153 F.3d 1318 (Fed. Cir. 1998), 97-1399, Hunter Douglas, Inc. v. Harmonic Design, Inc.

Docket Nº:97-1399, 97-1499, 97-1533.
Citation:153 F.3d 1318
Party Name:47 U.S.P.Q.2d 1769 HUNTER DOUGLAS, INC. and Hunter Douglas Fabrication Company, Plaintiffs-Appellants v. HARMONIC DESIGN, INC., Defendant Cross-Appellant, and Springs Industries, Inc. and Springs Window Fashions Division, Inc. Defendants Cross-Appellants
Case Date:August 18, 1998
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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Page 1318

153 F.3d 1318 (Fed. Cir. 1998)

47 U.S.P.Q.2d 1769

HUNTER DOUGLAS, INC. and Hunter Douglas Fabrication Company,

Plaintiffs-Appellants

v.

HARMONIC DESIGN, INC., Defendant Cross-Appellant,

and

Springs Industries, Inc. and Springs Window Fashions

Division, Inc. Defendants Cross-Appellants

Nos. 97-1399, 97-1499, 97-1533.

United States Court of Appeals, Federal Circuit

August 18, 1998

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[Copyrighted Material Omitted]

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James W. Dabney, Pennie & Edmonds LLP, New York City, argued, for plaintiffs-appellants. With him on the brief were James G. Markey and Brian M. Rothery. Of counsel was Caroline R. Clark. Also of counsel on the brief was Richard J. Codding, Loeb & Loeb, Los Angeles, California.

Joseph R. Re, Knobbe, Martens, Olson & Bear, Newport Beach, California, argued for defendant cross-appellant, Harmonic Design, Inc. With him on the brief was Michael K. Friedland.

Roy H. Wepner, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, New Jersey, argued for defendants cross-appellants, Spring Industries, Inc., et al. With him on the brief were William L. Mentlik, Marcus J. Millet and Jonathan A. David.

Before CLEVENGER, BRYSON, and GAJARSA, Circuit Judges.

CLEVENGER, Circuit Judge.

In this appeal, we consider to what extent federal patent law preempts state law causes of action prohibiting tortious activities in the marketplace, when to prevail on them, the plaintiff must prove that a United States patent is either invalid or unenforceable. In addition, we consider whether, under 28 U.S.C. § 1338, such state law causes of action arise under federal patent law for purposes of exclusive federal jurisdiction over them. We understand section 1338(a), as construed by both the U.S. Supreme Court and this court, to mandate that federal courts have exclusive jurisdiction over state law causes of action in which a substantial question of federal patent law is pleaded as a necessary element of that claim. Next, we rule that the application of a state law tort is preempted if, in holding a defendant liable for the conduct alleged and proved by the plaintiff, there would be conflict with federal patent law. Otherwise, if the state law tort, as-applied, does not conflict with federal patent law, then the tort is not preempted. The combined result of these rulings is to divest state courts of jurisdiction over state law torts that are subject to section 1338(a) jurisdiction, and to allow only those that survive the preemption analysis to proceed.

Hunter Douglas, Inc., and Hunter Douglas Fabrication Co. (collectively "Hunter Douglas") filed suit against Harmonic Design, Inc. ("Harmonic"), Springs Industries, Inc. ("Springs"), and Springs Window Fashions Division, Inc. ("SWFD") (collectively "the Defendants"). In its complaint, Hunter Douglas pleaded federal and state causes of action. The District Court for the Central District of California dismissed the claim for relief that was based on federal law and exercised jurisdiction over the state law claims, but held that federal patent law preempted them. We affirm the dismissal of Hunter Douglas's alleged federal cause of action, affirm the jurisdictional results, and vacate and remand the district court's preemption rulings.

I

The parties are involved in the manufacture and sale of motorized window blinds. Harmonic owns several patents that claim window-blind technology, including U.S. Patent Nos. 5,391,967, 5,444,339, 5,495,153, and 5,517,094 (the "Harmonic patents"). In its complaint, Hunter Douglas alleges that certain claims of the Harmonic patents are invalid because they are either (1) anticipated under 35 U.S.C. § 102 (1994), (2) obvious under 35 U.S.C. § 103(a) (Supp. I 1995), or (3) neither enabled nor particularly pointed out and distinctly claimed under 35 U.S.C. § 112 (1994). In addition, Hunter Douglas alleges that the Harmonic patents are unenforceable because of inequitable conduct. According to Hunter Douglas, Springs and SWFD have an exclusive license from Harmonic

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to commercialize window shades that use the claimed invention of U.S. Patent No. 5,495,153.

