Semiconductor Energy Laboratory Co., Ltd. v. Nagata

Filing 42

ORDER by Judge Charles R. Breyer granting 30 Motion to Dismiss; denying 35 Motion for Sanctions. (crblc1S, COURT STAFF) (Filed on 1/23/2012)

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1 2 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA United States District Court For the Northern District of California 10 11 12 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER GRANTING MOTION TO DISMISS AND DENYING MOTION FOR SANCTIONS Plaintiff, 13 14 No. C 11-02793 CRB SEMICONDUCTOR ENERGY LABORATORY CO, LTD., v. YUJIRO NAGATA, Defendant. / In this case, Plaintiff Semiconductor Energy Laboratory Co., Ltd., a Japanese company, sues Defendant Yujiro Nagata, a Japanese scientist, alleging that when he recently repudiated an assignment of one of Plaintiff’s patents, he did so in violation of the assignor estoppel doctrine, in breach of his contract, and tortiously. See generally FAC (dkt. 29). Defendant moves to dismiss, arguing that there is no federal cause of action based on violation of the assignor estoppel doctrine, and that the remaining state law claims constitute a SLAPP suit (or, in the alternative, support the imposition of sanctions under Federal Rule of Civil Procedure 11). See generally MTD (dkt. 31); Mot. for Sanctions (dkt. 36). As explained below, the Court concludes that the FAC does not allege a federal cause of action, and the Court does not reach the state court causes of action. The Court further denies the Motion for Sanctions, as Plaintiff’s suit is not frivolous. 1 2 I. BACKGROUND1 Plaintiff is a Japanese corporation that owns many U.S. and foreign patents relating to 3 semiconductors. FAC ¶ 11. It was founded by Dr. Shunpei Yamazaki, one of the world’s 4 most prolific inventors. Id. ¶ 12. Defendant and Dr. Yamazaki are co-inventors on seven 5 patents. Id. ¶ 13. Of those, the principal patent at issue is the ‘463 Patent. Id. ¶ 14. 6 There is no dispute that Defendant originally signed all necessary Declarations and/or 7 Assignments related to U.S. patent applications in the chain of priority of the ‘463 Patent. Id. 8 ¶ 27. One of the applications in the chain of priority for the ‘463 Patent at issue is U.S. 9 Patent application ‘437. Id. ¶ 30. In 1991, it became necessary to obtain Defendant’s United States District Court For the Northern District of California 10 signature on an additional Declaration and Assignments that related to the ‘102 Application, 11 which gave rise to the ‘334 Patent and to which the ‘437 Application claimed priority. Id. ¶ 12 33. Dr. Yamazaki specifically recalls observing Defendant sign the declaration and 13 assignment in September 1991, and speaking with Defendant about why his signature had 14 changed. Id. ¶¶ 34-35. It again became necessary to get Defendant’s signature on a 15 substitute assignment in December 1991, and again Dr. Yamazaki specifically recalls 16 obtaining Defendant’s signature. Id. ¶ 36. 17 In June 2002, Plaintiff filed a patent infringement lawsuit in the United States, and 18 Defendant cooperated with Plaintiff in providing information about one of the patents at 19 issue; in appreciation, Plaintiff paid him about $76,000 in February 2004. Id. ¶¶ 38-39. As 20 of March 2004, Defendant began a series of communications with Plaintiff and Dr. 21 Yamazaki in which he demanded additional compensation relating to patents on which he 22 was an inventor. Id. ¶ 40. Plaintiff refused his demands, and finally in 2008, Plaintiff’s 23 counsel asked Defendant to halt his disruptive contacts. Id. ¶¶ 40-41. 24 In January 2009, Plaintiff filed a patent infringement lawsuit against Samsung in the 25 Western District of Wisconsin. Id. ¶ 42. Because that lawsuit involved patents, including 26 the ‘463 patent, on which Defendant was a named inventor, Plaintiff met and communicated 27 with Defendant in October 2009, and assumed that Defendant would cooperate as he had in 28 1 This Order accepts as true all non-conclusory facts alleged in the FAC. 2 1 the earlier case. Id. ¶ 43. Instead of cooperating with Plaintiff, however, Defendant agreed 2 to assist Samsung in the litigation, “not as a fact witness but as a paid consultant for the U.S. 3 law firm defending Samsung.” Id. ¶ 44. Defendant repudiated his signature on the 1991 4 Declaration and Assignments; his “repudiation came to [Plaintiff]’s attention in part by 