Federal Circuit Makes It More Difficult for Accused Infringers to File Declaratory Judgment Actions

In its March 13, 2020 decision in Communications Test Design, Inc. v. Contec, LLC, the Federal Circuit highlighted the obstacles that an accused infringer faces in filing a declaratory judgment action.  In particular, the Federal Circuit held that district courts may refuse to hear declaratory judgment actions filed while licensing negotiations are ongoing.  The court reasoned that dismissing such cases is consistent with the policy of promoting “extrajudicial dispute resolution.”  Ironically, however, the decision in Communications Test Design is likely to have the opposite effect—discouraging alleged infringers from entering into negotiations for fear of losing the ability to file a declaratory judgment action. The decision is also likely to place more control of both the negotiations and litigation in the hands of the patent owner.
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