¶¶

16, 18. The Magician’s Assistant Fiddle developed was similar

to the version “B” Shrink-O-Matic. R. at ¶¶ 32-33, 36.

However, Fiddle’s Magician’s Assistant included additional

features for pre-recorded incantation spells and remote control

operation that were present in other wands on the market,

including the one sold by Wands’ chief competitor, Sticks. See

R. at ¶¶ 10, 34, 37.

After development of the Magician’s Assistant, Mr. Volda

diligently sought a freedom-to-operate opinion from outside

counsel, informing her that he looked at products available on

the market. R. at ¶ 22. After conducting a patent search,

opinion counsel issued an opinion that the Magician’s Assistant

did not infringe any of the patents from the search. R. at ¶

22. The search did not identify the ‘543 patent. Id.

Fiddle’s Magician’s Assistant stands above all others when

operated by directions contained in its Almighty Manual and has

multiple uses other than shrinking humans, such as an alarm for

voicing wake-up spells. R. at ¶¶ 30, 35. Fiddle sells the

Magician’s Assistant on its website and has promoted its

product, presenting it at a booth at the annual Magical

6

Advances conference, also attended by Wands, with a wizard room

where visitors can sample the Magician’s Assistant. R. at ¶

30. Fiddle’s Magician’s Assistant has been well received, and

even Wands’ expert testified that many wizards rely on its

“remarkable degree of consistency.” See R. at ¶ 36.

In May 2010, Fiddle’s engineers began to develop an

updated wand, Magician’s Assistant II. R. at ¶ 25. However,

after becoming aware of the ‘543 patent from an article

showcasing Wands’ litigation campaign, Mr. Volda felt that due

to the “specter of litigation,” it was “impossible” for Fiddle

to continue development and delayed the scheduled release of

the new, improved product. R. at ¶ 26.

SUMMARY OF THE ARGUMENT

Fiddle and Wands are engaged in a substantial controversy

that warrants an issuance of declaratory judgment. The record

establishes the reality and immediacy of this controversy due

to the fact that (1) Wands’ persistent litigious conduct

against products similar to Fiddle’s Magician’s Assistant

creates a “real and substantial” threat of litigation against

Fiddle, (2) Wands’ objective actions are an implicit assertion

of the ‘543 patent against Fiddle, as no specific threat aimed

at plaintiff or pre-filing communications between the parties

is required to find actual controversy, and (3) Fiddle’s

presence in the marketplace with an allegedly infringing

7

product makes its adverse legal position tangible, not

hypothetical or abstract.

Fiddle is not liable for induced infringement of the ‘543

patent as it had no actual knowledge of the ‘543 patent and was

not willfully blind to its existence. Wands presented no

evidence to establish Fiddle’s actual knowledge of the ‘543

patent, let alone any actual intent on Fiddle’s part to

infringe the ‘543 patent. Further, Wands has presented no

evidence to support the assertion that Fiddle had a “subjective

belief” that the ‘543 patent existed when (1) the version of

the product Fiddle purchased based on its good reviews was not

marked with patent information and (2) the freedom-to-operate

opinion from Fiddle’s outside counsel did not identify the ‘543

patent. In addition, Fiddle did not act deliberately to avoid

learning of the ‘543 patent’s existence by (1) actively seeking

a freedom-to-operate opinion while informing opinion counsel

that it considered products on the market and (2) immediately

seeking legal resolution for the Magician’s Assistant upon

learning of the ‘543 patent.

STANDARDS OF REVIEW

A grant or denial of a motion to dismiss for lack of

subject matter jurisdiction is a question of law reviewed de

novo. Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329, 1335

(Fed. Cir. 2008). Underlying factual findings are reviewed for

8

clear error. Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d

1358, 1361 (Fed. Cir. 2009).

Orders granting or denying summary judgment are reviewed

de novo and should be affirmed when “there is no genuine issue

as to any material fact and [] the moving party is entitled to

a judgment as a matter of law.” Crown Operations Int’l v.

Solutia Inc., 289 F.3d 1367, 1375 (Fed. Cir. 2002).

ARGUMENT

I. A Substantial Controversy Exists Between Fiddle and Wands,

Establishing Declaratory Jurisdiction.

