Oximetrix, Inc., In re

Citation748 F.2d 637,223 USPQ 1068
Decision Date31 October 1984
Docket NumberNo. 84-1676,84-1676
PartiesIn re OXIMETRIX, INC., Petitioner. Appeal
CourtU.S. Court of Appeals — Federal Circuit

Gerald D. Hosier and Barry W. Sufrin, Chicago, Ill., for petitioner.

Robert D. Raven, San Francisco, Cal., for respondent.

Before MARKEY, Chief Judge, and NIES and NEWMAN, Circuit Judges.

ORDER

Oximetrix, Inc. (Oxco) petitions for a writ of mandamus to the United States District Court for the Northern District of California (district court) ordering it: (a) to vacate its order remanding a state court action No. (C-84-4179 RPA) to the Superior Court for San Mateo County, California (state court); (b) to retain jurisdiction over, or dismiss, what Oxco says is a portion of that action that embodies claims "arising under" the Patent Laws of the United States; and (c) to vacate its stay of proceedings in Oxco's federal court suit for declaratory judgment (No. C-83-1252 RPA).

Shaw Associates (SA) has moved this court for an award of costs and attorneys fees incurred by SA as a result of Oxco's petition for a writ of mandamus.

Background

In a 1973 agreement, Shaw Associates (SA) exclusively licensed Oxco to use all of SA's inventions in the field of intravenous (I-V) administration apparatus--including patented and unpatented inventions, prototypes, plans, trade secrets, know-how, and other information (I-V inventions).

State Court Action

In 1981, Oxco notified SA that it would cease paying royalties, except on products covered by SA's patents and that none of its products was so covered. In 1982, Oxco sued SA in the state court in San Francisco, alleging that the agreement was unenforceable except in relation to the products covered by SA's patents, which Oxco said amounted to only 5% of Oxco's sales. A month later SA sued Oxco in the state court in San Mateo, alleging breach of contract and that the contract required payment of royalties on all of Oxco's I-V administration apparatus.

Following extensive proceedings, trial commenced in the San Mateo state court on September 26, 1983. The trial encompassed 24 days, spread over three months, and involved over 500 exhibits, charts, graphs, models, and equipment.

Further extensive post-trial briefs and memoranda were received and fully considered. On May 25, 1984, the court issued a Tentative Decision. On October 10, 1984, after considering further submissions, the court issued its final STATEMENT OF DECISION and a JUDGMENT. 1 The state court's 49-page STATEMENT OF DECISION constitutes a reasoned, careful, and thorough review of the evidence, the issues, the authorities, and the bases for its decision, all in full support of its CONCLUSION:

Oximetrix has breached the express terms of the 1973 Agreement by its failure to pay royalties prior to January 24, 1983. Oximetrix also breached the express terms of the Agreement by its continued use of the Shaw I-V inventions after that date and its repudiation of the Paragraph 8(b) license-back provisions. By the same conduct, Oximetrix has breached the separate implied covenant of good faith and fair dealing, as described above. The Court directs that judgment shall be entered for Shaw Associates based upon the foregoing Statement of Decision.

In its JUDGMENT, the state court held that: (1) the agreement is enforceable; (2) SA is entitled to Oxco's improvements as provided for in the agreement; (3) Oxco has no right to continue use of SA's I-V inventions after Oxco terminated the agreement on January 24, 1983; (4) Oxco's I-V products use and are based on SA's unpatented inventions obtained under the agreement; (5) Oxco's I-V products also use the inventions claimed in valid patents of SA; (6) Oxco is enjoined from using, directly or indirectly, the I-V inventions of SA; (7) the injunction is stayed for a year, with jurisdiction retained to determine when it should terminate; (8) Oxco shall pay SA certain compensatory damages; (9) Oxco must pay SA's attorney fees from the inception of the litigation through October 4, 1984; and (10) SA shall recover its costs.

In support of the injunctive relief granted, the state court said this:

In addition to this ground for an injunction based upon the misuse of the unpatented inventions, plans, apparatus and information, the Court further notes that Oximetrix, in its sales of I-V products, continues to utilize patented Shaw I-V inventions. The courts have held that under the circumstances here, such a continued use of patents constitutes a breach of contract enjoinable as such under state law. See, e.g., H.J. Heinz Co. v. Superior Court, 42 Cal.2d 164, 266 P.2d 5 (1954); Rogers v. Hensley, 194 Cal.App.2d 486, 14 Cal.Rptr. 870 (1961); Seagren v. Smith, 63 Cal.App.2d 733, 741, 147 P.2d 682 (1944). The Court notes this state law authority as an alternative, contract-based ground and basis for the injunctive relief herein granted.

