James v. J2 Cloud Servs., LLC

• Decision Date: 20 April 2018
• Docket Number: 2017-1506
• Citation: 887 F.3d 1368
• Parties: Gregory C. JAMES, Plaintiff-Appellant, v. J2 CLOUD SERVICES, LLC, Advanced Messaging Technologies, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

887 F.3d 1368

Gregory C. JAMES, Plaintiff-Appellant,

v.J2 CLOUD SERVICES, LLC, Advanced Messaging Technologies, Inc., Defendants-Appellees.

2017-1506

United States Court of Appeals, Federal Circuit.

Decided: April 20, 2018

Keith Vogt, Oak Park, IL, argued for plaintiff-appellant. Also represented by Daniel Charles Cotman, Obi Iloputaife, Cotman IP Law Group, PLC, Pasadena, CA.

Guy Ruttenberg, Ruttenberg IP Law, PC, Los Angeles, CA, argued for defendants-appellees. Also represented by Bassil George Madanat.

Before Reyna, Taranto, and Hughes, Circuit Judges.

Taranto, Circuit Judge.

In this action against j2 Cloud Services, LLC and Advanced Messaging Technologies, Inc. (AMT), Gregory James asserts a claim for correction of inventorship under 35 U.S.C. § 256, as well as various state-law claims. The district court dismissed the correction-of-inventorship claim for lack of jurisdiction and, consequently, dismissed the state-law claims. We reverse the jurisdictional dismissal and remand for further proceedings.

I

Mr. James alleges in his complaint that he is the sole inventor of the subject matter claimed in U.S. Patent 6,208,638, which names Jack Rieley and Jaye Muller as the inventors. The ’638 patent, which Messrs. Rieley and Muller applied for on April 1, 1997, describes and claims systems and methods "for accepting an incoming message over a circuit switched network and transmitting it over a packet switched network." ’638 patent, Abstract. More particularly, the patent describes the conversion of an incoming facsimile or voicemail message into a digital representation, which is then forwarded to an email address associated with the account holder’s phone number. Id ., col. 3, lines 47–61, col. 5, line 66 through col. 6, line 54. The application that issued as the ’638 patent was originally assigned to JFAX Communications, Inc., the company owned by Messrs. Rieley and Muller at the time of the invention. At present, the ’638 patent is assigned to AMT, and j2 has an exclusive license to it. The patent expired on April 1, 2017.

Mr. James alleges that in November 1995 he was introduced to JFAX’s Mr. Rieley, who asked Mr. James to develop software that would provide JFAX with three functionalities—"Fax-to-Email, Email-to-Fax, and Voicemail-to-Email." J.A. 37. At that time, Mr. James alleges, he agreed to "create and develop original software solutions and systems" and began working, and "[n]obody at JFAX provided input about how" the work was to be done. Id . According to the complaint, Mr. James successfully tested a Fax-to-Email system on December 25, 1995, and the next month he traveled to New York to install it. J.A. 38.

On February 11, 1996, Mr. James and Mr. Rieley, as representatives, signed a contract between their principals detailing the work to be done. J.A. 53–57. The agreement was between JFAX, for which Mr. Rieley signed, and GSP Software, "a partnership of professional software developers and independent contractors," for which Mr. James signed. J.A. 53, 57. The parties and the district court refer to this contract as the "Software Development Agreement" (SDA)—whose preamble states that it reflects the parties’ "Agreement on the terms by which" GSP "will develop software solutions for the exclusive use of JFAX." Id. The SDA (which states that it is governed by Delaware law) does not mention patent rights, whereas it expressly requires the assignment to JFAX of "all copyright interests" in the developed "code and compiled software." J.A. 55.

According to the complaint, from February to August 1996, Mr. James, while in New York, developed and deployed all three JFAX systems, which included software and hardware components covered by the ’638 patent.¹ J.A. 38–42. "The technical aspects of the code, functionality and operation of the system[s] were all conceived and implemented by [Mr.] James," he contends, and the only input provided by JFAX "was that JFAX needed a system." J.A. 37, 40–41.

Mr. James alleges that on August 30, 1996, he assigned all copyrights in code and compiled software to JFAX, but he "did not assign any patent ownership or inventorship rights." J.A. 42. He adds that he was not aware of the ’638 patent until "November 2013 when he was contacted by attorneys representing one of the defendants" in a suit brought by JFAX (or perhaps a successor) alleging infringement of the ’638 patent. J.A. 43.