Fiddle has standing to bring this suit as a justiciable

controversy exists between Fiddle and Wands. Under the Supreme

Court’s standard set forth in MedImmune, 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.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118,

127 (2007) (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co.,

312 U.S. 270, 273 (1941)). Fiddle’s potentially infringing

activity and Wands’ prior conduct has created an actual

controversy between the parties, and Fiddle is within its

rights to seek a declaration that its activities are not

infringing. See Cat Tech LLC v. Tube Master, Inc., 528 F.3d

9

871, 878-79 (Fed. Cir. 2008) (explaining that after passage of

the Declaratory Judgment Act, competitors “were no longer

restricted to [the hard] choice between incurrence of a growing

potential liability for potential infringement and abandonment

of their enterprises; they could clear the air by suing for a

[declaratory] judgment”).

In MedImmune, the Supreme Court rejected this Court’s

exclusive use of the “reasonable apprehension” of suit test as

the sole test for declaratory jurisdiction and redirected the

analysis to a “totality of the circumstances” approach. See

549 U.S. at 132; see also Prasco, 537 F.3d at 1336 n.4, 1339

(explaining that “reasonable apprehension” of suit and

“meaningful preparation to conduct potentially infringing

activity” remain important to the totally of the circumstances

test.). Indeed, “the now more lenient legal standard . . .

enhances the availability of declaratory judgment jurisdiction

in patent cases.” Micron Tech., Inc. v. Mosaid Techs., Inc.,

518 F.3d 897, 902 (Fed. Cir. 2008); see also Hewlett-Packard,

587 F.3d at 1361) (“Intentionally or not, MedImmune may have

lowered the bar for determining declaratory judgment

jurisdiction in all patent cases.”).

Wands’ aggressive litigation tactics against sellers of

products similar to Fiddle’s Magician’s Assistant, its public

threat to vigorously enforce its patent against any party it

10

finds to be infringing, and Fiddle’s resulting delay in product

release have created a substantial controversy between the

parties. R. at ¶ 41. Effectively, Wands’ conduct has put

Fiddle in “the position of either pursuing arguably illegal

behavior or abandoning that which he claims a right to do.”

SanDisk Corp. v. STMicroelectronics., Inc., 480 F.3d 1372, 1381

(Fed. Cir. 2007); see also MedImmune, 549 U.S. at 129 (noting

that Article III jurisdiction “d[oes] not require, as a

prerequisite to testing the validity of the law in a suit for

injunction, that the plaintiff bet the farm, so to speak, by

taking the violative action.”).

As required under MedImmune, the dispute between Fiddle

and Wands is “definite and concrete, touching the legal

relations of parties having adverse legal interests,” such that

this Court may admit “specific relief through a decree of a

conclusive character, as distinguished from an opinion advising

what the law would be upon a hypothetical state of facts.” See

549 U.S. at 127 (quotation omitted). Accordingly, this Court

should affirm the District Court’s findings and hold that

Wands’ motion to dismiss was correctly denied.

A. Wands’ objective actions have created a real

controversy with respect to Fiddle’s potential

infringement of the ‘543 patent.

Wands’ aggressive litigation strategies against products

similar to Fiddle’s Magician’s Assistant create a “real and

11

substantial” threat of litigation against Fiddle. See R. at ¶

40. As correctly recognized by the District Court, the

similarity between the Magician’s Assistant and the Shrink-o-

Matic devices, as well as similarities to prior devices against

which the ‘543 patent has been enforced, created a substantial

likelihood that Fiddle would be faced with litigation regarding

its ongoing activities. See R. at ¶¶ 32-34. Since the

acquisition of the ‘543 patent, Wands has repeatedly gone out

of its way to publically assert its position that it will

“vigorously enforce” its patent rights against “any party

[Wands] identifie[s] as infringing.” See R. at ¶¶ 7, 8. In

2008, Wands began filing law suits against other manufacturers

and sellers of similar magic wands in the industry. R. at ¶¶

9, 27. Wands outspoken public behavior and active and

aggressive enforcement of its patent against other similarly

situated sellers created a substantial likelihood that Fiddle

will be targeted by Wands with a lawsuit if it continues to

produce and sell its Magician’s Assistant.

Wands’ CEO, Umble Door, testified that he was unaware of

Fiddle’s patent and that he didn’t “think” it would have been

worth his time to pursue Fiddle’s product due to its low sales.

