Patterson v. Drews et al, No. 3:2009cv02741 - Document 24 (N.D. Cal. 2009)
Court Description: ORDER GRANTING PLAINTIFF'S MOTION FOR REMAND AND DENYING DEFENDANTS' MOTION TO TRANSFER AND CONSOLIDATE PROCEEDINGS re 15 , 16 . (SI, COURT STAFF) (Filed on 8/11/2009)
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Patterson v. Drews et al Doc. 24 1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE NORTHERN DISTRICT OF CALIFORNIA 7 8 DR. BRUCE PATTERSON, M.D., 9 United States District Court For the Northern District of California 10 11 12 No. C 09-2741 SI Plaintiff, ORDER GRANTING PLAINTIFF’S MOTION FOR REMAND AND DENYING DEFENDANTS’ MOTION TO TRANSFER AND CONSOLIDATE PROCEEDINGS v. JOHN DREWS, INVIRION DIAGNOSTICS LLC, et al., Defendants. / 13 14 15 Plaintiff’s motion for remand and defendants’ motion to transfer and consolidate proceedings 16 are scheduled for a hearing on August 14, 2009. Pursuant to Civil Local Rule 7-1(b), the Court 17 determines that the matters are appropriate for resolution without oral argument. For the reasons set 18 forth below, the Court concludes that it lacks jurisdiction over this case, and thus GRANTS plaintiff’s 19 motion for remand, REMANDS this case to the Superior Court of the State of California, County of 20 Santa Clara, and DENIES defendant’s motion to transfer and consolidate proceedings. 21 22 BACKGROUND 23 On May 21, 2009, plaintiff Dr. Bruce Patterson filed this lawsuit in the Superior Court of the 24 State of California, County of Santa Clara, against defendants John Drews, Invirion Diagnostics LLC 25 (“Invirion”) and Invirion Spain LLC (“Invirion Spain”). Invirion and Invirion Spain are limited liability 26 companies of which Patterson and Drews are the sole members. The complaint alleges that in 2000, 27 Patterson started a business called Invirion, Inc., a medical services company that sold HIV and HPV 28 testing kits. Compl. ¶ 6. Patterson obtained several patents for his testing methods. Id. In or around Dockets.Justia.com United States District Court For the Northern District of California 1 2004, after Invirion, Inc. became involved in a dispute with a third party, Patterson hired defendant 2 Drews, an attorney, to provide legal services regarding the dispute. Id. ¶ 8. Drews continued to provide 3 legal services for Patterson, and in or around the Fall of 2005, Drews prepared articles of incorporation 4 for Invirion and Invirion Spain. Id. ¶ 19. Patterson alleges that Drews did not provide a copy of the 5 documents to him or request that Patterson sign the documents, and that Drews filed the articles of 6 incorporation with the Illinois Secretary of State without Patterson’s signature or review. Id. The 7 complaint alleges that Patterson repeatedly requested a copy of the corporate organization documents 8 and that Drews ignored these requests. Plaintiff alleges that when he finally saw the documents in 2007, 9 he discovered that the agreements purported to provide Drews with a fifty percent share of all profits 10 from Invirion and Invirion Spain. Id. ¶ 21. Plaintiff alleges that he refused to sign the agreements 11 because he never intended, and Patterson and Drews never agreed, that Drews would share in fifty 12 percent of the profits from the two companies. Id. The relationship between Patterson and Drews 13 continued to deteriorate, and by May 2009, Patterson and Drews had filed lawsuits against each other 14 regarding Invirion, Invirion Spain, and the patents. 15 The complaint alleges the following claims: (1) violations of the California Corporate Code and 16 Illinois Business Corporations Act, (2) breach of fiduciary duty, (3) declaratory judgment regarding 17 Patterson’s ownership of certain patents, (4) declaratory judgment to dissolve Invirion and Invirion 18 Spain, and (5) accounting. On June 19, 2009, defendants removed this case to this Court on the ground 19 that plaintiff’s claim for declaratory relief of ownership of the patents arises under federal law. Now 20 before the Court are plaintiff’s motion for remand and defendants’ motion to transfer this case to the 21 Northern District of Illinois for consolidation with an earlier-filed lawsuit that Drews filed against 22 Patterson.1 23 24 1 25 26 27 28 Mr. Drews filed his lawsuit on May 9, 2009. His original complaint asserted diversity jurisdiction, and alleged solely state law claims against Patterson, including a claim for declaratory judgment that Invirion owns the patents at issue. Patterson moved to dismiss the Illinois case for lack of jurisdiction, and Drews filed an amended complaint alleging federal claims for patent infringement and Lanham Act violations. Patterson has moved to dismiss the amended complaint on the grounds that a party cannot recast a patent ownership dispute into patent infringement and Lanham Act claims. The Northern District of Illinois has indicated that it will not rule on Patterson’s motion to dismiss until November 4, 2009, at the earliest. 