Uspps v. Avery Dennison Corp..

Decision Date19 July 2011
Docket NumberNo. 10–50612.,10–50612.
CourtU.S. Court of Appeals — Fifth Circuit
PartiesUSPPS, LTD., Plaintiff–Appellantv.AVERY DENNISON CORPORATION; Renner, Otto, Boiselle & Sklar, L.L.P.; Neil DuChez, Individually, Defendants–Appellees.

OPINION TEXT STARTS HERE

James Edwin Willingham, Jr. (argued), San Antonio, TX, for PlaintiffAppellant.Jack Daniel Harkin (argued), Mark Joseph Barrera, Cox Smith, Vaughan Eugene Waters (argued), Richard J. Reynolds, III, Thornton, Biechlin, Segrato, Reynolds & Guerra, L.C., San Antonio, TX, for DefendantsAppellees.Appeal from the United States District Court for the Western District of Texas.Before DAVIS, PRADO and OWEN, Circuit Judges.EDWARD C. PRADO, Circuit Judge:

This suit, involving state-law claims of fraud and breach of fiduciary duty in connection with a patent application, reaches us for a third time. We most recently reversed the district court's dismissal of the case as time-barred at the pleading stage and remanded for further factual development. USPPS, Ltd. v. Avery Dennison Corp., 326 Fed.Appx. 842 (5th Cir.2009) (per curiam) (unpublished). PlaintiffAppellant USPPS, Ltd. (USPPS) now appeals the district court's grant of summary judgment in favor of DefendantsAppellees Avery Dennison Corp. (Avery); Renner, Otto, Boiselle & Sklar, L.L.P. (Renner); and Neil DuChez. The district court held that there was no genuine dispute of material fact as to whether USPPS's claims were time-barred such that the defendants were entitled to judgment as a matter of law, and that in the alternative there was no genuine dispute of material fact as to the causation elements of USPPS's claims. We requested supplemental briefing on the issue of whether exclusive appellate jurisdiction rests in the United States Court of Appeals for the Federal Circuit under 28 U.S.C. §§ 1295(a) and 1338(a). After reviewing the record, we conclude that this case raises a substantial issue of patent law such that we lack jurisdiction over the appeal, and we order the appeal transferred to the Federal Circuit.

I. FACTUAL AND PROCEDURAL BACKGROUND
A. Facts

The Supreme Court has explained that our assessment of whether this Circuit or the Federal Circuit has jurisdiction over the appeal must be made by reference to the allegations made in the plaintiff's “well-pleaded complaint”; that is, “from what necessarily appears in the plaintiff's statement of his own claim in the [complaint], unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may interpose.” Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (citation and quotation marks omitted). We therefore limit our recitation of the facts to those relevant to this inquiry.

USPPS filed suit in federal district court against Avery; Avery's law firm, Renner; and one of Renner's partners, Neil DuChez, on the basis of diversity jurisdiction. The dispute stems from the efforts of USPPS and its owner and founder, Joe Pat Beasley, to obtain a patent for an invention of Beasley's related to personalized postage stamps.

In 1999, Beasley filed a patent application with the United States Patent and Trademark Office (“PTO”). While the patent application was pending, Beasley negotiated a licensing and manufacturing contract with Avery. In March 2001, the PTO approved Beasley's patent application and notified him that it would issue the patent upon payment of the requisite fees. In May 2001, Beasley and Avery entered into an agreement under which Avery agreed to assume responsibility for prosecuting Beasley's patent application and to pay all related fees and expenses. Beasley subsequently revoked all previous powers of attorney and appointed attorneys from Renner, Avery's law firm, to act on his behalf. USPPS's complaint alleges that Renner never disclosed to Beasley or anyone at USPPS that the firm did not represent Beasley and held a higher loyalty to Avery's interests.

In June 2001, Renner, acting pursuant to Beasley's power of attorney, formally abandoned Beasley's original patent application and submitted a second application pursuing more claims. In August 2001, USPPS and Avery entered into an agreement under which Avery would pay USPPS a royalty on sales of personalized postage stamps. In mid–2002, the PTO rejected the patent applications. Renner filed responses, but the PTO again rejected the applications. Avery notified USPPS that there was no hope that the applications could be revived by additional claim language. Finally, on May 14, 2003, Renner notified Avery and USPPS that the applications had been abandoned. In 2004, Avery notified USPPS that it intended to sell personalized postage stamps to third parties without further payment of royalties after the royalty agreement expired by its own terms.

