Appealed from United States District Court for the District of South Carolina; William M. Catoe, Jr., United States Magistrate Judge.

Gordon R. Coons, John E. Rosenquist and Jeffrey S. Ward, Leydig, Voit & Mayer, and Gerald K. White, Morton Intern., Inc., Chicago, Ill., on petition for rehearing with suggestion for rehearing in banc for the plaintiff-appellant.

Charles F. Schill and Elizabeth R.P. Bowen, Adduci, Mastriani, Meeks & Schill, Washington, D.C., and William O. Sweeny, III and Arthur L. Coleman, Nelson, Mullins, Riley & Scarborough, Columbia, on petition for rehearing with suggestion for rehearing in banc for defendants/cross-appellants.

I. Fred Koenigsberg, President, American Intellectual Property Law Ass'n, Arlington, Va., and Joseph R. Re and William C. Rooklidge, Knobbe, Martens, Olson & Bear, of Newport Beach, Cal., and H. Ross Workman, Workman, Nydegger & Jensen, Salt Lake City, Utah and Nancy J. Linck, Cushman, Carby & Cushman, Washington, D.C., on brief for amicus curiae, American Intellectual Property Law Ass'n in support of suggestions for rehearing in banc.

For majority opinion, see 959 F.2d 948.

NIES, Chief Judge, dissenting from the orders declining suggestions for rehearing in banc:

Cardinal Chemical Company sought and obtained a declaratory judgment that U.S. Patents 4,062,881 and 4,120,845, owned by Morton International, Inc., were invalid. On appeal, a majority of the panel reasoned that because it affirmed the district court's finding on Morton's infringement claim that Cardinal did not infringe the subject patents, it "need not address the question of validity." Citing Vieau v. Japax, Inc., 823 F.2d 1510, 3 USPQ2d 1094 (Fed.Cir.1987) as authority, the majority, sua sponte, vacated the judgment of invalidity entered on Cardinal's declaratory counterclaim. Vieau holds that the issue of validity of a patent, presented in a counterclaim for a declaratory judgment, becomes "moot," in the sense of no longer presenting a case or controversy, upon this court's finding that: (1) the patent in issue is not infringed and (2) the dispute raised by the counterclaim does not extend beyond the patentee's infringement claim.1

The Vieau analysis stems from two Supreme Court cases, Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S. Ct. 860, 83 L. Ed. 1263 (1939), and Altvater v. Freeman, 319 U.S. 359, 63 S. Ct. 1115, 87 L. Ed. 1450 (1943), which addressed certain specific problems respecting validity and infringement rulings by district and circuit courts. Until revisited by the request for in banc in this case, I agreed with the interpretation of Altvater in our precedent, although I found the Altvater decision at best confusing. Upon closer scrutiny, I conclude that part of the Altvater analysis has been misinterpreted for reasons which will become evident, and that Altvater may mandate the opposite result in this case. At the very least, I am convinced that because Altvater does not support the holding of Vieau, we should overrule Vieau and address the problem anew.

* MISINTERPRETATION OF SUPREME COURT PRECEDENT

A review of the Supreme Court precedent must begin with Electrical Fittings v. Thomas & Betts, supra. In Electrical Fittings, the district court, on a bill and answer, held the patent in suit "valid"2 but not infringed. The patentee did not appeal. However, the victorious defendant sought to appeal the judgment to the extent it ruled the patent "valid." The circuit court dismissed the appeal on the theory that a winning party could not take an appeal. The Supreme Court reversed, holding that the winner/defendant could appeal to obtain, not a ruling on the merits, but reformation of the decree. The Court appeared concerned that the defendant might otherwise be precluded by the judgment from attacking the patent in another suit.

The next decision, Altvater v. Freeman, supra, raised the question of whether a counterclaim for invalidity should be treated the same by an appellate court as a defense of invalidity had been treated in Electrical Fittings. The Court answered with a resounding "No." Per Altvater, a judgment entered by the district court on a declaratory claim for invalidity must be reviewed on the merits by the appellate court so long as a case or controversy exists at that time to support the assertion of the declaratory claim. In Altvater the Court found such controversy existed, despite the accused infringer's exculpation from liability on the patentee's claim, because the dispute between the parties "went beyond the single claim and the particular accused devices involved in [the patentee's] suit." Id., 319 U.S. at 364, 63 S. Ct. at 1118, 87 L.Ed. at 1454.

