[00:00:28] Speaker 05:
The next case for argument is 15-1310, State of Vermont versus MPHJ Technologies.

[00:01:17] Speaker 00:
it's going to be a little bit more i think it's going to be a little bit more

[00:01:39] Speaker 00:
The MVHJ removed the case to state the amended complaint on the basis that the amended complaint sought relief in part under the Vermont's new anti-patent letter law, which I will refer to as the BFA Act.

[00:01:52] Speaker 00:
The District Court concluded that the amended complaint did not seek relief under the BFA Act, and therefore 1442 was not implicated.

[00:01:59] Speaker 00:
He separately concluded that even if it was implicated, that the removal was not timely.

[00:02:03] Speaker 00:
I will present that both of those decisions were an error, and do so by presenting four points.

[00:02:09] Speaker 00:
First, that 1442, specifically subsection A2, does apply to patent cases.

[00:02:14] Speaker 00:
Second, that it specifically applies to this case.

[00:02:17] Speaker 00:
And third, that it not only literally applies, but the policy behind that statute applies.

[00:02:21] Speaker 05:
Can I just ask you, I mean, there's so many questions floating around here, but under Christians, doesn't the fact that Vermont has only, they only have one non-patent theory of proving their case,

[00:02:35] Speaker 05:
then it remains in state, this case should be heard in state court.

[00:02:39] Speaker 05:
And if that is correct, then why, I know we've had a lot of debate about what the complaint covers and what it doesn't cover, but at least an aspect of it is the falsity of the statements in the letters.

[00:02:51] Speaker 05:
So if we conclude at least that one allegation is non-patent related under Christianson, why doesn't that resolve the whole question of whether or not they belong in state court?

[00:03:01] Speaker 00:
Because when the state admitted its complaint,

[00:03:04] Speaker 00:
It retained a request for relief.

[00:03:08] Speaker 00:
They requested an injunction compelling MPHJ to comply with Vermont law in the future.

[00:03:13] Speaker 05:
I thought they amended, they subsequently amended that complaint to remove the injunction request.

[00:03:17] Speaker 00:
They did.

[00:03:18] Speaker 00:
But when they filed the amended complaint, we now look at that complaint as the time that the relief was granted for the amendment.

[00:03:24] Speaker 00:
They retained the statement that they sought an injunction compelling compliance with Vermont law.

[00:03:29] Speaker 00:
They didn't specify the law.

[00:03:30] Speaker 05:
Okay, so let's assume hypothetically that we were to agree with the other side and choose to ignore it to suggest that they've taken that out, the injunction request out of the complaint.

[00:03:40] Speaker 05:
And therefore, let's look at the complaint in the absence of the injunction request.

[00:03:44] Speaker 00:
Can I clarify one point?

[00:03:46] Speaker 00:
Yes.

[00:03:47] Speaker 00:
There were two requests for an injunction in the original complaint.

[00:03:50] Speaker 00:
One request for an injunction was an injunction that we be forbidden from ever sending a letter related to our pass into Vermont ever again.

[00:03:58] Speaker 00:
The second was that we separately be compelled to comply with Vermont law in the future.

[00:04:04] Speaker 00:
Two different requests.

[00:04:05] Speaker 00:
The one they removed at the district court's suggestion to try to preserve federal jurisdiction at the hearing, the one they moved for amendments to remove was the one that would have joined us from ever sending a letter again.

[00:04:15] Speaker 00:
The one they retained in the amended complaint was the one that required or sought an injunction compelling us to comply with Vermont law.

[00:04:23] Speaker 00:
That was kept in that was not removed.

[00:04:26] Speaker 04:
So when you're saying Vermont law, you're saying that by definition that added in any

[00:04:34] Speaker 04:
to any laws that have been passed in the interim and wasn't limited to the Consumer Protection Act that was originally the predicate for the lawsuit?

[00:04:43] Speaker 00:
That's right.

[00:04:44] Speaker 00:
When they say, well, they want to seek an injunction to bellicose to apply with Vermont law and use that generic reference, has they chosen in their amended complaint

[00:04:52] Speaker 00:
to now that the BFA is the law, part of the law of Vermont, and they're aware of that, had they chosen to only seek relief under the BCPA, when they admitted that complaint to remove that one injunction request, they could have amended the second request for relief to say we're only seeking an injunction component compliance with the BCPA.

