Chemical Engineering Corp. v. Marlo, Inc.

• Decision Date: 16 July 1984
• Docket Number: No. 84-1179,84-1179
• Citation: 222 USPQ 738,754 F.2d 331
• Parties: CHEMICAL ENGINEERING CORP., and John O. McLean, Petitioners/Appellants, v. MARLO, INC., Respondent/Appellee. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 331

754 F.2d 331

222 U.S.P.Q. 738

CHEMICAL ENGINEERING CORP., and John O. McLean, Petitioners/Appellants, v. MARLO, INC., Respondent/Appellee.

Appeal No. 84-1179.

United States Court of Appeals, Federal Circuit.

July 16, 1984.

David A. Lundy, Fort Wayne, Ind., for petitioners/appellants.

James R. Custin, Milwaukee, Wis., for respondent/appellee.

Before MARKEY, Chief Judge, and FRIEDMAN and RICH, Circuit Judges.

ORDER

MARKEY, Chief Judge.

John O. McLean and Chemical Engineering Corporation (Chemical) sued Marlo, Inc. (Marlo) in the U.S. District Court for the Eastern District of Wisconsin for an injunction against threatened patent infringement, damages, costs, attorney fees, and other relief. The district court issued summary judgment in favor of Marlo and awarded Marlo its costs and attorney fees. Chemical filed a notice of appeal. Though the notice indicated appeal to the Seventh Circuit, the district court clerk, sua sponte, transmitted the appeal to this court. Chemical has moved for transfer of the appeal to the Seventh Circuit.

Chemical has an exclusive license under McLean patent No. 3,649,532 ('532 patent) to manufacture and sell a device for removing minerals from water. In late 1982, Chemical says it heard from its distributors that Marlo was preparing to market a similar device. "Upon information and belief," based solely on the alleged statements of its distributors, Chemical alleged in its complaint that Marlo executed an "Original Equipment Manufacture" (OEM) agreement with Essef, Inc. (Essef). Then and now, Chemical was and is suing Essef for infringement in the U.S. District Court for the Northern District of Indiana.

On February 1, 1983, Marlo moved to dismiss under Rule 12(b)(6) Fed.R.Civ.P. (1979), alleging a failure to state a claim upon which relief may be granted, and alternatively for judgment on the pleadings under Rule 12(c), alleging that they disclosed no genuine issue of material fact and that Marlo was entitled to judgment as a matter of law. Marlo also asked for costs and attorney fees under 28 U.S.C. Sec. 1927 or 35 U.S.C. Sec. 285.

Marlo and Chemical submitted affidavits. The trial court correctly considered and disposed of Marlo's motions as one also for summary judgment under Rule 56. See Rule 12(c) Fed.R.Civ.P.

Marlo's affidavit stated unequivocally that no OEM agreement with Essef existed; indeed, that Marlo had rejected such agreement. In response, Chemical moved to voluntarily dismiss its suit without prejudice under Rule 41(a)(2).

Chemical's affidavit attempted to explain why it had filed the suit. The trial court correctly characterized it as "based largely on belief and innuendo ... fall[ing] far short of the 'specific facts' requirement of Rule 56," and noted the absence of any contract, customer affidavits, price lists, or similar evidence of facts which might reflect "some basis for bringing this action".

The trial court noted that Chemical had acted on rumor and was not justified in suing without information based on reasonable inquiry that would warrant counsel in signing the complaint, citing Rule 11 F.R.Civ.P. The court declined to impose a sanction on counsel under that rule. The trial court also considered but rejected imposition of sanctions on counsel under 28 U.S.C. Sec. 1927. Costs and attorney fees were awarded under 35 U.S.C. Sec. 285 against Chemical in view of its bad faith in failing to investigate before suing.

On March 16, 1983, the district court denied Chemical's motion to dismiss without prejudice, and granted Marlo's motions to dismiss under Rule 12(b)(6), for summary judgment under Rule 56, and for costs and attorney fees.

We consider the motion to transfer and the appeal.

Jurisdiction

In enacting 28 U.S.C. Sec. 1295(a), Congress granted this court exclusive jurisdiction over appeals from a final decision of a federal district court when the subject matter jurisdiction of that court was based, in whole or in part, on 28 U.S.C. Sec. 1338(a), and the case was not based solely on a copyright or trademark claim. Chemical says that because its complaint pleads jurisdiction on diversity alone, 28 U.S.C. Sec. 1332, it may avoid the appellate jurisdiction of this court. We disagree.

This court is charged with the duty of increasing doctrinal stability in the field of patent law. See generally S.Rep. No. 97-275, 97th Cong., 2d Sess., 2-7, reprinted in 1982 U.S.Code Cong. & Ad.News 11, 12-17. Congress indicated that its grant of exclusive jurisdiction should not be manipulated:

This measure is intended to alleviate the serious problems of forums [sic] shopping among the regional courts of appeals on patent claims by investing exclusive jurisdiction in one court of appeals. It is not intended to create forum shopping opportunities between the Federal Circuit and the regional courts of appeals on other claims.

Id. at 19-20, 1982 U.S.Code Cong. & Ad.News at 29-30.

This court has strictly construed its jurisdiction in harmony with its congressional mandate. C.P.C. v. Nosco Plastics, Inc., 719 F.2d 400, 401 (Order) (Fed.Cir.1983). Substance, not form, controls our determination. Implicit in our mandate is the authority to recharacterize pleadings which would improperly evade the intent of Congress. Like all courts, "this court has inherent jurisdiction to determine its own jurisdiction". C.R. Bard v. Schwartz, 716 F.2d 874, 877, 219 USPQ 197, 200 (Fed.Cir.1983).

In Bard, this court held it had jurisdiction under Sec. 1295 to make the final determination of whether the district court correctly decided its own jurisdiction under Sec. 1338. To hold otherwise, we said, "would cause our jurisdiction to turn on the decision reached by the lower tribunal," 716 F.2d at 877, 219 USPQ at 200, a result viewed as "absurd" in light of the clear mandate of Congress. Id. A parallel authority to recharacterize a plaintiff's jurisdictional pleading is necessary to avoid an even more absurd result in which our jurisdiction would turn on a "decision reached by" a plaintiff.

Chemical emphasizes that the complaint correctly alleges that diversity jurisdiction is present. That is true, but irrelevant to the question before us, where jurisdiction does not rest solely on diversity but involves subject matter under acts of Congress relating to patents. Where, as here, the complaint prays for an injunction against infringement of the '532 patent, monetary damages, attorney fees, costs, and other appropriate relief, jurisdiction of the district court under 28 U.S.C. Sec. 1338 inheres in the nature of the action. In response to a properly supported complaint against threatened infringement, the defendant would normally assert invalidity and noninfringement of the patent. The district court, in awarding attorney fees under 35 U.S.C. Sec. 285, recognized that this case is one invoking the patent laws. An appeal from a summary judgment in a case like the present is within the jurisdiction of this court.

Chemical cites Automation Systems, Inc. v. Intel Corporation, 501 F.Supp. 345 (S.D.Iowa 1980) for the proposition that a complaint for declaratory judgment of validity in view of threatened infringement states a claim on which relief may be granted. Chemical disregards three fundamental facts. First, the entry of summary judgment presumes that such a claim that may be granted has been stated; therefore, although the district court granted all of Marlo's motions, citation of Automation is irrelevant to the consideration of the grant of summary judgment. Second, in Automation, plaintiff...