2011-1251 | Omnilex

Full text

# NOTE: This order is nonprecedential. United States Court of Appeals for the Federal Circuit

KEN NOLEN,
Plaintiff-Cross Appellant,
AND
MATTICKS & EASTHAM, LLP,
Movant-Cross Appellant,
AND
SAM G. GIBBS,
Plaintiff-Cross Appellant,
AND
COTTON, BLEDSOE, TIGHE & DAWSON, P.C.,
Movant-Cross Appellant,
V.
LUFKIN INDUSTRIES, INC., GARY BUSH AND
ANDREWS KURTH, LLP,
Defendants-Appellants.

2011-1251, -1265, -1278, -1279, -1499, -1500, -1522, -1523

Appeals from the United States District Court for the
Western District of Texas in case no. 10-CV-0048, Senior
Judge Harry Lee Hudspeth.

Before RADER, Chief Judge, LOURIE, and O'MALLEY,
Circuit Judges.

O'MALLEY, Circuit Judge.

## ORDER

Ken Nolen and Sam Gibbs (collectively, "Plaintiffs")
have filed separate motions to dismiss these appeals for
lack of subject matter jurisdiction and to stay the district
court's injunction, which prohibits Plaintiffs from litigat-
ing their remanded state law claims in state court. Be-
cause we conclude that Plaintiffs have not asserted a
claim that arises under the patent laws, we lack jurisdic-
tion over these appeals and, therefore, transfer them to
the United States Court of Appeals for the Fifth Circuit.

## BACKGROUND

These appeals arise out of a complaint filed by Lufkin
Industries, Inc. ("Lufkin") in Texas state court, asserting
various state law claims, including a claim for trade
secret misappropriation, against Nolen, Gibbs and other
former Lufkin employees. Nolen and Gibbs filed a coun-
terclaim against Lufkin and a third-party complaint
against attorney Gary Bush and his firm, Andrews Kurth,
LLP (collectively, Lufkin, Bush, and Andrews Kurth are
referred to as "Defendants"), alleging that those parties
fraudulently induced Plaintiffs to execute assignment
agreements transferring ownership of certain patents to
Lufkin ("the Assignment Agreements"). The third-party
complaint against Bush and Andrews Kurth alleged
various state law causes of action arising from Bush's role
in having the Assignment Agreements executed, including
breach of contract, breach of fiduciary duty, and profes-
sional negligence. Among other relief, Plaintiffs sought a
declaration that they are the rightful owners of the as-

signed patents. Plaintiffs also asserted claims under the
Lanham Act, alleging that Lufkin's continued use of their
first names to brand Lufkin's products constitutes a false
designation of origin.

Plaintiffs' counterclaims against Lufkin and third-
party claims against Bush and his firm were severed into
a new case and removed to the United States District
Court for the Western District of Texas. As grounds for
removal, Lufkin cited 28 U.S.C. §§ 1331 and 1338, point-
ing to the presence of Plaintiffs' Lanham Act claims and
the patent law issues relating to patent ownership, as
well as supplemental jurisdiction over Plaintiffs' state law
claims pursuant to 28 U.S.C. § 1367.1

After the case was removed, Plaintiffs amended their
complaints, with leave of court, to include counts for
patent infringement and false marking under the patent
laws. Plaintiffs expressly made each of these claims
contingent on the district court first rescinding the As-
signment Agreements and awarding ownership of the
assigned patents to Plaintiffs. For example, Nolen pref-
aces his infringement counts with the following:

119\. Nolen seeks a rescission and/or cancel-
lation of the assignment of the '890 patent to
Lufkin. Thereupon such relief being granted,
Nolen will again be the sole and exclusive
owner of the '890 Patent and entitled to
plead, prove and recover upon the following
causes of action.

Ken Nolen's Third Am. Compl., Nolen v. Lufkin Indus.,
Inc., Case No. 10-cv-48 (W.D. Tex. July 23, 2010), ECF
No. 69-1 1 119 ("Nolen's Third Amended Complaint")
(emphasis added). All of Plaintiffs' counts for patent

1 The parties do not argue that diversity jurisdiction
exists.

infringement and for false marking are similar in that
they expressly condition Plaintiffs' ability to assert those
claims on the district court first rescinding the Assign-
ment Agreements.

