Foreign Patentee’s Licensing Efforts Satisfy “Commercial Activity” Exception To Federal Sovereign Immunities Act

In Intel Corp. v. Commonwealth Sci. and Indus. Research Org. (Nos. 06-1032, -1040, July 14, 2006), the Federal Circuit finds the CSIRO's acts of obtaining a U.S. patent and attempting to generate royalty income by licensing the patent were not activities peculiar to a sovereign state under the Federal Sovereign Immunities Act (“FSIA”), but commercial activities that a private entity would engage in.

CSIRO, Australia's national science agency, had attempted to license its patent to certain U.S. companies, who subsequently filed declaratory-judgment actions for non-infringement and invalidity after the respective licensing offers expired. CSIRO moved to dismiss the actions for lack of subject matter jurisdiction, claiming immunity under the FSIA. The Federal Circuit panel rejects CSIRO's argument that the “commercial activity” exception to the FSIA would apply only if its patent license negotiations resulted in a fully-executed, binding contract.

The Federal Circuit also rejects CSIRO's argument that the declaratory-judgment suits are not “based upon” the alleged commercial activity as required under the FSIA. These declaratory-judgment suits, says the panel, are "based on" CSIRO's commercial acts of obtaining and asserting a U.S. patent and, to prevail, plaintiffs must prove that CSIRO attempted to enforce its patent against them. CSIRO's representations as to the scope and validity of the patent during license negotiations are also central to plaintiff's claims.