R. at ¶ 28. However, Wands subjective claims regarding its

intent to sue for infringement are immaterial to the Article

III jurisdiction analysis. See Hewlett-Packard, 587 F.3d at

12

1363 (finding whether patentee subjectively believed

declaratory plaintiff was infringing irrelevant to

determination of a justiciable controversy). Rather, the

proper focus is the patentee’s objective “preparedness and

willingness to enforce its patents rights” despite possible

claims to the contrary. See SanDisk, 480 F.3d at 1376, 1382-83

(holding that the patentee’s statement that it “has absolutely

no plan whatsoever to sue [the declaratory plaintiff]” fails to

“eliminate the justiciable controversy created by [the

patentee’s] actions”). Here, despite Umble Door’s claim that

suing Fiddle would not have been “worth [his] time,” the fact

remains Wands’ repeated assertions of the ‘543 patent clearly

indicate its adverse legal position to Fiddle, and it these

“objective words and actions of the patentee that are

controlling.” See Hewlett-Packard, 587 F.3d at 1363; R. at ¶

28.

Identical analysis was employed in Micron, in which this

Court found an actual controversy under the MedImmune standard

between a patentee who had previously sued other major

manufacturers of similar technology and a declaratory plaintiff

who had reason to believe it was next. 518 F.3d at 899-901.

In Micron, the patentee sent letters to the four major

manufacturers of random access memory chips suggesting that

they license the patentee’s technology. Id. at 899. After

13

failing to receive a favorable reply from any party, the

patentee brought suit against one of the manufacturers. Id.

Similar to the instant case, upon termination of the first

lawsuit, the Micron patentee soon settled with two of the other

manufacturers. Id. Suspecting it was next on the list,

plaintiff filed for declaratory relief nearly four years after

receiving the license inquiry. Id. This Court held an actual

controversy existed and found that there was ample evidence on

record supporting jurisdiction; namely, the original letters,

the prior litigious conduct, and the patentee’s public

statements indicating their intent to pursue aggressive

litigation. Id. at 901.

Micron is instructive in the instant action because both

patentees’ litigious conduct and public statements regarding

the enforcement of its patent, bolstered the likelihood that

the declaratory plaintiffs would be sued next. See id. at 899.

The patentees outward, objective actions created a reasonable

apprehension of a law suit and led to the creation of a “real

and substantial” controversy between the parties, regardless of

the content of the original licensing letters sent four years

prior. Id. at 901; see also Hewlett-Packard, 587 F.3d at 1363

(noting that “conduct that can be reasonably inferred as

demonstrating intent to enforce a patent can create declaratory

judgment jurisdiction.”); Prasco, 537 F.3d at 1336 (reaffirming

14

that post-MedImmune, the “reasonable apprehension” of suit test

continues to be “one of multiple ways that a declaratory

judgment plaintiff can satisfy the more general

all-the-circumstances test.”).

In addition, Umble Door’s public statements explicitly

show that Wands acquired the ‘543 patent for the sole purpose

of strengthening its patent portfolio and planned to

“vigorously enforce” its patent rights “against any party”

identified by Wands as infringing. R. at ¶¶ 7, 8 (emphasis

added). Wands has also carried through on its statements by

enforcing the ‘543 patent against manufacturers of similar

products. R. at ¶¶ 8, 9. In addition, Wands continues to

threaten and assert infringement of the ‘543 patent against

other magic wand sellers, as shown by Wands’ letter to Mr.

Ranger. R. at ¶ 27.

When Wands’ statements are viewed in conjunction with its

prior and current assertion of the ‘543 patent, Fiddle’s

apprehension of litigation is not only “reasonable” under any

standard, but is “definite and concrete,” touching the actual

legal relations between the parties. See MedImmune, 549 U.S.

at 127. In these circumstances, declaratory judgment is not

only appropriate, but also necessary, to clear the shroud of

uncertainty and settle the adverse legal positions of the

parties. See id. Accordingly, this Court should affirm the

15

District Court’s finding of declaratory jurisdiction.

B. Wands “implied assertion” of enforcing its patent

against Fiddle creates a justiciable controversy.

Wands’ vigorous enforcement of the ‘543 patent against

wand manufacturers similar to Fiddle creates an “implied

assertion” of patent enforcement warranting declaratory

adjudication, as no specific threat against Fiddle is required

for this Court to find an actual controversy. See Hewlett-

Packard, 587 F.3d at 1364; see also ABB Inc. v. Cooper Indus.,

LLC, 635 F.3d 1345, 1348 (Fed. Cir. 2011). Umble Door’s

testimony that he had yet to evaluate the Magician’s Assistant

or to determine whether Wands would ultimately sue Fiddle for

infringement is immaterial to the Article III analysis. See R.

at ¶ 28.