Hunter Douglas alleges that it has incurred, and continues to incur, damages because of the allegedly invalid and unenforceable claims of the Harmonic patents. According to Hunter Douglas, the Defendants informed one or more purchasers of motorized window shades that Springs and SWFD have an exclusive license to sell motorized window shades that are covered by the Harmonic patents. In 1996, before introducing a new motorized window shade to the market, Hunter Douglas investigated the Harmonic patents to determine whether they were valid and enforceable and whether its new product infringed them. After several months of delay, which Hunter Douglas attributes to its examination of the Harmonic patents, Hunter Douglas released its new product. In its complaint, Hunter Douglas emphasizes that Harmonic "acted with willful and wanton disregard" in procuring the invalid and unenforceable patent claims, and that "Harmonic made [misrepresentations] with intent to deceive and mislead the [Patent and Trademark Office (PTO) ] and to gain an unfair and unwarranted competitive advantage." Hunter Douglas asserts that Springs and SWFD, "by claiming to hold exclusive rights" under the Harmonic patents, "acted with willful and wanton disregard" because they "knew or should have known" that claims of the Harmonic patents were invalid and unenforceable. Finally, Hunter Douglas contends that the Defendants "acted ... with intent to hinder, delay, or exclude competition ... by unfair and unlawful means," and that, "[b]y falsely and recklessly asserting title to public property," they "have slandered and injured" Hunter Douglas's rights.

The complaint asserts federal jurisdiction under sections 1331, 1338(a), 1367, and 2201 of Title 28 of the U.S.Code. It sets forth seven claims for relief. In the first, Hunter Douglas seeks a declaratory judgment of noninfringement, invalidity, or unenforceability of claims of the Harmonic patents. In this same first count, Hunter Douglas alternatively alleges that, under Article I, section 8, clause 8 of the U.S. Constitution--the Patent Clause--and 35 U.S.C. §§ 102, 103, it has a federal right to use and copy material that is in the public domain. Hunter Douglas asserts that the Defendants, by obtaining invalid and unenforceable patent claims, violated that right. Counts two through seven plead causes of action that are creatures of California law. They are (2) unfair competition, (3) violation of the Unfair Competition Act, California Business & Professional Code § 17200 et seq., (4) injurious falsehood, (5) negligence, (6) intentional interference with prospective economic advantage, and (7) negligent interference with prospective economic advantage.

For relief, Hunter Douglas seeks a declaration that it has a federal right to use the subject matter of certain claims of the Harmonic patents, that those claims are invalid under sections 102, 103, or 112 of Title 35, and that the Harmonic patents are unenforceable because of inequitable conduct. Hunter Douglas further seeks damages and injunctive relief based on the state law causes of action.

II

The district court ruled on two motions to dismiss and two motions by the Defendants for attorney fees under 35 U.S.C. § 285 (1994).

A

Springs and SWFD moved to dismiss all the counts both for lack of subject matter jurisdiction and for failure to state a claim under Fed.R.Civ.P. 12(b)(1) & (6). The district court granted-in-part and denied-in-part the motion. See Hunter Douglas, Inc. v. Harmonic Design, Inc., 962 F.Supp. 1249, (C.D. Cal. 1997) (order and opinion). The Defendants also sought attorney fees under 35 U.S.C. § 285, which the district court denied.

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To elaborate, Hunter Douglas in the first count pleaded both a declaratory judgment action of noninfringement, invalidity, and unenforceability, and a federal right to copy and to use. The district court dismissed both versions with prejudice. With respect to the declaratory judgment action, the court ruled that there was no "actual controversy" to allow for jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201(a) (1994). According to the district court, Hunter Douglas did not have a reasonable apprehension of being sued for patent infringement. With respect to the federal right to copy and to use, the court held that there was no cause of action to enforce such a right. According to the district court, Hunter Douglas asked the court to imply a new cause of action. Stating that there was no reason to believe that Congress had intended to create such a cause of action, the court refused. Consequently, the court dismissed the first count.

With respect to counts two through seven, which plead state law causes of action, the district court denied the motion to dismiss for lack of subject matter jurisdiction. Under 28 U.S.C. § 1338(a) (1994), the "district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents." The Supreme Court has held that, under section 1338(a), there are two classes of actions arising under federal patent law: those in which the federal law creates the cause of action, and those in which "the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law." Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988). Because federal law did not create the state law causes of action, they were not members of the first class, the district court ruled, but they were members of the second class because they required the plaintiff to prove that the patent claims at issue are, in some way, defective. The court concluded that the issues of...

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