5 means of declarations signed by [Defendant] and filed with the U.S. District Court in 6 Wisconsin.” Id. ¶ 45. Plaintiff later learned that Defendant was to receive $52,500 from 7 Samsung, regardless of the hours he worked, with additional compensation at the rate of 8 $350 an hour. Id. ¶ 46. In the Samsung litigation, Samsung asserted that Defendant’s repudiation of the 9 United States District Court For the Northern District of California 10 signatures constituted evidence of forgeries which rendered the relevant patents, including 11 the ‘463 patent, unenforceable due to inequitable conduct. Id. ¶ 49. In May 2010, the court 12 declined to grant relief based on Samsung’s inequitable conduct allegations, and the litigation 13 subsequently settled. Id. ¶ 53. Nonetheless, Plaintiff alleges that Defendant’s conduct 14 caused it serious injury by, among other things, casting a cloud on the ownership, 15 enforceability, and validity of Plaintiff’s patent family, causing Plaintiff to settle its claims 16 against Samsung for less money than it would have otherwise, and impairing future 17 enforcement of the ‘463 patent. Id. ¶¶ 55-58. Plaintiff filed suit against Defendant in June 2011. See Compl. (dkt. 1). Defendant 18 19 brought a motion to dismiss, Plaintiff opposed, and Defendant replied. See dkts. 15, 17, 20. 20 Before that motion was heard, however, the Court held a CMC at which Defendant 21 questioned, for the first time, the Court’s subject matter jurisdiction. See Opp’n (dkt. 32) at 22 8-9. The Court then permitted Plaintiff to amend its complaint to supplements its allegations 23 related to federal question jurisdiction. Id. at 9. The FAC, filed October 2011, now includes 24 five causes of action, (1) “Declaratory Judgment – Violation of Federal Patent Law;” (2) 25 “Declaratory Judgment – Anticipatory Breach of Contract;” (3) Slander of Title; (4) Quiet 26 Title; (5) Unjust Enrichment. See generally FAC. Defendant again moves to dismiss. See 27 generally MTD. 28 // 3 1 II. LEGAL STANDARD Federal Rule of Civil Procedure 12(b)(1) authorizes a party to seek dismissal of an 2 3 action for lack of subject matter jurisdiction. Though the defendant makes the motion, the 4 plaintiff bears the burden of establishing subject matter jurisdiction. See Kokkonen v. 5 Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994); Stock W., Inc. v. Confederated Tribes 6 of the Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989). A Rule 12(b)(1) 7 jurisdictional attack may be facial or factual. See Safe Air for Everyone v. Meyer, 373 F.3d 8 1035, 1039 (9th Cir. 2004). “In a facial attack, the challenger asserts that the allegations 9 contained in a complaint are insufficient on their face to invoke federal jurisdiction.” Id. In United States District Court For the Northern District of California 10 resolving a facial attack, a motion will be granted if the complaint, when considered in its 11 entirety, on its face fails to allege facts sufficient to establish subject matter jurisdiction. See, 12 e.g., Savage v. Glendale Union High School, 343 F.3d 1036, 1040 n.2 (9th Cir. 2003).2 13 III. DISCUSSION 14 A. Subject Matter Jurisdiction 15 The FAC alleges that the Court has subject matter jurisdiction under 28 U.S.C. § 16 1338(a), as a civil action arising under any Act of Congress relating to patents. FAC ¶ 4. 17 Courts use the “well-pleaded complaint rule” to determine whether a case raises a federal 18 question; the rule provides that “federal jurisdiction exists only when a federal question is 19 presented on the face of the plaintiff’s properly pleaded complaint.” Caterpillar Inc. v. 20 Williams, 482 U.S. 386, 392 (1987). The issue in this case is whether the FAC truly presents 21 a federal question on its face. 22 1. 23 Assignor Estoppel as a Cause of Action The FAC’s only federal cause of action, “Declaratory Judgment – Violation of Federal 24 Patent Law,” cites no particular federal law. See MTD at 5. Instead, it alleges that “Federal 25 law bars an assignor of a U.S. Patent from conduct that attacks the U.S. Patent subject to that 26 assignment on grounds of invalidity or inequitable conduct.” FAC ¶ 65. It further alleges 27 28 2 Defendant also moves to dismiss under Federal Rule of Civil Procedure 12(b)(6), but the Court does not reach that basis for dismissal. 