IGT, a Nevada Corporation et al v. Acres, No. 2:2022cv02134 - Document 61 (D. Nev. 2023)
Court Description: ORDER Granting 10 Motion to Remand to State Court. The case is REMANDED to the Eighth Judicial District Court. The Clerk of Court is instructed to close the case. Signed by Judge Richard F. Boulware, II on 9/25/2023. (Copies have been distributed pursuant to the NEF. CC: Certified copy of Order and Public Docket mailed to State Court. -RGDG)
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IGT, a Nevada Corporation et al v. Acres Doc. 61 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 1 of 14 1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 8 IGT, a Nevada corporation; and ACRES GAMING INCORPORATED, a Nevada corporation, 9 10 11 Case No. 2:22-cv-02134-RFB-EJY ORDER Plaintiff, v. JOHN F. ACRES, an individual, 12 Defendants. 13 14 JOHN F. ACRES, an individual, 15 16 17 18 Counterclaimant, v. IGT and ACRES GAMING INCORPORATED, Counter-defendants. 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION Before the Court are seven motions: Plaintiffs and Counter-defendants IGT and Acres Gaming Incorporated (“AGI”) (collectively, “Plaintiffs”)’s Motion to Remand (ECF No. 10), Defendant and Counterclaimant John F. Acres (“Defendant”)’s Motion to Consolidate (ECF No. 12), Defendant’s Motion for Leave to File Supplemental Reply in support of his Motion to Consolidate (ECF No. 19), Plaintiffs’ Motion to Amend the Complaint (ECF No. 22), Plaintiffs’ Motion to Dismiss Defendant’s Answer by Plaintiffs, Plaintiffs’ Motion to Strike Defendant’s Answer (ECF No. 23), Defendant’s Motion for Judgment on the Pleadings (ECF No. 28). For the reasons stated below, the Court grants Plaintiffs’ Motion to Remand and dismisses all other Dockets.Justia.com Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 2 of 14 1 pending motions as moot. 2 3 II. PROCEDURAL BACKGROUND 4 On October 25, 2021, Acres 4.0 (a company Defendant owns) filed a complaint in Acres 5 4.0, Inc. v. IGT, in this Court: Case No. 2:21-cv-01962 (“Original Case”). Acres 4.0 sought 6 declaratory relief establishing that it had not infringed on various Patents, including the ‘263 7 Patent, or, in the alternative that the 263 Patent was invalid. On February 28, 2022, IGT filed an 8 answer and counterclaim in the Original Case. In its counterclaim, IGT named Mr. Acres as a 9 counter-defendant and alleged that Acres 4.0 and John F. Acres infringed the ‘263 Patent. On 10 August 3, 2022, Acres 4.0 petitioned the United States Patent and Trademark Office (“USPTO”) 11 to reexamine all claims of the ‘263 Patent. On October 25, 2022, this Court, upon Acres 4.0’s 12 motion, stayed the Original Case pending the USPTO’s reexamination of, among others, the ‘263 13 Patent. 14 On December 19, 2022, Plaintiffs commenced the instant case by filing a Complaint 15 against Mr. Acres in the Eighth Judicial District Court, Clark County, Nevada (Case No. A-22- 16 862804-B). ECF No. 1-1. 17 On December 22, 2022, Mr. Acres filed a Petition of Removal, pursuant to 28 U.S.C. § 18 1338(b). On January 11, 2023, Mr. Acres filed a Notice of Related Cases, alerting the Court to the 19 Original Case. ECF No. 7. On January 11, 2023, Mr. Acres alone filed a Statement Regarding 20 Removal. ECF No. 8. On January 12, 2023, Plaintiffs filed a Response to the Notice of Related 21 Cases. ECF No. 9. Plaintiffs also filed a Motion to Remand. ECF No. 10. On January 25, 2023, 22 Mr. Acres filed a Motion to Consolidate this case with the Original Case. ECF No. 12. On January 23 26, 2023, the parties filed a Joint Status Report. ECF No. 13. On February 8, 2023, Plaintiffs filed 24 a Response to the Motion to Consolidate. ECF No. 16. On February 15, 2023, Mr. Acres filed a 25 Reply in support of his Motion to Consolidate. ECF No. 18. On February 16, 2023, Mr. Acres 26 filed a Motion for Leave to file a Surreply in support of his Motion to Consolidate. ECF No. 19. 27 On February 17, 2023, Plaintiffs filed a Reply in support of their Motion to Remand. ECF No. 21. 28 On February 17, 2023, Plaintiffs filed a Motion to Amend their Complaint. ECF No. 22. 