Regents of University of Mn v. Glaxo Wellcome, Inc.

• Decision Date: 16 March 1999
• Docket Number: Civil No. 98-2465 (DSD/JMM).
• Parties: REGENTS OF THE UNIVERSITY OF MINNESOTA, Plaintiff, v. GLAXO WELLCOME, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

44 F.Supp.2d 998

REGENTS OF THE UNIVERSITY OF MINNESOTA, Plaintiff, v. GLAXO WELLCOME, INC., Defendant.

Civil No. 98-2465 (DSD/JMM).

United States District Court, D. Minnesota.

March 16, 1999.

COPYRIGHT MATERIAL OMITTED

John D. French, Kenneth A. Liebman, Felicia J. Boyd, Faegre & Benson, LLP, Minneapolis, MN, Robert W. Spearman, Parker, Poe, Adams & Bernstein, Raleigh, N.C., of counsel, for plaintiff.

Stephen B. Judlowe, James M. Bollinger, Jason A. Lief, Hopgood, Calimafde, Kalil & Judlowe LLP, New York City, Thomas B. Heffelfinger, Daniel C. Adams, Robert Lewis, Bowman & Brooke LLP, Minneapolis, MN, Susan S. Dunn, Rick Richardson, Glaxo Wellcome, Inc., Research Triangle Park, N.C., of counsel, for defendant.

MEMORANDUM

MASON, United States Magistrate Judge.

Background/Procedural History

Plaintiff University of Minnesota filed this action in Hennepin County District Court on October 16, 1998. Defendant Glaxo Welcome, Inc., a North Carolina corporation, is a major manufacturer and distributor of pharmaceutical products with its principal place of business in North Carolina. It removed the action to this Court on November 16, 1998 [Docket No. 1], Invoking this Court's jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1338(a). The latter statutory provision gives federal courts exclusive jurisdiction of actions "arising under any Act of Congress relating to patents ..."

Plaintiff's Complaint alleges that Professor Robert Vince, an employee of Plaintiff, synthesized various chemical compounds which may be useful in the treatment of acquired immune deficiency syndrome ("AIDS"). Plaintiff obtained a series of patents for these compounds, referred to as the "Vince Patents." In November of 1992. Plaintiff and Defendant (then known as Burroughs Welcome Co.) entered into a License Agreement which granted Defendant an exclusive right to make, have made, use and sell compounds and products covered by claims in the Vince Patents. Complaint, at ¶ 10. The License Agreement required Defendant "to pay royalties of 5% on sales of a compound, based upon its method of manufacture, in the event that the compound was approved for sale and sold in the United States, or a royalty of 10% if the final compound as sold in the United States would infringe in the United States but for the license." Complaint, at ¶ 16.

Plaintiff alleges that Defendant developed a synthetic compound 1592U89 (hereinafter "`U89") which could be used to treat the AIDS virus. Defendant allegedly understood that synthesis of `U89 required the use of a compound covered by the Vince Patents. Defendant eventually developed a pharmaceutical product based upon the compound `U89 which it calls "Ziagen." Plaintiff alleges that under the License Agreement, Defendant promised to manufacture and sell Ziagen (and other products that are based upon `U89) in the United States, and that if the License Agreement does not expressly so provide, it should be reformed to do so.

The Complaint alleges that Ziagen, "if manufactured, used or sold in the United States would infringe upon certain of the U.S. Vince Patents ..." Complaint, at ¶ 20. According to the Complaint, Defendant now plans to manufacture Ziagen exclusively in the United Kingdom, and does not intend to pay a royalty on sales of Ziagen because it contends that "the use or sale of Ziagen in the United States will not infringe any Vince Patents in the United States ... [if it is not manufactured in the United States]." Complaint, at ¶ 24.

Plaintiff contends that Defendant must manufacture Ziagen in the United States, and must pay a 10% royalty on sales. The Complaint seeks a declaratory judgment to establish that claim. The action was commenced in state court. After Defendant removed to this Court, Plaintiff brought this Motion to Remand, in which it contends that the Court lacks subject matter jurisdiction because it does not arise under federal patent law. Alternatively, Plaintiff argues that even if the Court had subject matter jurisdiction over the action, removal violates the Eleventh Amendment to the U.S. Constitution.

