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License Defense Does Not Deny Federal Court Jurisdiction

May 29, 2002

Decision icon Decision

Last Month at the Federal Circuit - June 2002

Judges: Mayer (author), Rader, and Dyk

In Pixton v. B&B Plastics, Inc., No. 01-1012 (Fed. Cir. May 29, 2002), the Federal Circuit vacated an order of the U.S. District Court for the Southern District of Florida dismissing a complaint for patent infringement by Dennis Pixton for lack of subject matter jurisdiction.

Pixton owns two patents directed to plastic fishing lures. He had previously granted B&B Plastics, Inc. (“B&B”), d/b/a Gambler, an exclusive license to the patents. The license provided B&B to pay a minimum royalty, and in the event that sales dropped to a certain level, B&B could cover the shortfall. If B&B chose not to cover the shortfall, Pixton had the option to either make the license nonexclusive or to terminate outright. Pixton alleged that in 1998, B&B had breached the license. After sending cease and desist letters, and receiving no response, Pixton sued for patent infringement. In response, B&B argued that the license was still in force because it had been modified orally to remove the minimum royalty provisions. The district court dismissed the complaint for lack of jurisdiction, concluding that the underlying action sounded entirely in contract.

The Federal Circuit concluded that Pixton’s complaint expressly set out an action for patent infringement. In the Court’s words, the issue was not ownership of the patent, but patent infringement, to which the Defendant simply asserted the defense of license. The Court concluded that jurisdiction in the federal courts is not lost simply because the most efficient approach at trial may be to address the license defense first. Accordingly, the Court vacated the district court’s decision and remanded the case for further proceedings.