2 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 3 of 14 1 On February 21, 2023, Mr. Acres filed an Answer to the Complaint. ECF No. 23. The Answer 2 contained affirmative defenses and counterclaims. Id. On March 14, 2023, Plaintiffs filed a 3 Motion to Dismiss the counterclaims contained in Mr. Acres’ Answer to the Complaint. ECF No. 4 26. The Motion was fully briefed on April 21, 2023. ECF Nos. 38, 45. On March 14, 2023, 5 Plaintiffs also filed a Motion to Strike the Answer entirely. ECF No. 27. This Motion was fully 6 briefed on April 21, 2023. ECF Nos. 39, 46. On March 21, 2023, Mr. Acres filed a Motion for 7 Judgment on the Pleadings. ECF No. 28. The Motion was fully briefed on April 21, 2023. ECF 8 Nos. 35, 43. On March 27, 2023, Mr. Acres filed a Motion to Stay Discovery. ECF No. 31. On 9 April 5, 2023, the parties filed a proposed Discovery Plan and Scheduling Order. ECF No. 34. On 10 April 21, 2023, Mr. Acres filed a Motion to Seal Exhibits to his Motion for Judgment on the 11 Pleadings (ECF No. 28). ECF No. 41. On April 21, 2023, the Court granted the Motion. ECF 12 No. 49. On May 18, 2023, the Court set a hearing for May 30, 2023, on the seven pending motions 13 before the Court; the Motion to Stay Discovery (ECF No. 31) is properly before Magistrate Judge 14 Elayna J. Youchah. ECF No. 51. At the hearing, the Court ordered the parties to file supplemental 15 briefing by June 13, 2023, that addressed the scope of any legal determination related to patent 16 law that would be required to address Plaintiffs’ state law contract claims. ECF No. 59. The Court 17 further required the parties to attach the relevant contracts to their submissions as separate exhibits. 18 Id. The parties complied with the Court’s order. ECF Nos. 56-58. 19 This order follows. 20 21 III. FACTUAL ALLEGATIONS 22 Defendant Mr. Acres is an inventor and business owner who has operated for several 23 decades in the fields of casino and gaming technology. Mr. Acres created his first casino 24 technology business, Electronic Data Technologies, in 1981, and sold it in 1984 for $1 million. In 25 1986, he created a second business, called Mikohn, which he sold in 1989 for $6 million. 26 Defendant Acres subsequently founded a third business, AGI. On or about July 1, 1996, Defendant 27 Acres entered into an Employment Agreement with AGI, formally establishing certain terms and 28 obligations of Defendant Acres’ role as Chief Executive Officer of AGI (the “Employment 3 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 4 of 14 1 Agreement”). While operating AGI, Mr. Acres developed an invention for a “Method of 2 Implementing Cashless Play of Gaming Devices Interconnected by a Computer Network” (the 3 “Invention”). 4 On October 11, 2000, in exchange for “good and valuable consideration,” Mr. Acres 5 assigned and transferred to AGI the full and exclusive right, title, and interest to the Invention, and 6 any and all subsequent patent rights throughout the world (the “2000 Assignment”). On October 7 19, 2000, Mr. Acres applied for protection of the Invention with the U.S. Patent and Trademark 8 Office (“USPTO”) as U.S. Patent Application No. 09/694,065. Mr. Acres was the sole inventor 9 listed on the application for the Invention. As part of his application, Defendant Acres executed a 10 declaration, affirming his belief that he is the original, first, and sole inventor of the Invention. On 11 June 24, 2008, the USPTO issued U.S. Patent No. 7,390,263 for the Invention (the “’263 Patent”). 12 While this patent application was under consideration by the USPTO, IGT entered into 13 negotiations to acquire AGI. 14 On or about June 29, 2003, International Game Technology—a nonparty corporation that 15 is the parent to IGT—and its wholly owned subsidiary NWAC Corp. entered into an Agreement 16 and Plan of Merger with AGI (the “2003 Merger”). Mr. Acres himself states that through this 17 transaction, he sold AGI to International Game Technology for $143 million dollars. As a result 18 of the 2003 Merger, AGI became a wholly owned subsidiary of International Game Technology 19 and continued to assume all of its rights and obligations, including those trailing rights under the 20 Employment Agreement. 