Intellisoft, Ltd. v. Acer Am. Corp.
| Decision Date | 03 April 2020 |
| Docket Number | 2019-1522 |
| Citation | 955 F.3d 927 |
| Parties | INTELLISOFT, LTD., a Delaware Corporation, Plaintiff/Counterclaim Defendant-Appellant Bruce Bierman, an Individual, Counterclaim Defendant-Appellant v. ACER AMERICA CORPORATION, a California Corporation, Acer Incorporated, a Taiwan Corporation, Defendants/Counterclaimants-Appellees |
| Court | U.S. Court of Appeals — Federal Circuit |
Aaron Martin Panner, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Washington, DC, argued for plaintiff/counterclaim defendant-appellant and counterclaim defendant-appellant. Also represented by Collin White ; Andrew Spielberger, Balaban & Spielberger LLP, Los Angeles, CA.
Matthew Gordon Ball, K&L Gates LLP, San Francisco, CA, argued for defendants/counterclaimants-appellees. Also represented by Jason Nathaniel Haycock ; Theodore J. Angelis, Jeffrey Charles Johnson, Seattle, WA.
Before Dyk, O’malley, and Chen, Circuit Judges.
Intellisoft, Ltd. ("Intellisoft") and its president Bruce Bierman (collectively, "appellants") sued Acer America Corporation and Acer Inc. (collectively, "Acer") in California state court, asserting various state law claims, including misappropriation of trade secrets. After more than three years of litigation, Acer sought to plead a patent inventorship counterclaim under federal law and thereafter removed the action to the United States District Court for the Northern District of California. The district court denied Intellisoft’s motion to remand and later entered final judgment in favor of Acer.
We conclude that the district court erred by holding that removal was proper under 28 U.S.C. §§ 1441 and 1454. We thus reverse the district court’s decision refusing to remand, vacate the district court’s judgment, and remand to the district court with instructions to remand the action to California state court.
This case originated from a business relationship between the appellants and Acer dating back to the early 1990s. At that time, the appellants allegedly shared with Acer trade secrets concerning computer power management technology under a non-disclosure agreement ("NDA"). According to the appellants, the NDA allowed Acer’s use of their "Confidential Information" only to "directly further" the evaluation of Intellisoft’s product for licensing and restricted Acer from "manufactur[ing] parts or components incorporating the Confidential Information." J.A. 406; Appellants’ Br. 5. The appellants claim that they discovered in the early 2010s that Acer had applied for a patent that incorporated their trade secrets and became the owner of U.S. Patent No. 5,410,713 ("the ’713 patent"). The appellants concluded that Acer had misappropriated their trade secrets and violated the NDA.
In March 2014, the appellants filed suit against Acer in California state court, asserting that Acer misappropriated their trade secrets by incorporating them into patent applications that issued as the ’713 patent and three other related patents ("the ’713 patent family").1 The complaint also asserted that Acer unlawfully "incorporate[ed] [their] Confidential Information, products, and/or technology in Acer products without having a license." J.A. 392. The complaint alleged various other state law claims as well.
In May 2015, Bierman assigned his ownership interest in the trade secrets to Intellisoft and dismissed his claims in the state court action. On September 25, 2015, Intellisoft filed the operative Fourth Amended Complaint in state court. On October 26, 2015, Acer filed an answer.
In September 2017, Intellisoft produced three expert reports concerning liability and damages on the trade secret claim. First, Intellisoft’s expert Irving Rappaport concluded that "trade secret and confidential information described in the [’]713 [patent] family ... were created by ... Bierman," J.A. 2213, and "[he] should have been named [at least] as a co-inventor of the [’]713 patent," J.A. 2237. During his deposition, Mr. Rappaport stated that J.A. 1794.
Second, Intellisoft’s expert Robert Zeidman opined that "Intellisoft’s trade secrets were disclosed by Acer in the patent specifications," pointing to the written description and claims of the ’713 patent family as corresponding to various aspects of the purported trade secrets. J.A. 2276. He also concluded that Acer’s computer products could not comply with the Advanced Configuration and Power Interface ("ACPI"), an industry power management standard, without using the technology disclosed in the ’713 patent family. Because the ’713 patent family incorporated the trade secrets, Mr. Zeidman concluded that the computer products "would [have] need[ed] to incorporate Intellisoft’s trade secrets." J.A. 2276–77.
Lastly, Intellisoft’s expert Brian Napper, relying on Mr. Zeidman’s report, and assuming that all Acer computers complied with the ACPI industry standard and incorporated the trade secrets, calculated damages based on a theory that Acer should have paid Intellisoft royalties for using the trade secrets.
