Patent Watch: Semiconductor Energy Lab. Co. v. Nagata


"[Neither the Declaratory Judgment Act nor Federal Circuit jurisprudence creates] a federal cause of action for assignor estoppel."

On February 11, 2013, in Semiconductor Energy Lab. Co. v. Nagata, the U.S. Court of Appeals for the Federal Circuit (Lourie,* Bryson, Wallach) affirmed the district court's dismissal of SEL's complaint with prejudice pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction under 28 U.S.C. § 1338(a) over a case involving U.S. Patent 6,900,463, which related to a semiconductor device. The Federal Circuit stated:

[Section] 1338 jurisdiction . . . extend[s] only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that 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. In appropriately dismissing SEL's complaint for lack of subject matter jurisdiction, the district court correctly held that SEL neither established that federal patent law created a cause of action as pleaded nor that federal patent law was a necessary element of its claims.

The only claim asserted by SEL that purports to arise under federal law, which SEL labeled "Declaratory Judgment - Violation of Federal Patent Law," was premised on the doctrine of assignor estoppel. [A]ssignor estoppel is an equitable doctrine that prohibits an assignor of a patent or patent application, or one in privity with him, from attacking the validity of that patent when he is sued for infringement by the assignee. Assignor estoppel is thus a defense to certain claims of patent infringement. . . . Despite SEL's contentions, assignor estoppel is a form of estoppel, and with rare exception, estoppel is a shield; it is an affirmative defense, not a claim for relief on its own. . . . Under the doctrine, an assignor sued for infringement may not defend or counterclaim that the patent he assigned is invalid or unenforceable. That is not the case here, and we are not inclined to transform the shield into a sword. The relief requested by SEL is akin to seeking a declaratory judgment of patent validity, which is not a viable cause of action. As the district court fittingly noted, "it simply makes no sense to use a doctrine intended to estop a party from advancing a particular claim or defense in a legal case as a way to sue a non-party who has made no claim or defense in a legal case."

The dispute before us is one between a plaintiff in another, separate litigation and a witness for the defendant in that proceeding. The appropriate remedy, if any, for SEL to foreclose Nagata's relevant, factual testimony might have been to challenge his credibility in the crucible of cross-examination during the Wisconsin case, not to bring collateral litigation against him under a nonexistent independent cause of action. Moreover, we have routinely rejected the proposition that assignors should be prohibited from testifying as fact witnesses in cases where they are neither a party to a case nor in privity with the defendant, and we will not now devise a cause of action to preclude such testimony. Accordingly, we conclude that the district court did not err in ruling that SEL's complaint did not invoke federal subject matter jurisdiction on the ground that SEL stated no claim arising under federal law.

Even where a plaintiff does not state a federal cause of action, a federal court may still have subject matter jurisdiction if the plaintiff's claims implicate a substantial issue of federal law. . . . SEL contends that the application and enforcement of the legal duty imposed on inventors by the assignor estoppel doctrine relates to a federal cause of action, viz., patent infringement; thus resolution of Nagata's alleged violation of that legal duty is sufficiently central to each of the counts of its complaint so as to invoke subject matter jurisdiction over the state law claims under the "artful pleading" rule. Specifically, beyond the first count discussed above seeking declaratory judgment that Nagata violated the assignor estoppel doctrine as a matter of federal law, SEL argues that we should find federal subject matter jurisdiction over its remaining state law claims because Nagata's allegedly wrongful repudiation amounted to a breach of contract, slander of title, and unjust enrichment, the effects of which may be cured by application of a putative reverse assignor estoppel doctrine.

We disagree, because the asserted federal issue was insubstantial, implausible, and without merit. For the same reasons that reliance on the doctrine of assignor estoppel does not present a substantial issue of federal law in connection with SEL's purported federal claim, it likewise fails to provide a substantial issue of federal law justifying federal jurisdiction over SEL's state law claims. SEL's contrived federal issue is not a necessary element of its state law claims, which are each independent issues of state law, separately supported by alternative state law theories that do not necessarily require resolution of any disputed substantial question of federal patent law. "[T]he mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction." The district court was therefore correct in holding that SEL's artful pleading did not give rise to federal subject matter jurisdiction.


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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