Dismissal of Declaratory Judgment Action Was An Abuse of Discretion

Electronics for Imaging, Inc., v. Coyle, 04-1266 (Fed Cir. 2005). The Federal Circuit reversed the district court's dismissal of EFI's action for declaratory judgment of invalidity and non-infringement. The Federal Circuit said that the decision to stay or dismiss a declaratory judgment action is reviewed for an abuse of discretion, which occurs when (1) the court's decision was clearly unreasonable, arbitrary, or fanciful; (2) the decision was based on an erroneous conclusion of law; (3) the court's findings were clearly erroneous; or (4) the record contains no evidence upon which the court rationally could have based its decision. The district court found that EFI's suit did not serve the purposes of the Declaratory Judgment Act because EFI was not uncertain of its position. The Federal Circuit said that the uncertainty addressed by the Declaratory Judgment Act was the reasonable apprehension created by a patentee's threats and the looming specter of litigation that results from those threats. The Federal Circuit found that such uncertainties were present, and they were caused by defendant. The Federal Circuit concluded that the district court's reason for dismissing the action was erroneous, and thus a abuse of discretion.

NOTE: The Federal Circuit observed that "litigation is rarely 'certain,' even if one is confident in one's position".