Defendants filed several motions to dismiss and mo-
tions for summary judgment on Plaintiffs' federal and
state law claims, which the district court resolved in a
series of decisions. Among its orders, the district court
granted partial summary judgment to Lufkin on Plain-
tiffs' patent infringement claims. Specifically, the court
found that Plaintiffs lacked standing to assert such claims
because they did not own the patents at issue and re-
quired judicial action (i.e., rescission of the Assignment
Agreements) to obtain ownership.

The district court also disposed of Plaintiffs' Lanham
Act claims prior to trial and issued summary judgment
rulings on some of the state law claims. Having resolved
all the federal claims at issue and some of the state law
claims, the court declined to exercise supplemental juris-
diction over the remaining state law claims and remanded
those claims to the Texas state court. On motion of Bush
and the firm, the district court also enjoined Plaintiffs and
their counsel from participating in the state court litiga-
tion.

Each party has appealed various portions of the dis-
trict court's orders. Bush and the firm appeal the ruling
in which the district court declined to exercise supplemen-
tal jurisdiction over the state law claims, while Plaintiffs
and Lufkin appeal from various other pre-remand orders.
Plaintiffs and their counsel also appeal from the district
court's injunction, and they move this court to stay that
injunction pending disposition of these appeals. Finally,
Plaintiffs move to dismiss these appeals for lack of subject
matter jurisdiction, the motion that is the subject of this
order.

## DISCUSSION

This court has jurisdiction over "an appeal from a fi-
nal decision of a district court of the United States . . . if
the jurisdiction of that court was based, in whole or in
part, on [28 U.S.C. § ] 1338 .... " 28 U.SC. § 1295 (2010).2
In turn, Section 1338 provides that "[t]he district courts
shall have original jurisdiction of any civil action arising
under any Act of Congress relating to patents ... . " 28
U.S.C. § 1338. Based on these statutes, the Supreme
Court has explained that our jurisdiction extends "only to
those cases in which a well-pleaded complaint establishes
either [1] that federal patent law creates the cause of
action or [2] 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." Christianson v. Colt
Indus. Operating Corp., 486 U.S. 800, 809 (1988). Be-
cause we conclude that the claims in this case do not fall
within either of those categories, this court lacks jurisdic-
tion over these appeals.

As an initial matter, the parties dispute which ver-
sions of Plaintiffs' complaints are the relevant versions for
this analysis.3 Plaintiffs urge us to look to the complaints
at the time of removal, which contained only state law
and Lanham Act claims. Defendants argue that the

2 The Leahy-Smith America Invents Act, which was
signed into law on September 16, 2011, amended Sections
1295 and 1338. See Leahy-Smith America Invents Act,
Pub. L. No. 112-29 § 19, 125 Stat. 284, 331-32 (2011).
Because those amendments are effective only for actions
commenced on or after the date of enactment, id. § 19(e),
we rely on the version of our jurisdictional statute in place
at the time Plaintiffs filed their complaints in this case.

3 Gibbs and Nolen each filed separate complaints and
amended complaints.

relevant pleadings are the complaints as amended that
existed at the time of the parties' notices of appeal, which
would require us to review Gibbs' and Nolen's Third
Amended Complaints.

Generally, an amended pleading supersedes the origi-
nal for all purposes. Thus, "when a plaintiff files a com-
plaint in federal court and then voluntarily amends the
complaint, courts look to the amended complaint to de-
termine jurisdiction." Rockwell Int'l Corp. v. United
States, 549 U.S. 457, 473-74 (2007). By extension, this
court on a number of occasions has looked to the com-
plaint as amended to determine which forum has jurisdic-
tion. See, e.g., Chamberlain Group, Inc. v. Skylink Techs.,
Inc., 381 F.3d 1178, 1189 (Fed. Cir. 2004) ("Federal Cir-
cuit jurisdiction depends on whether the plaintiff's com-
plaint as amended raises patent law issues."); Gronholz v.
Sears, Roebuck & Co., 836 F.2d 515, 518 (Fed. Cir. 1987)
(determining jurisdiction based on the complaint as
amended); see also Christianson, 486 U.S. at 822-24
(Stevens, J., concurring); Holmes Group v. Vornado Air
Circulation Sys., 535 U.S. 826, 835 (2002) (Stevens, J.,
concurring). Accordingly, we agree with Defendants that
Plaintiffs' Third Amended Complaints control this analy-
sis.4

