Allied Machine & Engineering Corporation v. Competitive Carbide, Inc.

Filing 63

Opinion and Order. Third party Defendants Joseph Nuzzi and Rolf Kraemer's Motion to Dismiss (Related doc # 49 ) is granted. Judge Christopher A. Boyko on 3/22/2013. (H,CM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

ALLIED MACHINE & ENGINEERING )
CORPORATION,
)
Plaintiff,
)
)
vs.
)
)
COMPETITIVE CARBIDE, INC.,
)
)
Defendant.
)

CASE NO. 1:11CV2712
JUDGE CHRISTOPHER A. BOYKO
OPINION AND ORDER

CHRISTOPHER A. BOYKO, J.:
This matter comes before the Court upon Motion (ECF DKT #49) of Third-Party
Defendants, Joseph P. Nuzzi and Rolf H. Kraemer, to Dismiss pursuant to Fed. R. Civ. P.
12(b)(1). Upon consideration of the Motion, Response, Exhibits, and applicable law, the
Court GRANTS Third-Party Defendants’ Motion to Dismiss.
I. BACKGROUND
On December 14, 2011, Allied filed its Complaint for Patent Infringement. Allied
alleges it is the owner by assignment of U.S. Patent No. 7,942,616 (‘616 Patent), issued on
May 17, 2011, to the inventors, Joseph P. Nuzzi and Rolf H. Kraemer, and entitled Drilling
Tool and Method for Producing Port Seals. Further, Allied alleged Competitive Carbide, Inc.

