Patent Watch: Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc.

by BakerHostetler
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[P]ermitting state courts to adjudicate disparagement cases (involving alleged false statements about U.S. patent rights) could result in inconsistent judgments between state and federal courts [but] this possibility of future conflict does not arise here.

On May 16, 2013, in Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc., the U.S. Court of Appeals for the Federal Circuit (Newman, Bryson, Dyk*) vacated and remanded the district court's summary judgment, inter alia, that Wheelabrator did not engage in tortious interference with Forrester's business under New Hampshire state law based on misrepresentations regarding U.S. Patents No. 4,737,356, No. 5,430,233 and No. 5,245,114, which related to treatment systems to prevent heavy metals from potentially leaching into sources of drinking water. The Federal Circuit stated:

Under 28 U.S.C. § 1441(a), a defendant may remove to federal district court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." . . . The question here is whether the district court would have had original jurisdiction under 28 U.S.C § 1338, which gives federal district courts original jurisdiction over "any civil action arising under any Act of Congress relating to patents." [A] claim may "aris[e] under" the patent laws even where patent law did not create the cause of action, provided that the "well-pleaded complaint establishes . . . that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law." Thus, even a cause of action created by state law may "aris[e] under" federal patent law within the meaning of 28 U.S.C. § 1338 if it involves a patent law issue that is "(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." . . .

Wheelabrator argues that Forrester's claims necessarily raise a substantial issue of patent law because Forrester "seeks relief based upon allegations that [Wheelabrator] has made a false statement about a United States patent" and "such allegations necessarily require the trial court to construe the claims of the patent in order to determine whether the alleged statements were, indeed, false." In the past, we have concluded that similar state law claims premised on allegedly false statements about patents raised a substantial question of federal patent law.

[P]ermitting state courts to adjudicate disparagement cases (involving alleged false statements about U.S. patent rights) could result in inconsistent judgments between state and federal courts. For example, a federal court could conclude that certain conduct constituted infringement of a patent while a state court addressing the same infringement question could conclude that the accusation of infringement was false and the patentee could be enjoined from making future public claims about the full scope of its patent as construed in federal court.

But this possibility of future conflict does not arise here. Wheelabrator's allegedly inaccurate statements regarding its patent rights concerned conduct taking place entirely in Taiwan. Those statements did not concern activities that could infringe U.S. patent rights, and it is not entirely clear why the Taiwanese entities in this case cared about the extent of Wheelabrator's U.S. patent rights. The use of a patented process outside the United States is not an act of patent infringement. While the importation into the United States of a product produced by a U.S. patented process can constitute infringement, there is no suggestion here that any product was being imported into the United States. Therefore there is no prospect of a future U.S. infringement suit arising out of Kobin's use of WES-PHix or FESI-BOND in Taiwan, and accordingly no prospect of inconsistent judgments between state and federal courts. Moreover, the '356, '233, and '114 patents have all now expired, so there is also no prospect that future conduct in the U.S. could lead to an infringement suit regarding those patents. [T]he potential conflict is purely "hypothetical."

Wheelabrator argues that this case nevertheless raises a substantial question of federal patent law because "resolution of the claim construction . . . issues necessarily raised by [Forrester's] Amended Petition would have . . . potential preclusive effects in any future litigation involving the patents-in-issue." [But] any such collateral estoppel effect "would be limited to the parties and patents that had been before the state court," and that "[s]uch 'fact-bound and situation-specific' effects are not sufficient to establish federal arising under jurisdiction." Wheelabrator further argues that there is federal jurisdiction because Forrester seeks remedies that might be preempted by federal patent law. However, "[f]ederal preemption is ordinarily . . . a defense to the plaintiff's suit," and "[a]s a defense, it does not appear on the face of a well-pleaded complaint, and, therefore, does not authorize removal to federal court." Wheelabrator's jurisdictional arguments are therefore without merit.

In sum, we conclude that even if the allegations contained in Forrester's complaint necessarily raise a question of patent law, the patent law issues are not "substantial in the relevant sense" . . . . Because the district court lacked subject-matter jurisdiction over Forrester's claims, we vacate the district court's judgment and remand to the district court. On remand from this court, the district court shall remand the case to New Hampshire state court.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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