Board of Regents, Univ. Of Tex. v. Nippon

• Decision Date: 13 July 2005
• Docket Number: No. 04-1452.,04-1452.
• Citation: 414 F.3d 1358
• Parties: BOARD OF REGENTS, THE UNIVERSITY OF TEXAS SYSTEM, on behalf of the UNIVERSITY OF TEXAS AT AUSTIN, and Hydro-Quebec, Plaintiffs-Appellees, v. NIPPON TELEPHONE AND TELEGRAPH CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

414 F.3d 1358

BOARD OF REGENTS, THE UNIVERSITY OF TEXAS SYSTEM, on behalf of the UNIVERSITY OF TEXAS AT AUSTIN, and Hydro-Quebec, Plaintiffs-Appellees, v. NIPPON TELEPHONE AND TELEGRAPH CORPORATION, Defendant-Appellant.

No. 04-1452.

United States Court of Appeals, Federal Circuit.

July 13, 2005.

James S. Renard, Bickel & Brewer, of Dallas, Texas, argued for plaintiffs-appellees. With him on the brief were William A. Brewer III, Joyce M. Hellstern, and Garreth A. Sarosi. Of counsel was Daniel F. Perez.

Gerald C. Conley, Andrews Kurth LLP, of Dallas, Texas, argued for defendant-appellant. Of counsel on the brief were Timothy E. Taylor, Bernard H. Masters, and Tonya M. Gray. Also of counsel on the brief were Kendall M. Gray and Anthony F. Matheny, of Houston, Texas.

Before SCHALL, GAJARSA, and LINN, Circuit Judges.

GAJARSA, Circuit Judge.

Nippon Telephone and Telegraph Corporation ("NTT") appeals from an order by the United States District Court for the Western District of Texas denying NTT's motion to dismiss a suit filed by the Board of Regents of the University of Texas System ("UT") and Hydro-Quebec ("HQ"). Bd. of Regents, Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., Case No. A-01-CA-478 (W.D. Tex. June 1, 2004) (the "Order"). The Order denied NTT's motion to dismiss on grounds of sovereign immunity, a decision that NTT asserts is appealable under the "collateral order" doctrine established by Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Because we conclude that this case does not fall within the jurisdiction of this court, we fail to reach the issue as to whether the Order is appealable. Accordingly, pursuant to 28 U.S.C. § 1631, we transfer NTT's appeal to the United States Court of Appeals for the Fifth Circuit for resolution of the issues raised therein.

I. BACKGROUND

NTT is the largest telecommunications company in Japan. NTT was created in 1985 when the telecommunications industry was privatized and its predecessor, Nippon Telegraph and Telephone Public Corporation, was dissolved.

In October 1993, NTT and UT entered into an agreement whereby an NTT scientist was given permission to work for one year as a visiting scientist in UT's Center for Materials Science and Engineering. During his tenure, the NTT scientist worked with Dr. John B. Goodenough, a UT professor and an expert in lithium phosphate cathode materials designed primarily for use in rechargeable batteries. According to the terms of the agreement between NTT and UT, "any information, ideas, discoveries, applications, research, inventions, and work product generated by the [NTT] scientist, directly or indirectly, or with which he became familiar as a result of his stay, were the exclusive property of [UT]."

While at UT, the NTT scientist was involved in research on a compound to be used as cathodes in high-performance batteries. In 1996, UT filed for United States patent protection on the product of this research which it identified in its application as "cathode materials for secondary (rechargeable) Lithium batteries," commonly referred to as LiFePO₄. In 1999, UT obtained U.S. Patent No. 5,910,382 ("the '382 patent") covering its LiFePO₄ invention. In January 1997, while the application for the '382 patent was pending, UT entered into a licensing agreement giving HQ exclusive rights to make and use LiFePO₄.

According to UT, in November 1995, the NTT scientist and NTT applied for Japanese patent protection based on the research into LiFePO₄ that the NTT scientist was exposed to while at UT. UT asserts that such use of its confidential and proprietary technology was a misappropriation of UT's intellectual property and constituted a breach of the agreement by which the NTT scientist was given access to that proprietary information.

On June 15, 2001, UT and HQ (collectively, "Plaintiffs") filed suit against NTT in the 126th Judicial District Court of Travis County, Texas. Plaintiffs' complaint (the "Complaint") asserted state law claims for breach of confidential relationship, conversion, breach of contract, statutory and common law misappropriation of trade secrets, breach of fiduciary duty, tortious interference, unfair competition, and civil conspiracy.^* The relief sought in the Complaint included actual damages, punitive damages, attorneys' fees under state law, disgorgement of profits collected by NTT in relation to the UT technology and a constructive trust over the Japanese patent for the benefit of UT. The Complaint also sought a permanent injunction ordering NTT to turn over all materials containing any purloined proprietary information and to refrain from using or disseminating any such information or engaging in any conduct that interferes with Plaintiffs' business relationships.