4 1 that Defendant signed the assignments and declarations at issue in 1991, and that he 2 “intentionally relinquished any right to attack the enforceability of the patents subject to his 3 assignment by virtue of Federal patent law estopping such attacks.” Id. ¶ 66. And it alleges 4 that relief from Defendant’s wrongful conduct “necessarily depends on the resolution of one 5 or more substantial questions of Federal patent law, resolution of which is essential to each 6 of the claims herein.” Id. ¶ 72. The cause of action makes multiple references to “Federal 7 patent law” generally. See, e.g., id. ¶¶ 73, 75. 8 9 Defendant argues that such allegations demonstrate that the Court lacks subject matter jurisdiction. See MTD at 5-9. He argues, “Simply put, there is no ‘Federal law’ giving rise United States District Court For the Northern District of California 10 to an affirmative claim that ‘bars’ an assignor from ‘conduct’ that attacks the validity or 11 enforceability of a patent that he has assigned. Rather, there is a federal doctrine in patent 12 law that legally estops a party-inventor from asserting a claim for invalidity or 13 unenforceability of a patent.” Id. at 6. Indeed, Plaintiff’s subsequent filings confirm that it is 14 bringing suit under the “assignor estoppel” doctrine. See, e.g., Opp’n (dkt. 32) at 15 (“the 15 application of the assignor estoppel doctrine is a federal question”). 16 “Assignor estoppel is an equitable doctrine that prevents one who has assigned the 17 rights to a patent . . . from later contending that what was assigned was a nullity. The 18 estoppel also operates to bar other parties in privity with the assignor, such as a corporation 19 founded by the assignor.” Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 20 (Fed. Cir. 1988). Diamond Scientific was the Federal Circuit’s “first opportunity” to 21 examine the assignor estoppel doctrine: the case involved an assignor who, after assigning 22 his rights in various patents and leaving his employer, formed his own company, which his 23 employer accused of infringing three of the assigned patents. Id. at 1222. The assignor 24 sought to “defend against accusations of infringement by trying to show that the three patents 25 in issue are invalid because the inventions either were inadequately disclosed by the 26 specifications, lacked novelty, or could have been obvious to one of ordinary skill at the time 27 the inventions were made.” Id. at 1225. The Federal Circuit found that such a defense was 28 barred by the assignor estoppel doctrine because it would be unfair for the assignor to profit 5 1 both from his initial assignment and also by his later attack on the value of what he assigned. 2 Id. 3 Defendant here argues that the assignor estoppel doctrine is a defense, not the basis 4 for an affirmative cause of action. See MTD at 6 (citing Fed. R. Civ. P. 8(c) (estoppel is 5 affirmative defense); Cont’l Airlines Inc. v. Intra Brokers, Inc., 24 F.3d 1099, 1103 (9th Cir. 6 1994) (“Estoppel is an affirmative defense”)). Plaintiff insists that “[t]he assignor estoppel 7 doctrine is not merely a defense,” Opp’n at 10, but the best argument it can muster is that 8 Defendant’s cases pertain to garden variety estoppel, not assignor estoppel, id. at 10 n.3. 9 But even assignor estoppel is still a kind of estoppel. See Diamond Scientific Co., United States District Court For the Northern District of California 10 848 F.2d at 1225 (explaining that “The Supreme Court . . . has explicitly recognized assignor 11 estoppel to be the functional equivalent of estoppel by deed”) (citing Westinghouse Elec. & 12 Mfg. Co. v. Formica Insulation Co., 266 U.S. 342, 348-49 (1924)); see also Briggs & Riley 13 Travelware, LLC v. Paragon Luggage, Inc., 324 F. Supp. 2d 395, 401 (S.D. N.Y. 2003) 14 (“Like other estoppel doctrines, such as collateral estoppel, judicial estoppel, or promissory 15 estoppel, assignor estoppel . . . . like many other estoppel rules, assignor estoppel is based on 16 the equitable principle that a party may not change position after another party has relied on 17 that position to its detriment.”) (emphasis added). 