National Patent Development Corp. v. T.J. Smith & Nephew Ltd.

• Decision Date: 16 June 1989
• Docket Number: No. 88-7062,88-7062
• Citation: 11 USPQ2d 1211,877 F.2d 1003
• Parties: , 58 USLW 2021, 11 U.S.P.Q.2d 1211 NATIONAL PATENT DEVELOPMENT CORPORATION, Appellant v. T.J. SMITH & NEPHEW LIMITED.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1003

877 F.2d 1003

278 U.S.App.D.C. 215, 58 USLW 2021,

11 U.S.P.Q.2d 1211

NATIONAL PATENT DEVELOPMENT CORPORATION, Appellant v. T.J. SMITH & NEPHEW LIMITED.

No. 88-7062.

United States Court of Appeals, District of Columbia Circuit.

June 16, 1989.

C. Frederick Leydig, Jeffrey S. Ward, and John P. Bundock were on the suggestion for rehearing en banc of appellant.

Albert L. Jacobs, Jr., Mark H. Sparrow, and Stephen M. Haracz were on the reply to the suggestion for rehearing en banc.

Before WALD, Chief Judge, ROBINSON, MIKVA, EDWARDS, RUTH BADER GINSBURG, SILBERMAN, BUCKLEY, WILLIAMS, D.H. GINSBURG, and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.

Concurring opinion filed by Circuit Judge SILBERMAN.

ON SUGGESTION FOR REHEARING EN BANC.

RUTH BADER GINSBURG, Circuit Judge:

This appeal calls on us to decide whether a federal long-arm statute, 35 U.S.C. Sec. 293

                (1982), authorizes the district court to exercise personal jurisdiction over a foreign holder of United States patents in a suit over ownership of those patents.  Section 293 prescribes that the United States District Court for the District of Columbia shall have personal jurisdiction over a nonresident patentee in order "to take any action respecting the patent or rights thereunder."    A panel of this court, constrained by circuit precedent, held that section 293 does not extend to a patent ownership dispute.  National Patent Development Corp. v. T.J. Smith & Nephew, Ltd., 865 F.2d 353 (D.C.Cir.1989).  Two members of the panel, however, stated that the controlling precedent was "misconceived" and suggested that the full court might consider overruling it.  Id. at 359 (Ruth B. Ginsburg, J., concurring).  Upon en banc review, we now vacate the panel decision and hold that 35 U.S.C. Sec. 293 empowers the district court to assert personal jurisdiction over a foreign holder of U.S. patents in a dispute over the patents' ownership
                

I.

In 1967, appellant National Patent Development Corporation (National), a Delaware corporation with its principal place of business in New York, entered into a series of agreements with SANACO, a British corporation, pursuant to which National and SANACO formed Hydron Limited, a British corporation owned in equal shares by National and SANACO. This joint venture was designed to link SANACO's expertise in research and development of health care products with National's patent rights relating to hydrophilic polymers; the parties agreed that the results of Hydron's research, including any patent rights, were to be the property of Hydron--and thus of National and SANACO in equal parts.

Subsequent to those agreements, in 1968 and 1969, applications for British and U.S. patents relating to adhesive wound dressings were filed in the names of SANACO subsidiaries. ¹ In 1970, National and SANACO executed another agreement which modified the earlier agreements. The 1970 agreement provided that, notwithstanding the 1967 contracts, the adhesive wound dressing patents resulting from the 1968-69 applications would be the property of another British subsidiary of SANACO, appellee T.J. Smith & Nephew Limited, not of Hydron. Pursuant to the 1970 agreement, Smith & Nephew became the owner of U.S. Patent No. 3,654,835, which was granted in 1972. That patent was reissued in 1985 as U.S. Reissue Patents Nos. 31,886 and 31,887.

In January 1987, National sued Smith & Nephew in the United States District Court for the District of Columbia, seeking a declaratory judgment that National has a one-half ownership interest in the reissue patents. National alleged that SANACO and Smith & Nephew had concealed the commercial value of the wound dressing applications and had procured National's agreement to the terms of the 1970 contract through fraud and breach of contractual and fiduciary obligations. National asked the district court to declare that Smith & Nephew held the allegedly misappropriated patents in trust for Hydron and to assign all rights, title, and interest in the patents to Hydron.