This Court has held that a specific threat to enforce a

patent against a declaratory plaintiff is not required in order

to confer Article III jurisdiction upon a court. See ABB Inc.,

635 F.3d at 1348. Rather, a patentee’s actions must be viewed

objectively, focusing on whether they create an “implied

assertion” of its rights. See Hewlett-Packard, 587 F.3d at

1364. In Hewlett-Packard, this Court found that the conduct of

a patentee, who had not investigated the declaratory

plaintiff’s product or determined whether that product

infringed, created an “implied assertion” of enforcement

16

against declaratory plaintiff. See id. at 1363. There, the

patentee wrote to the declaratory plaintiff stating that it

wished to discuss the patented technologies at issue. Id. at

1360. In its letters, the patentee repeatedly stated that the

communications would not be used in any future litigation and

that it did not believe that it currently had “any basis for

filing a declaratory judgment action.” Id. Nevertheless, the

plaintiff filed for declaratory relief later that month. Id.

at 1361. At trial, the patentee repeatedly argued that

declaratory jurisdiction was inappropriate because the patentee

had yet to determine if it even had a basis for asserting the

patent. Id. at 1363. This Court declined to find these facts

persuasive, and instead held that the patentee’s correspondence

with the declaratory plaintiff created an “implied assertion of

its rights under the [] patent.” Id. at 1364 (emphasis added).

Like Hewlett-Packard, Wands’ alleged unawareness of

Fiddle’s product is irrelevant as a patentee is not required to

have evaluated an allegedly infringing device in order for an

actual controversy to exist. See id. at 1363 (finding whether

patentee conducted an adequate investigation of plaintiff’s

potentially infringing product irrelevant to determination of a

justiciable controversy). Furthermore, that the patentee in

Hewlett-Packard contacted the declaratory plaintiff in a

neutral manner is instructive as it reaffirms that jurisdiction

17

post-MedImmune remains focused the totality of conduct inasmuch

as an objective view of that conduct creates a substantial

controversy between the parties. See also ABB Inc., 635 F.3d

at 1348 (finding patentee’s argument that a justiciable

controversy requires actual threatened litigation impermissible

under the MedImmune standard). In the instant action, Wands

has not only litigated its patent against similarly situated

companies but has publicly stated its intent to vigorously

enforce its rights and continues to actively pursue potential

infringers in the marketplace. R. at ¶¶ 7, 8. Thus, Wands has

gone beyond the limited at-arm’s-length neutral contact present

in Hewlett-Packard and created a real and concrete apprehension

of an assertion of adverse legal interests against Fiddle.

Additionally, in Panavise Products, Inc. v. National

Products, Inc., this Court recognized that lack of direct pre-

complaint communication between the patentee and declaratory

plaintiff is not sufficient by itself to defeat subject matter

jurisdiction. 306 Fed. Appx. 570, 573 (Fed. Cir. 2009). The

Panavise plaintiff based its argument for declaratory

jurisdiction on the fact that distribution of its potentially

infringing device had begun, the patentee had seen this device

at a trade show, and the patentee had a history of litigious

conduct. Id. at 571. This Court declined to find jurisdiction

based primarily on the fact that there was no “immediate”

18

threat or injury since declaratory plaintiff had already

brought its product to market. Id. at 572-73. This Court

noted that declaratory plaintiff did not allege that

“[patentee] actually restrained its right to freely market its

products before or at the time of the complaint,” and therefore

concluded that any future injury was hypothetical. Id. at 573.

Nevertheless, this Court stated:

“We do not, of course, mean that the lack of

direct pre-direct pre-complaint communication .

. . by itself is sufficient to defeat subject

matter jurisdiction. . . . On the contrary, we

recognize that ‘[p]rior litigious conduct is one

circumstance to be considered in assessing

whether the totality of the circumstances

creates an actual controversy.’”

Id. (internal citations and quotations omitted). When read in

conjunction, the Hewlett-Packard and Panavise opinions

reinforce that specific threats or pre-complaint communication

are not prerequisites to finding declaratory jurisdiction.