4 Plaintiffs point to a statement in a footnote of one of
our decisions suggesting that the relevant complaint is
the complaint at the time of removal. See Air Measure-
ment Techs., Inc. v. Akin Gump Strauss Hauer & Feld,
L.L.P., 504 F.3d 1262, 1268 n.8 (Fed. Cir. 2007). That
statement, however, is dictum because we acknowledged
that there were "no substantial differences" between the
removal complaint and the amended complaint. Id. In
addition, the case we cited for that proposition addressed
the propriety of the removal of an action and expressly
distinguished that analysis from the determination of

As mentioned above, Plaintiffs' Third Amended Com-
plaints purport to allege claims for patent infringement
and false marking, but Plaintiffs expressly and repeatedly
condition their ability to bring those claims on the district
court first rescinding the Assignment Agreements. As a
result, this case falls squarely within our precedent
holding that a claim for patent infringement does not
arise under the patent laws when it requires judicial
action to vest title in the party alleging infringement. See
Jim Arnold Corp. v. Hydrotech Sys., Inc., 109 F.3d 1567,
1572 (Fed. Cir. 1997) (finding that, if a plaintiff does not
own a patent absent judicial intervention voiding a patent
assignment, "federal court is not the place to seek that
initial judicial intervention"); see also Larson v. Correct
Craft, Inc., 569 F.3d 1319, 1327 (Fed. Cir. 2009) (finding
no standing to sue for correction of inventorship because,
"[w]ithout first voiding his patent assignments, Larson
has no ownership interest in the . . . patents.") ..

Our decision in Jim Arnold is remarkably similar to
this case and controls the outcome here. In Jim Arnold,
the plaintiffs originally filed an action in Texas state
court, asserting state law claims for fraudulent induce-
ment, breach of fiduciary duties, and breach of contract,
as well as a claim for patent infringement. 109 F.3d at

whether federal jurisdiction is proper, which is closer to
the question presented here. See Bd. of Regents v. Nippon
Tel. & Tel. Corp., 414 F.3d 1358, 1360 n .* (Fed. Cir. 2005)
("Because Plaintiffs have contested the propriety of NTT's
removal prior to entry of final judgment, this case is
distinguishable from the line of cases considering only
whether federal jurisdiction is proper."); see also Pegram
v. Herdrich, 530 U.S. 211, 215 n.2 (2000) ("Herdrich's
amended complaint alleged ERISA violations, over which
the federal courts have jurisdiction, and we therefore have
jurisdiction regardless of the correctness of the removal").

1573\. Like Plaintiffs in this case, the plaintiffs in Jim
Arnold sought rescission of a patent assignment agree-
ment and alleged that, because the patent assignment
was void, the defendants had no rights in the patents at
issue and were liable for patent infringement. Id. The
district court entered summary judgment in favor of the
defendants, finding that the patent claim was barred by
laches. Id. at 1571.

The plaintiffs in Jim Arnold originally appealed to the
Fifth Circuit, which transferred the appeal to this court.
Id. at 1569. This court, however, found that there was no
federal question present in the plaintiffs' complaint and
vacated the district court's decision with instructions to
remand it to state court. In reaching that conclusion, we
found that the plaintiffs' patent infringement claim did
not confer federal question jurisdiction because the plain-
tiffs did not have ownership rights in the patent without
judicial intervention. Id. at 1577. We explained that,
"[t]o invoke the jurisdiction of a federal court under §
1338, it is necessary that plaintiff allege facts that dem-
onstrate that he, and not the defendant, owns the patent
rights on which the infringement suit is premised." Id. at
1571-72. The allegations of ownership must "have a
plausible foundation" and not be "frivolous or insubstan-
tial." Id. at 1572.

We further held that:

[u]ntil ownership is restored in the assignor,
there can be no act of patent infringement by
the assignee. Federal question jurisdiction
must exist at the time the complaint is filed
for a federal court to exercise authority over
the case [citation omitted], and without first
receiving equitable relief that restores to the
assignor title to the patent, any claim of
ownership by the assignor will be unfounded.
Further, because an action to rescind or can-

cel the assignment is a state-law based claim
[citation omitted], absent diversity jurisdic-
tion it is to a state court that plaintiffs must
look in seeking a forfeiture of the license.

Id. at 1577. Accordingly, although the complaint pur-
ported to assert a claim for patent infringement, we
concluded that it "fail[ed] to present a nonfrivolous allega-
tion of ownership of the patents at issue sufficient to
confer jurisdiction on the district court pursuant to 28
U.S.C. § 1338." Id. at 1578.

