April 2014
Jurisdiction Under DJ Act Requires Actual Controversy
| Judges: Rader (author), Moore, Reyna |
| [Appealed from N.D. Tex., Judge Solis] |
In StoneEagle Services, Inc. v. Gillman, No. 13-1248 (Fed. Cir. Mar. 26, 2014), the Federal Circuit reversed and remanded the district court’s judgment with instructions to dismiss the case based on the district court’s lack of jurisdiction.
In 2006, Robert Allen and David Gillman teamed up to adapt Allen’s electronic payment system to process health care claims. Allen and Gillman agreed that Allen’s company, StoneEagle Services, Inc. (“StoneEagle”), owned the technology. Allen also obtained a patent, U.S. Patent No. 7,792,686 (“the ’686 patent”) on the health care payment system, which listed Allen as the sole inventor. The ’686 patent was licensed to Gillman and two entities named Talon Technologies, Inc. (collectively “Appellants”). Although Gillman had some role in drafting the patent application, he never objected to Allen’s status as the sole inventor, and instead retained an ownership interest in the patent application until assigning his interest to StoneEagle shortly before the ’686 patent issued.
Allen and Gillman’s business relationship eventually soured, and StoneEagle filed a DJ action against Appellants and asked the district court to declare that Allen was the sole inventor and owner of the ’686 patent. StoneEagle also asserted a number of state law trade secret misappropriation claims and requested a preliminary injunction. Slip op. at 3-4. The district court soon issued a preliminary injunction prohibiting Appellants from using or disclosing StoneEagle’s trade secrets and confidential information. Appellants appealed.
“[T]o demonstrate a sufficient controversy for a declaratory judgment claim that satisfies the requirements of Article III, ‘the facts alleged, under all the circumstances, [must] show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’” Slip op. at 6 (second alteration in original) (quoting MedImmune, Inc. v. Genentech, Inc., 549 F.3d 118, 127 (2007)).
On appeal, Appellants argued that the district court lacked subject matter jurisdiction over the suit because there was no actual controversy regarding StoneEagle’s inventorship claim. The Federal Circuit agreed with Appellants and explained that, for a federal court to have subject matter jurisdiction over a DJ action, (1) the hypothetical action that would be brought by the DJ defendant has to be proper before the federal court; and (2) it has to be a case of actual controversy, as required by Article III of the U.S. Constitution. The Court held that StoneEagle’s DJ claim involves inventorship, which is a federal question, and is therefore proper before the district court.
However, the Court noted that StoneEagle’s complaint, while raising issues of ownership, did not allege a sufficient controversy concerning inventorship. The Court acknowledged that StoneEagle only alleges that Gillman claims to have written the patent application, and that the most favorable inference from the record in favor of StoneEagle shows only that Gillman assisted in constructively reducing the invention to practice. The Court noted that assistance in reducing an invention to practice generally does not contribute to inventorship, as otherwise, “patent attorneys and patent agents would be co-inventors on nearly every patent. Of course, this proposition cannot be correct.” Id. at 7. The Court therefore held that StoneEagle failed to allege an actual controversy over inventorship that satisfies Article III, and concluded that the district court lacked jurisdiction over StoneEagle’s DJ suit.
Accordingly, the Federal Circuit vacated and remanded to the district court with instructions to dismiss.