USPPS's complaint contends that Renner's representation of Avery created a conflict of interest with its representation of Beasley and USPPS in the patent-prosecution process. Specifically, USPPS argues that Avery benefitted from the rejection of the patent application because Avery could produce the stamps without paying royalties once the patent was rejected. Neither Avery nor Renner supposedly disclosed this conflict to USPPS.

B. Prior Appeals

This lawsuit was preceded by a nearly identical one filed with Beasley named as the plaintiff. The district court dismissed that case for lack of standing after it was discovered that Beasley had previously assigned all his intellectual property rights to USPPS. The district court also denied Beasley's motion to add USPPS as a party and sanctioned him for concealing the assignment. Beasley appealed but filed no briefing, and the clerk of this court entered an order dismissing the appeal for failure to prosecute. See Beasley v. Avery Dennison Corp., No. 07–51311, 2008 U.S.App. LEXIS 28075, at *1 (5th Cir. Feb. 7, 2008) (citing 5th Cir. R. 42.3).

The lawsuit was then refiled in USPPS's name, including additional allegations based on information learned in the course of discovery in the prior suit. The district court dismissed the claims as time-barred. USPPS appealed, and we reversed and remanded for further factual development, concluding that the discovery rule or fraudulent-concealment doctrine might apply on the face of the complaint. USPPS, 326 Fed.Appx. at 851. The parties made no arguments concerning jurisdiction in that appeal, and our prior opinion makes no mention of the basis for the court's jurisdiction other than to describe the complaint as asserting that the case was “based on diversity of citizenship.” Id. at 843.

II. STANDARD OF REVIEW

We must always be sure of our appellate jurisdiction and, if there is doubt, we must address it, sua sponte if necessary.” Castaneda v. Falcon, 166 F.3d 799, 801 (5th Cir.1999). Whether an appeal properly belongs in this Court or the Federal Circuit is such a question of appellate jurisdiction. See 28 U.S.C. § 1295(a). If we conclude that our jurisdiction is lacking, we cannot reach the merits of the appeal. See Christianson, 486 U.S. at 818, 108 S.Ct. 2166.

III. DISCUSSION

“Under 28 U.S.C. § 1295(a), the Federal Circuit has exclusive jurisdiction of an appeal where the district court's jurisdiction was based, in whole or in part, on 28 U.S.C. § 1338.” Natec, Inc. v. Deter Co., 28 F.3d 28, 29 (5th Cir.1994) (per curiam). Where an appeal over which the Federal Circuit has exclusive jurisdiction is taken to this Court in error, we are directed by statute to, “if it is in the interest of justice, transfer such ... appeal to” the Federal Circuit. See 28 U.S.C. § 1631. The Supreme Court has clarified that if such a transfer is not “in the interest of justice,” our sole alternative is to dismiss the appeal. See Christianson, 486 U.S. at 818, 108 S.Ct. 2166. All the parties agree that if we lack jurisdiction, then transfer rather than dismissal best serves the interest of justice. We agree that “a balancing of equities weighs in favor of transfer because a new appeal ... at this point would be barred as untimely and we find nothing to indicate that the [appellants] acted in bad faith by filing the instant appeal” with this Court. Scherbatskoy v. Halliburton Co., 125 F.3d 288, 292 (5th Cir.1997).

We therefore must transfer this appeal to the Federal Circuit if the district court's jurisdiction was based, even in part, on § 1338. In relevant part, § 1338(a) grants exclusive jurisdiction to the federal district courts over “any civil action arising under any Act of Congress relating to patents.” In Christianson, the Supreme Court summarized its precedents delimiting the scope of this language:

[I]n order to demonstrate that a case is one “arising under” federal patent law the plaintiff must set up some right, title or interest under the patent laws, or at least make it appear that some right or privilege will be defeated by one construction, or sustained by the opposite construction of these laws.... [Thus] § 1338(a) jurisdiction ... extend[s] only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to 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.

... Under the well-pleaded complaint rule, as appropriately adapted to § 1338(a), whether a claim “arises under” patent law must be determined from what necessarily appears in the plaintiff's statement of his own claim in the [complaint], unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may interpose.

486 U.S. at 807–09, 108 S.Ct. 2166 (internal citations and quotation marks omitted). In Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, the Supreme Court clarified the role that federalism concerns should play in this...

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