C.R. Daniels, Inc. v. Naztec Int'l Grp., LLC

Decision Date13 April 2012
Docket NumberCivil Action No.: ELH-11-01624
CourtU.S. District Court — District of Maryland
PartiesC.R. DANIELS, INC. AND CASTO & HARRIS, INC., Plaintiffs, v. NAZTEC INTERNATIONAL GROUP, LLC, Defendant.
MEMORANDUM OPINION

Plaintiffs C.R. Daniels, Inc. ("C.R. Daniels") and Casto & Harris, Inc. ("Casto & Harris"), filed suit on June 13, 2011, against Naztec International Group, LLC ("Naztec"), defendant, alleging patent infringement with respect to a particular type of voting booth, in violation of 35 U.S.C. § 271 et seq. ("Complaint," ECF 1). They seek injunctive and declaratory relief as well as damages. Id. at 6. In its second motion to dismiss, Naztec argues lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) ("Motion," ECF 23).1 It contends that plaintiffs "did not own the patents they have asserted when they filed their Complaint and therefore lack standing to proceed" ("Motion," ECF 23). See also "Defendant's Memorandum Of Points And Authorities In Support Of Its Motion To Dismiss Under Fed. R. Civ. R. [sic] 12(b)(1)" ("Motion Memo," ECF 23-1). Plaintiffs oppose the Motion ("Opposition," ECF 29), to which defendant has replied ("Reply," ECF 30).

As the matter has been fully briefed, the Court rules now pursuant to Local Rule 105.6, no hearing being necessary.

Factual Background2

C.R. Daniels, a Maryland corporation with its principal place of business in Maryland, is a manufacturing company that produces, among other things, voting booths, utility carts, and other accessories for the election supply industry. Complaint at 1 ¶ 1. Casto & Harris, a West Virginia corporation with its principal place of business in West Virginia, is a distributor of election supplies throughout the United States, including products made by C.R. Daniels. Id. at 2 ¶ 2. Naztec, a Florida corporation with its principal place of business in Florida, manufactures and sells voting booths for the election supply industry. Id. at 2 ¶ 3.

In 2008, Gary Abel, President of C.R. Daniels, and Joseph Wilson, of Casto & Harris, designed a wheeled voting booth that nests with other like voting booths and, when nested together, can be transported in groups. Id. 3 at ¶ 13. Unlike conventional voting booths, which must be assembled and disassembled in order to be transported and stored, id. at 3 ¶11, the booth designed by Abel and Wilson requires no assembly and can be stored compactly. Id. at 3 ¶¶ 12-13. Because polling places tend to be temporary facilities set up in schools, churches, and other permanent structures, multiple voting booths must be brought in during elections. Id. at 3 ¶ 9. Consequently, ease of transport and removal, simplicity of setup, durability, and compactness of storage are all crucial design concerns for voting booths. Id. at 3 ¶ 10.

On March 9, 2009, Abel and Wilson, individually, filed a "U.S. provisional patent application" for the voting booth in issue. Id. at 4 ¶ 14. That application eventually matured into United States Utility Patent 7,895,954 (the "954 patent"). Id. The 954 patent, entitled "Portable, nesting voting booth," was issued on March 1, 2011. Id. Abel and Wilson subsequently appliedfor and obtained five design patents covering the "ornamental appearance" of the portable nesting voting booth: D622,975 (the "975 patent"); D603,184 (the "184 patent"); D603,621 (the "621 patent"); D616,217 (the "217 patent"); and D603,183 (the "183 patent"). Id. at 4 ¶¶ 15-16.3 In the Complaint, plaintiffs aver that Abel and Wilson subsequently assigned their joint ownership interests in these patents to the corporate plaintiffs, but do not specify when such an assignment occurred. Id. at 4 ¶ 17.

Since mid 2009, C.R. Daniels has manufactured, and Casto & Harris has marketed, the portable nesting voting booth, under the "ReadyVoteTM" brand name ("ReadyVote"). Id. at 4 ¶ 18. According to plaintiffs, the Ready Vote has developed significant market share. Id.

Naztec has been manufacturing and selling a voting booth under the "Smartpoll™" brand name ("Smartpoll"). Id. at 5 ¶ 19. According to plaintiffs, the Smartpoll employs a design that infringes upon the ReadyVote patents. Id. Therefore, as noted, plaintiffs filed suit against Naztec on June 13, 2011, alleging that Naztec has infringed upon plaintiffs' patents by distributing the Smartpoll throughout the United States, and by continuing their acts of infringement after plaintiffs provided notice of the ReadyVote patents. Id. at 5 ¶¶ 20-21.

Naztec has moved to dismiss for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. It contends that plaintiffs "did not own the patents they have asserted when they filed their Complaint and therefore lack standing to proceed." See Motion at 1.