21 On or about January 2, 2005, IGT and its sister company AGI, as part of a larger plan for 22 International Game Technology to integrate its subsidiaries, executed an Assignment and 23 Assumption of Agreements whereby the entire right, title and interest in the Invention and the 24 patent application that resulted in the ’263 Patent (among other assets) were assigned and 25 transferred to IGT (the “2005 Assignment”). 26 As a result of the 2003 Merger and the 2005 Assignment, IGT is the successor-in interest 27 to the Assignee under the 2000 Assignment. IGT holds all rights, title, and interest in the ’263 28 Patent and the benefits of the promises made by Mr. Acres under the 2000 Assignment have inured 4 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 5 of 14 1 to IGT. 2 In 2009, Mr. Acres formed Acres 4.0, a Nevada corporation. In 2018, Mr. Acres formed 3 Acres Manufacturing Company, a Washington corporation. Mr. Acres is the President, Secretary, 4 Treasurer, Director, CEO and Founder of both Acres 4.0 and Acres Manufacturing Company, and 5 fully owns both Acres 4.0 and Acres Manufacturing Company. 6 Unbeknownst to IGT, in or around 2010, Mr. Acres began developing a product titled 7 Foundation™. In or around 2021, IGT became aware that Mr. Acres, through Acres 4.0 and Acres 8 Manufacturing Company, manufactures, uses, sells, and offers Foundation™ for sale in the United 9 States in a way that infringes the claims of the ’263 Patent. Foundation™ is covered by the claims 10 of the ’263 Patent. 11 As the successor Assignee and owner of the ’263 Patent, IGT has not licensed or otherwise 12 granted permission for either Acres 4.0 or Acres Manufacturing Company to manufacture, use, 13 sell, and offer for sale in the United States and/or import into the United States any product covered 14 by the claims of the ’263 Patent. Mr. Acres was aware of the existence and validity of his own 15 patented invention. He was also aware that IGT was the successor Assignee and owner of the ‘263 16 Patent. He is the named inventor of the ‘263 Patent. He is the founder and key employee of AGI. 17 Upon information and belief, Acres 4.0 availed itself of Mr. Acres’ knowledge of the claimed 18 inventions to develop and market Foundation™ for manufacture, use, and sale in the United States. 19 Following its discovery, IGT formally notified Mr. Acres and Acres 4.0 that it believed 20 Foundation™ infringed upon the ’263 Patent. On October 25, 2021, Mr. Acres—through Acres 21 4.0— filed a civil action in Federal Court, seeking, among other things, a declaratory judgment 22 that Acres 4.0 does not infringe the ’263 Patent: Acres 4.0 v. IGT, 2:21-cv-01962-GMN-BNW (D. 23 Nev.). On August 3, 2022, Mr. Acres—through Acres 4.0—filed a third-party request for ex parte 24 reexamination of the ’263 Patent with the USPTO. The reexamination request asks the USPTO to 25 find that the ’263 Patent should not have been patented over prior art that Mr. Acres did not 26 disclose. Mr. Acres’ actions contravene both the express language and spirit of his obligations 27 under the 2000 Assignment (the benefit of which has inured to IGT as successor-in-interest to the 28 original Assignee to “do everything possible to aid Assignee, its successors and assigns to obtain 5 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 6 of 14 1 and enforce proper patent protection.” His actions further constitute deceptive trade practices. 2 3 IV. LEGAL STANDARD 4 Under 28 U.S.C. § 1332, a federal district court has "original jurisdiction of all civil actions 5 where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and 6 costs, and is between citizens of different States." 28 U.S.C. § 1332(a)(1). 7 When original jurisdiction exists under either 28 U.S.C. § 1331 or § 1332 but the matter 8 was filed in a state court, the matter may be removed to federal district court. 28 U.S.C. § 1441(b). 9 "If at any time before final judgment it appears that the district court lacks subject matter 10 jurisdiction," however, "the case shall be remanded." 