Paradise Creations, Inc. v. Uv Sales, Inc.

• Decision Date: 03 January 2003
• Docket Number: No. 02-1283.,02-1283.
• Citation: 315 F.3d 1304
• Parties: PARADISE CREATIONS, INC., Plaintiff-Appellant, v. UV SALES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

315 F.3d 1304

PARADISE CREATIONS, INC., Plaintiff-Appellant, v. UV SALES, INC., Defendant-Appellee.

No. 02-1283.

United States Court of Appeals, Federal Circuit.

DECIDED: January 3, 2003.

Elliot H. Scherker, Greenberg Traurig, P.A., of Miami, FL, argued for plaintiff-appellant.

Kyle B. Fleming, Baker & Hostetler LLP, of Cleveland, OH, argued for defendant-appellee. With him on the brief was Thomas H. Shunk.

Before LOURIE, BRYSON, and DYK, Circuit Judges.

DYK, Circuit Judge.

This case presents the question of whether a suit for patent infringement must be dismissed for lack of Article III standing because the plaintiff corporation claimed its patent rights under a contract executed at a time when it was administratively dissolved. Paradise Creations, Inc. ("the appellant") appeals the final judgment of the United States District Court for the Southern District of Florida. The district court granted summary judgment in favor of the defendant, U V Sales, Inc. ("the appellee"), and dismissed the appellant's claim for patent infringement for lack of standing. Paradise Creations, Inc. v. U V Sales, Inc., No. 00-8898 (S.D.Fla. Nov. 13, 2001). We hold that the appellant lacked standing and that the district court properly dismissed the case. We accordingly affirm the judgment of the district court.

BACKGROUND

The appellant was incorporated under the laws of Florida on March 13, 1985. On August 23, 1996, the appellant was administratively dissolved for failing to file its annual report, pursuant to Florida Corporation Statutes, chapter 607.1622(8), which provides: "[a]ny corporation failing to file an annual report ... shall be subject to dissolution or cancellation of its certificate of authority to do business as provided in this act." Fla. Stat. ch. 607.1622(8) (2001). The appellant remained administratively dissolved until it obtained reinstatement on June 29, 2001, after the filing of the complaint in this action.

During the period of its dissolution, the appellant entered into an agreement with Leon Hayduchok, whereby it alleges it obtained exclusive rights to the patent in suit, U.S. Patent No. 4,681,471 ("the '471 patent"). Under the agreement, Hayduchok, who was one of the named inventors listed in the patent, granted to the appellant "the exclusive, unlimited, irrevocable, world-wide right and license" to the '471 patent, effective October 14, 1997. (J.A. at 113). The appellant also relies on two letters, dated April 7, 1999, and May 13, 1999, in which Hayduchok and the other named inventor listed in the patent, Leopold Strauss, are alleged to have resolved litigation between each other regarding ownership of the '471 patent, and consented to continued enforcement and licensing of the patent by the appellant. Like the 1997 licensing agreement, these letters were written during the period of the appellant's administrative dissolution.

The appellant initiated this action by filing a complaint for patent infringement against the appellee in the United States District Court for the Southern District of Florida on September 29, 2000, during the period that the appellant was administratively dissolved.

On June 22, 2001, the appellee filed a motion for summary judgment, alleging that because the appellant had been administratively dissolved since August 1996, it did not have capacity to sue under Florida law or standing to invoke the district court's jurisdiction under Article III of the United States Constitution. The appellee argued that the appellant lacked capacity under Florida Corporation Statutes chapter 607.1622(8), which provides, "[a]ny corporation failing to file an annual report ... shall not be permitted to maintain or defend any action in any court of this state." The appellee further argued that because Florida law prohibits dissolved corporations from conducting business except that necessary to wind up and liquidate their business and affairs, the agreements the appellant entered into while administratively dissolved did not transfer enforceable patent rights to the appellant during the period of dissolution. Therefore, the appellee argued, the appellant did not have sufficient interest in the patent at suit to establish standing.

As noted above, on June 29, 2001, the appellant obtained reinstatement as a corporation from the Florida Department of State.

