• No Infringement for Claim Conditioned on Rescission

    by  • April 4, 2012 • patent

    Lufkin Industries sued Ken Nolen, Sim Gibbs and other former employees in Texas state court for trade secret misappropriation. Nolen and Gibbs counterclaimed alleging they were fraudulently induced to assign some patents to Lufkin and sought a declaration that they are the rightful owners of the patents. The counterclaim was severed and removed to federal court by Lufkin, alleging that there was federal jurisdiction because of the patent-related claims. Nolen and Gibbs amended the complaint to include counts for patent infringement, prefaced this way:

    119. Nolen seeks a rescission and/or cancellation of the assignment of the ‘ 890 patent to Lufkin. Thereupon such relief being granted, Nolen will again be the sole and exclusive owner of the ‘890 Patent and entitled to plead, prove and recover upon the following causes of action.

    The federal district court dismissed the patent infringement claims on the basis that Nolen and Gibbs didn’t have standing because their ownership of the patents required judicial intervention. The federal court also decided some other federal claims and some state law claims, declined to exercise supplemental jurisdiction over the remaining state law claims, and enjoined the plaintiffs from litigating the remaining claims in state court. (The decision doesn’t provide any insight into why the plaintiffs were enjoined; perhaps the reason relates to the state law claims in the original Lufkin complaint.) The parties appealed to the Court of Appeals for the Federal Circuit.
    But the Federal Circuit doesn’t have jurisdiction. The Federal Circuit has jurisdiction over “an appeal from a final decision of a district court of the United States … if the jurisdiction of that court was based, in whole or in part, on 28 U.S.C. § 1338 ….” 28 U.SC. § 1295 (2010). Section 1338 provides jurisdiction “only to those cases in which a well-pleaded complaint establishes either [1] that federal patent law creates the cause of action or [2] that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” But a claim for patent infringement does not arise under the patent laws when it requires judicial action to vest title in the party alleging infringement. Therefore the plaintiffs’ conditioning of their patent infringement claims on first having to obtain a rescission of the contract assigning the patents to Lufkin means that there is no live patent infringement claim and thus no Federal Circuit jurisdiction.  The Federal Circuit transferred the case to the Fifth Circuit.
    Nolen v. Lufkin Indus., Inc., Nos. 2011–1251, 2011–1265, 2011–1278, 2011–1279, 2011–1499, 2011–1500, 2011–1522, 2011–1523 (Fed. Cir. Feb. 1, 2012) (nonprecedential).

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