28 U.S.C. § 1447(c). Proper jurisdiction 11 under Section 1332 requires complete diversity, so each plaintiff must be diverse from each 12 defendant. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553, 125 S. Ct. 2611, 162 13 L. Ed. 2d 502 (2005). A district court has "original jurisdiction of all civil actions arising under 14 the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. 15 An action "arises under" federal law when "federal law creates the cause of action." Merrell 16 Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808, 106 S. Ct. 3229, 92 L. Ed. 2d 650 (1986). But 17 even where a claim finds its origins in state rather than federal law, the Supreme Court has 18 identified a "special and small category" of cases in which federal question jurisdiction still exists. 19 Empire Healthchoice Assurance, Inc., v. McVeigh, 547 U.S. 677, 699, 701, 126 S. Ct. 2121, 165 20 L. Ed. 2d 131 (2006). Federal jurisdiction over a state law claim will lie if a federal issue is: (1) 21 necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal 22 court without disrupting the federal-state balance approved by Congress. Grable & Sons Metal 23 Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 313-14, 125 S. Ct. 2363, 162 L. Ed. 2d 257 24 (2005). 25 Where all four Grable requirements are met, jurisdiction is proper because there is a 26 "serious federal interest in claiming the advantages thought to be inherent in a federal forum," 27 which can be vindicated without disrupting Congress's intended division of labor between state 28 and federal courts. Id. at 313. To protect the jurisdiction of state courts, removal jurisdiction should 6 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 7 of 14 1 be strictly construed in favor of remand. Harris v. Bankers Life and Cas. Co., 425 F.3d 689, 698 2 (9th Cir. 2005). "Federal jurisdiction must be rejected if there is any doubt as to the right of 3 removal." Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992) (internal citation omitted). "Th[is] 4 strong presumption against removal jurisdiction means that the defendant always has the burden 5 of establishing that removal is proper." Id. 6 7 V. DISCUSSION 8 Federal District Courts are courts of limited jurisdiction. As Mr. Acres has not satisfied his 9 burden of showing why Removal is appropriate, under Grable, the Court grants Plaintiffs’ Motion 10 to Remand. 545 U.S. 308, 314; Gunn v. Minton 568 U.S. 251, 258 (2013); see also City of Oakland 11 v. BP PLC, 969 F.3d 895, 904-905 (9th Cir. 2020) (noting that all four Grable factors must be 12 established for original jurisdiction in the limited circumstances when the court looks beyond 13 plaintiff’s complaint for jurisdictional facts). 14 As a preliminary matter, there is not complete diversity between the parties, as Mr. Acres 15 resides in Clark County, Nevada, and IGT is a Nevada Corporation. Therefore, Mr. Acres bears 16 the burden of showing that the Court has original jurisdiction over this case and the claims 17 contained within it. In undertaking this analysis, the court may only consider the pleadings filed 18 at the time of removal without reference to subsequent amendments. City of Oakland, 969 F.3d 19 at 904. 20 Federal district courts have original jurisdiction over civil actions arising under the 21 Constitution, laws, or treaties of the United States. 28 U.S.C.S. § 1331. Additionally, 28 U.S.C. 22 §§ 1338 and 1454 give the district courts original jurisdiction over cases involving patents. In his 23 Petition for Removal, Defendant asserts jurisdiction pursuant to 28 U.S.C. § 1338, which gives 24 federal district courts original jurisdiction over “[a]ny civil action arising under any Act of 25 Congress relating to patents, plant variety protection, copyrights and trademarks.” See also Gunn 26 v. Minton, 568 U.S. 251, 257 (2013) (“For cases falling within the patent-specific arising under 27 jurisdiction of § 1338(a) . . . Congress has not only provided for federal jurisdiction but also 28 eliminated state jurisdiction, decreeing that no State court shall have jurisdiction over any claim 7 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 8 of 14 1 for relief arising under any Act of Congress relating to patents.”). 