Subject matter jurisdiction over National's suit was based solely on diversity of citizenship and an amount in controversy in excess of $10,000, exclusive of interest and costs. See 28 U.S.C. Sec. 1332(a) (1982). ² National claimed that the district court had personal jurisdiction over Smith & Nephew on the basis of 35 U.S.C. Sec. 293, which provides:

Every patentee not residing in the United States may file in the Patent and Trademark Office a written designation stating the name and address of a person (Emphasis added.)

residing within the United States on whom may be served process or notice of proceedings affecting the patent or rights thereunder. If the person designated cannot be found at the address given in the last designation, or if no person has been designated, the United States District Court for the District of Columbia shall have jurisdiction and summons shall be served by publication or otherwise as the court directs. The court shall have the same jurisdiction to take any action respecting the patent or rights thereunder that it would have if the patentee were personally within the jurisdiction of the court.

The district court, relying upon two precedents of this circuit, Neidhart v. Neidhart S.A., 510 F.2d 760 (D.C.Cir.1975), and Riker Laboratories, Inc. v. Gist-Brocades N.V., 636 F.2d 772 (D.C.Cir.1980), and one district court decision, North Branch Products, Inc. v. Fisher, 179 F.Supp. 843 (D.D.C.1960), rev'd on other grounds, 284 F.2d 611 (D.C.Cir.), cert. denied, 365 U.S. 827, 81 S.Ct. 713, 5 L.Ed.2d 705 (1961), dismissed the complaint for lack of personal jurisdiction. Specifically, the district court ruled that National's suit, which claimed breach of contract, fraud, and breach of fiduciary duty, was not an "action respecting the patent or rights thereunder" within the meaning of section 293.

On appeal, a panel of this court affirmed the district court's judgment. Neidhart and Riker, the panel agreed, held that section 293 provides a basis for personal jurisdiction over a nonresident patentee only "if the complaint shows that the court will be obliged to resolve an issue of patent law." National Patent, 865 F.2d at 357. Because this suit, essentially a dispute over patent ownership, involves no issue of patent law, "no matter how broadly defined," the panel concluded that circuit precedent required dismissal of the complaint. Id.

Two judges on the panel stated in a separate concurrence that "[w]ere this court writing on a clean slate," they would read section 293 to encompass a suit over patent ownership. Id. at 358 (Ruth B. Ginsburg, J., concurring). The author of the panel opinion, too, indicated that absent the constraint of circuit precedent, he might construe section 293 more broadly. 865 F.2d at 357 (Silberman, J.) ("If this case came to us without circuit precedent, we would find [the Neidhart dissent's] analysis appealing, if not compelling.").

National then petitioned for rehearing en banc. We granted that petition and, upon consideration by the full court, ³ we now vacate the panel's decision, reverse the district court's judgment, and remand for further proceedings.

II.

The genesis of the existing narrow construction of section 293 is the opinion of the district court in North Branch. In that case, the district court stated that it lacked jurisdiction under section 293 over a suit by a U.S. corporation seeking a judgment declaring that it, and not the defendant, a resident of Canada, owned certain U.S. patents. ⁴ The court believed that the statutory phrase " 'proceedings affecting the patent or rights thereunder' ⁵ ... should be The court's rationale in North Branch was twofold. First, although it found section 293's legislative history unenlightening, the court stated: "The fact that the Section is included in the codification of laws relating to patents [Title 35] would seem to lead to the conclusion that the Section should be construed as being limited to actions under the patent laws, rather than extended to all actions affecting patents generally." Id. at 845. Second, the court feared "a possible lack of any constitutional basis for jurisdiction either over the subject matter or the person, if such a suit were not brought either under the patent laws or under the provision relating to diversity of citizenship." Id.

                construed as synonymous with 'actions under the patent laws of the United States' [i.e., actions within the compass of 28 U.S.C. Sec. 1338(a) ] and, therefore, should be limited and restricted to actions for infringement of patents and actions for declaratory judgments to adjudicate the validity or infringement of patents."    179 F.Supp. at 845-46. 6   Because a suit over patent ownership does not fit that confined category, the court held section 293 inapplicable
                

This court first addressed the scope of section 293 in Neidhart. That case consisted of two consolidated actions. In one, a United States citizen alleged that the defendant, a Swiss corporation, had breached an agreement giving the plaintiff the exclusive right to award sublicenses under the defendant's U.S. patents. The plaintiff sought a judgment declaring the validity of, and modifying, the agreement, establishing his entitlement to royalties, and enjoining the defendant from interfering with his sublicensing. In the companion case, a Maryland corporation charged that a Canadian corporation had breached an agreement giving the plaintiff an exclusive territorial use license of the defendant's U.S. patents. The plaintiff sought a judgment declaring the existence and validity of the license, an order directing specific performance, an injunction preventing the defendant from granting conflicting licenses, and damages.

This court, announcing its essential agreement with the North Branch rationale, held that license agreement controversies were not "among the situations embraced by ...