A previous post discussed Aquatech‘s declaratory judgment (DJ) action against Water Systems and Veolia Water seeking a judgment that U.S. Patent No. 7,815,804 (‘804 Patent) is invalid and unenforceable and that Aquatech’s water filtration processes do not infringe the ’804 Patent.
The ‘804 Patent is entitled “Method for treating wastewater or produced water†and relates to Veolia’s OPUS process, a high-efficiency water purification technology that uses reverse osmosis to treat industrial waste streams.
Aquatech claims that the defendants have coerced and intimidated its potential partners and customers under threat of patent litigation, particularly with respect to Aquatech’s proposal to use its patented HERO water purification process at a power plant to be constructed by Bechtel and a proposal for a project at the Pio Pico Energy Center.
The court granted defendants’ motion to dismiss Aquatech’s initial complaint for lack of DJ jurisdiction, and subsequently dismissed its amended complaint on the same ground. Aquatech filed a second amended complaint in March 2013, adding a claim for tortious interference.
Recently, the court for the third time granted defendants’ motion to dismiss for lack of DJ jurisdiction.Â
To establish declaratory judgment jurisdiction there must be a “case or controversy,” that is “a substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”
According to the court, during the course of the legal proceedings the defendants executed four covenants not to sue, which formed, at least in part, the basis for all three of the court’s decisions.
The second covenant waived defendants’ right to assert any infringement claim related to the proposed Bechtel process. The third covenant more broadly waived defendants’ right to assert that the patented HERO processes infringe the ‘804 Patent. Finally, the fourth covenant waived defendants’ right to assert infringement claims with respect to the proposed Pio Pico Energy Center process.
The court found that defendants’ “multiple covenants not to sue preclude plaintiffs from maintaining declaratory judgment jurisdiction”  because covenants relate to Aquatech’s HERO process and demonstrate that the defendants believe the process does not infringe the patent-in-suit:
[T]he covenants at issue in this case are written and memorialized and cover both past, present, and future infringement claims with respect to the HERO process generally, and specifically the Bechtel project and Pio Pico Energy Center project processes….the covenants not to sue in this case merely affirm defendants’ repeated assertions that they do not believe that the HERO Patents infringe the ‘804 Patent.
Accordingly, the court dismissed Aquatech’s DJ claim of non-infringement because the covenants “moot[s] the basis for declaratory judgment relief.”Â
With respect to Aquatech’s DJ claims that the ‘804 Patent is invalid and unenforceable, they also had to be dismissed because they are defenses to infringement:
 Without an active case or controversy with respect to defendants’ patent rights in the ‘804 Patent, plaintiffs’ claims of invalidity and unenforceability must also be dismissed. Invalidity and unenforceability are defenses to a claim of infringement. Until plaintiffs can establish that there is a real and immediate threat that defendants will take action to enforce their rights with respect to the ‘804 Patent, plaintiffs cannot continue to assert defenses to such claims.
This decision closes the case on infringement and related defenses for now. Â Aquatech could bring another DJ action only if the defendants make new threats of infringement in derogation of the covenants not to sue.
