Glassey et al v. Symmetricom, Inc.

Filing 40

ORDER TO SHOW CAUSE WHY CASE SHOULD NOT BE DISMISSED FOR LACK OF SUBJECT MATTER JURISDICTION. Order to Show Cause Hearing set for 5/14/2014 01:00 PM. Plaintiffs' Show Cause Response due by 4/30/2014. Case Management Conference continued from 4/23/2014 to 5/14/2014 01:00 PM in Courtroom A, 15th Floor, San Francisco.. Signed by Judge Nathanael M. Cousins on 4/18/2014. (nclc2, COURT STAFF) (Filed on 4/18/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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TODD S. GLASSEY and MICHAEL E.

13 MCNEIL,
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Plaintiffs,
v.

16 SYMMETRICOM, INC.,
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Case No. 13-cv-04662 NC
ORDER TO SHOW CAUSE WHY
CASE SHOULD NOT BE
DISMISSED FOR LACK OF
SUBJECT MATTER
JURISDICTION

Defendant.

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This case arises from a dispute over a settlement agreement that divided intellectual

21 property rights between plaintiffs and defendant’s predecessor company. According to the
22 complaint, the settlement agreement at issue provided that plaintiffs (Glassey and McNeil)
23 would own “Phase II Technology,” which plaintiffs invented, but that Datum (defendant
24 Symmetricom’s predecessor in interest) would own a U.S. patent application that
25 incorporated some Phase II Technology. The U.S. patent application ultimately issued as
26 U.S. Patent No. 6,370,629 (“the ’629 Patent”). Plaintiffs assert five claims against
27 Symmetricom, including two breach of contract claims, an unjust enrichment claim, a
28 tortious interference with prospective economic advantage claim, and a declaratory
Case No. 13-cv-04662 NC
OSC RE: SUBJECT MATTER
JURISDICTION

1 judgment claim. Plaintiffs allege that Symmetricom breached the settlement agreement (1)
2 by rewriting the patent application for the ’629 Patent, such that it covered Phase II
3 Technology never contemplated by the settlement agreement, and (2) by failing to maintain
4 foreign patent applications that covered Phase II Technology. Plaintiffs further allege that
5 the patent rewrite unjustly enriched Symmetricom and that Symmetricom interfered with
6 plaintiffs’ attempts to license Phase II Technology by advising prospective licensees that
7 plaintiffs did not have rights to any of the intellectual property embodied in the ’629 Patent.
8 Plaintiffs seek a declaratory judgment that delineates which parts of the ’629 Patent read on
9 Phase II Technology not contained in the pre-settlement patent application for the ’629
10 Patent. Symmetricom filed a motion to dismiss, which is currently pending before the
11 Court. Because plaintiffs assert only state law claims and the Declaratory Judgment Act is
12 not an independent source of federal subject matter jurisdiction, the Court orders plaintiffs
13 to show cause in writing why the case should not be dismissed for lack of subject matter
14 jurisdiction.
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Federal courts are courts of limited jurisdiction and are presumptively without

16 jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A
17 federal court may dismiss an action on its own motion if it finds that it lacks subject matter
18 jurisdiction over the action. Fiedler v. Clark, 714 F.2d 77, 78-79 (9th Cir. 1983); see also
19 Fed. R. Civ. P. 12(h)(3) (“If the court determines at any time that it lacks subject-matter
20 jurisdiction, the court must dismiss the action.”). District courts have federal question
21 jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the
22 United States[,]” 28 U.S.C. § 1331, including “civil action arising under any Act of
23 Congress relating to patents,” 28 U.S.C. § 1338. Federal courts have diversity jurisdiction
24 over “all civil actions where the matter in controversy exceeds the sum or value of $75,000 .
25 . . and is between citizens of different states[.]” 28 U.S.C. § 1332(a).
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Because plaintiffs allege in their complaint that all parties are citizens of California,

27 the Court does not have diversity jurisdiction over this action. Dkt. No. 1 at 1. Plaintiffs
28 assert that the Court has federal question jurisdiction under 28 U.S.C. § 1338 because “the
Case No. 13-cv-04662 NC
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JURISDICTION

2

1 matters in [the case] relate to patents.” Id. at 2. Plaintiffs further assert that the Court has
2 supplemental jurisdiction under 28 U.S.C. § 1367 to hear the state law claims. Id.
3

“For statutory purposes, a case can ‘aris[e] under’ federal law in two ways.” Gunn v.