Additionally, Panavise lacked critical facts present in

the instant action. The Panavise Court’s opinion was heavily

influenced by the fact that the declaratory plaintiff rested on

the allegations contained in its complaint and failed to adduce

additional evidence that the patentee “actually restrained its

rights to freely market its product” at the time the complaint

was filed. See Panavise, 306 Fed. Appx. at 572-73.

Specifically, the fact that the Panavise plaintiff had since

19

entered the market with its product showed that it had suffered

no injury and faced no real or immediate threat. Id. at 573.

However, unlike the plaintiff in Panavise, Fiddle has not yet

entered the market with its second-generation product and has

halted any further development for fear of litigation. See R.

at ¶ 26 (Mr. Volda’s testimony that the immediate threat of

litigation compelled Fiddle to delay bringing the Magician’s

Assistant II to market). Thus, the looming threat of future

injury has in fact paralyzed Fiddle and caused Fiddle’s present

injury. Given the substantial degree of similarity between

Fiddle’s products and the products against which Wands has

previously asserted the ‘543 patent, Fiddle should not be

forced to “bet the farm, so to speak, by taking the violative

action” of bringing the Magician’s Assistant II to market. See

MedImmune, 549 U.S. at 129, 134 (explaining the rule that a

plaintiff must risk damages and loss of its business “before

seeking a declaration of its actively contested legal rights

finds no support in Article III”).

C. The dispute between the parties is “real and

immediate” and the parties’ adverse legal positions

are not based on a hypothetical set of facts.

Fiddle’s active sale of an allegedly infringing product

renders this dispute “real and immediate” and worthy of this

Court rendering conclusive relief. Fiddle has already been

selling the Magician’s Assistant for over two years and has

20

undertaken significant development of a second-generation wand

product, the Magician’s Assistant II. See R. at ¶¶ 25, 30.

Fiddle’s actions weigh heavily in favor of declaratory

jurisdiction because “whether there has been potentially

infringing activity or meaningful preparation to conduct

potentially infringing activity, ‘remains an important element

in the totality of circumstances which must be considered in

determining whether a declaratory judgment is appropriate.’”

See Prasco, 537 F.3d at 1336 n.4 (quoting Cat Tech LLC v.

TubeMaster, Inc., 528 F.3d 871, 880 (Fed. Cir. 2008)) (emphasis

added).

Moreover, the fact that the specter of litigation has

forced Fiddle to halt its progress in developing the Magician’s

Assistant II is a tribute to the sufficiency and reality of the

threat posed by Wands’ actions. When a manufacturer is faced

with justifiable unpredictability, it cannot be forced to

choose between remaining paralyzed and immobile or opting to

engage in possible unlawful activity by selling a potentially

infringing activity. See Water, Inc. v. Ecolochem, Inc., 846

F.2d 731, 734-35 (Fed. Cir. 1988) (noting the purpose of the

Declaratory Judgment Act was to allow a potential infringer to

“clear the air by suing for a judgment that would settle the

conflict of interests.”). Rather, where there are “real and

substantial” doubts as to potential infringement based on

21

“definite and concrete” actions of the parties, a manufacturer

must be allowed to seek declaratory relief. See MedImmune, 549

U.S. at 127.

When viewed in their totality, the objective circumstances

of the instant action have created a “definite and concrete”

legal dispute between the parties. Accordingly, this Court

should uphold the District Court’s finding that declaratory

jurisdiction was proper and affirm the denial of Wands’ motion

to dismiss.

II. Fiddle Has Not Induced Infringement of the ‘543 Patent

Under 35 U.S.C. § 271(b).

The facts of this case are insufficient to establish that

Fiddle actually intended users of its Magician’s Assistant

product to infringe the ‘543 patent or that Fiddle was

willfully blind to the patent. Mr. Volda purchased an unmarked

version of the Shrink-O-Matic based on its popularity and he

received a favorable freedom-to-operate opinion from counsel

after disclosing that he developed his design from products in

the market. R. at ¶¶ 16, 19, 22. Upon learning that Wands was

enforcing its patent against products similar to the Magician’s

Assistant, Fiddle immediately filed this lawsuit for

declaratory judgment to resolve any potential issues with the

sale of the Magician’s Assistant and to reinvigorate his

development and release of the updated Magician’s Assistant II.

22

See R. at ¶ 27.