[00:05:09] Speaker 00:
But they didn't do that, and they could have done that.

[00:05:11] Speaker 00:
Instead, they retained the request for injunction compliance for a law law.

[00:05:16] Speaker 00:
There is no doubt that had we not raised, removed the case again and we were in the state court and were liability to be found because the court ignores this court's law, Globetrotter, that they would be seeking relief for requirements to comply with both the BFA Act and the BCP Act, and they would say then that we were clearly unnoticed with that, so by the time they admitted the complaint, the BFA was part of the law.

[00:05:35] Speaker 05:
Okay, but let me ask you, hypothetically, purely hypothetically,

[00:05:37] Speaker 05:
If in fact it were clear in the complaint, if they said we are only pursuing this under the consumer protection law and not under the, I forget the acronyms, B's, whatever the new law is, would you be satisfied that this case belongs in state court?

[00:05:52] Speaker 00:
I think, no, we think it should have belonged in federal court to begin with.

[00:05:57] Speaker 00:
Right, given where we are.

[00:05:58] Speaker 00:
Given where we are, yes, our case relies upon, here, the removal under 1442A2 as we sit now, relies upon the request for relief seeking to compel an injunction of us complying with Vermont law at the time the amendment complaint was filed.

[00:06:14] Speaker 00:
In other words.

[00:06:16] Speaker 00:
Part of that law.

[00:06:17] Speaker 00:
We don't disagree that the complaint was filed.

[00:06:23] Speaker 00:
But 1442 doesn't talk about what the liability is based on.

[00:06:30] Speaker 00:
It talks about what's the effect of the case.

[00:06:32] Speaker 00:
If you go look at 1442, it requires four things.

[00:06:38] Speaker 00:
A civil action brought to the state court against a property holder, or clearly a property holder, whose title is derived from a federal officer.

[00:06:45] Speaker 00:
There's no doubt that patents have titles and that title is derived from a federal officer.

[00:06:48] Speaker 00:
Where the lawsuit affects, where the successful lawsuit would affect the validity of the U.S.

[00:06:54] Speaker 04:
law.

[00:06:55] Speaker 04:
That's where I want to zero in, because I think that, in fairness, some of the arguments that your opponent make on the first three prongs are a little weak.

[00:07:03] Speaker 04:
But on that fourth prong, I just don't see how this affects the validity of the Patent Act.

[00:07:10] Speaker 00:
Sure, I can explain that in two ways.

[00:07:11] Speaker 04:
Well, it may be that the Patent Act would preempt, but I don't see how it affects its validity.

[00:07:17] Speaker 00:
So the effects of validity, if you look at the cases of Benitez and Tanna Davis and others,

[00:07:22] Speaker 00:
that's been looked at primarily as it affects the law if it impairs the right to a patent owner or frustrates the right to a patent owner or the property owner or the federally-derived property right.

[00:07:31] Speaker 00:
Separately, the state says, no, you have to actually challenge the validity of the law.

[00:07:35] Speaker 00:
We think here we satisfy either test.

[00:07:37] Speaker 00:
We think the correct test, and if you look at the history of this act, the history of this act goes back, you can read Stratford and the Supreme Court case in Mason, which gives some of the history.

[00:07:45] Speaker 00:
This was passed because South Carolina didn't like federal law, which allowed a federal tax revenue officer to seize property and sell it to others.

[00:07:53] Speaker 00:
So under state law, it was provided you could sue the owner of the property and get it transferred back to someone else.

[00:07:58] Speaker 00:
So they were not seeking, that suit did not say, we think that federal law is invalid.

[00:08:03] Speaker 00:
It simply frustrated the purpose of the law, which is to give someone else the rights to the property.

[00:08:08] Speaker 01:
Looking ahead to the future, whichever court you're in, these issues are all

[00:08:15] Speaker 01:
material, are they not, to what happens next?

[00:08:18] Speaker 01:
Let's say that we agree that for one reason or another, you ought to be in the district court.