4 Minton, 133 S. Ct. 1059, 1064 (2013). First, “a case arises under federal law when federal
5 law creates the cause of action asserted.” Id. Second, “[e]ven where a claim finds its
6 origins in state rather than federal law[,]” the Supreme Court has identified “a ‘special and
7 small category’ of cases in which arising under jurisdiction still lies.” Gunn, 133 S. Ct. at
8 1064-65. “[F]ederal jurisdiction over a state law claim will lie if a federal issue is: (1)
9 necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in
10 federal court without disrupting the federal-state balance approved by Congress.” Id. at
11 1065. A federal issue is substantial only if it is important “to the federal system as a
12 whole.” Id. at 1066. “[I]t is not enough that the federal issue be significant to the particular
13 parties in the immediate suit[.]” Id.
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Federal law does not create the causes of action plaintiffs assert. Breach of contract,

15 unjust enrichment, and tortious interference are state law claims. Further, while the
16 Declaratory Judgment Act provides for a federal remedy, it is not a federal cause of action
17 that can serve as an independent jurisdictional basis. Fiedler v. Clark, 714 F.2d 77, 79 (9th
18 Cir. 1983) (“The Declaratory Judgment Act does not provide an independent jurisdictional
19 basis for suits in federal court. It only permits the district court to adopt a specific remedy
20 when jurisdiction exists.” (citations omitted)). Therefore, plaintiffs must demonstrate that
21 their case falls into that “special and small category” of cases where a federal court has
22 jurisdiction even though federal law does not create the causes of action asserted.
23

Plaintiffs’ complaint appears to argue that this case arises under federal law because

24 the Court needs to construe patent claims in order to adjudicate the dispute. Dkt. No. 1 at 3.
25 Earlier cases have held that state law claims requiring a determination of patent
26 infringement arose under federal law. See, e.g., Additive Controls & Measurement Sys.,
27 Inc. v. Flowdata, Inc., 986 F.2d 476, 478 (Fed. Cir. 1993) (“Adcon’s right to relief
28 necessarily depends upon resolution of a substantial question of patent law, in that proof
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1 relating to patent infringement is a necessary element of Adcon’s business disparagement
2 claim.” (internal quotation marks omitted)). However, it is not clear that claim construction
3 gives rise to a substantial federal issue after the Supreme Court’s decision in Gunn. The
4 Supreme Court in Gunn noted that even when adjudication of a state law claim could have a
5 preclusive effect on future patent litigation, that is not enough to establish federal arising
6 under jurisdiction. 133 S. Ct. at 1067-68 (“[E]ven assuming that a state court’s case-within7 a-case adjudication may be preclusive under some circumstances, the result would be
8 limited to the parties and patents that had been before the state court. Such ‘fact-bound and
9 situation-specific’ effects are not sufficient to establish federal arising under jurisdiction.”).
10 Subsequent cases seem to reach the same conclusion. See Forrester Envtl. Servs., Inc. v.
11 Wheelabrator Techs., Inc., 715 F.3d 1329, 1335 (Fed. Cir. 2013) (“Wheelabrator argues
12 that this case nevertheless raises a substantial question of federal patent law because
13 ‘resolution of the claim construction . . . issues necessarily raised by [Forrester’s] Amended
14 Petition would have . . . potential preclusive effects in any future litigation involving the
15 patents-in-issue.’ But the Supreme Court rejected a related argument in Gunn, concluding
16 that any such collateral estoppel effect ‘would be limited to the parties and patents that had
17 been before the state court,’ and that ‘[s]uch “fact-bound and situation-specific” effects are
18 not sufficient to establish federal arising under jurisdiction.’” (citations omitted)); see also
19 MDS (Canada) Inc. v. Rad Source Techs., Inc., 720 F.3d 833, 841-43 (11th Cir. 2013)
20 (holding that district court did not have federal arising under jurisdiction to adjudicate
21 breach of contract claim requiring claim construction and patent infringement
22 determination). Accordingly, plaintiffs must explain how their breach of contract, unjust
23 enrichment, and tortious interference claims give rise to federal subject matter jurisdiction
24 in light of the principles set forth in Gunn and subsequent case law.
25

In addition, if plaintiffs contend that their declaratory judgment claim gives rise to

26 federal question jurisdiction, they must explain the basis for this assertion. Plaintiffs seek a
27 declaration that delineates which parts of the ’629 Patent read on Phase II Technology not
28 contained in the pre-settlement patent application for the ’629 Patent. But “the declaratory
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nt
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fer
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lf.”
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Postal Serv., 768
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1 judgmen statute do not conf jurisdict by itsel Janake v. U.S. P
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2 F.2d 109 1093 (9th Cir. 1985 And to the extent t plaintif assert ow
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3 the ’629 patent, pat owners is not a federal iss
28735, at *3 (Fed. Cir. Mar. 26, 20
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014) (“[Pat
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6 declaratory judgme claim if “the declar
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8 (9th Cir. 1985). Ac
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12 plaintiff to show cause in wri
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13 case for lack of sub
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14 after the plaintiffs file their res
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15 hearing on the orde to show cause on Ma 14, 2014 at 1:00 p. The cas managem
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16 conferen set for April 23, 20 is cont
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Th Court wi defer ruling on the pending mo
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19 threshol jurisdictio questio
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IT IS SO OR
T
RDERED.

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Date: April 18, 2014

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____
__________
__________
_____
Nath
hanael M. C
Cousins
Unit States M
ted
Magistrate J
Judge

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