18 Although it is not entirely unheard of for estoppel to be the basis for a cause of action, 19 see, e.g., Clark v. Kellogg Co., 205 F.3d 1079, 1083 (8th Cir. 2000) (under Nebraska law, 20 promissory estoppel may be asserted as the basis for a cause of action), it simply makes no 21 sense to use a doctrine intended to “estop [a] party from advancing a particular claim or 22 defense” in a legal case, see Briggs & Riley Travelware, 324 F. Supp. 2d at 401, as a way to 23 sue a non-party who has made no claim or defense in a legal case (see privity discussion 24 below). See also Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 412 F.3d 1331, 1336 (Fed. Cir. 25 2005) (“assignor estoppel prevents a party that assigns a patent to another from later 26 challenging the validity of the assigned patent.”) (emphasis added). 27 28 Perhaps the best support for Defendant’s argument that an “assignor estoppel” cause of action does not exist is that Plaintiff did not cite in its briefing even a single case 6 1 recognizing such a cause of action. At the motion hearing, Plaintiff’s counsel conceded that 2 it had still not found one. Nor has the Court. Instead, the typical assignor estoppel case 3 involves an assignor being sued for infringement and trying to defend himself by arguing the 4 patent’s invalidity, something the doctrine prevents. See, e.g., Diamond Scientific, 848 F.2d 5 at 1225, Dane Indus., Inc. v. Ameritek Indus., Inc., 154 Fed. Appx. 894, 899 (2005).3 6 7 This Court declines Plaintiff’s invitation to be the first to recognize a cause of action under the assignor estoppel doctrine. 2. 8 9 United States District Court For the Northern District of California 10 Applicability of the Doctrine Here There are two additional reasons why the assignor estoppel cause of action alleged in the FAC would not apply here, even if it existed. a. 11 Requirement of Privity 12 First, assignor estoppel only applies when the assignor is a party, or in privity with a 13 party. See Synopsys, Inc. v. Magma Design Automation, No. 04-3923, 2005 WL 1562779, 14 at *7 (N.D. Cal. July 1, 2005). Thus, in Briggs & Riley Travelware, 324 F. Supp. 2d at 400, 15 the plaintiff argued that the doctrine precluded the defendant, an alleged infringer, from using 16 the inventor/assignor’s testimony to establish the invalidity of the patent. The Southern 17 District of New York held that, although the assignor estoppel doctrine estops an assignor 18 from attacking the validity of a patent as against anyone claiming the right under the 19 assignment, or any party in privity with the assignor, the doctrine does not bar the testimony 20 of the assignor who testifies as a non-party witness against the validity of the patent. The 21 court explained that “[t]here is no equity . . . in denying a party which is not so estopped 22 from presenting any competent evidence that can aid a factfinder in determining the merits of 23 its defense.” Id. It continued, “Assignor estoppel operates against the inventor/assignor; it 24 cannot unfairly hamstring a party which never obtained, held or assigned the patent from 25 26 27 28 3 Defendant makes the additional argument that recognizing such a cause of action would have disastrous effects on the administration of justice: “It is one thing for the Federal courts to estop a party from asserting, via affirmative claim, that which he has transferred for value has no value. It is quite another for the Federal courts to rule that inventors may never provide percipient testimony that would harm an assigned patent.” MTD at 8. This is a persuasive policy argument and it is consistent with Briggs & Riley Travelware, 324 F. Supp. 2d at 400, discussed below. 7 1 proving its case, by declaring incompetent the testimony of a witness who may have valuable 2 testimony to offer.” Id. And it concluded that while the assignor’s testimony would be 3 “subject to vigorous attack,” it would be for the factfinder to decide whether his testimony 4 was credible; “[n]o estoppel, however, prevents [the alleged infringer] from calling him as a 5 witness.” Id. at 402. 6 Relatedly, the Federal Circuit in Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 412 F.3d 1331, 1337 (Fed. Cir. 2005) rejected the argument that an alleged infringer could not use 8 inventor testimony to challenge the validity of a patent, and held: “a party that is not barred 9 by assignor estoppel from challenging the validity of the patent, should be able to at least 10 United States District Court For the Northern District of California 7 proffer all otherwise admissible evidence in support of its case.”4 See also Verizon Servs. 