[00:08:24] Speaker 01:
These state issues, nonetheless, are relevant, are they not?

[00:08:29] Speaker 01:
They're within the court's jurisdiction.

[00:08:31] Speaker 01:
And if you do our return to the state court, nonetheless, the patent issues are as relevant, are they not, to what the state has charged you with?

[00:08:45] Speaker 01:
Or is it entirely a question of which judge makes the decision on the same issue?

[00:08:54] Speaker 00:
In theory, yes.

[00:08:55] Speaker 00:
In theory, they would be considered by both courts.

[00:08:58] Speaker 00:
Congress passed 1442A2 for the express purpose of not letting the state court and state law interfere with rights that are granted by the federal government, the federalism issue, where the state's trying to interfere with those rights.

[00:09:11] Speaker 04:
And so while... Is that really what 1442 was all about?

[00:09:16] Speaker 04:
You've got an ex parte young lawsuit.

[00:09:18] Speaker 04:
Why isn't that sufficient?

[00:09:20] Speaker 00:
Because 1442-82, that under... We have that civil rights case going, but that court has now ruled that the issues that are pending in state court can't be heard in federal court.

[00:09:30] Speaker 00:
Now, what I think that means is we go all the way through the process in state court, and if they violate our First Amendment rights, we will then go to state federal court and proceed from there and come back... So the ex parte young lawsuit has been stayed pending the...

[00:09:40] Speaker 00:
He stayed the case saying that any issues that was in the state court case, or this case that's been remanded, have to be heard in the state court and are actually dismissed without prejudice under Younger.

[00:09:51] Speaker 00:
He retained for the moment the case under the BFA Act, because he has the view that it's not part of this case.

[00:09:57] Speaker 05:
Oh, well that's a pretty relevant consideration.

[00:09:59] Speaker 05:
So he is going forward with the whole preemption issue.

[00:10:02] Speaker 00:
Well, the state is in the mood for reconsideration, and so that's up in the air, but he did keep it for now, subject to the motion for reconsideration.

[00:10:10] Speaker 05:
So what would happen were you to... Because he construed the complaint just only covering the Vermont consumer law.

[00:10:17] Speaker 00:
Right.

[00:10:17] Speaker 00:
And the reason we think that's error is this.

[00:10:19] Speaker 00:
He was focused on what the liability was based upon.

[00:10:22] Speaker 00:
When 1442 focuses on what's the effect of the suit, the effect of the suit would be to allow the state to compel us to comply with the BFA.

[00:10:30] Speaker 00:
And going back to your point, that does impair our rights under the patent law and under the First Amendment.

[00:10:34] Speaker 00:
That's very important.

[00:10:36] Speaker 04:
Wouldn't you have an argument in state court that that broad injunction is not justified based on the liability basis for the complaint?

[00:10:48] Speaker 00:
Yes, but we're entitled to have that heard in federal court, not state court.

[00:10:51] Speaker 00:
That's what Congress intended.

[00:10:53] Speaker 05:
But you are having it heard in federal court, because you just, I mean, the whole issue about the new statute, the BFA, whatever, is being heard in federal court, right?

[00:11:05] Speaker 00:
No, what will happen is if we go back to state court and we were to lose our liability, then the state would then seek relief saying they want us to comply with Vermont law.

[00:11:14] Speaker 00:
That's what their complaint says.

[00:11:16] Speaker 00:
And Vermont law includes the BFA.

[00:11:20] Speaker 00:
That would be what they would say.

[00:11:21] Speaker 00:
And they would say at that time, we were on notice of it.

[00:11:24] Speaker 00:
Now, if they want to sit here and say verbally rewrite their complaint and say, oh, now we're not going to seek that, that's not what you base jurisdiction on.

[00:11:30] Speaker 00:
You base it on the complaints they wrote, not the one they wish they wrote.

[00:11:34] Speaker 00:
But I want to go back to the question that Judge O'Malley asked.

[00:11:38] Speaker 00:
This is the most critical issue in this case.