Federal Court Action

Having terminated the agreement in January 1983, Oxco had thereupon filed in the federal district court an action (C-83-1252 RPA) for declaratory judgment that one of the patents in the agreement was invalid (later amended to include the other patents in the agreement). In May, 1983, the district court stayed proceedings in C-83-1252 RPA, pending completion of the state court action.

On receipt of the state court's May 25, 1984 Tentative Decision, Oxco obtained two ex parte extensions of time in which to request a STATEMENT OF DECISION under California Court Rule 232. On June 22, 1984, the last day of the second extension, Oxco filed its request for a STATEMENT in the state court and its removal petition in the district court. SA moved in the district court to remand the case, and, on August 23, 1984, the district court granted the remand and entered an order.

The district court's order contained these three findings:

(1) This action was improvidently removed from state court;

(2) This court does not have jurisdiction over this action under 28 U.S.C. Sec. 1338(a) because this is not a case which arises under the patent laws of the United States;

(3) The petition for removal was not timely filed under 28 U.S.C. Sec. 1446(b) because it was not filed within thirty days after defendant first ascertained the purported basis for removal.

Based on those findings, the district court ORDERED:

(1) That the motion to remand is granted, the Petition for Removal is dismissed and the action is remanded forthwith;

(2) That defendant and its counsel are ordered pursuant to this Court's authority under 28 U.S.C. Sec. 1447, Rule 11, Fed.R.Civ.Proc., 28 U.S.C. Sec. 1927 and the inherent power of this Court to pay plaintiff's just and reasonable costs and sanctions, including attorneys' fees, associated with the removal petition....;

(3) This action is remanded pursuant to 28 U.S.C. Sec. 1447(c) 2 and therefore is not reviewable by any means, whether by appeal or by mandamus. 28 U.S.C. Sec. 1447(d); Gravitt v. Southwestern Bell Telephone Co., 430 U.S. 723, 97 S.Ct. 1439, 52 L.Ed.2d 1 (1977).

Oxco's Arguments

Oxco makes these arguments in support of its mandamus petition:

(1) Removal must be reinstated to "interdict" the state court's reach beyond its jurisdiction into "exclusive federal patent jurisdiction."

(2) This court must grant mandamus to protect its "exclusive appellate jurisdiction over the patent claims" in the declaratory judgment and the state court action, thus avoiding "derogation of is Congressional mandate to bring doctrinal stability to the Patent Law."

(3) Though the state court action did not involve patent validity or infringement issues, reference to "valid" patents and an injunction that included patented inventions in the Tentative Decision made the state action removable on the date the Decision issued, and Oxco's removal petition was not untimely because it was filed within the prescribed period following that date.

(4) The district court's continuance of the stay of Oxco's declaratory judgment action delegates "sub-silentio" the disposition of that action to the state court, because the state court injunction includes patented as well as unpatented products. 3

Analysis

Oxco's arguments are totally without merit, are based on mutually exclusive concepts, and are drawn in disregard of the record. Its filing and maintenance of the present petition is frivolous.

(1)

Concerning the state court's reference in its STATEMENT OF DECISION to "valid" patents and the injunction in its JUDGMENT against Oxco's use of the unpatented and patented inventions in the agreement, Oxco admits that state courts may decide patent questions, as this court has recognized, Beghin-Say Int'l. v. Ole-Bendt Rasmussen, 733 F.2d 1568, 221 USPQ 1121 (Fed.Cir.1984).

Oxco argues that there was no basis in the state court record for the reference to "valid" or for what it calls a "coercive injunction against patent infringement." The argument ignores Oxco's own position that it never challenged patent validity in the state court and that its federal court challenge to validity has yet to be heard. The state court's reference to "valid" patents was thus eminently correct when it was made. 35 U.S.C. Sec. 282. The state court entered no "injunction against patent infringement." Oxco's blow-up of the state court's use of "valid" is disingenuous. It is also clearly misdirected here. Whether all parts of a state court decision are supported by the trial record is a matter for presentation on appeal to the appropriate court in the judicial system of California.

Further, the entire and extended argument of both parties concerning the question of whether "patent" issues were or were not presented to and decided by the state court is but "sound and fury, signifying nothing." The state court, as above indicated, specifically grounded its decision and judgment on state law governing breach of contract. Thus Oxco, because it was found to have breached the agreement, and to have done so in bad...

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