Sutton v. Shasta Indus.
| Decision Date | 19 August 2021 |
| Docket Number | CV-20-02320-PHX-SMB |
| Parties | Sam Sutton, Plaintiff, v. Shasta Industries Incorporated, Defendant. |
| Court | U.S. District Court — District of Arizona |
The Court is in receipt of Defendant Shasta Industries Inc.'s (“Shasta”) Motion to Dismiss. (Doc 8.) Plaintiff Sam Sutton (“Sutton”) responded (Doc. 22), and Shasta replied. (Doc. 23.) Shasta requested oral argument, but the Court declines to hold oral argument finding that it is unnecessary. See LRCiv 7.2(f). The Court has reviewed the pleadings, exhibits, and relevant law and issues this order granting Shasta's motion.
This case comes before the Court after several related state court proceedings and concerns a decade long dispute between Sutton and Shasta centered around a patent known as the “PPRP Patent.” Sutton filed a Complaint with this Court for alleged patent infringement related to the PPRP patent arising under 35 U.S.C. § 271. (Doc. 1.) The Complaint alleges that Shasta infringed the PPRP patent, which was owned by Sutton, during the “Period of Infringement” of February 2014 through October 2019. (Doc. 1 ¶ 78.) The Complaint alleges that Sutton's co-owner of the PPRP patent expressly assigned him the right to sue for and collect past damages for infringement of the PPRP patent. (Id. ¶ 38.) It also alleges that thereafter, Shasta paid Sutton and his co-inventor $450, 000 for assignment of the PPRP patent without any assignment of the right to sue for past infringement. (Id.) Sutton now files this lawsuit alleging that Shasta infringed the PPRP patent from February 2014 through October 2019.
Shasta previously filed suit against Sutton in Maricopa County Superior Court, No. CV 2016-002714, which culminated in Shasta obtaining a temporary restraining order and preliminary injunction against Sutton, his son, and his business, Aspen Research, Ltd. (“Aspen”). The preliminary injunction prohibited Sutton, his son, and Aspen from communicating with Shasta's customers and distributors and from using the technologies covered by the PPRP patent. Shasta Indus., Inc. v. Sutton, No. 1 CA-CV-17-0063, 2018 WL 3387320, at *2 (Ariz.Ct.App. July 12, 2018). The preliminary injunction was affirmed by the Arizona Court of Appeals. Id. at *4. On September 26, 2019, Aspen, Sutton, and Shasta executed a Rule 80(a) Settlement Memorandum, in which Shasta agreed to pay Sutton and his son a sum of money for the transfer of the PPRP patent to Shasta. (Doc. 8-1 at 30.) The parties agreed that the settlement agreement would include a full release. (Id. at 31.) On November 25, 2019, the parties executed a Settlement Agreement and Mutual Release and Patent Assignment. (Doc. 8-1 at 33-38, 50-52.)
On January 4, 2021, this Court issued an order granting Shasta's request for a preliminary injunction against Sutton. (Doc. 18.) The order enjoined Sutton from (1) publicly disseminating any statements regarding Shasta's purported infringement of patents, including but not limited to the PPRP Patent, and (2) from engaging in any other activities that would constitute a breach of the parties' settlement agreement. (Id. at 6.) In reaching this conclusion, the Court evaluated Shasta's likelihood of success on the merits for its claim. The Court determined, “[Shasta] is likely to be successful on its claim that [Sutton] no longer retains any rights in the PPRP Patent, including the right to sue for past infringement because such rights were either extinguished by the parties['] settlement or assigned with the patents.” (Id. at 3.) The Court reasoned, “[T]he Patent Assignment, when read in context of the Rule 80 Settlement Agreement (Exhibit 6), Settlement Agreement and Mutual Release (Exhibit 7) and email between counsel (Exhibit 16), demonstrates an intent to transfer all rights, including the right to sue for past infringement.” (Id. at 5.)
The Constitution limits federal court jurisdiction to “Cases” and “Controversies.” U.S. Const. art. III § 2; Raines v. Byrd, 521 U.S. 811, 818 (1997). To show that a case or controversy exists, a plaintiff must establish that he has standing to bring suit. Lujan v. Defs. Of Wildlife, 504 U.S. 555, 560-61 (1992). A plaintiff must satisfy three elements to establish Article III standing: (1) an injury in fact, (2) a causal connection between the injury and the allegedly wrongful conduct, and (3) that the injury is likely to be redressed by a favorable decision from the Court. Id. In addition, when a plaintiff “seeks declaratory and injunctive relief only, there is a further requirement that [the plaintiff] show a very significant possibility of future harm.” San Diego Cty. Gun Rights Comm. v. Reno, 98 F.3d 1121, 1126 (9th Cir. 1996). “Since they are not mere pleading requirements but rather an indispensable part of the plaintiff's case, each element must be supported…with the manner and degree of evidence required at the successive stages of the litigation.” Defs. Of Wildlife, 504 U.S. 555, at 561 (1992) (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 883-889 (1990)). Thus, “at the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we ‘presum[e] that general allegations embrace those specific facts that are necessary to support the claim.'” Id. (quoting Nat'l Wildlife Fed'n, 497 U.S. at 889.) “A suit brought by a plaintiff without Article III standing is not a and an Article III federal court therefore lacks subject matter jurisdiction over the suit, ” and “the suit should be dismissed under Rule 12(b)(1).” Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir. 2004) (citations omitted).
To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet the requirements of Rule 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the claim showing that the pleader is entitled to relief, ” so that the defendant has “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Dismissal under Rule 12(b)(6) “can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss if it contains sufficient factual matter, which, if accepted as true, states a claim to relief that is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Facial plausibility exists if the pleader sets forth “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. Plausibility does not equal “probability, ” but requires “more than a sheer possibility that a defendant has acted unlawfully.” Id. “Where a complaint pleads facts that are ‘merely consistent' with a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.'” Id. (quoting Twombly, 550 U.S. at 557).
In ruling on a Rule 12(b)(6) motion to dismiss, the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, legal conclusions couched as factual allegations are not given a presumption of truthfulness, and “conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). A court ordinarily may not consider evidence outside the pleadings in ruling on a Rule 12(b)(6) motion to dismiss. See United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). “A court may, however, consider materials- documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment.” Id. at 908.
The primary issue of this motion is whether Sutton assigned his right to sue for past infringement of the PPRP patent when he executed the Rule 80 Settlement Memorandum, Settlement Agreement, and Patent Assignment assigning his right in the PPRP patent to Shasta in 2019. In deciding the issue, the Court may properly consider the settlement documents and patent assignment attached to Defendants' Motion to Dismiss. A court may consider evidence on which a complaint necessarily relies if: “(1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion.” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) (citations omitted). “The court may treat such a document as ‘part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6).'” Id. (quoting United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003)). Here, all three elements are satisfied.[1] Accordingly, the Court will treat such documents as a part of the Complaint and consider them in ruling on this motion.
Defendants first argue that Sutton lacks standing to pursue his infringement claims. Only a “patentee” has a civil remedy for infringement of his patent. 35 U.S.C. § 281. A patentee includes the patentee to whom the patent was issued and successors in title to the patentee....
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