[00:11:40] Speaker 00:
This court, and every other regional circuit that considers the matter, has reviewed the First Amendment right to petition to protect parties in sending precinct letters from suits like this, unless the conduct was objectively baseless and subjectively baseless.

[00:11:54] Speaker 00:
That's in the law.

[00:11:56] Speaker 00:
That's the First Amendment.

[00:11:57] Speaker 00:
Vermont's position is that this court's rule and globe charter in later cases does not apply in Vermont.

[00:12:02] Speaker 00:
They've expressly said that.

[00:12:03] Speaker 00:
that expressly says they can pursue the state law case in the state court without establishing objective baselesses and subjective baselesses.

[00:12:12] Speaker 00:
The BFA Act, and the reason it directly affects the validity of a law and challenges the validity of U.S.

[00:12:16] Speaker 00:
law, is it's directly related to any patent letters, and it's directly related, and it directly allows you to have liability under that Act without proving the predicate requirement of objective baselesses and subjective baselesses.

[00:12:28] Speaker 00:
You simply have to ask the state when they get up here, do they think they're obligated, in the context of somebody sending a patent letter, to do what Globetrotter says?

[00:12:36] Speaker 00:
Prove as a predicated basis under the First Amendment that the conduct was objectively based.

[00:12:41] Speaker 04:
So ultimately you can assert a First Amendment defense in state court, correct?

[00:12:47] Speaker 04:
Yes, we can certainly assert it.

[00:12:49] Speaker 04:
So just because the state attorney general might be arguing one thing as it relates to the application of the First Amendment doesn't mean either that the state court will adopt that argument or that ultimately the U.S.

[00:13:03] Speaker 04:
Supreme Court would endorse that argument?

[00:13:05] Speaker 00:
Congress says that when you've got federally-derived property rights,

[00:13:08] Speaker 00:
They want those cases heard by federal court.

[00:13:11] Speaker 00:
Just as it's true we could bring them to state court, they can make the argument in federal court.

[00:13:14] Speaker 00:
And Congress says under 1442 they want those arguments heard in federal court, and that's where they should be heard.

[00:13:19] Speaker 00:
And there's a good reason.

[00:13:20] Speaker 00:
This court has a long body of law under Redwood on personal jurisdiction that construes the 14th Amendment Due Process Clause to not subject a patent owner to personal jurisdiction in the state simply because they send a patent demand letter or patent inquiry letter.

[00:13:33] Speaker 00:
We've already had the personal jurisdiction ruling in the state court in Vermont, and they expressly contradicted this law.

[00:13:39] Speaker 00:
We have a decision by the federal district court in the eastern district of Louisiana, which we cite in our briefs, which applied this court's law correctly and found there couldn't be personal jurisdiction over it since they sent a letter inquiring about patent infringement.

[00:13:50] Speaker 00:
Vermont's state court has expressly rejected that and gone the other way.

[00:13:53] Speaker 00:
So we're perfectly legitimate that Congress's fear that it passed in 1442 is going to apply here, that our first amendment rights will not be honored in the state court as they would be in federal court.

[00:14:03] Speaker 00:
Okay, why don't we reserve the rest of your time.

[00:14:14] Speaker ?:
Ms.

[00:14:14] Speaker 02:
Say.

[00:14:15] Speaker 02:
Thank you, the court.

[00:14:16] Speaker 02:
My name is Bridget A. C. I represent the state of Vermont in this case.

[00:14:19] Speaker 02:
NPHJ's second effort to remove this case was untimely.

[00:14:23] Speaker 02:
It was an improper effort to relitigate the first removal and further they have no basis to remove under 1442A2.

[00:14:30] Speaker 05:
To begin with, is it your position that the complaint covers the new statute?

[00:14:35] Speaker 02:
No, it does not, Your Honor.

[00:14:36] Speaker 02:
Are you willing to stipulate that?

[00:14:39] Speaker 02:
We have asserted that repeatedly in filings in multiple courts that we are not asserting a claim under the new statute, and we're not seeking relief under that statute.

[00:14:49] Speaker 04:
And you're not seeking an injunction that would require them to comply with that statute?

[00:14:53] Speaker 02:
No, we're not, Your Honor.

