ExcelStor Technology, Inc. v. Papst Licensing GMBH & Co. KG

541 F.3d 1373, 88 U.S.P.Q. 2d (BNA) 1060, 2008 U.S. App. LEXIS 19570, 2008 WL 4207435
CourtCourt of Appeals for the Federal Circuit
DecidedSeptember 16, 2008
Docket2008-1140
StatusPublished
Cited by21 cases

This text of 541 F.3d 1373 (ExcelStor Technology, Inc. v. Papst Licensing GMBH & Co. KG) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
ExcelStor Technology, Inc. v. Papst Licensing GMBH & Co. KG, 541 F.3d 1373, 88 U.S.P.Q. 2d (BNA) 1060, 2008 U.S. App. LEXIS 19570, 2008 WL 4207435 (Fed. Cir. 2008).

Opinion

LOURIE, Circuit Judge.

ExcelStor Technology, Inc., ExcelStor Technology, Ltd., ExcelStor Group Ltd., ExcelStor Great Wall Technology Ltd., and Shenzhen ExcelStor Technology Ltd. (collectively “ExcelStor” or “appellants”) appeal from the decision of the U.S. District Court for the Northern District of Illinois granting Papst Licensing GMBH & Co. KG’s motion to dismiss. ExcelStor Tech., Inc. v. Papst Licensing GMBH & Co. KG, No. 07-C2467, 2007 WL 3145013, 2007 U.S. Dist. LEXIS 79305 (N.D.Ill. Oct.24, 2007). Because the district court correctly concluded that it lacked subject matter jurisdiction over ExcelStor’s claims, we affirm.

BACKGROUND

In January 2004, ExcelStor, a manufacturer of computer products, entered into a licensing agreement with Papst Licensing GMBH & Co. KG (“Papst”). In that agreement, Papst permitted ExcelStor to manufacture patented hard disk drives in exchange for royalty payments. The agreement also required Papst, on a quarterly basis, to notify ExcelStor of the exis *1375 tence of any other royalty-bearing licenses for the patented hard disk drives. Excel-Stor alleges that Papst sent numerous notice letters over a period of nearly three years indicating that no royalties were being paid, other than those paid by Excel-Stor.

At some point in 2006 or 2007, ExcelStor became aware of a license agreement between Papst and Hitachi Corporation (the “Hitachi agreement”). After learning of the Hitachi agreement, representatives from ExcelStor became concerned about the potential terms in that agreement and sought to obtain copies of the agreement, which was confidential. Papst allegedly assured ExcelStor that Hitachi was not paying royalties, and that the Hitachi agreement had been entered into after the formation of the ExcelStor agreement. Papst also continued to send notice letters to ExcelStor reporting no royalty payments from third parties on the hard disk drives.

According to ExcelStor, Papst’s representations and the notice letters were fraudulent. ExcelStor claims that Papst had entered into the Hitachi agreement prior to entering into its agreement with ExcelStor. It further alleges that the Hitachi agreement involved royalty payments for the hard disk drives that ExcelStor was manufacturing.

Accordingly, ExcelStor brought an action, claiming fraud and breach of contract, in the U.S. District Court for the Northern District of Illinois. Papst filed a motion to dismiss for lack of subject matter jurisdiction. ExcelStor responded by filing an amended complaint that included numerous references and citations to federal patent law, as will be described further below. ExcelStor’s amended complaint contained four claims for relief, three of which are at issue on appeal. The first claim (Count I) requested a declaratory judgment that Papst had violated the “Patent Exhaustion/First Sale doctrine” by collecting two royalties from the sale of the same patented hard disk drives. Appellants’ Am. Compl. at 8. The third claim (Count III) was a fraud claim arising from Papst’s alleged failure to disclose its violation of the Patent Exhaustion/First Sale Doctrine. Id. at 4. The fourth claim (Count IV) was a breach of contract claim regarding Papst’s alleged failure to notify ExcelStor of its violation of the patent exhaustion/first sale doctrine. Id.

The district court dismissed ExcelStor’s complaint for lack of subject matter jurisdiction. As to Count I of the complaint, the court held that since Patent Exhaustion was a defense to patent infringement and not, as ExcelStor believed, a cause of action sufficient to grant the relief sought, the mere citation of federal patent law was insufficient to confer federal jurisdiction over the case. The court then found that Count III and Count IV were not based on federal patent law and therefore that Ex-celStor was not entitled to proceed in federal court.

ExcelStor timely appealed the district court’s judgment.

DISCUSSION

We review a dismissal for lack of subject matter jurisdiction without deference. Mars, Inc. v. Kabushiki-Kaisha Nippon Conlux, 24 F.3d 1368, 1371 (Fed.Cir.1994). Where, as here, appellants do not claim diversity of citizenship, there must be federal question jurisdiction. See 28 U.S.C. §§ 1331, 1332, 1338 (2000) (providing district courts with subject matter jurisdiction over diversity and federal question cases generally, and patent cases specifically). ExcelStor asserts that jurisdiction is proper under 28 U.S.C. § 1338, which provides district courts with exclusive federal jurisdiction over “any civil ac *1376 tion arising under any Act of Congress relating to patents.” 28 U.S.C. § 1338(a).

In Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988), the United States Supreme Court set forth a two-part test for determining whether federal courts have exclusive jurisdiction over a case pursuant to 28 U.S.C. § 1338(a). The Court held that § 1338 jurisdiction extends to any case “in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiffs 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, 486 U.S. at 809, 108 S.Ct. 2166. In analyzing whether patent law is a necessary element of ExcelStor’s claims, we are limited to an analysis of ExcelStor’s well-pleaded complaint. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Under the well-pleaded complaint rule, “arising under” jurisdiction “must be determined from what necessarily appears in the plaintiffs 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.” Christianson, 486 U.S. at 809, 108 S.Ct. 2166 (citations omitted). A claim does not arise under the patent laws if a patent issue appears only in a defense to that claim. Thompson v. Microsoft Corp., 471 F.3d 1288, 1292 (Fed.Cir.2006) (quoting Christianson, 486 U.S. at 809, 108 S.Ct. 2166).

On appeal, ExcelStor argues that the three causes of action at issue arise under federal patent law. ExcelStor claims that Counts I, III, and IV arise under the patent exhaustion doctrine of patent law, and are therefore within the jurisdiction of the federal courts.

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541 F.3d 1373, 88 U.S.P.Q. 2d (BNA) 1060, 2008 U.S. App. LEXIS 19570, 2008 WL 4207435, Counsel Stack Legal Research, https://law.counselstack.com/opinion/excelstor-technology-inc-v-papst-licensing-gmbh-co-kg-cafc-2008.