11 Corp. v. Cox Fibernet Va., Inc., 602 F.3d 1325, 1339-40 (Fed. Cir. 2010) (not error for 12 district court to allow inventors to testify about the patents they invented; declining to 13 address argument that assignor estoppel barred such testimony); Earth Resources Corp. v. 14 United States, 44 Fed. Cl. 274, 287-88 (1999) (inventor/assignor not estopped from testifying 15 as non-party witness as to the patent’s validity where there was no privity with party 16 asserting invalidity claim). 17 The FAC alleges that Defendant is in privity with Samsung. See FAC ¶ 68 18 (“[Defendant] undertook his repudiation for his own personal financial gain in conjunction 19 with an accused infringer, Samsung, and/or Samsung’s agents and representatives, with 20 whom [Defendant] was in privity and who stood in a position to benefit substantially from 21 [Defendant’s] repudiation in violation of Federal patent law.”). If true, the assignor estoppel 22 doctrine would apply. See Synopsys, 2005 WL 1562779, at *7. But the FAC’s allegation 23 that Defendant and Samsung are in privity is not controlling. See Iqbal, 129 S. Ct. at 1950 24 (court “not bound to accept as true a legal conclusion couched as a factual allegation”). The 25 Court must therefore undertake its own analysis of whether privity exists. 26 27 28 4 Defendant argues, persuasively, that “[i]t would be perverse indeed for the Federal courts to rule, on the one hand, that the assignor estoppel doctrine does not prohibit non-party inventor testimony in support of invalidity, yet rule, on the other hand, that the assignor estoppel doctrine gives rise to a cause of action for providing the very testimony that it does not prohibit.” Reply at 4. 8 1 As Judge Chesney held in Synopsys, in undertaking such an analysis, “the Court must 2 evaluate ‘all direct and indirect contacts,’” and “evaluate the relationship between the 3 inventor/assignor and the entity ‘in light of the act of infringement.’” 2005 WL 1562779, at 4 *4 (citing Mentor Graphics Corp. v. Quicktum Design Sys., Inc., 150 F.3d 1374, 1379 (Fed. 5 Cir. 1998); and Shamrock Techs. v. Med. Sterilization, 903 F.2d 789, 793 (Fed. Cir. 1990)). 6 “Privity, like the doctrine of assignor estoppel itself, is determined upon a balance of the 7 equities . . . The closer that relationship [between an inventor and the other entity], the more 8 the equities will favor applying the doctrine.” Earth Resources Corp., 44 Fed. Cl. at 284. 9 Here, Plaintiff points to a single contact between Defendant and Samsung in order to United States District Court For the Northern District of California 10 establish privity: “having failed to extract unwarranted additional compensation from 11 [Plaintiff], [Defendant] maliciously contracted himself to an accused infringer at an 12 exorbitant fee to repudiate his assignments contrary to federal law, thereby assisting the 13 infringer in perpetuating its infringement.” Opp’n at 12 n.4. Indeed, the FAC alleges that 14 Defendant was to receive $52,500 from Samsung, regardless of the hours he worked, with 15 additional compensation at the rate of $350 an hour. FAC ¶ 46. 16 The payment from Samsung is insufficient to establish privity. “What is significant is 17 whether the ultimate infringer availed itself of the inventor’s ‘knowledge and assistance’ to 18 conduct infringement.” Intel Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d 821, 839 (Fed. Cir. 19 1001) (quoting Shamrock Tech., Inc. 903 F.2d at 794). Here, nothing in the FAC suggests 20 that Defendant helped Samsung to infringe; the alleged infringement appears to have already 21 happened at the time Defendant got involved. The acts of Defendant’s that are complained 22 of in the FAC involve the litigation, not the infringement itself. See, e.g., FAC ¶ 44 23 (Defendant agreed to assist Samsung in the litigation); ¶ 45 (Defendant’s “repudiation came 24 to [Plaintiff]’s attention in part by means of declarations signed by [Defendant] and filed with 25 the U.S. District Court in Wisconsin.”); Briggs & Riley Travelware, 324 F. Supp. 2d at 402 26 n.7 (“Paragon manufactured the allegedly infringing suitcases without any assistance from 27 Nykoluk. Indeed, it appears that Nykoluk only came in contact with Paragon as a result of 28 this lawsuit.”). Compare Synopsys, 2005 WL 1562779, at *8 (privity established where “van 9 1 Ginneken then left Synopsys to work for Magma, where he had a key role in developing at 2 least four Magma products that are alleged to infringe the ‘114 patent, and at least some role 3 in developing the allegedly infringing portions of the products.”). 