On July 2, 2001, the appellant filed a motion for leave to file an amended complaint, pursuant to Rule 15(a) of the Federal Rules of Civil Procedure. The appellant sought to join Hayduchok and Strauss as plaintiffs, as well as other parties. On August 9, 2001, the district court denied the appellant's motion without prejudice, holding that "[a]lthough leave to amend shall be `freely given,' Defendant correctly argues that subsequent attempts to `fix' deficient standing by adding additional plaintiffs are futile." (J.A. at 214).¹

On August 16, 2001, the appellant filed an opposition brief to the appellee's motion for summary judgment. The appellant argued that although it was administratively dissolved at the time it obtained exclusive rights to the patent and at the time it filed suit, under Florida Corporation Statutes chapter 607.1422(3), when an administratively dissolved corporation is reinstated, the reinstatement "relates back to and takes effect as of the effective date of the administrative dissolution and the corporation resumes carrying on its business as if the administrative dissolution had never occurred." (J.A. at 227, quoting Fla. Stat. ch. 607.1422(3) (2001)). According to the appellant, its reinstatement retroactively gave it the capacity to sue and standing to assert federal jurisdiction at the time it filed its complaint. (J.A. at 228).

On November 13, 2001, the district court granted the appellee's motion for summary judgment. The court held that standing in federal court is a matter of federal law, and "depends upon the state of things at the time of the action brought." Paradise Creations, No. 00-8898, slip op. at 5 (quoting Keene Corp. v. United States, 508 U.S. 200, 207, 113 S.Ct. 2035, 124 L.Ed.2d 118 (1993)). Therefore, the court reasoned, the Florida Corporation Statutes could not retroactively create jurisdiction where it was lacking at the time the action was filed. Id. at 7. The court noted that the "Plaintiff does not dispute" that the agreements it relied upon as its basis for rights in the patent "were not valid during the time that Plaintiff was dissolved." Id. at 6. Therefore, the court held, the appellant did not have enforceable rights to the '471 patent on the day it filed its complaint and could not establish federal standing. Id. at 7.

The appellant timely filed this appeal. This court has jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

I

We review the district court's grant of summary judgment without deference. Schumer v. Lab. Computer Sys., Inc., 308 F.3d 1304, 1310, 64 USPQ2d 1832, 1837 (Fed.Cir.2002). This court reviews questions of law, including standing and capacity to sue under Federal Rule of Civil Procedure 17(b), without deference. Lans v. Digital Equip. Corp., 252 F.3d 1320, 1328, 59 USPQ2d 1057, 1061 (Fed.Cir. 2001).

II

It appears that under Florida law, the appellant had capacity to sue at the time of the complaint, at least insofar as the suit for patent infringement was "necessary to wind up and liquidate its business and affairs." Fla. Stat. ch. 607.1421(3) (2001). Under Federal Rule of Civil Procedure 17(b), "[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." The Florida courts are now apparently unanimous that, although under chapter 607.1622 a corporation loses its capacity to sue if it fails to file an annual report, once it is administratively dissolved, somewhat paradoxically it regains capacity to sue under chapters 607.1421(3) and 607.1405(2)(e), as "`necessary to wind up and liquidate its business and affairs.'" Cygnet Homes, Inc. v. Kaleny Ltd. of Fla., 681 So.2d 826, 826 (Fla. 5th Dist.Ct.App.1996), (quoting Fla. Stat ch. 607.1421(3)); Nat'l Judgment Recovery Agency, Inc. v. Harris, 826 So.2d 1034, 1035 (Fla. 4th Dist.Ct.App.2002) (overruling its precedent to the contrary and adopting the rule of Cygnet). Because the appellant was administratively dissolved on August 23, 1996, before having filed its complaint, it had capacity to sue under Florida law, as necessary to wind up its business and affairs.

III

However, regardless of whether the appellant had capacity to sue, it must establish that it had standing under Article III of the Constitution at the time it filed suit. Whether a party has standing to sue in federal court is a question of federal law. Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). Article III standing, like other bases of jurisdiction, generally must be present at the inception of the lawsuit. Lujan v. Defenders of Wildlife, 504 U.S. 555, 570 n. 5, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (plurality opinion) ("[S]tanding is to be determined as of the commencement of suit."); see also Keene Corp. v. United States, 508 U.S. 200, 207, 113 S.Ct. 2035, 124 L.Ed.2d 118 (1993) ("[T]he jurisdiction of the Court depends on the state of things at the time of the action brought."); Arizonans for Official English v. Arizona, 520 U.S. 43, 64, 67, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997) (holding that standing is an aspect of the case or controversy requirement, which must be satisfied "at all stages of review").

To demonstrate standing under Article III, the plaintiff must satisfy three elements. First, the plaintiff must allege that it has suffered an "`injury in fact' — an invasion of a legally protected interest." Lujan, 504 U.S. at 560, 112 S.Ct. 2130. Second, "there must be a causal connection between the injury and the conduct complained of." Id. And third, "it must be `likely,' as opposed to merely `speculative,' that the injury will be `redressed by...