Should I Stay or Should I Go?

Should I Stay or Should I Go

In these 2 orders, the Federal Circuit said no way to a stay, but it told another case to go away.

Not *NSYNC with the Timeline

SynQor, Inc. v. Artesyn Technologies, Inc., Nos. 2011-1191, -1192, -1193, 2012-1069, -1071, -1072 (Fed. Cir. Jan. 31, 2012) (Judge Moore) (nonprecedential order)

The defendants in this case wanted a little more time for their reexamination at the Board of Patent Appeals and Interferences (BPAI) before the Federal Circuit case moved ahead, but the Federal Circuit said “Bye Bye Bye” to that request.

SynQor sued several defendants for infringing 5 patents. A jury sided with SynQor in the suit, and the defendants appealed. While the litigation was going on, the defendants initiated reexamination proceedings at the BPAI for those patents. The defendants asked the Federal Circuit to stay the appeal while the reexam for some of the patents continued. They expected that the reexam would take 10-14 months.

The Federal Circuit said that, since the district court litigation game is over, and the proceeding at the BPAI would take so long, it didn’t make sense to stay the appeal. I wonder if this order is tearin’ up the defendants’ hearts.

Here’s the SynQor order, if you’re interested.

Can You Hear Me Now?

Nolen v. Lufkin Industries, Inc., Nos. 2011-1251, -1265, -1278, -1279, -1499, -1500, -1522, -1523 (Fed. Cir. Feb. 1, 2012) (Chief Judge Rader, Circuit Judges Lourie and O’Malley) (nonprecedential order)

I’ve said it before, and I’ll say it again: You can’t sue for patent infringement unless you own a patent. Got that? Great. That’s rule #1. Let’s take that one step further: You have to own the patent when you sue for infringement to have a legitimate patent infringement case. That’s rule #2. One more thing—you need a legitimate patent infringement case to appeal to the Federal Circuit. That’s rule #3, and that’s the step that tripped up these parties.

To understand this order, you need to know a couple of basics about jurisdiction. Generally, state courts hear state law claims, like contract disputes, and federal courts hear federal law claims, like patent and trademark cases. You can only get into federal court if you have a legitimate federal claim when you file suit (or if you have diversity jurisdiction, but that’s a discussion for another time and place). Now, moving on to this case….

Lufkin Industries sued Nolen and some other former employees in Texas state court, claiming that the former employees had stolen its trade secrets. Nolen and another former employee, Gibbs, responded by alleging that Lufkin forced them to sign an agreement that transferred certain patents to Lufkin.

Since the case now involved patent claims (plus some federal trademark claims that Nolen and Gibbs added), Lufkin was able to separate the federal claims from the original lawsuit and moved those claims to federal district court. So, there were some claims being litigated in state court, and other claims being litigated in federal court.

Here’s the catch with the federal claims. Nolen and Gibbs sued Lufkin for patent infringement (a federal claim), but first, they wanted the federal district court to cancel the assignment contract—which, they claimed, was fraudulent—and declare that they were the rightful owners the patents that Lufkin was allegedly infringing. Contract claims like that usually get handled in state court, although federal courts can choose to deal with them.

The district court wouldn’t hear Nolen and Gibbs’ patent infringement claims. It said they didn’t have standing to sue since they didn’t own the patents (yet). In other words, they broke rule #1. The district court decided not to deal with the contract issue and sent it back to state court. Lufkin and its co-defendants wanted to stay in federal court, so they appealed this decision. But they weren’t sure which court had jurisdiction, so they filed appeals in both the Federal Circuit and the Fifth Circuit.

Nolen and Gibbs, though, wanted to stay in state court. Apparently, they didn’t like the federal district court’s rulings on several matters, and they wanted the state court to re-examine those rulings. Asking a court to reconsider the rulings of another court is a big no-no, so the district court barred Nolen and Gibbs from litigating their state law claims in state court, at least until the appeals are resolved.

This brings us (finally) to this Federal Circuit order. Nolen and Gibbs asked the Federal Circuit to lift the bar on their state law claims and to dismiss Lufkin’s appeal. Nolen and Gibbs argued that the Federal Circuit didn’t have jurisdiction because the appeal isn’t really about patent law.

The Federal Circuit’s jurisdiction is very defined. According to the Supreme Court, the Federal Circuit can only hear patent cases where “federal patent law creates the cause of action or … the plaintiff’s 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.” Basically, the core issue has to be based on patent law.

At the time they sued, the core issue for Nolen and Gibbs was a contract issue—they had to get the assignments terminated and the patent ownership transferred to them before they could sue for patent infringement. And just because the contracts involve patents doesn’t mean there’s a substantial question of patent law that the Federal Circuit is allowed to hear. The Federal Circuit concluded that it didn’t have jurisdiction over this case, so the Fifth Circuit needs to hear the case.

Feel free to read the Nolen order here.

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