Vieau and other decisions of our court have understood Altvater to mean that all declaratory claims for invalidity must be evaluated for the presence of a case or controversy under a standard of whether the counterclaim extended beyond the dispute defined by the patentee's claim of infringement. Thus, we have concluded that, if a declaratory claim simply involves the same devices and patent claims involved in the patentee's complaint, upon a finding of no infringement, a counterclaim seeking a declaration of invalidity becomes "moot", in the Constitutional sense of no case or controversy. See supra, at n. 1.

This understanding of the import of Altvater is, in my view, wrong. A significant fact which distinguishes Altvater, and which makes its case or controversy analysis no longer germane, is that the Altvater claimant for a declaration of invalidity was a licensee. By reason of licensee estoppel, the licensee could not attack the validity of the patent except under limited circumstances. See, e.g., Katzinger Co. v. Chicago Mfg. Co., 329 U.S. 394, 67 S. Ct. 416, 91 L. Ed. 374 (1947) (licensee estoppel not applied in light of price-fixing provision of license). Altvater is interlaced with principles of licensee estoppel. Twenty-five years had to pass before Lear v. Adkins, 395 U.S. 653, 89 S. Ct. 1902, 23 L. Ed. 2d 610 (1969), overruled the doctrine of license estoppel. Thus, the discussion of case or controversy must be read in the context of that age--a time when a licensee had to base its declaratory judgment claim on a controversy beyond the patentee's assertion of a right to royalties under the license.

To interpret Altvater broadly as requiring an accused infringer who is not a licensee to prove that its counterclaim for invalidity goes beyond the scope of the patentee's complaint in order to establish a case or controversy has never been warranted. Such extension of Altvater leads to the absurd result that an accused infringer can obtain a declaratory judgment for claims of the patent that were not asserted in the patentee's suit but not for those that were, whereas the patentee's suit in itself shows that the controversy rages as to the asserted patent claims.3 In any event, with respect to even a licensee's need to show a dispute outside the scope of that asserted by the patentee, Altvater must be assigned to the graveyard with respect to its case or controversy analysis by reason of Lear v. Adkins and possibly Blonder-Tongue Labs, Inc. v. University of Ill. Found., 402 U.S. 313, 91 S. Ct. 1434, 28 L. Ed. 2d 788 (1971).4

All of the precedent of this court stems from Altvater in holding that a counterclaim for a declaration of invalidity is mooted, in the sense of no longer presenting a case or controversy, upon a finding of noninfringement on the patentee's specific charge of infringement, unless the declaratory claimant asserts matters beyond the patentee's complaint. Inasmuch as Altvater no longer has any viability respecting the need for a counterclaimant's separate and distinct case or controversy, the precedent of this court has been based on a false premise. The remaining and only controlling principle of Altvater is that an appellate court must decide a counterclaim for a declaration of invalidity where a case or controversy is present and the district court has entered judgment on the counterclaim. I believe that this court should address for itself this "case or controversy" requirement in the context of declaratory counterclaims, unrestricted by the outdated pronouncements of Altvater.

II

"MOOTNESS"

A.

Confusion of Principles

Altvater aside, any suit including a counterclaim for a declaration of patent invalidity requires the presence of a case or controversy at all stages of litigation. If a claim becomes "moot" in this sense at the appellate level, it must be dismissed for lack of jurisdiction. Vieau relied on this principle but, in my view, confused concepts of mootness. The Vieau opinion concluded there was no case or controversy respecting validity and then said that the court exercised its "discretion" to dismiss the appeal of that issue. 823 F.2d at 1520-21, 3 USPQ2d at 1102-03. The majority opinion in this case also indicates, by its statement that "we need not address the question of validity," Morton Int'l, Inc. v. Cardinal Chem. Co., 959 F.2d 948, 22 USPQ2d 1231, 1235 (Fed.Cir.1992), that it made a discretionary decision to dismiss Morton's appeal of the judgment of invalidity. Indeed, the precedent of this court now takes a "one-size-fits-all" approach to treatment of the issue of validity. The court may always dismiss and vacate the judgment below as a matter of discretion once it concludes that the patent claims in issue are not infringed. This result is imposed on the parties regardless of whether the judgment below held the patent valid or invalid, regardless of whether a patentee attempted to have the declaratory counterclaim dismissed, regardless of a dispute over validity between the parties, and regardless of which party appeals the judgment and what that party seeks on appeal. I believe each of these situations requires a separate analysis.5

B.