4 Moreover, although there is a financial relationship between Defendant and Samsung, 5 it is a relatively limited one. The court in Earth Resources Corp., 44 Fed. Cl. at 284-87, 6 undertook a thorough study of the three leading cases in the Federal Circuit on the issue of 7 privity,5 and concluded that such cases “involve very close financial relationships in which 8 the actual assignor almost envelopes the other entity,” and discussed “a degree of financial 9 interconnectedness such as one entity having financial control over the other.” If even United States District Court For the Northern District of California 10 “employment is insufficient to establish privity,” Dane Indus., Inc. v. Ameritek Indus., LLC, 11 154 Fed. Appx. 894, 899 (2005), it is hard to see how a $52,000 contract is sufficient. 12 Although the financial arrangement between Defendant and Samsung is arguably 13 troublesome, it should have been raised in a cross-examination, as a basis for challenging 14 Defendant’s credibility. As Defendant was not in privity with Samsung, the assignor 15 estoppel doctrine should not bar his testimony, let alone give rise to an independent cause of 16 action against him. b. 17 Requirement that the Conduct Challenge the Validity of the Patent Itself 18 Second, in University of West Virginia Board of Trustees v. VanHoorhies, 278 F.3d 19 1288, 1301 (Fed. Cir. 2002), the Federal Circuit held that “While the doctrine precludes 20 challenges to the validity of a patent itself, . . . it does not preclude challenges to the validity 21 of a contract assigning the patent.” See also 5 Annotated Patent Digest § 35:18 (“assignor 22 estoppel does not prohibit the assignor from challenging the legality of the actual 23 assignment”). Here, the conduct at issue in the FAC is Defendant’s having repudiated his 24 signature on the assignment. See FAC ¶ 45. That is not a challenge to the validity of the 25 patent itself, but to the contract assigning the patent, something Univ. of W. Va. Bd. of 26 Trustees, 278 F.3d at 1301, allows. When the Court raised this point with Plaintiff’s counsel 27 28 5 These are Mentor Graphics, 150 F.3d 1374, Intel Corp., 946 F.2d 821, and Shamrock Techs., 903 F.2d 789. Id. 10 1 at the motion hearing, counsel merely relied on Judge Newman’s concurrence in Diamond 2 Scientific Co., 848 F.2d at 1227-28. The Court finds such concurrence inapposite. 3 4 3. The Artful Pleading Rule Plaintiff contends in the alternative that the Court has jurisdiction under the artful 5 pleading doctrine. See Opp’n at 13-15. That doctrine states that a case arises under federal 6 law if federal law creates the cause of action or if plaintiff’s right to relief necessarily 7 depends on resolution of a substantial question of federal law. See Grable & Sons Metal 8 Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005) (citing Smith v. Kan. City 9 Title & Trust Co., 255 U.S. 180 (1921)). Thus, in Additive Controls & Measurement Sys., United States District Court For the Northern District of California 10 Inc. v. Flowdata, Inc., 986 F. 2d 476, 478 (Fed. Cir. 1993), where the plaintiff brought a 11 Texas state law claim for business disparagement, and the disparaging statement was that the 12 plaintiff infringed on a patent, plaintiff’s right to relief necessarily depended on a substantial 13 question of patent law (whether there was patent infringement). Accordingly, 28 U.S.C. § 14 1338 gave the district court jurisdiction over the case. Id. Referencing Additive Controls, 15 Plaintiff argues that “the application of the assignor estoppel doctrine is a federal question” 16 and that it is “central to each of the Counts in the Complaint.” Opp’n at 15. This is incorrect 17 for two reasons. 18 19 20 First, as just discussed, the assignor estoppel doctrine does not apply to the facts here, and so it cannot be “central to each of the Counts.” See id. Second, a claim supported by alternative theories is not sufficient for federal question 21 jurisdiction unless federal (patent) law is essential to each of those theories. See Christianson 22 v. Colt Indus. Operating Corp., 486 U.S. 800, 810 (1988). The other counts are supported by 23 alternate state law theories. 