Federal Circuit Addresses Subject Matter Jurisdiction in Patent-Related CasesFebruary 14, 2013 In Semiconductor Energy Lab. Co., Ltd. v. Yujiro Nagata, the Federal Circuit weighed in on federal subject matter jurisdiction and provided two important reminders: (1) Just because a cause of action originates from a patent, standards in the patent statute, or even from other patent litigation, it is the present cause of action and claims that dictate whether subject matter jurisdiction is proper; and (2) Subject matter jurisdiction, in this case federal question, must be sufficiently pled. The background of this case is as follows: Semiconductor Energy Laboratory (“SEL”) owns U.S. Patent 6,900,463 (“the ’463 patent”). Dr. Yujiro Nagata (“Dr. Nagata”) is a named co-inventor of the ’463 patent. Dr. Nagata assigned his rights in any applications and patents related to the ’463 patent to SEL’s founder in 1991. He later signed a substitute Declaration and Assignment of those applications and patents. Dr. Nagata assisted SEL in a patent infringement lawsuit during the span of 2002 and 2003. SEL sued Samsung for infringement of the ’463 patent in 2009. Dr. Nagata was contacted by Samsung to serve as a fact witness, which he agreed to do. Subsequently, SEL contacted Dr. Nagata assuming that he would cooperate with them during the litigation, as he had previously done. During the litigation, Dr. Nagata testified that he did not sign the 1991 Declarations and Assignments, but that his signature was forged. Samsung then argued that the ’463 patent was unenforceable because of inequitable conduct. Due to Dr. Nagata’s testimony the lawsuit was settled for less money than SEL otherwise would have considered. SEL went on to sue Dr. Nagata in federal court, with five claims: (1) Declaratory Judgment – Violation of Federal Patent Law; (2) Declaratory Judgment – Anticipatory Breach of Contract; (3) Slander of Title; (4) Quiet Title; and (5) Unjust Enrichment. SEL asserted that the claim for declaratory judgment of violation of federal patent law was a federal question—one of the two bases for federal subject matter jurisdiction—and sought supplemental jurisdiction for the other causes of action. Dr. Nagata moved to have the case dismissed for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). The district court granted the motion and dismissed the case with prejudice. SEL appealed. In order to invoke federal subject matter jurisdiction under federal question, the “complaint must either plead a federal cause of action or necessarily implicate a substantial issue of federal law.” SEL v. Nagata, Slip op., at p. 5. SEL’s argument in support of its “Declaratory Judgment – Violation of Federal Patent Law” claim was based on the doctrine of assignor estoppel. The Federal Circuit summarized the doctrine of assignor estoppel as, “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.” Id. at p. 6. SEL argued that the doctrine should be extended to apply not only as a defense limiting arguments by assignors, but offensively to estop assignees from undermining the validity of a patent as well. The Federal Circuit went on to note SEL did not plead or offer any precedent establishing that assignor estoppel is a federal cause of action. As such, the Court concluded, SEL thus effectively invites us to create a new federal cause of action recognizing a supposed violation of the assignor estoppel doctrine under the Declaratory Judgment Act. . . . 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. Id. at p. 7 (citations omitted). In light of this, the Court held that the doctrine of assignor estoppel as applied to patent law was not at issue in this case, since here it was the assignee, Dr. Nagata, who was undermining the validity of the patent. The court held that the underlying dispute in this case was an evidentiary one in the original case and the proper remedy were through the laws of evidence that permit impeachment and other methods of countering the credibility of a witness. Therefore, the district court’s dismissal of the case was affirmed. This case raises two important points to consider when contemplating litigation. The first is that the present cause of action and claims dictate whether subject matter jurisdiction is proper, despite the fact that the dispute may have evolved from the patent statute or even patent litigation. The second is that the plaintiff’s complaint controls the litigation, or lack thereof when the case is dismissed under FRCP 12(b)(1). In this case, this meant that although there was arguably a basis to seek extension of a federal law doctrine, the insufficiency of the pleadings precluded the federal court from fully addressing the issue. ← Return to Filewrapper