On August 3, 2016, Mr. James brought the present action. The operative (first amended) complaint asserts a claim for correction of inventorship under 35 U.S.C. § 256, along with state-law claims for unjust enrichment, conversion, misappropriation, and unfair competition. In October 2016, j2 and AMT filed a motion requesting, among other things, that the case be dismissed on the ground that the court lacks jurisdiction because Mr. James has no Article III standing to bring the action.²

On December 19, 2016, the district court agreed with the Article III standing argument and granted the motion under Rule 12(b)(1) of the Federal Rules of Civil Procedure. It concluded that Mr. James lacks a stake in the controversy because he "fail[ed] to allege facts sufficient to show that he has an ownership or financial interest in the ’638 patent." James v. j2 Cloud Servs. Inc ., No. 2:16-cv-05769, 2016 WL 9450470, at *5 (C.D. Cal. Dec. 19, 2016). Accordingly, the court also dismissed the state-law claims. Id . The dismissal was entered on December 22, 2016.

Mr. James timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

II

We review without deference the ruling before us: the district court’s Rule 12(b)(1) dismissal for lack of standing. See Chou v. Univ. of Chicago , 254 F.3d 1347, 1357 (Fed. Cir. 2001) ; Cedars-Sinai Medical Ctr. v. Watkins , 11 F.3d 1573, 1580 (Fed. Cir. 1993) (citing Love v. United States , 915 F.2d 1242, 1245 (9th Cir. 1989) ).

The district court stated the standard it was applying: "When deciding a Rule 12(b)(1) motion, the court construes all factual disputes in favor of the non-moving party." James , 2016 WL 9450470, at *3 (citing Dreier v. United States , 106 F.3d 844, 847 (9th Cir. 1996) ). We apply the same standard. "[A]t the pleading stage, the plaintiff must clearly ... allege facts demonstrating each element" required for standing, Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016), as revised (May 24, 2016) (internal quotation marks omitted), but "general factual allegations of injury resulting from the defendant’s conduct may suffice, for on a motion to dismiss we presume that general allegations embrace those specific facts that are necessary to support the claim," Lujan v. Defenders of Wildlife , 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (internal quotation marks and alterations omitted). "For purposes of ruling on a motion to dismiss for want of standing, both the trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Warth v. Seldin , 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ; see Ritchie v. Simpson , 170 F.3d 1092, 1097 (Fed. Cir. 1999).

A

To have Article III standing, the "plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo , 136 S.Ct. at 1547 (citing Defenders of Wildlife , 504 U.S. at 560–61, 112 S.Ct. 2130 ); see Chou , 254 F.3d at 1357. "The benefit of the suit to the plaintiff must relate to the alleged injury." Huster v. j2 Cloud Servs., Inc. , 682 Fed.Appx. 910, 914 (Fed. Cir. 2017) (citing Vermont Agency of Natural Resources v. United States ex rel. Stevens , 529 U.S. 765, 772–73, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) ). In conducting the standing analysis, we "assume[ ] the merits of a litigant’s claim and determine[ ] whether even though the claim may be correct the litigant advancing it is not properly situated to be entitled to its judicial determination." Rocky Mountain Helium, LLC v. United States , 841 F.3d 1320, 1325 (Fed. Cir. 2016) (internal quotation marks omitted); see 13A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure §§ 3531, 3531.4 (3d ed. 2008 & Supp. 2016).

In this case, Mr. James alleges that he is the sole inventor of the inventions claimed in the ’638 patent, that sole inventorship entails sole ownership, and that 35 U.S.C. § 256 gives him a cause of action to establish sole inventorship and therefore sole ownership. Subject to an important qualification, if Mr. James were to prevail on those allegations in this case, he would stand to gain concretely, whether through securing an entitlement to seek damages for past acts of infringement or otherwise. Such a gain would be directly related to the merits of the claim and would redress the asserted injury of being deprived of allegedly rightful ownership. In the absence of other facts, that is enough to give Mr. James Article III standing.

The district court did not conclude otherwise. Nor did it depart from the longstanding "basic principle, codified in the Patent Act, that an inventor owns the rights to his invention." Bd. of Trustees of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc. , 563 U.S. 776, 790, 131 S.Ct. 2188, 180 L.Ed.2d 1 (2011) ; see Teets v. Chromalloy Gas Turbine Corp. , 83 F.3d 403, 407 (Fed. Cir. 1996) ("Ownership springs from invention."). Rather, the court found the straightforward standing logic recited above to be inapplicable in this matter because of the important qualification that "[w]hen the owner of a patent assigns away all rights to the patent, neither he nor his later assignee has a ‘concrete financial interest in the patent’ that would support standing in a correction of inventorship action." Trireme Medical, LLC v. AngioScore, Inc. , 812 F.3d 1050, 1053 (Fed. Cir. 2016) (quoting Chou , 254 F.3d at 1359 ).

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