2 The operative question is whether this case arises under federal law relating to patents. 3 Here, Plaintiffs raise no claims for relief under federal law in the traditional sense, i.e., there are 4 no causes of action created by federal law as pled in the Complaint. "The [well-pleaded complaint] 5 rule makes the plaintiff the master of the claim; [the plaintiff] may avoid federal jurisdiction by 6 exclusive reliance on state law.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (footnote 7 omitted). Additionally, at the time he removed the matter, Mr. Acres had not answered the 8 Complaint in state court; therefore, at the time of Removal, there were no compulsory 9 counterclaims arising under the patent laws. See generally 28 U.S.C. § 1454 (“A civil action in 10 which any party asserts a claim for relief arising under any Act of Congress relating to patents . . 11 . may be removed to [federal] district court . . . .”) (emphasis added). 12 Since Plaintiffs’ complaint contains only state law claims, removal is proper only if Mr. 13 Acres establishes that the four-part Grable test has been fully satisfied and Plaintiffs state law 14 claims arise under federal law. For the reasons stated below, Mr. Acres has not carried his burden 15 here. 16 A. Whether Federal Issues Are “Necessarily Raised” 17 To trigger “arising under” jurisdiction, a federal issue must be necessarily raised. See Rivet 18 v. Regions Bank of Louisiana, 522 U.S. 470, 472, 118 S. Ct. 921, 139 L. Ed. 2d 912 (1998) 19 (explaining that “arising under” jurisdiction exists “where the vindication of a right under state 20 law necessarily [turns] on some construction of federal law.”); see also Grable, 545 U.S. at 314 21 (“‘[F]ederal issue’ [is not] a password opening federal courts to any state action embracing a point 22 of federal law. Instead, the question is, does a state-law claim necessarily raise a stated federal 23 issue . . . .”). A federal issue is necessarily raised if it is "basic," "necessary," "pivotal," "direct," 24 or "essential" to the claim. Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033, 1045 (9th 25 Cir. 2003). The Court analyzes each of the Plaintiffs’ claims which Defendant believe necessarily 26 raise a question of federal law. 27 28 i. Breach of the 2000 Assignment Plaintiff alleges that Mr. Acres breached the 2000 Assignment by breaching the “do 8 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 9 of 14 1 everything possible provision” in the Assignment when he (1) forced reexamination of the ‘263 2 Patent and (2) sought to limit the scope or invalidate the intellectual property that he transferred 3 through the 2000 Assignment. 4 The 2000 Assignment is attached to the parties’ supplemental filings. it assigns all rights 5 flowing from Mr. Acres Invention—defined as “A METHOD OF IMPLEMETING CASHLESS 6 PLAY OF GAMING DEVICES INTERCONNECTED BY A COMPUTER NETWORK”—from 7 Mr. Acres to Plaintiff AGI. The Assignment states in relevant part that it applies to “the invention, 8 patent application, patent rights throughout the world, including foreign patent priority rights; said 9 invention, application and letters patent in this or any foreign country, and all divisions, 10 continuations, reissues and extensions thereof, to be held and enjoyed by Assignee [i.e., Plaintiff 11 AGI], for its own use and benefit and for its successors and assigns to the full end of the term for 12 much letter patent may be granted in this or any foreign country, as fully and entirely as the same 13 would have been held by Assignor had this agreement and sale not been made. . . .” The 14 Assignment further states that Mr. Acres, as “Assignor” agrees to “communicate to Assignee, 15 testify in any legal proceeding, sign all lawful papers, execute all divisional, continuing and reissue 16 applications, make all rightful oaths, and do everything possible to aid Assignee [i.e. Plaintiff 17 AGI], its successors and assigns to obtain and enforce proper patent protection for said invention 18 in this or any foreign country.” 