The Meanings of "Mootness"

As an initial matter, it is necessary to clarify what is meant when a court declares an issue is "moot." Indeed, the failure to recognize that "moot" has various meanings is a major defect in our precedent. "Mootness" can rise to the level of a bar to the court's exercise of jurisdiction or descend to the level of prudential convenience and economic use of judicial resources.

"Mootness" is jurisdictional when the dispute between the parties, or at least an issue in the case, no longer exists. That is, the issue no longer presents an actual case or controversy. If an issue is moot in this sense, a court has no discretion but must dismiss for lack of jurisdiction. Powell v. McCormack, 395 U.S. 486, 496 n. 7, 89 S. Ct. 1944, 1950 n. 7, 23 L. Ed. 2d 491, 502 n. 7 (1969) (court lacks jurisdiction to consider the merits of a moot case); Brownlow v. Schwartz, 261 U.S. 216, 43 S. Ct. 263, 67 L. Ed. 620, (1923) (where mandamus action for issue of building permit is mooted by the permit's issue pending appeal, appellate court must remand with directions to dismiss); Smith Intern., Inc. v. Hughes Tool Co., 839 F.2d 663, 5 USPQ2d 1686 (Fed.Cir.1988) (settlement prior to appellate court decision moots case); Fundicao Tupy S.A. v. United States, 841 F.2d 1101 (Fed.Cir.1988) (appeal of denial of preliminary injunction mooted by district court's intervening judgment).

An issue is also said to be "mooted" when a court, having decided one dispositive issue, chooses not to address another equally dispositive issue. In this sense, mootness means only that a decision on another issue would have no practical significance. This type of mootness results from prudential, not jurisdictional, considerations. See United States v. Leon, 468 U.S. 897, 924-25, 104 S. Ct. 3405, 3421-22, 82 L. Ed. 2d 677, 699-700 (1984) (Fourth Amendment issue may be decided as a matter of discretion before addressing "good faith exception" for warrantless searches.); Fischer & Porter v. United States Int'l Trade Comm'n, 831 F.2d 1574, 4 USPQ2d 1700 (1987) (patent issues mooted by affirmance of no injury in proceeding under 19 U.S.C. § 1337). See also Airline Pilots Ass'n, Intern. v. UAL Corp., 897 F.2d 1394, 1397 (7th Cir.1990) (distinguishing between a court's resolution of an alternative, unnecessary issue and Article III mootness); 13A Wright, Miller and Cooper, Federal Procedure: Jurisdiction § 3533 (1984).

In a patent suit, an accused infringer may raise as defenses noninfringement and various grounds for holding the patent claims invalid, as well as various grounds for holding that patent unenforceable. A decision on any one of the grounds in favor of the accused infringer defeats the patentee's claim for damages or injunctive relief. Although not jurisdictionally moot, other equally dispositive issues are deemed "moot" in the sense that a ruling is not necessary to decision. Thus, a decision of noninfringement by this court "moots," i.e., may make it unnecessary to decide, the various other defenses. Unette Corp. v. Unit Pack Co., Inc., 785 F.2d 1026, 1029, 228 U.S.P.Q. (BNA) 933, 935 (Fed.Cir.1986). In this sense, a decision of invalidity "moots" the defense of noninfringement. United Carbon Co. v. Binney Co., 317 U.S. 228, 237, 63 S. Ct. 165, 170, 87 L. Ed. 232, 238 (1942) ("We are of the opinion that the claims in litigation are bad for indefiniteness, and have no occasion to consider questions of novelty, invention, and infringement.") Which defense the court chooses to address is a matter of discretion, although the Supreme Court has indicated that the more important public policy issue in patent cases is validity. Sinclair & Carroll Co. v. Interchemical Corp., 325 U.S. 327, 330, 65 S. Ct. 1143, 1145, 89 L. Ed. 1644, 1646 (1945).6 On the other hand, an appellate court, like a district court, may choose to decide all issues. As Judge Lourie explains, this court is not a court of last resort. Like the district court, it may resolve the issue of validity even as a defense and even after finding no infringement. Indeed, the Supreme Court in Sinclair would not have directed lower courts to resolve the issue of validity after finding no infringement if the latter finding jurisdictionally mooted the issue of validity.7

