Declaratory Judgment Actions

Martin Schwimmer points to a case filed by BlueAir, Inc. versus Apple, Inc. asking the United States District Court for the Northern District of Illinois for a declaratory judgment that BlueAir’s AIRPOD trademark does not infringe Apple’s iPOD trademarks. Putting the merits of the case aside for a moment, I’m interested in the procedural aspect of filing a declaratory judgment action.

What is a “declaratory judgment”? A declaratory judgment is a judgment from a court that declares the rights of the parties in a dispute.

When would someone file an action for a declaratory judgment? Typically, a person files a declaratory judgment action when another person threatens them with litigation. In the trademark context, if Apple, for example, threatened to sue BlueAir for trademark infringement and BlueAir does not think that they are infringing Apple’s mark, then BlueAir can file a “dec action” in federal court to have the court determine who’s right as they did in this case.

What are the advantages of filing a dec action? One advantage is that the accused can bring the issue to a head rather than wait around for the accuser to file a lawsuit. Congress, in passing the Declaratory Judgment Act way back in 1930, realized that a person or business might be held up by the continuing threat of litigation. Instead of waiting for the accuser to file a lawsuit, the accused can file its own action first. In the BlueAir case, BlueAir decided to file the dec action rather than wait around for Apple to file a trademark infringement lawsuit.

Another advantage of filing a dec action is that the accused gets to pick the venue, which can be very important. In the BlueAir case, BlueAir sued in its home state of Illinois, in the Northern District. Had BlueAir waited for Apple to sue, Apple almost certainly would have filed its case in northern California, far from BlueAir’s place of business and attorneys. Filing closer to home reduces the cost of litigation to BlueAir. In addition, sometimes the law in one venue is more favorable to your side than another venue.

OK, then, what are the disadvantages? One disadvantage of filing a dec action is that doing so may make the other side really mad. If the accuser has a strong case and threatens litigation, but really just wants a quick settlement, and you have a meager defense, but you file a dec action to pick your venue, the accuser might decide to go all out trying to bury you.

Another disadvantage is that the jurisdiction of the court in a dec action is discretionary. That means that the court does not have to hear the case if it doesn’t want to hear it. So, you hire an attorney to draft a complaint, pay a filing fee, pay to serve the complaint on the other side, then the other side files a motion to dismiss, to which you pay your attorney to respond, and then the judge decides that he doesn’t want to hear your case. Now you’re out several thousand dollars in attorneys’ fees and the filing fees. Oh, and be sure that the other side is going to file a new lawsuit in their chosen venue.

Declaratory judgment action can be a great tool in the right circumstance. Just be careful what you ask for.