19 Mr. Acres argues this cause of action requires resolution of a patent law question; this is 20 because when an inventor assigns a pending patent application and not an issued patent, the 21 application of assignor estoppel is not straightforward. Similarly, whether Mr. Acres breached the 22 2000 Assignment depends on the scope of the claims that were included in the ‘263 patent, as 23 issued, versus the scope of the claims when the 2000 Assignment was executed and when the 2000 24 Assignment was transferred to IGT. Determining whether Mr. Acres breach his obligation to 25 obtain and enforce proper patent protection for the “invention” will require the Court to determine 26 the scope of the claims issuing as part of the ‘263 patent and compare that to the scope of what 27 Mr. Acres, in 2000, assigned to AGI, and what AGI later assigned to IGT. 28 Plaintiff responds that assignor estoppel is not a “necessary element” to their state law 9 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 10 of 14 1 claims, see Semiconductor Energy Lab’y Co. v. Nagata, 706 F.3d 1365, 1368, 1371 (Fed. Cir. 2 2013). Although a change in patent claims can “remove the rationale for applying assignor 3 estoppel,” Minerva Surgical, Inc. v. Hologic, Inc., 141 S. Ct. 2298, 2310 (2021), no such limitation 4 applies to a breach of contract claim. 5 The Court agrees. Here, regardless of the ‘263 patent’s validity, and regardless of whether 6 an intervening change in patent law affected the nature of the invention assigned to AGI, Mr. Acres 7 agreed to do “everything possible” to protect the invention and AGI’s rights therein. The 8 Assignment does not suggest any way a limitation on Acres’ obligation to support Plaintiff’s 9 exploitation of the Patent (or Patent Application). No such distinction is referenced or created. 10 Therefore, whether Mr. Acres breached that provision of the 2000 Assignment does not “really 11 and substantially involve a dispute or controversy resecting the validity, construction or effect of 12 [federal] law.” Grable, 545 U.S. at 313. Plaintiffs’ claims relating to the 2000 Assignment do not 13 necessarily raise issues of federal patent law. 14 ii. Breach of the 1996 Employment Agreement 15 Mr. Acres’ 1996 Employment Agreement (“Employment Agreement”) is attached to the 16 parties’ stipulated supplemental filings. The Employment Agreement creates obligations by Mr. 17 Acres to assist his Employer (Plaintiff AGI) in every way in obtaining and/or enforcement of its 18 Intellectual Property, regardless of patentability. The Agreement states, in relevant part, that Mr. 19 Acres agreed “during and subsequent to” his employment with Plaintiff AGI, to assist AGI “in 20 every lawful way including but not limited to testifying and/or otherwise supporting [AGI] in the 21 obtaining and/or enforcement of its Intellectual Property . . . to obtain for the benefit of [AGI] 22 patents trademarks, copyrights, design protection and similar legal protections of Intellectual 23 Property in any and all countries, irrespective of whether Employee believes such Intellectual 24 Property to be patentable . . . .” 25 Plaintiffs allege that Mr. Acres violated the “assist Employer” provision of the 26 Employment Agreement when he sought reexamination of the ‘263 Patent and limited the scope 27 of the protected intellectual property that he transferred to Plaintiff AGI. Plaintiffs further allege 28 that “[b]y agreeing to assist Employer ‘in every lawful way . . . in the obtaining and/or enforcement 10 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 11 of 14 1 of its Intellectual Property . . . irrespective of whether Employee believes such Intellectual Property 2 to be patentable,’ the plain spirit and purpose of the Employment Agreement includes an obligation 3 to refrain from taking action, or allowing action to occur when preventable, that would render that 4 intellectual property to be invalid or unenforceable.” 