Like the complaint in Jim Arnold, Plaintiffs' Third
Amended Complaints in this case expressly condition
their patent infringement and false marking claims on
rescission of the Assignment Agreements. Each count for
infringement or false marking first alleges that Plaintiffs
seek a "rescission and/or cancellation" of the Assignment
Agreements and can assert a claim "[t]hereupon such
relief being granted," or explain that Plaintiffs are enti-
tled to relief "[i]n the event the '890 [Assignment] is
cancelled or rescinded." See, e.g., Nolen's Third Amended
Complaint 11 119, 125, 131, 135. We therefore agree with
the district court's conclusion that "the complaint can only
be read as stating that in order for this Court to reach the
patent infringement claims, it first must resolve the
ownership interests resulting from the assignments
outlined therein." See Order Regarding Lufkin's Mot. for
Partial Summ. J. at 5, Nolen v. Lufkin Indus., Inc., Case
No. 10-cv-48 (W.D. Tex. Feb. 3, 2011), ECF No. 181.

Our conclusion is bolstered by the parties' own char-
acterizations of Plaintiffs' "patent claims" in their district
court papers, where they agreed that Plaintiffs' patent
claims are either conditioned on rescission of the Assign-
ment Agreements or are essentially repackaged state law
claims. For example, in responding to Lufkin's motion for
partial summary judgment on his patent infringement
claims, Gibbs expressly stated that his "infringement

claims are conditioned upon Gibbs' election to obtain the
equitable remedy of rescission of the post-October 22,
2003 patent assignments." Gibbs' Response to Lufkin's
Mot. for Partial Summ. J. on Standing and Fraud Claims,
Nolen v. Lufkin Indus., Inc., Case No. 10-cv-48 (W.D. Tex.
Jan. 15, 2011), ECF No. 152. For its part, Lufkin initially
moved to dismiss Plaintiffs' claims for patent infringe-
ment and false marking, asserting that these claims were
"repackage[d]" fraud claims "that are all based and
grounded in a course of conduct by Lufkin which Gibbs
alleges was fraudulent (alleged fraud relating to the
assignment of intellectual property rights)." Lufkin's Mot.
to Dismiss Gibbs' Third Amended Complaint, Nolen v.
Lufkin Indus., Inc., Case No. 10-cv-48 (W.D. Tex. Aug. 16,
2010), ECF No. 89. Accordingly, Lufkin argued that these
patent claims were no different than Plaintiffs' fraud
claims and, therefore, should fall with those claims.

Based on our reading of Plaintiffs' Third Amended
Complaints, which is confirmed by the parties' own char-
acterizations of those pleadings, we find that Plaintiffs
have not alleged any claims that arise under the patent
laws sufficient to confer jurisdiction on this court. Plain-
tiffs' allegations regarding the Assignment Agreements
relate solely to ownership of the patents at issue, which is
a question governed by state law. MyMail, Ltd. v. Am.
Online, Inc., 476 F.3d 1372, 1376 (Fed. Cir. 2007) ("[T]he
only question is one of ownership. State law, not federal
law, addresses such property ownership disputes.") In
addition, Plaintiffs have failed to make any plausible
allegations of ownership of the patents at issue that do
not first require judicial intervention. See Jim Arnold
Corp., 109 F.3d at 1572. As a result, this court lacks
jurisdiction over these appeals.

Accordingly,

IT IS ORDERED THAT:

Gibbs' and Nolen's motions to dismiss for lack of sub-
ject matter jurisdiction are granted. Pursuant to 28
U.S.C. § 1631, in the interest of justice, we transfer Ap-
peal Nos. 2011-1251, -1265, -1278, -1279, -1499, -1500, -
1522, -1523 to the United States Court of Appeals for the
Fifth Circuit. Because we lack jurisdiction over these
appeals, we do not address the parties' other pending
motions, which are properly directed to the Fifth Circuit
should the parties choose to re-file them there.

FOR THE COURT

FEB 0 1 2012

Date

/s/ Jan Horbaly
Jan Horbaly
Clerk

cc: Kenneth E. Carroll, Esq.
Kenneth R. Matticks, Esq.
Richard D. Milvenan, Esq.
Charles C. Aycock, Esq.

Issued As A Mandate:
FEB 0 1 2012

FILED
U.S. COURT OF APPEALS FOR
THE FEDERAL CIRCUIT
FEB 01:2012

JAN HORBALY
CLERK

Ken Nolen v. Lufkin Industries, Inc., Gary Bush and Andrews Kurth, Llp

Full text

Continue your research in ChatGPT or Claude