McGlothlin v. Drake

Decision Date17 May 2012
Docket NumberNo. 1:11CV00055 JH,1:11CV00055 JH
PartiesDANNY MCGLOTHLIN; and MCB SALES & INSTALLATION SERVICES, INC. PLAINTIFFS v. FRANK DRAKE; and CEQUENT PERFORMANCE PRODUCTS, INC. DEFENDANTS
CourtUnited States District Courts. 8th Circuit. United States State District Court of Eastern District of Arkansas
OPINION AND ORDER

Danny McGlothlin and MCB Sales & Installation Services, Inc., initiated this action against Frank Drake and Cequent Performance Products, Inc., seeking monetary damages and injunctive relief for patent infringement, patent interference, misappropriation of trade secrets in violation of Arkansas and Wisconsin's trade secrets acts, violations of the Arkansas Deceptive Trade Practices Act, and tortious interference with contractual relations. The plaintiffs also seek a declaration that two patents belonging to Cequent are invalid.

Both defendants have filed a motion to dismiss the complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Document #26. The plaintiffs have responded, and also have filed a motion for leave to file an amended complaint. Documents #34, #40. The plaintiffs have provided their proposed amended complaint, which adds specific factual allegations but otherwise is similar to the original complaint. Document #40-1. In their response to the motion to dismiss, the plaintiffs have relied upon factual allegations contained in the proposed amended complaint but not in the original complaint. The defendants contend that the proposed amendments would be futile and ask the Court to deny the motion to amend and dismiss all claims with prejudice. See Documents #39, #41.

Separately, Drake has also filed a motion to dismiss the complaint pursuant to Rules 12(b)(2) and 12(b)(3). Document #24. Drake contends that the Court cannot exercise personal jurisdiction over him because he lacks minimum contacts with Arkansas.1 The plaintiffs, apparently conceding that the Court lacks personal jurisdiction over Drake, have filed a motion to non-suit Drake and dismiss all claims against him without prejudice. Document #33. In response, Drake contends that he is entitled to have the claims against him dismissed with prejudice for the reasons articulated in the motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6). See Document #37. However, the Court must possess personal jurisdiction over Drake before it "can reach the merits of a dispute and enter legally binding orders[.]" Falkirk Min. Co. v. Japan Steel Works, Ltd., 906 F.2d 369, 374 (8th Cir. 1990) (finding personal jurisdiction to be a threshold issue which must be resolved before considering whether the complaint failed to state a claim). Consequently, Drake's motion to dismiss pursuant to Rules 12(b)(2) and 12(b)(3), and the plaintiffs' motion to non-suit Drake will be granted. The claims against Drake will be dismissed without prejudice.

Furthermore, for reasons discussed hereafter, the Court will grant the plaintiffs' motion to amend their complaint. However, the Court will construe the motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) as applying to the proposed amended complaint. See, e.g., Reddy v. JPMorgan Chase Bank, N.A., No. 2:09CV1152, 2010 WL 3447629, at *4 (S.D. Ohio Aug. 30, 2010) (considering defendants' motion to dismiss as applying to the proposed amended complaint); Hentz v. E. Or. Corr. Inst. Admin., No. CIV 98-993, 1999 WL 562698, at *1 (D. Or. July 30, 1999) ("[T]he court will hereby construe [the defendant]'s motion to dismiss as applying to the SecondAmended Complaint."). Construed in this manner, the Court will grant that motion to dismiss in part and deny it in part.

I.

McGlothlin is the named inventor of United States Patent No. 7,311,331, a utility patent that claims a powered jacking device which can be installed on a trailer and used to raise or lower the trailer. It appears from the face of the patent, which the plaintiffs attached to the complaint, that McGlothlin assigned the patent to MCB Sales. The patent application was filed in 20032 and the patent issued on December 25, 2007.

The proposed amended complaint alleges that the plaintiffs began to market the product to potential buyers in 2005. According to the proposed amended complaint, the plaintiffs approached Cequent and one of its engineers, Drake. The proposed amended complaint alleges that Drake initially expressed interest but that Cequent subsequently refused to purchase any products from MCB Sales. The proposed amended complaint alleges further that the plaintiffs provided Cequent and Drake with two prototypes marked with the phrase "patent pending." According to the proposed amended complaint, Drake did not return the two prototypes, claiming they were lost.