5 Mr. Acres chiefly argues that this claim raises a federal issue because (1) whether the ‘263 6 patent was valid would determine the scope of Plaintiffs’ damages and (2) the plain language of 7 the complaint puts validity in issue. Plaintiff responds that the Employment Agreement 8 unambiguously defines “intellectual property,” which includes “discoveries, inventions, ideas, 9 etc., whether or not patentable . . . .” Furthermore, pursuant to the Employment Agreement, Mr. 10 Acres was obliged to assist Plaintiff AGI in every way in obtaining and/or enforcement of its 11 intellectual property, “irrespective of whether [Mr. Acres] believe[d] such Intellectual Property to 12 be patentable, subject to trademark protection, copyrightable or otherwise protectable.” Plaintiff 13 asserts that this is an unambiguous contract provision, and the Court should reject any attempt by 14 Mr. Acres to argue that there is an implicit agreement between the parties that runs counter to the 15 explicit language of the written agreement. 16 The Court again agrees with Plaintiff. The Court finds that the language of the Employment 17 Agreement creates obligations irrespective of the patentability of the underlying intellectual 18 property or Mr. Acres’ beliefs about patentability. While it is true that Plaintiffs’ damages claim 19 may possibly (but not necessarily) be affected by this Court’s determination regarding the ‘263 20 patent, this by no means makes it a necessary element of Plaintiffs’ cause of action. The Court 21 finds that whether Mr. Acres breached the Employment Agreement is a legal question that turns 22 on Nevada law. There is no federal question “necessarily raised” in this claim, since, independent 23 of any patent infringement, Mr. Acres could have violated the agreement, based on the allegations 24 pled in the Complaint. See, e.g., Lippitt v. Raymond James Fin. Servs., Inc., 340 F.3d 1033, 1045 25 (9th Cir. 2003) (finding no arising under jurisdiction in part because the underlying state law claim 26 did not “require a court to make an independent assessment about whether [d]efendants violated 27 [NYSE] rules or regulations” and because the plaintiff’s “right to relief does not depend on the 28 resolution of a substantial, disputed federal question.”). 11 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 12 of 14 1 iii. Deceptive Trade Practices Act Claim 2 Plaintiffs allege that “Defendant Acres has engaged in deceptive trade practices because 3 he assigned the Invention for value, while pledging to ‘do everything possible to aid Assignee, its 4 successors and assigns to obtain and enforce proper patent protection for said invention in this or 5 any foreign country,’ but subsequently has asserted that the ’263 Patent should be invalidated.” 6 Nevada law broadly conceptualizes “deceptive trade practice” and includes over 16 7 primary definitions of the term. See generally NRS § 598.0900 et seq. Plaintiffs allege that 8 Defendant committed seven different violations of Nevada’s Deceptive Trade Practices Act. In 9 part, they allege Defendant “knowingly [made] a false representation as to the characteristics, 10 ingredients, uses, benefits, alterations or quantities of goods or services for sale or lease or a false 11 representation as to the sponsorship, approval, status, affiliation, or connection of a person 12 therewith[;]” that he “disparage[d] the goods, services, or business of another person by false or 13 misleading representation of fact[;]” and that he “violated a state or federal statute or regulation 14 relating to the sale or lease of goods or services.” NRS § 598.0915(5), (8); NRS § 598.0923(1)(b). 15 Mr. Acres argues that patent issues are “necessarily” raised here, because Plaintiffs 16 continually allege infringement of the ‘263 patent, which is a legal determination involving patent 17 law. Specifically, Mr. Acres argues that whichever court reviewing Plaintiffs’ Deceptive Trade 18 Practices Act claims must also determine whether Foundation™ infringes the ’263 patent and 19 whether Mr. Acres is prohibited from challenging the validity of the ’263 patent. Plaintiffs argue 20 the core “deception” alleged is Mr. Acres’ practice of agreeing to do everything possible in support 21 of an invention while simultaneously seeking to declare the associated patent unenforceable. 