Under Section 271(b) of the Patent Act, an individual must

“actively induce[] infringement of a patent” in order to be

liable as an infringer. 35 U.S.C. § 271(b) (2006). The

Supreme Court has recently held that the “actively induces”

language of Section 271(b) implies that “at least some intent

is required.” Global-Tech Appliances, Inc. v. SEB S.A., ___

U.S. ___, 131 S. Ct. 2060, 2065 (2011). Fiddle’s products have

multiple uses other than shrinking humans, which casts doubt on

Fiddle’s affirmative intent for the Magician’s Assistant to

infringe the ‘543 patent. See R. at ¶ 37 (Wands’ expert

conceding that the additional functionalities of the Magician’s

Assistant provide an “entirely separate reason for purchasing”

the device).

Furthermore, “the inducement must involve the taking of

affirmative steps to bring about the desired result” and

necessarily requires “knowledge of the existence of the patent

that is infringed.” Global-Tech, 131 S. Ct. at 2065, 2068. In

Global-Tech, the Supreme Court rejected this Court’s

“deliberate indifference” to a “known risk” test for induced

infringement and redirected the analysis to require a plaintiff

to show the potential infringer had actual knowledge or acted

with “willful blindness.” Id. at 2068-71. In the instant

case, Wands has failed to prove that Fiddle had either (A)

23

actual knowledge of the ‘543 patent, or (B) was willfully blind

to the patent’s existence.

A. Fiddle did not have actual knowledge of the '543

patent.

No facts have been presented in this case to establish

that Fiddle had actual knowledge of the ‘543 patent or that it

actually intended users of its Magician’s Assistant product to

infringe the ‘543 patent. Mr. Volda first became aware of the

‘543 patent when he saw an article about Wands’ litigation

campaign in a trade publication. R. at ¶ 26. After Fiddle

learned of Wands’ active assertions of infringement of the ‘543

patent against similar product manufacturers, it quickly sought

legal resolution. R. at ¶ 27. The only evidence alleged to

establish Fiddle’s prior knowledge of the patent is a vague

promotional brochure indiscriminately sent to all magic wand

companies, which Fiddle received many years prior to developing

its product. R. at ¶¶ 6, 23. That brochure listed some patent

claims with features of magic wands currently on the market

mapped to the corresponding claim elements. Id. However, the

first page of the brochure sent to Fiddle was destroyed and the

remaining pages contained no information identifying the patent

by title, inventor, or number. Id. This Court is hard-pressed

to find that Fiddle intended its customers to infringe the ‘543

patent when there is no other evidence of Fiddle’s awareness of

24

the patent. Accordingly, the evidence is simply insufficient

to establish Fiddle’s actual knowledge of the ‘543 patent.

B. Fiddle was not willfully blind to the existence of

the ‘543 patent.

The facts of this case also fail to meet the “willful

blindness” standard for knowledge articulated in Global-Tech.

In Global-Tech, the Supreme Court held that a potential

inducing infringer acts with “willful blindness” only if he (1)

“subjectively believe[s] that there is a high probability that

a fact exists,” and (2) “take[s] deliberate actions to avoid

learning of the fact.” 131 S. Ct. at 2070, n.9. This is

contrasted from a potential infringer who acts recklessly by

mere knowledge of a “substantial and unjustified risk of []

wrongdoing,” or negligently when the potential infringer

“should have known of a similar risk, but in fact, did not.”

Id. at 2071. Rather, the willfully blind party “is one who

takes deliberate actions to avoid confirming a high probability

of wrongdoing and who can almost be said to have actually known

the critical facts.” Id. at 2071-72 (emphasis added). Here,

Wands has failed to meet the stringent standard set forth in

Global-Tech. See Versata Software Inc. v. SAP America, Inc.,

No. 2:07–CV–153 CE, 2011 WL 4017952, at *4 (E.D. Tex. Sept. 9,

2011) (“[G]lobal-Tech establishes a stringent requirement for

knowledge of the patent.”).

25

In Global-Tech, the potential infringer copied all but the

cosmetic features of the patentee’s overseas cool-touch fryer

after conducting market research to determine it enjoyed market

success as an innovative product. 131 S. Ct. at 2071. The

potential infringer was familiar with the U.S. patent system,

the CEO being named as inventor on many U.S. patents. Id. at

2071. The potential infringer obtained a right-to-use opinion

but failed to disclose any information to counsel that the

patentee’s product was copied from another product on the

market. Id. at 2064. The Supreme Court affirmed this Court’s

finding of induced infringement, holding that the evidence was

“more than sufficient” to support a finding of knowledge under

the doctrine of willful blindness. Id. at 2064, 2072. The

Court reasoned that (1) the copying of an overseas product when

domestic products were readily available and which the

potential infringer knew would not bear U.S. patent markings,

and (2) the decision to not inform opinion counsel about the

copied product, showed a subjective belief that a patent

existed and deliberate actions to avoid learning of the patent.

