Can a Website Disclaimer Prevent Declaratory Judgment Actions in IP Cases? Maybe…or Maybe Not

Disclaimer-1-272x300A decision this week from the Federal Circuit, in a patent invalidity action, has been getting a lot of press for its suggestion that patent (and by implication trademark) holders may be able to avoid challenges to the validity of their IP simply by crafting a website disclaimer explaining that they will not sue certain competitors or other potential challengers. The decision has been argued by some to be an extension of the reasoning of the U.S. Supreme Court earlier this year in Already, LLC v. Nike, in which the Court affirmed the ability of trademark holders to terminate an action challenging the validity of a mark by issuing a covenant not to sue the challenger.

While the possibility of a simple website disclaimer as a shield for trademark holders to insulate their marks from challenge seems enticing, the press for the recent Federal Circuit opinion is overblown and not completely accurate.

As explained on this blog in January, in breaking down the Already v. Nike decision, a formal covenant not to sue cuts off an potential infringer’s constitutional standing to maintain a declaratory judgment (“DJ”) action to have a mark declared invalid, unless the challenger can demonstrate a real risk of a future infringement suit despite the covenant.  In patent infringement actions, it has long been established that a patent holder can end an enforcement action, and stop a counter-challenge to the validity of its patents, by issuing a covenant not to sue.

This week, in Organic Seed Growers and Trade Association v. Monsanto Co., the Federal Circuit considered whether Monsanto could stop a group of farmers from challenging the validity of its “Roundup Ready” seed patents with a website disclaimer stating (in part): “It has never been, nor will it be Monsanto policy to exercise its patent rights where trace amounts of our patented seeds or traits are present in farmer’s fields as a result of inadvertent means.”  Monsanto refused to issue a formal covenant not to sue to the plaintiff farmers, who alleged that they were potential targets for Monsanto’s patents because trace amounts (defined as more than 1%) of patented seed inevitably blow onto their land.  Monsanto did, however, stand by its website disclaimer in court, in both briefing and in oral statements.

The three-judge panel of the Federal Circuit confirmed that Monsanto’s website disclaimer, in combination with its representations to the court, were sufficient to eliminate standing for the group of plaintiff farmers.  The court’s analysis, however, was not based on the website disclaimer alone. The Federal Circuit then noted that “[t]aken together, Monsanto’s representations unequivocally disclaim any intent to sue,” and therefore create a “judicial estoppel.”  The judicial estoppel the Federal Circuit relied on requires a representation in the context of a litigation, beyond merely a website disclaimer.

This language suggests that the recent Monsanto decision did not signal a sea change in the law concerning a patent or trademark owner’s ability to avoid the risk of a DJ action. While a website disclaimer may be a useful tool for IP owners to shield their IP from challenge, it may not be enough to completely insulate the IP owner from a DJ action. In the event that such a challenge is brought, however, a patent or trademark owner can still cut off the challenger’s constitutional standing with a representation that it has no intent to sue the challenger based on its current activities.

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