The proposed amended complaint alleges that approximately three months later Cequent began selling a powered jacking device that is similar, if not identical, in design and utility to the invention claimed in the 331 patent. Furthermore, according to the proposed amended complaint, Cequent subsequently acquired two design patents for a powered drive for a jack—Nos. D560,324 and D561,424—purportedly invented by Drake.

II.

The pleading standards, and the correlative standards for ruling on a motion to dismiss under Rule 12(b)(6), are well known. A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). While Rule 8(a)(2) does not require a complaint to contain detailed factual allegations, it does require a plaintiff to state the grounds of his entitlement to relief, which requires more than labels and conclusions. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1964-65, 167 L. Ed. 2d 929 (2007). In ruling on a motion to dismiss, the Court must accept as true all factual allegations in the complaint and review the complaint to determine whether its allegations show that the pleader is entitled to relief. Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008). All reasonable inferences from the complaint must be drawn in favor of the nonmoving party. Crumpley-Patterson v. Trinity Lutheran Hosp., 388 F.3d 588, 590 (8th Cir. 2004). The Court need not, however, accept as true legal conclusions, even those stated as though they are factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949-50, 173 L. Ed. 2d 868 (2009).

III.

Cequent contends that the Court lacks subject matter jurisdiction over the plaintiffs' request for a declaratory judgment that the design patents are invalid. Cequent also contends that the plaintiffs have failed to state a claim for patent interference, patent infringement, misappropriation of trade secrets, tortious interference with business contacts, and deceptive trade practices. Finally, Cequent challenges McGlothlin's standing to bring any of the claims asserted in the proposed amended complaint.

A. Declaratory Judgment

The plaintiffs seek a declaratory judgment that Cequent's two design patents are invalid. Cequent contends that the Court lacks subject matter jurisdiction over this claim inasmuch as there is no case or controversy as required by the Declaratory Judgment Act, 28 U.S.C. § 2201(a), because Cequent has not attempted to enforce its patents against the plaintiffs. "A court has subject matter jurisdiction under the Declaratory Judgment Act only if'the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.' " Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1361 (Fed. Cir. 2009) (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127, 127 S. Ct. 764, 771, 166 L. Ed. 2d 604 (2007)). "[D]eclaratory judgment jurisdiction will not arise merely on the basis that a party learns of the existence of an adversely held patent, or even perceives that such a patent poses a risk of infringement, in the absence of some affirmative act by the patentee." Ass'n for Molecular Pathology v. U.S. Patent & Trademark Office, 653 F.3d 1329, 1344 (Fed. Cir. 2011), vacated on other grounds by 132 S. Ct. 1794 (2012); see also SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1380-81 (Fed. Cir. 2007).

The proposed amended complaint does not allege that Cequent performed any "an affirmative act[s] . . . related to the enforcement of [its] patent rights[.]" Ass'n for Molecular Pathology, 653 F.3d at 1343. Consequently, the Court lacks subject matter ofthe plaintiffs' claim that Cequent's two patents are invalid. This claim must be dismissed.

B. Patent Interference

The plaintiffs allege that Cequent's two patents interfere with the 331 patent. The parties agree that patents only interfere if they claim the same subject matter. See Albert v. Kevex Corp., 729 F.2d 757, 758 n.1 (Fed. Cir. 1984) ("Two or more patents 'interfere'—a term of art in patent law—when they claim the same subject matter."); see also Medichem, S.A. v. Rolabo, S.L., 353 F.3d 928, 934 (Fed. Cir. 2003). "By definition, a utility patent encompasses 'any new and useful process, machine, manufacture, or composition of matter.' " Safco Prods. Co. v. Welcom Prods., Inc., 799 F. Supp. 2d 967, 974 (D. Minn. 2011) (quoting 35 U.S.C. § 101). "In contrast, a design patent claims [only] ornamental features[.]" Id. (citing 35 U.S.C. § 171 and OddzOn Products, Inc. v. Just Toys, Inc., 122 F.3d 1396, 1405 (Fed. Cir. 1997)); see also Pepitone v. Am. Standard, Inc., 983 F.2d 1087, 1992 WL 336539, at *2 (Fed. Cir. Nov. 17, 1992) (Table) (design patents "cannot include claims to the structural or functional aspects of the article or device.") (citing 37 C.F.R. § 1.153(a) and Lee v. Dayton-Hudson Corp., 838 F.2d 1186, 1188 (Fed. Cir. 1988)). Consequently, "a design patent and a utility patent cannot interfere because they cannot claim the same subject matter." Pepitone, 1992 WL 336539, at *2.

According to the proposed amended complaint, the...

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