Id. at 2071. The facts of the present case are simply not on

all fours with Global-Tech.

26

1. Fiddle did not have the “subjective belief” that

the ‘543 patent existed, let alone that it was

likely infringed by the use of Fiddle’s

products.

Unlike the potential infringer in Global-Tech, Fiddle did

not engage in any actions demonstrating a subjective belief of

the existence of the ‘543 patent. The facts before this Court

establish that Fiddle developed the Magician’s Assistant using

a version “B” Shrink-O-Matic, which bore no U.S. patent

markings. R. at ¶¶ 18, 19. Version “B” was available in the

U.S. and selected by Fiddle specifically due to the fact it had

received good reviews. R. at ¶¶ 18, 19. In addition, Fiddle

exercised diligence in obtaining a freedom-to-operate opinion

of counsel before selling the Magician’s Assistant, and unlike

the potential infringer in Global-Tech, Fiddle informed opinion

counsel that prior to development he looked at products on the

market. R. at ¶ 22. Lastly, although Fiddle obtained a

promotional brochure advertising sale of the ‘543 patent in

early 2007, the sole page bearing the actual patent number was

missing upon receipt and the brochure was received at a time

significantly prior to Fiddle’s product development and release

of the Magician’s Assistant. R. at ¶¶ 6, 23, 24. Furthermore,

Fiddle was unaware of the ‘543 patent until 2011 when he saw an

article referring to Wands litigation in a trade publication.

R. at ¶¶ 11, 26.

27

Accordingly, any assertions that Fiddle “subjectively

believed” the ‘543 patent existed are based on mere allegations

that lack any probative evidence and do not present a genuine

issue of material fact. See Celetex Corp. v. Catrett, 477 U.S.

317, 327 (1986) (explaining that “a motion for summary judgment

is properly supported by documentary and testimonial evidence,

however, the nonmoving party may not rest upon mere allegations

or denials of his pleadings, but rather, must present

significant probative evidence to establish a genuine issue of

material fact.”).

2. Fiddle’s actions were not deliberate attempts to

avoid learning about the existence of the ‘543

patent or attempts to avoid learning that the

use of the Magician’s Assistant might infringe

the ‘543 patent.

Fiddle’s actions are insufficient to support a finding of

the existence of deliberate attempts to avoid learning of the

‘543 patent. The promotional brochure sent by the inventor of

the ‘543 patent to Fiddle was not relevant to Fiddle’s business

plan as it did not refer to any Fiddle products, did not

contain the first page which identified the patent by number,

and was sent more than two years prior to Fiddle’s interest in

developing the Magician’s Assistant. R. at ¶¶ 6, 7, 11.

Furthermore, Fiddle immediately discarded the brochure as he

had yet to even develop a competing product at this time and

therefore had little interest in acquiring a patent. R. at ¶¶

28

18-19, 23. Failure to maintain and recall an unsolicited

promotional brochure which contained generic patent claims that

did not relate to any products of the receiving party at the

time of receipt does not indicate purposeful actions by Fiddle

as required under Global-Tech. See 131 S. Ct. at 2071, n.9

(explaining that willful blindness “impute[s] the element of

knowledge . . . if the evidence indicates that [potential

infringer] purposely closed his eyes to avoid knowing what was

taking place around him.”).

It is also important to note that unlike the inducing

infringer in Global-Tech, Mr. Volda did not possess the same

level of patent knowledge. Namely, Mr. Volda had no interest,

or means, to acquire any patents at the time he received the

brochure and, therefore, did not seek out additional

information with respect to the patent promoted. R. at ¶ 23.

More than two years after receiving the brochure, when Mr.

Volda was in a position to request a freedom-to-operate

opinion, he actively notified his attorney that he looked at

products available on the market prior to developing the

Magician’s Assistant. R. at ¶ 22. Wands Shrink-O-Matic

enjoyed 80% market-share among magic wand devices. R. at ¶ 15.

