No “Plausible Basis” to Establish Federal Circuit Jurisdiction in Transfer From Eleventh Circuit

by McDermott Will & Emery

Krauser v. Biohorizons, Inc.

Addressing whether a declaratory judgment action qualified as a civil action relating to patents for purposes of establishing appellate jurisdiction, the U.S. Court of Appeals for the Federal Circuit transferred an appeal back to the U.S. Court of Appeals for the Eleventh Circuit, finding that the ownership dispute surrounding a dental implant system did not fall within the Federal Circuit’s exclusive appellate jurisdiction.  Krauser v. Biohorizons, Inc., Case No. 13-1461 (Fed. Cir., June 4, 2014) (Dyk, J.).

Plaintiff Jack Krauser (Krauser) first sued defendant Biohorizons’ (BHI) predecessor Minimatic in state court and federal district court in 1993.  Krauser, a periodontist, designed a dental implant system in 1987 and obtained a patent covering one component of a larger system in 1994.  During that time he collaborated with BHI’s predecessor to build prototypes of the dental implant system and authorized the predecessor to pursue marketing and sales of the system in exchange for an agreed-upon royalty.  Krauser’s first suits arose out of allegations that BHI’s predecessor was not paying him the royalties he was owed and had sought its own patents covering the dental implant systems that improperly omitted Krauser as a named inventor.  Eventually the parties reached a licensing agreement to settle proceedings pending in bankruptcy court in 1996.

Krauser again sued in 2010 alleging that patents issuing between 2000 and 2003 also omitted him as an inventor, and that he had ownership rights in BHI’s commercial dental implant system.  During the course of this litigation, Krauser withdrew his claims of inventorship and filed an amended complaint limiting the case to a dispute surrounding whether he had ownership rights in BHI product.  The district court, interpreting the 1996 licensing agreement between the parties, found that Krauser had not established any ownership rights and granted summary judgment in favor of BHI.  Krauser appealed to the 11th Circuit.

The 11th Circuit accepted BHI’s arguments that the case belonged at the Federal Circuit and transferred without explaining the basis for the transfer.  The Federal Circuit recognized that under the law of the case doctrine it was bound to adhere to the directions of the 11th Circuit so long as there was a plausible basis for the transfer decision.  However, the Federal Circuit found that it did not have jurisdiction over the case as “arising under any Act of Congress relating to patents.”

The Federal Circuit analyzed the arguments BHI presented to the 11th Circuit.  First, because Krauser withdrew the inventorship claim, the Federal Circuit concluded that it was divested of jurisdiction at the time of filing the amended complaint, where the only remaining claim was a non-patent claim for unfair competition.  Second, the Federal Circuit applied the Supreme Court’s recent guidance in Gunn v. Minton (IP Update, Vol. 16, No. 7) to reject the proposition that Krauser’s ownership allegations rested on a theory of inventorship that implicated issues of patent law.  Third, the Federal Circuit explained that even if Krauser’s remedies under state law were preempted by federal patent law, federal pre-emption was never pled as a defense in the amended answer, thereby precluding the exercise of jurisdiction based on federal patent law.  Having assessed all three arguments and seeing no plausible claim on which the Federal Circuit could satisfy itself of its own jurisdiction, the Federal Circuit dismissed the appeal and transferred the matter back to the 11th Circuit.

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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