## Facts

- EMC Corporation manufactured disk drive storage subsystems; Norand Corporation held four U.S. patents related to that general technology but did not make or sell competing products.
- Norand’s consultant contacted EMC in August 1994 to propose patent license negotiations and noted a preference for business discussions rather than referral to litigation counsel.
- Norand’s outside counsel requested that negotiations not be used as a basis for filing a declaratory-judgment action.
- The parties met in September and October 1994 to discuss possible sale or licensing of the patents; the parties disputed whether Norand made infringement assertions or threats of suit.
- At a January 1995 meeting, Norand stated it was also approaching multiple other companies in EMC’s market about licensing or selling the patents.
- While negotiations continued, EMC filed a declaratory-judgment action in the District of Massachusetts seeking declarations of noninfringement and invalidity.
- The district court found an Article III controversy existed but dismissed under 28 U.S.C. § 2201(a), concluding that suit during active negotiations would skew bargaining leverage and interfere with Norand’s discussions with other potential licensees.

## Issues

1. Whether, despite the existence of an Article III case or controversy, the district court abused its discretion under the Declaratory Judgment Act by declining to exercise jurisdiction over EMC’s patent declaratory-judgment claims.

## Decision

- The Federal Circuit affirmed the dismissal.
- The court held the Declaratory Judgment Act grants district courts broad discretion to decline declaratory relief even when constitutional jurisdiction exists.
- On the record before it, the court concluded the district court’s reasons—ongoing negotiations, lack of direct competition, and the likely effect of litigation on bargaining dynamics and parallel licensing efforts—were within the permissible range of discretion.

## Legal Principles

- The Declaratory Judgment Act is enabling, not mandatory; it confers discretion on district courts rather than an entitlement to declaratory relief.
- Satisfaction of Article III “case or controversy” requirements does not remove a district court’s statutory discretion to dismiss a declaratory-judgment action.
- A district court may decline declaratory jurisdiction when entertaining the action would primarily serve to alter negotiating leverage or disrupt related commercial negotiations, rather than resolve a sufficiently developed dispute.
- Appellate review of a discretionary dismissal under § 2201(a) is deferential; reversal requires a clear abuse of discretion.

## Conclusion

The Federal Circuit held that, although an actual controversy existed, the district court acted within its broad statutory discretion in dismissing EMC’s declaratory-judgment suit because it was filed during active licensing negotiations in a non-competitor relationship and risked distorting ongoing and multi-party licensing discussions.


EMC Corp. v. Norand Corp., 89 F.3d 807 (Fed. Cir. 1996)