The Supreme Court is set to address in Already, LLC v. Nike, Inc., No. 11-982, what exactly a covenant not to sue must encompass in order to sufficiently divest a district court of the subject matter jurisdiction required to hear a case. The issue concerns a tactic commonly used by plaintiffs in trademark and patent cases to unilaterally end its pending lawsuit against a defendant’s wishes. The tactic is primarily employed when a patent or trademark owner fears a defendant (or declaratory judgment plaintiff) may successfully invalidate or cancel the patent or trademark at issue, respectively. This ensures that the patent or trademark owner may still pursue other infringers in separate lawsuits that, for one reason or another, may not mount a similarly threatening defense.

Case law requires that a covenant not to sue must address current and/or previous commercial activities. At issue is whether these covenants should also address future infringing modifications of the marks or products as well. In order to successfully divest a court of subject matter jurisdiction and thus unilaterally end a case pre-judgment, a party must prove that there is no longer a real and substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant further legal action. Until now, it’s been held that promising not to assert infringement claims against past and existing commercial activities satisfied this standard, but the Supreme Court has granted certiorari to further address the issue.

Does the residual possibility of a future suit preclude divestment of a court’s subject matter jurisdiction? If so, patent and trademark holders may find that maneuvering out of an unsuccessful attack may require full immunization of their opponent, even for future-developed infringing activities.

Source: http://www.patentlyo.com/patent/2012/06/supreme-court-grants-cert-in-already-v-nike.html

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