On July 23, 2001, NTT filed a notice to remove the case to the United States District Court for the Western District of Texas. NTT initially sought removal of the case on the basis of 28 U.S.C. § 1331, which grants district courts original jurisdiction over questions arising under federal law, and 28 U.S.C. § 1338(a), which grants district courts original jurisdiction over civil actions arising under U.S. patent laws. On October 15, 2001, NTT filed a Supplemental Notice of Removal that asserted as an additional basis for removal 28 U.S.C. § 1330, which grants district courts original jurisdiction over civil actions against a foreign state. Plaintiffs filed a motion to remand the case to state court.

On November 26, 2001, the district court issued an order denying the motion to remand on the grounds that it had jurisdiction under 28 U.S.C. § 1338(a). In so holding, the court found that Plaintiffs' claim for tortious interference with business opportunity required UT to "show that the '382 patent overlaps the subject matter of NTT's Japanese patent. This requires an interpretation of the '382 patent, which is a substantial question of federal law." Citing U.S. Valves, Inc. v. Dray, 212 F.3d 1368, 1372 (Fed.Cir.2000), and Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1325 (Fed.Cir.1998), overruled in part on other grounds by Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1361 (Fed.Cir.1999), the court determined that it had jurisdiction under 28 U.S.C. § 1338(a), because there was no theory by which Plaintiffs' claim for tortious interference could be established that would not implicate federal patent law. Because the court found that it had jurisdiction over one of Plaintiffs' state law claims, it determined that it had supplemental jurisdiction to hear Plaintiffs' other claims pursuant to 28 U.S.C. § 1367. In its November 26, 2001 order, the district court also denied NTT leave to supplement its removal notice to include 28 U.S.C. § 1330 as a basis for jurisdiction on the ground that NTT had not shown cause for failing to comply with the timing requirement of 28 U.S.C. § 1446(b).

On March 26, 2004, nearly three years after removing the case, NTT filed a motion to dismiss on the ground of sovereign immunity. On June 1, 2004, the district court concluded that NTT is not entitled to foreign sovereign status and therefore not entitled to sovereign immunity under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1602 et seq. Accordingly, the court denied NTT's motion to dismiss. It is from the court's June 1, 2004 order that NTT appeals.

On July 16, 2004, UT and HQ filed a motion to dismiss NTT's appeal for lack of jurisdiction. A single judge of this court denied that motion without prejudice stating that "[w]e deem the better course is to have the parties address this issue in their briefs." Bd. of Regents, Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp. 04-1452 (Fed.Cir. Aug. 16, 2004). The issue of this court's jurisdiction over NTT's appeal is now squarely before us.

II. DISCUSSION

NTT seeks to invoke this court's jurisdiction under the terms of 28 U.S.C. § 1295(a)(1), which enables this court to hear appeals from a district court "if the jurisdiction of that court was based, in whole or in part, on section 1338 of this title." The threshold issue to be resolved, then, is whether or not the district court properly exercised jurisdiction over this case pursuant to 28 U.S.C. § 1338(a). This court's review of jurisdictional determinations is plenary. Hunter Douglas, 153 F.3d at 1325.

A. Jurisdiction Under Section 1338(a)

According to the terms of the statute, jurisdiction exists under section 1338(a) if an action "arises under" the federal patent laws. Therefore, jurisdiction extends "only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law in that patent law is a necessary element of one of the well-pleaded claims." Christianson v. Colt, 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988). As we have stated, "[a] court must review and analyze the plaintiff's pleadings, with special attention directed to the relief requested by the plaintiff, in making the determination as to whether a cause of action arises under the patent laws." Air Prod. & Chem., Inc. v. Reichhold Chem., Inc., 755 F.2d 1559, 1562 (Fed.Cir.1985).

Here there is no question that the claims framed in the Complaint assert only causes of action created by the state law of Texas and not the federal patent laws. Accordingly, the issue becomes whether the state law claims asserted or the relief requested by Plaintiffs "necessarily depends on resolution of a substantial question of federal patent law." Christianson, 486 U.S. at 809, 108 S.Ct. 2166.

NTT identifies only one of Plaintiffs' state law claims that it argues requires the resolution of substantial questions of patent law: the claim for tortious interference with business opportunity and prospective economic advantage. Under Texas...