2 United States District Court For the Northern District of California 1 LEGAL STANDARD 2 A defendant may remove any civil action brought in a state court over which the district court 3 has original jurisdiction. 28 U.S.C. § 1441(a). Original federal jurisdiction embraces an action founded 4 on federal question jurisdiction under 28 U.S.C. § 1331 or diversity jurisdiction under 28 U.S.C. § 1332. 5 See 28 U.S.C. § 1441(a), (b). A defendant must remove within thirty days of receiving plaintiff’s initial 6 pleading or, where the case is not removable based on the initial pleading, within thirty days of receiving 7 an amended pleading, motion, order or other paper from which it may first be ascertained that the case 8 has become removable. 28 U.S.C. § 1446(b). Federal law expressly provides that a district court shall 9 remand any action in which subject-matter jurisdiction is lacking. 28 U.S.C. § 1447(c). 10 Because of the “Congressional purpose to restrict the jurisdiction of the federal courts on 11 removal,” courts must strictly construe the removal statute against removal jurisdiction. Duncan v. 12 Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996) (quoting Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 13 100, 108 (1941)); see also Petrie v. Pacific Stock Exch., Inc., 982 F. Supp. 1390, 1393 (N.D. Cal. 1997) 14 (“[T]he court must reject federal jurisdiction if there is any doubt as to whether removal was proper.”). 15 The burden of establishing grounds for federal jurisdiction rests on the removing party. Emrich v. 16 Touche-Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988) (citations omitted); see also Gaus v. Miles, 17 Inc., 980 F.2d 564, 566 (9th Cir. 1992) ( “[T]he ‘strong presumption’ against removal jurisdiction means 18 that the defendant always has the burden of establishing that removal is proper.”). 19 20 DISCUSSION 21 Plaintiff contends that this Court lacks jurisdiction because he alleges only state law claims and 22 the parties are not diverse. Defendants assert that plaintiff’s declaratory relief claim regarding 23 ownership of the patents confers federal question jurisdiction, and that this Court should transfer this 24 case to the Northern District of Illinois for consolidation with Drews’ earlier-filed case.2 The Court 25 addresses the jurisdictional question first because the Court must have jurisdiction over this case in order 26 to consider defendants’ motion to transfer and consolidate. 27 2 28 Because the Court concludes that it lacks jurisdiction, the Court does not address the parties’ arguments about whether the Illinois action is truly the “first filed.” 3 1 Defendants removed this action on the ground that plaintiff’s claim for declaratory judgment of 2 ownership of certain patents arises under federal law. Defendants contend that plaintiff has engaged 3 in artful pleading, and that while the claim alleged is for declaratory judgment of ownership of the 4 patents, in reality plaintiff is alleging patent infringement. Although defendants wish to recast plaintiff’s 5 declaratory relief claim as one involving patent infringement, the complaint only seeks a judgment of 6 patent ownership: 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 Prior to Invirion’s existence and without any involvement by Mr. Drews, Dr. Patterson obtained patents for his technology, which are on file with the U.S. Patent Office. Dr. Drews never assigned or sold his patents to Invirion, Invirion Spain, or Mr. Drews. An actual and ripe controversy exists between the parties in that Mr. Drews, on behalf of himself and/or Invirion, has claimed an ownership interest in Dr. Patterson’s patents and has further instructed K&L Gates to refuse to turn over the legal files they possess regarding Dr. Patterson’s patents, without legal authority. Compl. ¶¶ 41-42.3 The complaint seeks a declaratory judgment that Dr. Patterson is the sole owner of the patents in his name, and that Dr. Patterson has a legal right to the files that K&L Gates currently maintains concerning his patents. Id. ¶ 43. Contrary to defendants’ assertions, there is no language in the complaint suggesting that plaintiff’s declaratory relief claim involves questions of infringement. 