[00:14:54] Speaker 02:
Our lawsuit, as the district court has recognized in both of the decisions in this case, is brought under the Vermont Consumer Protection Act.

[00:15:02] Speaker 02:
It's captioned that way, claims are cited under the Consumer Protection Act.

[00:15:06] Speaker 05:
Well, why didn't it really demand a complaint much earlier to just get rid of this whole issue?

[00:15:14] Speaker 02:
Your Honor, it was decided by the district court

[00:15:19] Speaker 02:
in the context of the first removal in remand, that the case was brought into the Vermont Consumer Protection Act.

[00:15:25] Speaker 02:
It was not known to anyone on the state side that the new statute was considered to be part of the case until the second removal notice was filed.

[00:15:37] Speaker 02:
So it wasn't an issue to be addressed.

[00:15:40] Speaker 02:
The state's position has been consistent on this point.

[00:15:42] Speaker 02:
And again, the district court has agreed with that position twice.

[00:15:45] Speaker 02:
That's not the relief that was given.

[00:15:46] Speaker 01:
So you moved your position, and you repeated it.

[00:15:48] Speaker 01:
In your brief, is there nothing at all to prevent these patentees from proceeding tomorrow with the patent cases in Vermont?

[00:15:59] Speaker 02:
That's right.

[00:16:00] Speaker 02:
There's no relief in place.

[00:16:01] Speaker 02:
There's no order in place against NPHJ that would prevent that.

[00:16:05] Speaker 01:
And no intention at all?

[00:16:08] Speaker 01:
How do you foresee this interaction to work?

[00:16:12] Speaker 01:
It's quite clear, and I think the state has recognized,

[00:16:17] Speaker 01:
that there is a defense to the charges in the statute, that these are straightforward, legitimate federal patent actions.

[00:16:31] Speaker 01:
Is that right?

[00:16:31] Speaker 01:
That evidence has to be part of the state's case.

[00:16:36] Speaker 01:
And again, looking at your reply brief and the insistence that you have no interest whatsoever in intervening or interfering

[00:16:47] Speaker 01:
with a straightforward patent enforcement action in Vermont.

[00:16:52] Speaker 01:
How do you put all of that together?

[00:16:54] Speaker 02:
We put it together this way, Your Honor.

[00:16:56] Speaker 02:
It's our claim, it's been our consistent claim in the case that the communications that MPHJ sent to targets in Vermont contained deceptive, false, and misleading statements, and that those statements violate our state consumer protection law, and that the First Amendment is not a defense to that.

[00:17:12] Speaker 02:
and that they are not, in fact, straightforward patent inquiry letters.

[00:17:15] Speaker 02:
So those MPHA have a defense.

[00:17:18] Speaker 02:
It seeks to raise that defense.

[00:17:20] Speaker 02:
When the case is litigated on the merits, if it's returned to state court, they can litigate their preemption defense.

[00:17:27] Speaker 02:
And we fully expect that the state court will, in the context of either a trial on the merits or summary judgment, vet all of those issues.

[00:17:34] Speaker 04:
But aren't you attempting to prevent them from enforcing their patent rights

[00:17:42] Speaker 02:
We're asking for release from the state court that would require them to comply with the Consumer Protection Act going forward, which would certainly not prevent them from enforcing legitimate patent rights in the state.

[00:17:52] Speaker 04:
But you're saying that the only way they could have enforced a legitimate patent right would be to file a lawsuit?

[00:17:58] Speaker 04:
No, Your Honor.

[00:17:59] Speaker 04:
Because if they send a letter, then they're at risk of having violated some injunction that you've got put in place.

[00:18:08] Speaker 02:
We have not taken that position, Your Honor.

[00:18:09] Speaker 02:
The state court hasn't had a chance to reach the merits.

[00:18:12] Speaker 02:
There's been no vetting of the issue of what perspective injunctive relief would be in place if the state court rules in the state's favor.

[00:18:22] Speaker 02:
It's quite possible that an injunction could permit certain communications and not others.

[00:18:26] Speaker 02:
Again, our allegations are not targeted at the

[00:18:31] Speaker 02:
at the patents themselves, or at what NPHJ considers a straightforward inquiry letter.