According to Naztec, "electronic assignment records of the U.S. Patent and Trademark Office reflect that the assignments] for the [Ready Vote patents] transferring ownership from Gary V. Abel to Plaintiff C.R. Daniels, Inc. were executed by the [sic] Mr. Abel on September16, 2011," and the records reflect an "assignment of rights to the [ReadyVote patents] to Plaintiff Casto & Harris, Inc. by Mr. Joseph Wilson on September 20, 2011." Motion Memo at 2. Further, Naztec asserts that the records reflect "that the assignment documents were recorded with the Patent Office on September 21, 2011." Id. Defendant has appended copies of these records to the Motion, which conform to defendant's assertions.

Plaintiffs appended as Exhibit 2 to their Opposition the "Affidavit Of Gary V. Abel." Exhibit 2 includes "Appendix A," a copy of Abel's employment agreement with C.R. Daniels, dated December 3, 1999. The text of the employment agreement is discussed, infra, at 7. Plaintiffs' Exhibit 2 also includes "Appendix B," which consists of six documents, entitled "Assignment Of Patent Rights," one for each of the ReadyVote patents, signed by Abel on September 16, 2011.

In addition, plaintiffs appended as Exhibit 3 to their Opposition the "Affidavit Of Joseph Wilson." Exhibit 3 includes "Appendix A," a copy of Wilson's employment agreement with Casto & Harris, dated December 12, 2006. See page 8, infra. They also attached "Appendix B," consisting of six documents, entitled "Assignment Of Patent Rights," one for each of the ReadyVote patents, signed by Wilson on September 20, 2011.

Each of the "Assignment Of Patent Rights" documents contains the following language: "Assignor owns, and by this documents assigns to Assignee, all right, title, and interest to the Patent Rights..." See plaintiffs' Exh. 2, App'x B; plaintiffs' Exh. 3, App'x B.

Defendant appended to its Reply, as its Exhibit 2, the applications for the various ReadyVote patents, with the first application in March 2009. In the applications, Abel and Wilson, as applicants, affirm that they had not "assigned, granted, conveyed or licensed and[were] under no obligation under contract or law to assign, grant, convey or license, any rights in the invention[s]...."

Additional facts will be discussed below.

Standard of Review

"It is well established that before a federal court can decide the merits of a claim, the claim must invoke the jurisdiction of the court." Miller v. Brown, 462 F.3d 312, 316 (4th Cir. 2006). Fed. R. Civ. P. 12(b)(1) governs motions to dismiss for lack of subject matter jurisdiction. See Khoury v. Meserve, 628 F. Supp. 2d 600, 606 (D. Md. 2003), affd, 85 F. App'x 960 (4th Cir. 2004). "[S]tanding...is generally associated with Civil Procedure Rule 12(b)(1) pertaining to subject matter jurisdiction." CGM, LLC v. BellSouth Telecomms., Inc., 664 F.3d 46, 52 (4th Cir. 2011). "[D]efendants may aptly challenge [standing] by a motion to dismiss for lack of jurisdiction over the subject matter, pursuant to Federal Rule of Civil Procedure 12(b)(1)." Miller v. Pac. Shore Funding, 224 F.Supp.2d 977, 994 (D. Md. 2002) (citing Marshall v. Meadows, 105 F.3d 904, 905-06 (4th Cir.1997)). "Under Rule 12(b)(1), if a party lacks standing the court automatically lacks subject matter jurisdiction." Casey v. Litton Loan Servicing LP, No. RDB-11-0787, 2012 WL 502886, *2 (D. Md. Feb. 14, 2012). See also McInnes v. Lord Baltimore Emp. Ret. Income Account Plan, No. JKB-11-2286, ____ F.Supp.2d _, 2011 WL 5505392, *2 (D. Md. Nov. 10, 2011) (same); Knowledge Boost, LLC v. SLC California, LLC, No. WDQ-09-0936, 2009 WL 3379269, *2 (D. Md. Oct. 16, 2009) (same).

"[A] motion to dismiss under Rule 12(b)(1) is nonwaivable and may be brought at any time-even on appeal-regardless of whether a litigant raised the issue in an initial pleading." Sucampo Pharms., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 548 (4th Cir. 2006); see Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, thecourt must dismiss the action."). Once a challenge is made to subject matter jurisdiction, the plaintiff bears the burden of proving that the court has subject matter jurisdiction. See Evans v. B.F. Perkins Co., a Div. of Standex Int'l Corp., 166 F.3d 642, 647 (4th Cir.1999); see also Ferdinand-Davenport v. Children's Guild, 742 F. Supp. 2d 772, 777 (D. Md. 2010); Khoury, 268 F. Supp. 2d at 606.

In ruling on a motion under Fed. R. Civ. P. 12(b)(1), the court "should 'regard the pleadings as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.'" Ferdinand-Davenport, 742 F. Supp. 2d at 777 (quoting Evans, 166 F.3d at 647); see also Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991), cert. denied, 503 U.S. 984 (1992). The court should grant a Rule 12(b)(1) motion "only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Evans, 166 F.3d at 647.

Discussion

As noted, when plaintiffs filed suit on June 13, 2011, they averred that the rights to the ReadyVote patents had been assigned to p...

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