Supreme Court and Precedential Federal Circuit Patent Cases
The Supreme Court’s ruling in Impression Products v. Lexmark will force patentees to get what they can in their initial sale or licensing of patented products in both the U.S. and abroad, knowing that they will have to rely on breach of contract remedies to prevent resale in the U.S. Lack of privity with the original purchaser will undoubtedly complicate such actions. Read our full report on Lexmark here.
The Federal Circuit rules in Preston v. Nagel that it cannot hear the appeal of a remand following removal to federal court.
Any precedential cases decided tomorrow will be included in next week’s report.
Preston v. Nagel, Fed. Cir. Case 2016-1524 (June 1, 2017)
The Circuit dismisses for lack of subject matter jurisdiction an appeal of a district court decision remanding a removed case back to state court.
A fight between former business partners resulted in a state court lawsuit filed by Preston based on state law claims. Nagel counterclaimed for declaratory judgment of noninfringement of patents assigned to the company he had owned with Preston, and removed the case under the general removal statute 28 U.S.C. § 1441 and the patent removal statute 28 U.S.C. § 1454. The district court granted Preston’s motion to remand, ruling that it lacked subject matter jurisdiction because the state law claims did not arise under federal law, and Nagel’s patent counterclaims did not present a justiciable case or controversy.
Nagel appealed the district court’s remand. The panel first points out that under 28 U.S.C. § 1447(d), “an order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise….” Recognizing that § 1447(d) would ordinarily bar reviewability here, Nagel asks the Circuit to hold that an exception exists where defendants invoked § 1454, the patent removal statute, to remove patent claims over which federal courts have exclusive jurisdiction. In support, Nagel relies on the 2007 Supreme Court case Osborn v. Haley to argue that the America Invents Act (AIA) overrides § 1447(d)’s bar.
Noting that because appellate review is “scarcely” permitted, Osborn held that courts should review remand orders ordinarily governed by § 1447(d) only “in the extraordinary case in which Congress has ordered the intercourt shuttle to travel just one way—from state to federal court.” According to Nagel, the AIA makes this case similarly “extraordinary.”
Congress included several provisions in the AIA to strengthen federal courts’ jurisdiction over patent claims in response to the Supreme Court’s 2002 decision in Holmes Group v. Vornado, which held that the Federal Circuit lacked jurisdiction to hear appeals from cases “in which the complaint does not allege a claim arising under federal patent law, but the answer contains a patent-law counterclaim.” These AIA provisions included the following: (1) 28 U.S.C. § 1338(a) was strengthened to clarify that state courts had no jurisdiction over “any claim for relief arising under any Act of Congress relating to patents”; (2) the Federal Circuit’s exclusive jurisdiction was extended to include cases with compulsory patent counterclaims, 28 U.S.C. § 1295(a)(1); and (3) a provision was added to permit a party to remove to federal court a case in which any party asserts a patent claim, 28 U.S.C. § 1454.
Nagel argues that the “Holmes Group fix” created the one-way “intercourt shuttle” that Osborn described. According to Nagel, by depriving the state court of jurisdiction to hear patent claims (including counterclaims) and by creating a removal provision targeted at patent claims (and counterclaims), Congress created a vehicle for patent counterclaims to be heard in federal court alongside a plaintiff’s state-law claims. But the panel rules that nothing in the AIA operates like the situation that resulted in the ruling in Osborn. Rather, here the district court was still required to undertake a threshold inquiry of whether complete diversity exists or whether the complaint raises a federal question. Having done so, the district court concluded that it lacked subject-matter jurisdiction because Preston’s claims arose under state law and Nagel did not establish that the counterclaims satisfied the Article III case-or-controversy requirement. Since the district court’s task was that of the “typical case,” the narrow exception of Osborn does not permit the Circuit to review the district court’s remand decision.
Nagel further argued that the Circuit must be able to review the district court’s remand here to avoid a problem that the Supreme Court identified as potentially “serious: the death knell of a claim subject to exclusive federal jurisdiction without federal review.” But Nagel’s concern rings hollow here, where, unlike in Osborn, Nagel has an alternative way to present his patent claims on the merits in federal court: a separate federal declaratory judgment action.