16 17 18 19 20 21 22 23 24 25 The Ninth Circuit has held that “[c]laims concerning patent ownership do not create federal jurisdiction.” Prize Frize, Inc. v. Matrix (U.S.), Inc., 167 F.3d 1261, 1264 (9th Cir. 1999), superseded by statute on other grounds as stated in Abrego Abrego v. Dow Chem. Co., 443 F.3d 676, 681 (9th Cir. 2006); see also Beghin-Say Int’l Inc. v. Rasmussen, 733 F.2d 1568, 1570 (Fed. Cir. 1984) (affirming dismissal for lack of jurisdiction and holding “[t]hat the involved contracts may or may not constitute agreements to assign future patent applications does not convert a contract dispute cognizable in state courts to a federal question appropriate for determination in a federal court. . . . [Courts] have consistently held for over 130 years that contract disputes involving patents do not arise under any Act of Congress relating to patents, as required by 28 U.S.C. § 1338(a).”) (internal citations omitted). As 26 3 27 28 According to the complaint, K&L Gates is plaintiff’s former patent counsel. The complaint alleges upon information and belief that Drews falsely represented to K&L Gates that Drews and/or Invirion owns plaintiff’s patents, and that Drews has instructed K&L Gates not to forward plaintiff’s patent files to plaintiff’s new patent counsel. Compl. ¶ 30. 4 United States District Court For the Northern District of California 1 in Prize Frize and Beghin-Say International, Inc., the claim here only involves questions of patent 2 ownership, and “[n]o question under the patent laws (e.g., patent validity, patent infringement, fraud 3 upon the PTO, patent-antitrust) is present in or arises out of the allegations in the complaint.” Beghin- 4 Say, 733 F.2d 1570-71. 5 Although plaintiff cited Prize Frize and other on-point authority in the motion for remand and 6 opposition to defendants’ motion to transfer, defendants do not address these cases. Instead, defendants 7 rely on inapposite cases where the claim alleged was not one of patent ownership, but of infringement, 8 inventorship, or related to patent prosecution. See, e.g., Ultra-Precision Mfg., Ltd. v. Ford Motor Co., 9 411 F.3d 1369, 1377-80 (Fed. Cir. 2005) (state law unjust enrichment claim regarding inventorship of 10 patent preempted by federal patent law); Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282, 1285-86 (9th 11 Cir. 1984) (addressing whether Ninth Circuit or Federal Circuit has jurisdiction over case involving 12 claims of patent infringement and antitrust claim of bad faith patent prosecution). Indeed, several of 13 the cases cited by defendants support plaintiff’s contention that there is no jurisdiction here. See 14 Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262 (1979) (“Commercial agreements traditionally 15 are the domain of state law. State law is not displaced merely because the contract relates to intellectual 16 property which may or may not be patentable; the states are free to regulate the use of such intellectual 17 property in any manner not inconsistent with federal law.”). 18 Defendants also contend that plaintiff’s claim for declaratory judgment of patent ownership is 19 a compulsory counterclaim to defendants’ patent infringement claims alleged in the Illinois action. 20 However, removal must be based on original jurisdiction over the claims alleged, not supplemental 21 jurisdiction over counterclaims. Section 1441 states that “any civil action brought in a State court of 22 which the district courts of the United States have original jurisdiction” may be removed. 28 U.S.C. 23 § 1441(a). Jurisdiction over compulsory counterclaims based on state law lies solely within a court’s 24 supplemental jurisdiction when there is no diversity jurisdiction. See 28 U.S.C. § 1367(a); Lussier v. 25 Dollar Tree Stores, Inc., 518 F.3d 1062, 1066 (9th Cir. 2008) (“the supplemental jurisdiction statute is 26 not a basis for removal”). 27 Finally, defendant invokes the “first to file” rule and argues that this Court should “defer” to the 28 Illinois District Court by denying remand and transferring this case to Illinois. However, the “first to 5 1 file” rule is a doctrine allowing a district court to transfer, stay or dismiss a complaint over which it does 2 have jurisdiction when a similar complaint has been filed in another district court, Alltrade Inc. v. 3 Uniwield Products, Inc., 946 F.2d 622, 623 (9th Cir. 1991). The “first to file” rule is not an independent 4 source of jurisdiction, and only becomes relevant if the transferor court has jurisdiction over the case. 5 See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94-95 (1998) (“The requirement that 6 jurisdiction be established as a threshold matter ‘spring[s] from the nature and limits of the judicial 7 power of the United States’ and is ‘inflexible and without exception.’” ) (quoting Mansfield, C. & 8 L.M.R. Co. v. Swan, 111 U.S. 379, 382 (1884)). 9 United States District Court For the Northern District of California 10 CONCLUSION 11 For the foregoing reasons, the Court GRANTS plaintiff’s motion for remand and REMANDS 12 this case to the Santa Clara County Superior Court. The Court DENIES defendants’ motion to transfer 13 and consolidate proceedings. (Docket Nos. 15 & 16). The Court DENIES plaintiff’s request for fees 14 and expenses, although it is a close question. 15 16 IT IS SO ORDERED. 17 18 Dated: August 11, 2009 SUSAN ILLSTON United States District Judge 19 20 21 22 23 24 25 26 27 28 6
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