I. SUBJECT MATTER JURISDICTION

Plaintiff filed a timely Motion to Remand pursuant to 28 U.S.C. § 1447(c), requesting that this action be remanded to state court. 28 U.S.C. § 1447(c) provides:

"A motion to remand the case on the basis of any defect in removal procedure must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."

28 U.S.C. § 1447(c). A motion to remand is within the jurisdiction of a United States Magistrate Judge under 28 U.S.C. § 636(b)(1)(A). Banbury v. Omnitrition International, Inc., 818 F.Supp. 276, 279 (D.Minn.1993). See also Blair v. Source One, 925 F.Supp. 617, 618 (D.Minn.1996); Dyrda v. Wal-Mart Stores, Inc., 41 F.Supp.2d 943, 944 (D.Minn.1999).

Defendant contends that this Court has original jurisdiction over this action under 28 U.S.C. §§ 1331 and 1338(a). Section 1331 provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Section 1338(a) provides that "[t]he district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents ... Such jurisdiction shall be exclusive of the courts of the states in patent ... cases." 28 U.S.C. § 1338(a).

"The seemingly simple phrase `arising under' has engendered interpretation for at least a century." Schwarzkopf Development Corp. v. Ti-Coating, Inc., 800 F.2d 240, 243 (Fed.Cir.1986). "The most difficult single problem in determining whether federal-question jurisdiction exists is deciding when the relation of federal law to a case is such that the action may be said to be one `arising under' that law." 13B Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure, § 3562, at 17-18 (1969). One judge has stated: "The jurisprudence of `arising under' jurisdiction is confusing because it is confused." Hodder v. Schoharie County Child Dev. Council, Inc., No. 95-CV-557, 1995 WL 760832, at *9 (N.D.N.Y. Nov.14, 1995).

The Supreme Court has stated the abstract principles to be applied:

"A district court's federal-question jurisdiction extends over `only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.' Franchise Tax Board of California v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28, 103 S.Ct. 2841, 2856, 77 L.Ed.2d 420 (1983), in that `federal law is a necessary element of one of the well-pleaded ... claims,'" id. at 13, 103 S.Ct. at 2848. Linguistic consistency, to which we have historically adhered, demands that § 1338(a) jurisdiction likewise extend only to those cases in which a well-pleaded complaint established either that federal patent law creates the cause of action or that the plaintiff's right for relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims."

Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 808-809, 108 S.Ct. 2166, 2173-74, 100 L.Ed.2d 811 (1988) (emphasis supplied).

"[T]he `well pleaded complaint' rule contemplates that whether an action arises under federal law `must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may interpose.'" Speedco, Inc. v. Estes, 853 F.2d 909, 912 (Fed.Cir.1988) (citations omitted). As noted by the Supreme Court, "the party who brings a suit is master to decide what law he will rely upon, and therefore does determine whether he will bring a `suit arising under' the patent or other law of the United States by his declaration or bill." The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 57 L.Ed. 716 (1913), overruled on other grounds by Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).

Determination of whether Plaintiff's cause of action "arises under" the patent laws requires the Court to "review and analyze the plaintiff's pleadings, with special attention directed to the relief requested by the plaintiff, in making the determination as to whether a cause of action arises under the patent laws, or is a cause of action based upon a licensing agreement." Air Products and Chemicals, Inc. v. Reichhold Chemicals, Inc., 755 F.2d 1559, 1562 (Fed.Cir.), cert. dismissed, 473 U.S. 929, 106 S.Ct. 22, 87 L.Ed.2d 700 (1985). In addition, "the court must consider as a whole the substance of the claim in addition to the language of the complaint, and may also consider jurisdictional facts outside the pleadings." Air Products, 755 F.2d at 1561.

Plaintiff's cause of action, which seeks a declaration of rights under a Licence Agreement between the parties, and reformation of the Agreement, is clearly not created by federal patent law. Defendant has substantiated, however, that Plaintiff's right to relief necessarily depends on resolution of whether Defendant's products infringe any of the claims in the Vince patents, and that issues of infringement raise a substantial question of federal patent law.

The Complaint seeks a declaratory judgment establishing that Defendant must manufacture Ziagen in the United States. In this respect, the Complaint does not implicate federal law, and would not provide jurisdiction. But the Complaint also seeks a declaratory judgment that the manufacture, use or sale of Ziagen in the United States will infringe one or more of the Vince patents which...