24 25 Accordingly, artful pleading of the state law claims does not give rise to subject matter jurisdiction. As there is no subject matter jurisdiction, the Court dismisses the sole 26 27 28 11 1 federal cause of action with prejudice,6 and declines to exercise supplemental jurisdiction 2 over the remaining state law claims. 3 B. Sanctions 4 Defendant also moves for sanctions under Federal Rule of Civil Procedure 11. See 5 generally Mot. for Sanctions (“This motion is being brought because the Court has by now 6 presumably dismissed [Plaintiff]’s claims in such a manner as to not award attorney’s fees 7 and costs under California’s anti-SLAPP statute. Even if monies are not awarded pursuant to 8 that statute, however, this Court has the power to award such costs and fees under Rule 11”). 9 Rule 11 provides that, by presenting a pleading to the court, an attorney represents that: United States District Court For the Northern District of California 10 to the best of the person’s knowledge . . . : (1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support . . . 11 12 13 14 Fed. R. Civ. P. 11(b). If Rule 11(b) has been violated, the court may impose an appropriate 15 sanction on the attorney, law firm or party responsible for the violation. Fed. R. Civ. P. 16 11(c). 17 Defendant contends that the original complaint and the FAC “comprised nothing more 18 than legally unwarranted claims,” and that Plaintiff “was fully aware that its claims could not 19 be sustained at least as early as [Defendant’s] briefing on his first motion to dismiss.” Mot. 20 for Sanctions at 3. Defendant argues that he spent “significant time and money defending 21 himself against” such claims, and that “at the very least, [Plaintiff] wished to inconvenience 22 [Defendant] financially and otherwise by bringing him before a court in a foreign country to 23 defend himself against meritless claims.” Id. 24 But complaints that initiate cases are not filed for an improper purpose if they are non25 frivolous. See Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990) 26 27 6 28 Plaintiff has already amended once, and the Court finds that any further amendment would be futile. See Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995) (“Futility of amendment can, by itself, justify the denial of a motion for leave to amend.”). 12 1 (en banc). Regardless of a plaintiff’s motives for filing a complaint, Rule 11 will not apply 2 to a non-frivolous complaint because “the bringing of meritorious lawsuits by private 3 individuals is one way that public policies are advanced.” Id. Whether a complaint is 4 frivolous is objective. See In re Keegan Mgmt. Co., 78 F.3d 431, 434 (9th Cir. 1996). 5 Moreover, Rule 11 “is not intended to chill an attorney’s enthusiasm or creativity in pursuing 6 federal or legal theories.” Advisory Notes to the Fed. R. Civ. P. 11 1982 amendment. See 7 also BE&K Constr. Co. v. NLRB, 536 U.S. 516, 532 (2002) (“Even unsuccessful but 8 reasonably based suits advance some First Amendment interests. Like successful suits, 9 unsuccessful suits allow the public airing of disputed facts.”). Here, although the Court concludes that the FAC should be dismissed – because the United States District Court For the Northern District of California 10 11 sole federal claim is defective – the Court also recognizes that there was little relevant 12 authority on that question. Moreover, although Defendant argued in its first Motion to 13 Dismiss that the case was a SLAPP suit, see generally dkt. 16, it did not argue until the CMC 14 hearing that the Court lacked subject matter jurisdiction over the case, see Opp’n to Mot. for 15 Sanctions (dkt. 40) at 12. Plaintiff was therefore not objectively unreasonable in continuing 16 to assert in the FAC that the assignor estoppel doctrine could support an affirmative federal 17 cause of action. Plaintiff’s position appears to the Court to be a “nonfrivolous argument for 18 extending, modifying, or reversing existing law or for establishing new law,” see Fed. R. 19 Civ. P. 11(b)(2), albeit an argument the Court rejects. Accordingly, the Court denies the Motion for Sanctions. 20 21 22 23 24 IV. CONCLUSION For the foregoing reasons, the Court GRANTS the Motion to Dismiss and DENIES the Motion for Sanctions. IT IS SO ORDERED. 25 26 CHARLES R. BREYER UNITED STATES DISTRICT JUDGE Dated: January 23, 2012 27 28 G:\CRBALL\2011\2793\order re MTD, sanctions.wpd 13

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