clearly correct that in some instances the activities of a customer and the patentee's threats of suit against a customer can support jurisdiction over a manufacturer's declaratory judgment action. But we conclude that these so-called "customer suits" do not encompass the situation that confronts us here.
In the typical customer suit, although the customer is the party threatened with a lawsuit, it is the manufacturer that makes the potentially infringing product; the customer merely sells that product without alteration, incorporates it in its own product, or employs it as part of a manufacturing process. Since the manufacturer in such cases is itself a potential infringer and the customer is merely using the manufacturer's product, a threat of suit against the customer "reasonably implies potential suit against the manufacturer." Viking Injector Co. v. Chemtron, Inc., 1993 U.S. Dist. LEXIS 19679, No. 3:CV-93-0791, 1993 WL 625543, at *3 (M.D.Pa. Nov. 9, 1993). See, e.g., Grafon Corp. v. Hausermann, 602 F.2d 781, 782-84 (7th Cir. 1979) (customers purchased abrading machines from declaratory plaintiff; patentee's threats against plaintiff's customers sufficient to establish jurisdiction); Joseph Bancroft & Sons Co. v. Spunize Co. of America, 268 F.2d 522, 523 (2d Cir. 1959) (patentee's suit against plaintiff-manufacturer's licensee, who made potentially infringing product based on plaintiff's methods, was sufficient to establish actual controversy between manufacturer and patentee); Dickey v. B&H Manufacturing, Inc., 1991 U.S. Dist. LEXIS 21586, No. CV-F-91-481 OWW, 1991 WL 322239, at *2-3 (E.D.Cal. Dec. 18, 1991) (in finding that manufacturer of allegedly infringing labeling machine had reasonable apprehension of suit by patentee, court considered threats of suit against manufacturer's customers, who merely purchased the machine); Akzona Inc. v. E.I. du Pont de Nemours & Co., 662 F. Supp. 603, 612-13 (D.Del. 1987) (threat of suit against customers who used declaratory plaintiff's aramid fibers to fashion various end products could support jurisdiction; plaintiff's fibers themselves potentially infringed defendant's patents); Electro Medical Systems S.A. v. Cooper LaserSonics, Inc., 617 F. Supp. 1036, 1037 (N.D.Ill. 1985) (threats of suit against declaratory plaintiff's customers were sufficient basis for jurisdiction where customers merely purchased or distributed plaintiff's allegedly infringing device).
On the other hand, where the manufacturer's product does not infringe the patent in question but its customers use the product to make an infringing device, courts typically hold that the manufacturer lacks any reasonable apprehension of suit for direct infringement, even if the customers are being threatened with legal action. See, e.g., Viking Injector Co. v. Chemtron, Inc., 1993 U.S. Dist. LEXIS 19679, No. 3:CV-93-0791, 1993 WL 625543, at *3 (M.D.Pa. Nov. 9, 1993) (court lacked jurisdiction over plaintiff's declaratory judgment claim, despite fact that plaintiff's customers were threatened with suits, because plaintiff manufactured only noninfringing component parts; plaintiff's customers were the ones who assembled the parts into an infringing device). In other words, the customer suit cases show that a manufacturer generally can establish jurisdiction based on a threat of suit against its customer only when the manufacturer is itself involved in infringing the patent and the customer is "merely a conduit for the manufacturer." Viking Injector, 1993 U.S. Dist. LEXIS 19679, 1993 WL 625543 at *3 That is not the case here.
Dow asks us to go a step further and hold that its substantial economic interest in its sales of polymers to ANC, Cyrovac, and other customers constitutes a sufficiently real interest in the dispute to sustain jurisdiction. In support of its position, Dow cites two cases: Wallace & Tiernan, Inc. v. General Electric Co., 291 F. Supp. 217 (S.D.N.Y. 1968), and Airship Industries (UK) Ltd. v. Goodyear Tire & Rubber Co., 643 F. Supp. 754 (S.D.N.Y. 1986). Airship was a trademark case in which Airship, a blimp manufacturer, sought to enjoin Goodyear from suing Airship's customers under state antidilution statutes. The customers had used Airship's blimps in advertisements, prompting Goodyear to sue to protect its trademark rights in the shape and symbol of its blimps. The court held that although Airship itself was not threatened with suit, it could maintain a declaratory judgment action against Goodyear because it would suffer a "'distinct and palpable injury'" if its customers "decided not to buy or lease blimps from Airship as a result of Goodyear's actions." 643 F. Supp. at 758 (quoting Warth v. Seldin, 422 U.S. 490, 501, 45 L. Ed. 2d 343, 95 S. Ct. 2197 (1975)).