Trial was scheduled to begin in November 2017. On October 30, 2017, Acer "e-filed" a "Cross-Complaint of Acer Defendants for Declaratory Relief" against the appellants, seeking a declaration that "Bierman properly was not named as an inventor of any of the ’713 Family of Patents and ... is not entitled to an inventorship correction under 35 U.S.C. § 256." J.A. 622. Referring to Mr. Rappaport’s expert report and deposition, Acer alleged that "Bierman [was] asserting an inventorship claim," J.A. 624, and sought declaratory relief that "Bierman properly was not named as an inventor of [the ’713 patent family]," J.A. 622.
In California state court, a party may file a "cross-complaint" setting forth a "cause of action he has against any of the parties who filed the complaint ... against him." Cal. Civ. Proc. Code § 428.10(a). Such a "cause of action" is equivalent to a counterclaim under the Federal Rules of Civil Procedure Rule 13. Acer was required to "obtain leave of court to file [the] cross-complaint" because it had already filed its answer to Intellisoft’s complaint. See Cal. Civ. Proc. Code § 428.50(c). The state court confirmed that Acer’s "Cross-Complaint is considered lodged (pending approval of a stipulation & proposed order for filing of same, or absent a stipulation & order, an ex parte application/order)." J.A. 1388 (emphasis in original).
Also on October 30, 2017, Acer removed the action to the United States District Court for the Northern District of California under (1) 28 U.S.C. § 1441 providing removal of an action which the district court would have original jurisdiction and (2) 28 U.S.C. § 1454 providing removal of an action where a party asserts a patent counterclaim. In its Notice of Removal, Acer stated that section 1441 removal was proper because Intellisoft’s state law claim for trade secret misappropriation arose "under federal patent law—specifically, 35 U.S.C. § 256."2 J.A. 303. Acer’s basis for section 1441 removal was also Mr. Rappaport’s opinion that "Bierman should have been named as an inventor" under federal patent law. J.A. 302. Acer asserted that removal was proper under section 1454 because its cross-complaint alleged a patent inventorship claim. After removal, on November 20, 2017, Acer filed a First Amended Counterclaim, seeking a declaration under 35 U.S.C. § 256 that Bierman properly was not named an inventor of the ’713 patent family. Acer alleged that Intellisoft "intended to ... try numerous other patent law issues, including patentability, patent validity, claim construction, and patent infringement." J.A. 1283.
On November 27, 2017, Intellisoft moved the district court to remand the action to state court. Intellisoft argued that there was no disputed federal issue because its state law trade secret claim did "not require determination of inventorship" under federal patent law and Acer’s cross-complaint was not "[o]perative" due to Acer’s failure to obtain leave of court. Intellisoft, Ltd. v. Acer Am. Corp. , No. 17-CV-06272, 2017 WL 6993094 (N.D. Cal. 2017), ECF 21 at 2, 12, 20.
The district court denied Intellisoft’s motion to remand. It held that section 1441 removal was proper because Intellisoft "ha[d] only advanced one theory of liability and that theory necessarily raise[d] substantial patent law issues," J.A. 16, and the case "boil[ed] down to an inventorship dispute," J.A. 12. The district court concluded that "the inventorship issue [wa]s not just an alternate theory that [the] plaintiff might [have] use[d] to show liability and damages" but was the "only theory of its case." J.A. 10. The district court also held that section 1454 removal was proper, reasoning that the statute did not require the patent counterclaim to be pleaded in an operative pleading and that it did not matter "[w]hether or not defendants’ cross-complaint was allowed by the [state] court." J.A. 17–18.
Having declined to remand the case to state court, in December 2018, the district court granted summary judgment in favor of Acer with respect to Intellisoft’s state law claims, reasoning that Intellisoft failed to prove under federal patent law that Bierman was the inventor of the ’713 patent family claims. Based on this failure, the district court concluded that Intellisoft could not show trade secrets ownership and damages. It also held that the claims were time barred. The parties thereafter stipulated to an entry of judgment on the inventorship counterclaim in favor of Acer. In February 2019, the district court entered final judgment in favor of Acer based on its summary judgment on Intellisoft’s state law claims and the parties’ stipulation regarding Acer’s inventorship counterclaim.
The appellants appeal, arguing that removal was improper and seeking a remand to state court. We have jurisdiction under 28 U.S.C. § 1295(a)(1).
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