Therefore, under the more “stringent requirement for knowledge

of a patent,” Mr. Volda’s communication to his opinion counsel

did not amount to the same offense as that of the inducing

29

infringer of Global-Tech who shared absolutely no information

with its counsel regarding its direct copying of the most

innovative product on the market. See Versata Software, 2011

WL 4017952, at *4 (referring to Global-Tech’s “stringent

requirement” for knowledge of the patent).

Finally, Fiddle’s promptness in filing this declaratory

judgment action upon learning of the existence of Wands ‘543

patent and learning the fact that Wands was enforcing the

patent against similar products demonstrates a focused,

affirmative resolve to put to rest any legal issues that may be

confronted by sale of the Magician’s Assistant or by launch of

the improved Magician’s Assistant II. R. at ¶ 27. In

launching the Magician’s Assistant, Fiddle was not trying to

“escap[e] conviction merely by deliberately closing his eyes to

the obvious risk that he is engaging in unlawful conduct.” See

Global-Tech, 131 S. Ct. at 2071, n.9. Rather, inapposite, once

Fiddle became aware of any risks, he utilized the legal tools

available to him for resolution of his product’s legal place in

the market.

Accordingly, there is no probative evidence that Fiddle

acted deliberately to avoid learning of the ‘543 patent’s

existence of the ‘543 patent and to find such this Court would

have to rely on mere denials of the fact that Fiddle brought

this action for legal resolution upon learning of the ‘543

30

patent. Therefore, faced with no genuine issue of material

fact, the District Court’s finding of summary judgment was

appropriate.

CONCLUSION

For the foregoing reasons, Plaintiff-appellee respectfully

requests this Court affirm the District Court’s denial of

Defendant’s motion to dismiss based on lack of jurisdiction.

In addition, Plaintiff-appellee respectfully requests this

Court affirm the District Court’s grant of Plaintiff’s motion

for summary judgment finding no liability for induced

infringement under 271(b).

Respectfully submitted,

February 3, 2012 __________________________

RACHEL L. SCHWEERS

NICHOLAS A. RESTAURI

SCHWEERS & RESTAURI, P.C.

123 Platform 9-3/4

King’s Cross Station

London, Illinois 90001

Counsel for the Plaintiff-Appellee

31

CERTIFICATE OF SERVICE

I hereby certify that on February 3, 2012, I caused a copy of

the foregoing BRIEF OF PLAINTIFF-APPELLEE T. FIDDLE, INC. to be

served upon the below listed counsel of record via electronic

mail:

Bruce Wilson, brucewilsonesq@aol.com

Samuel Oddi, asoddi@uakron.edu

Douglas Gordon, DGORDON@ULMER.com

J. Masur, jmasur@uchicago.edu

Greg Jolley, RPE8859854@aol.com

Dr. Martha Siegel, deanofstudents@concord.kaplan.edu

Sam S. Han, Ph.D., J.D., Prof.sam.han@gmail.com

Barbara B. Bressler, bbressle@depaul.edu

Mary B. Trevor, mtrevor@hamline.edu

Andrew Crouse, acrouse01@hamline.edu

J. Schaub, jschaub02@hamline.edu

Nicholas-stephens@uiowa.edu

Jane-chang@uiowa.edu

John R. Schaibley, jrschaib@iupui.edu

Mark Janis, nacjones@indiana.edu

Ardath A. Hamann, 6mchugh@jmls.edu

Mickie A. Piatt, mvpiatt@kentlaw.edu

Themistocles Frangos, Themis.frangos@gmail.com

Ann Meckstroth, ameckstroth@gmail.com

Ryann Beck & Ramon Klitzke, mugilesrich@gmail.com

Richard Grauer, mstamour@umich.edu

Jeffrey Carter-Johnson, jeffcarterjohnson@gmail.com

Barry Berenberg, barry@barrylawnm.com

Andy Pieper & Brock Specht, hrbishop@stthomas.edu

David Deal, gprinslow@wustl.edu

James Baker, jbaker@mmm.com

I hereby certify that on February 3, 2012, I caused thirteen

copies of the foregoing BRIEF OF PLAINTIFF-APPELLEE T. FIDDLE,

INC. to be served upon the regional direct by hand delivery to:

Dr. Kevin E. Noonan

McDonnell, Boehnen, Hulbert & Berghoff

300 South Wacker Drive, 32nd Floor

Chicago, IL 60605

February 3, 2012 ____________________________

Nicholas A. Restauri

Rachel L. Schweers