(“Competitive”) made, used, sold, offered for sale, and/or imported into the United States drill
tools, under the name “Helmet Head,” that infringe upon one or more claims of the ‘616
Patent.
On January 27, 2012, Competitive filed its Answer with defenses of, inter alia,
invalidity and unenforceability. Competitive also filed a Third-Party Complaint, seeking a
Declaratory Judgment for Inequitable Conduct during prosecution of the ‘616 Patent in the
United States Patent and Trademark Office (USPTO) against inventors and Third-Party
Defendants Nuzzi and Kraemer. Such a finding might ultimately invalidate the ‘616 Patent
and lead to a decision in favor of Competitive. Third-Party Defendants now file this Motion
to Dismiss pursuant to Fed. R. Civ. P. 12(b)(1), asserting that they assigned their rights to the
‘616 Patent to Allied, and therefore, no controversy exists with respect to Competitive.
II. LEGAL STANDARDS
A. Fed. R. Civ. P. 12(b)(1) Standard
Fed. R. Civ. P. 12(b)(1) states in pertinent part:
Every defense, in law or fact, to a claim for relief in any pleading, whether a
claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the
responsive pleading thereto if one is required, except that the following defenses
may at the option of the pleader be made by motion: (1) lack of jurisdiction over
the subject matter . . . .
When challenged on a motion to dismiss, it is plaintiff’s burden to prove the existence of
subject matter jurisdiction. Rogers v. Stratton Indus., 798 F.2d 913, 915 (6th Cir.1986). Such
challenges are brought by two different methods: (1) facial attacks and (2) factual attacks.
See, e.g., United States v. Ritchie, 15 F.3d 592, 598 (6th Cir.1994).
“A facial attack is a challenge to the sufficiency of the pleading itself. On such a
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motion, the court must take the material allegations of the petition as true and construed in the
light most favorable to the nonmoving party.” Walters v. Leavitt, 376 F.Supp.2d 746, 752
(E.D. Mich 2005), citing Scheuer v. Rhodes, 416 U.S. 232, 235-37 (1974). “A factual attack,
on the other hand, is not a challenge to the sufficiency of the pleading’s allegations, but a
challenge to the factual existence of subject matter jurisdiction. On such a motion, no
presumptive truthfulness applies to the factual allegations, . . . and the court is free to weigh
the evidence and satisfy itself as to the existence of its power to hear the case.” Walters at
752.
B. Declaratory Judgment Standard
It is well-settled that federal courts may only adjudicate actual cases or controversies.
U.S. Const., Art. III, Section 2. In fact, that principle is reiterated in the Declaratory Judgment
Act, which states: “[i]n a case of actual controversy within its jurisdiction . . . any court of the
United States . . . may declare the rights and other legal relations of any interested party
seeking such declaration.” 28 U.S.C. § 2201. Nonetheless, the Supreme Court has
emphasized the discretionary nature of the Act. In Public Affairs Associates, Inc. v. Rickover,
369 U.S. 111, 112 (1962), the highest court opined: “‘The Declaratory Judgment Act was an
authorization, not a command. It gave the federal courts competence to make a declaration of
rights; it did not impose a duty to do so.’ Brillhart v. Excess Ins. Co., 316 U.S. 491, 494, 499
[62 S.Ct. 1173, 1177-78, 86 L.Ed. 1620 (1942)].” Put another way, the declaratory judgment
statute “is an enabling Act, which confers a discretion on the courts rather than an absolute
right upon the litigant.” Green v. Mansour, 474 U.S. 64, 72 (1985). In exercising its
discretion, a federal court must only pass judgment upon real, not uncertain nor hypothetical,
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disputes. As the Supreme Court noted in Golden v. Zwickler, 394 U.S. 103, 108 (1969),
quoting earlier decisions:
[T]he federal courts established pursuant to Article III of the Constitution do not
render advisory opinions. For adjudication of constitutional issues ‘concrete legal
issues, presented in actual cases, no abstractions’ are requisite. This is as true of
declaratory judgments as any other field. United Public Workers of American
(C.I.O.) v. Mitchell, 330 U.S. 75, 89, 67 S.Ct. 556, 564, 91 L.Ed. 754 (1947). The
difference between an abstract question and a ‘controversy’ contemplated by the
Declaratory Judgment Act is necessarily one of degree, and it would be difficult,
if it would be possible, to fashion a precise test for determining in every case
whether there is such a controversy. Basically, the question in each case is
whether the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a declaratory
judgment. Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273,
61 S.Ct. 510, 512, 85 L.Ed. 826 (1941).
In patent cases, the existence of a case or controversy “must be evaluated on a claimby-claim basis.” Jervis B. Webb Co. v. So. Sys., Inc., 742 F.2d 1388, 1399 (Fed. Cir. 1984).
A party seeking a declaratory judgment must establish that jurisdiction “existed at the time the
claim for declaratory relief was filed and that it has continued since.” Benitec Austl., Ltd. v.
Nucleonics, Inc., 495 F.3d 1340, 1344 (Fed. Cir. 2007). In MedImmune, Inc. v. Genentech,
Inc., 549 U.S. 118, 127 (2007), the Supreme Court held that, while there is no bright-line test
for deciding whether a declaratory judgment action constitutes an actual controversy, what is
required is:
that the dispute be definite and concrete, touching the legal relations of parties
having adverse legal interests; and that it be real and substantial and admit of
specific relief through a decree of a conclusive character, as distinguished from
an opinion advising what the law would be upon a hypothetical state of facts.
More importantly, MedImmune “does not stand for the proposition that an Article III case or
controversy exists automatically whenever a competitor desires to mount a validity
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challenge.” Streck, Inc. v. Research & Diagnostic Systems, Inc., 665 F.3d 1269, 1284 (Fed.
Cir. 2012).
III. ANALYSIS
Third-Party Plaintiff, Competitive, filed a claim for Declaratory Judgment against
Third-Party Defendants, Nuzzi and Kraemer, for Inequitable Conduct during prosecution of
the ‘616 Patent in the USPTO. Nuzzi and Kraemer argue that Competitive lacks subject
matter jurisdiction to assert such a claim because there is no present controversy as is required
for declaratory judgment actions. In support of this argument, Nuzzi and Kraemer state that
they “have not asserted any claims against Carbide, and that each have assigned their rights in
the asserted Patents to Allied.” ECF DKT #49, at 3. In response, Competitive provides three
reasons why the present case presents a substantial and concrete controversy between
Competitive, and Nuzzi and Kraemer: (1) Nuzzi and Kraemer violated the law; (2) Nuzzi and
Kraemer, not their agents, are liable to Competitive for damages; and (3) Nuzzi and Kraemer
are the ones who have harmed Competitive by their inequitable conduct, not necessarily
Allied alone. ECF DKT #54, at 5-6.
As provided in Golden, “the question in each case is whether the facts alleged, under
all the circumstances, show that there is a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.” Golden, 394 U.S. at 108 (emphasis added). Because invalidity is a
defense to a patent infringement claim, not an action in itself, and Nuzzi and Kraemer
assigned their rights in the ‘616 Patent to Allied, Competitive, and Nuzzi and Kraemer cannot
have adverse legal interests. Therefore, Competitive’s arguments regarding Nuzzi and
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Kraemer’s inequitable conduct may all have merit, but such arguments are with respect to
invalidating the Patent asserted against them by Allied, not Nuzzi and Kraemer. That is not to
say, however, that Nuzzi and Kraemer lack any legal interest in the determination of their
inequitable conduct. Nuzzi and Kraemer have a substantial legal interest if, in fact, the ‘616
Patent is eventually invalidated, but only with respect to any action Allied might take against
them as a result. This jurisdictional decision also does not negate the important role Nuzzi
and Kraemer might play during current and future litigation between Competitive and Allied,
because their conduct is central to the questions involved. In light of the above, Defendant
Competitive, and Third-Party Defendants, Nuzzi and Kraemer, do not have adverse legal
interests as is required for subject matter jurisdiction in declaratory judgment actions.
IV. CONCLUSION
For the foregoing reasons, this Court GRANTS Third-Party Defendants’ Motion to
Dismiss pursuant to Fed. R. Civ. P. 12(b)(1).
IT IS SO ORDERED.
s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
Dated: March 22, 2013

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