In Wallace & Tiernan, the defendant held a patent for a "three-membered composition" consisting of polyethylene, a curing agent, and a filler. 291 F. Supp. at 218 (emphasis removed). All manufacturers of the composition operated under license from the patentee, and the overwhelming majority used "Dicup" as the curing agent. The plaintiff developed a competing curing agent known as Lupersol. The defendant maintained that compositions made with Lupersol were covered by its patent and demanded royalties from its licensees for any such compositions. The plaintiff attempted to induce its customers (the defendant's licensees) to use Lupersol, but the customers deferred to the defendant's view that using Lupersol obliged them to pay royalties -- the cost of which rendered Lupersol uncompetitive with Dicup. The plaintiff was therefore deprived of the chief market for its product and sought declaratory relief against the defendant. Although the defendant had asserted that it would never sue the plaintiff to enforce its patent, the court found that it had jurisdiction because "the injury to plaintiff's business" rendered the dispute "'real and substantial.'" Id. at 221 (quoting Aetna Life, 300 U.S. at 240). In defense of its decision, the court noted that (a) the plaintiff had developed Lupersol specifically for the use it sought to defend and that Lupersol had no other major uses, (b) the plaintiff stood to lose considerable revenue if its customers did not purchase Lupersol, (c) the plaintiff's customers were unwilling to commence proceedings to resolve the dispute, and (d) the plaintiff had indemnified its customers against enforcement suits by the defendant. Id. at 222-23.
Although Airship and Wallace & Tiernan support Dow's position, we do not consider them sufficiently persuasive to warrant finding an actual controversy here. Airship was a trademark case, and the court neither applied the actual controversy test that governs this dispute nor conducted a rigorous analysis of the jurisdictional question. Moreover, unlike Dow, the plaintiff in Airship apparently could have been held liable for its actions; after all, Airship sued for a declaratory judgment that "neither it nor any of its customers" had violated an antidilution statute "by permitting or engaging in blimp advertising." 643 F. Supp. at 757 (emphasis added).
Wallace & Tiernan, though factually very similar to our case, is also distinguishable. The plaintiff in that case had agreed to indemnify its customers against the defendant's enforcement of its patent. That fact was critical to the court's decision, and rightly so: by indemnifying a customer, a manufacturer assumes a legal duty and therefore acquires the kind of real legal interest in the controversy that the Declaratory Judgment Act requires. See Bancroft, 268 F.2d 522 at 523 (declaratory plaintiff's contractual obligation to pay for customer's defense established actual controversy between plaintiff and patentee). In contrast, Dow alleges only that one of its customers sought indemnification from it; it does not say that it has actually agreed to indemnify anyone against Viskase's claims. This is not enough to establish an actual controversy. See Viking Injector, 1993 U.S. Dist. LEXIS 19679, 1993 WL 625543 at *3-4 (no actual controversy where plaintiff's customer sought indemnification but there was no evidence that plaintiff could be held liable on that basis).
Wallace & Tiernan is unusual in that the court in that case found jurisdiction despite the fact that the plaintiff-manufacturer produced only a noninfringing component and its customers were the potential infringers. Despite this abnormality, we agree with Wallace & Tiernan insofar as it held that a manufacturer's obligation to indemnify customers threatened with suit is a sufficient basis for jurisdiction over the manufacturer's declaratory judgment action. After all, indemnification is a legal obligation. Dow would have us read the case as holding that jurisdiction is appropriate where a manufacturer has a substantial economic interest in a dispute and its product is "closely and inextricably related to the controversy." Dow's Br. in Opposition to Motion to Dismiss at 12. We reject Wallace & Tiernan to the extent that it admits of such an interpretation.
In sum, although in certain circumstances a manufacturer can maintain a declaratory judgment action based on threats against its customers even where the manufacturer itself is under no threat of suit, we do not believe those circumstances are present here. Dow may stand to lose business, but it has not alleged that it has any legal interest at stake. Declaratory relief is available only to those "who [are] reasonably at legal risk because of an unresolved dispute" and therefore is inappropriate here. Applexion, 1995 U.S. Dist. LEXIS 4957, 1995 WL 229049 at *3; see also Arrowhead, 846 F.2d at 735 (Declaratory Judgment Act grants courts jurisdiction over only those cases in which there is "'a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of [declaratory relief]'") (quoting Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 85 L. Ed. 826, 61 S. Ct. 510 (1941)).
Viskase's motion to dismiss for lack of subject matter jurisdiction is granted.
JAMES B. MORAN,
Chief Judge, U.S. District Court
May 25, 1995.
JUDGMENT IN A CIVIL CASE
Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED that Viskase's motion to dismiss for lack of subject matter jurisdiction is granted.
May 25, 1995