Thus, the distinction between jurisdictional mootness and prudential mootness is important respecting what action can or must be taken by the lower courts. Jurisdictional mootness mandates that the court make no resolution on the issue. There is no discretion either to decide or not to decide. Only prudential mootness involves the exercise of discretion. Compare United States v. Leon, supra, with Brownlow v. Schwartz, supra.

III

DECLARATORY CLAIMS

A.

Jurisdictional Mootness

A finding of noninfringement does not moot a declaratory claim for invalidity jurisdictionally regardless of the scope of the patentee's infringement suit.

If Cardinal's action for a declaration of invalidity had been the sole proceeding in the case, Morton could not have inserted as an affirmative defense that Cardinal did not infringe the patent claims. A declaratory action for a judgment of invalidity is based on a fear of suit under the patent. Such fear is not dependent on being held liable for infringement. "A declaratory plaintiff has sufficient interest [where] ... there is a reasonable threat that the patentee or licensor will bring an infringement suit against the alleged infringer. Smith, Foreclosure of Licensee Validity Challenge with Procedural Barriers: Federal Jurisdiction, 61 JPOS 690, 697 (1979)." C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 879, 219 U.S.P.Q. (BNA) 197, 202 (Fed. Cir.1983); cf. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 176, 86 S. Ct. 347, 350, 15 L. Ed. 2d 247, 251 (1965). Once the patentee creates a legitimate fear in an adversary that the patent will be asserted against it, nothing short of the patentee's unconditional guarantee not to do so under any circumstances ordinarily will remove that apprehension and thereby jurisdictionally moot the claim for declaratory relief. In Bard, even the affidavit of the patentee that it had no intention of suing the declaratory claimant fell short of mooting the asserted declaratory claim. Bard, 716 F.2d at 881, 219 USPQ at 204. Here, Morton has made no similar representation to Cardinal. Indeed, its suit against Cardinal confirmed the presence of the necessary controversy on Cardinal's counterclaim respecting at least the asserted claims. Morton's appeal of the invalidity judgment confirms again the threat of the patent.8 And Cardinal has not waived its declaratory claim against the asserted claims, as some vindicated defendants have on appeal. I can see no possible basis for holding Cardinal's declaratory claim jurisdictionally moot.

B.

Prudential Mootness

In a few circumstances, a declaratory invalidity claim may be prudentially mooted by the appellate court judgment on another issue. However, a finding of noninfringement is not such a circumstance. As indicated, noninfringement is not a permissible affirmative defense by the patentee and, thus, cannot be an alternative ground for judgment on a declaratory claim for invalidity as it is for a judgment on the patentee's claim. Altvater, supra.

An example of prudential mootness of the declaratory claim on appeal appears in A.B. Dick Co. v. Burroughs Corp., 798 F.2d 1392, 1400, 230 U.S.P.Q. (BNA) 849, 855-56 (Fed. Cir.1986). There, this court upheld the accused infringer's defense of inequitable conduct which rendered the patent entirely unenforceable. Thus, a judgment of invalidity would have added nothing to the relief already afforded the counterclaimant on the patentee's claim.

C.

Redundancy

In my view the issues which should have been addressed in banc, after eliminating the concept of a declaratory judgment being jurisdictionally "mooted" as held in Vieau, concern the discretionary power of a court to refuse to accept an accused infringer's declaratory judgment suit or counterclaim which is merely redundant to a claim being litigated by its adversary. As stated by Justice Frankfurter in his dissent in Altvater,