22 Therefore, whether the Court finds Mr. Acres infringed the ‘263 patent—a question to be 23 addressed in the currently stayed matter before Judge Navarro—the issue in this case is separate 24 and does not necessarily require a determination of federal law. 25 The Ninth Circuit has held that this very statutory scheme does not per se trigger federal 26 question jurisdiction because the statute’s “glancing reference to federal law is insufficient to 27 confer jurisdiction over Nevada[] state law claims.” Nevada v. Bank of Am. Corp., 672 F.3d 661, 28 675 (9th Cir. 2012). Even with respect to Plaintiffs’ other claims under Nevada’s Deceptive Trade 12 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 13 of 14 1 Practices Act, the Court finds that a federal claim is not necessarily raised, since the deception that 2 Plaintiffs allege relate to Mr. Acres’ alleged business model of (1) assigning rights to intellectual 3 property, (2) promising to help secure or protect those rights, and (3) later undermining these 4 promises by creating competing goods. The Court does not find that the determination of whether 5 or not Nevada’s Deceptive Trade Practices Act was violated in this case does not turn on whether 6 or not ‘263 patent is valid or was infringed. Therefore, there is no federal issue necessarily raised 7 as to this claim. B. Remaining Grable Factors 8 9 The Court next considers the remaining Grable factors. While it is true that the parties 10 genuinely dispute whether the ‘263 patent is valid, and whether Mr. Acres’ conduct constitutes 11 patent infringement, these disputes are not “substantial in the relevant sense.” Gunn, 568 U.S. at 12 260. As the Supreme Court noted in Gunn, the substantiality requirement “looks . . . to the 13 importance of the issue to the federal system as a whole.” Id. at 259-60. In that case, whether a 14 patent law argument would have changed the result in a prior infringement action was critical to 15 establishing a legal malpractice claim; this, however, was a hypothetical and backwards looking 16 federal issue, that, when resolved, would not have “broader significance” in terms of its application 17 to other cases or federal interest. Id. at 261-62. Thus, even though the patent issues involved in 18 the case were “vitally important” to the parties, to confer jurisdiction, “something more, 19 demonstrating that the question is significant to the federal system as a whole, is needed.” Id. at 20 263-64. 21 Here, the outcome of the state law claims will not alter the status of the ‘263 patent. The 22 state law claims are based on contracts creating obligations beyond and outside of the scope of 23 patentability, regardless of what Mr. Acres believed to be patentable and requiring Mr. Acres to 24 protect the “intellectual property” “in every possible way.” Mr. Acres might be correct that the 25 resolution of the Federal Court case may affect the scope of damages in the state court action. 26 However, this is a far cry from meeting the substantiality requirement under Grable and Gunn. 27 Finally, in the absence of a substantial federal issue, “Grable’s fourth requirement 28 [regarding the appropriate balance between federal and state judicial responsibilities] is also not 13 Case 2:22-cv-02134-RFB-EJY Document 61 Filed 09/25/23 Page 14 of 14 1 met.” Id at 264. Because Mr. Acres cannot satisfy all four requirements of “arising under” 2 jurisdiction, this Court does not have subject matter jurisdiction over this case pursuant to 28 3 U.S.C. § 1338(a). 4 5 VI. 6 IT IS ORDERED that Plaintiffs’ Motion to Remand (ECF No. 10) is GRANTED. The 7 8 CONCLUSION case is REMANDED to the Eighth Judicial District Court. The Clerk of Court is instructed to close the case. 9 10 11 DATED: September 25, 2023. 12 __________________________________ RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14
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