[00:18:37] Speaker 02:
Our allegations in the complaint, which we want the opportunity to prove in state court, is that the letters themselves were deceptive and misleading in material respect.

[00:18:46] Speaker 05:
Okay, well, I get that.

[00:18:49] Speaker 05:
But in the complaint, I guess what seems dubious to me is that at least one of the allegations, and this is in paragraph 55,

[00:18:57] Speaker 05:
charges sending letters that threaten patent infringement litigation with no independent evidence that the recipients were infringing its patents.

[00:19:06] Speaker 05:
That seems to me very much a federal patent question and not a deceptive.

[00:19:11] Speaker 05:
I understand that some of the allegations could be construed as being outside of the Patent Act, but this seems to me requiring an inquiry as to the evidence and the validity of the evidence with regard to whether or not there's an appropriate infringement allegation or not.

[00:19:29] Speaker 05:
Isn't that very much a federal Patent Act question?

[00:19:32] Speaker 02:
I disagree, Your Honor, for this reason.

[00:19:33] Speaker 02:
Again, our allegations are directed

[00:19:35] Speaker 02:
communications that MTHJ sent into Vermont.

[00:19:38] Speaker 02:
And what those letters said, which are in the record here, the first letter said, we have identified you as someone who appears to be using the patented technology.

[00:19:46] Speaker 02:
It's almost certain that they're targeted using the technology.

[00:19:50] Speaker 02:
So the allegations that we're getting at are that those statements, which MTHJ didn't have to make,

[00:19:56] Speaker 02:
those statements were false and misleading, if in fact MPHJ did not have the evidence they claim to have.

[00:20:03] Speaker 02:
So it isn't that sending a letter which merely says, is it possible you might be infringing this patent that we have, would violate the Consumer Protection Act.

[00:20:13] Speaker 02:
Our cases targeted at the specific communications that they sent to Vermont, which contained very specific statements.

[00:20:19] Speaker 02:
that represent that some investigation has taken place and that make representations about licenses that have been paid by others and the reasonable price for a license based on that conduct.

[00:20:30] Speaker 02:
If those representations are misleading, we believe that's a violation of state law.

[00:20:35] Speaker 02:
Those issues, however, are not before the court at this time.

[00:20:38] Speaker 02:
What's before the court here is the second removal, which is procedurally flawed in several respects.

[00:20:45] Speaker 02:
First of all,

[00:20:46] Speaker 02:
First removal settled the question of whether there was arising under federal jurisdiction.

[00:20:52] Speaker 02:
And that issue could not be revisited by NPHJ.

[00:20:55] Speaker 04:
Well, from the face of the complaint.

[00:20:58] Speaker 04:
From the face of the complaint, correct?

[00:20:59] Speaker 04:
From the face of the complaint.

[00:21:00] Speaker 04:
After the AIA, there's all different ways to get, including counterclaims, to get federal jurisdiction.

[00:21:07] Speaker 02:
And NPHJ did not assert that in its first removal.

[00:21:09] Speaker 02:
So again, that issue was settled by the first removal.

[00:21:13] Speaker 02:
The only way that a second removal could be permissible is if an amended complaint had added a new basis for removal or so substantially changed the nature of the action, that it was essentially a new action.

[00:21:25] Speaker 02:
And here, all that the state did was remove a request for release.

[00:21:28] Speaker 02:
The amended complaint narrowed the scope of the complaint.

[00:21:32] Speaker 02:
It did not expand it.

[00:21:33] Speaker 02:
So this effort to remove a second time is, first of all, procedurally improper because it's really an effort to re-litigate the first removal question, which is settled and can't be revisited under federal law.

[00:21:45] Speaker 02:
Second, even if the amended complaint had somehow triggered a new basis for removal, and again we contend that it did not, that amended complaint was filed in state court as a matter of right on May 7, 2014, and MPHJ did not file the second removal notice for over four months.

[00:22:04] Speaker 02:
It was well out of time

[00:22:06] Speaker 02:
even if it had a second option.

[00:22:08] Speaker 04:
But there was a pending motion to amends, correct, that ultimately was granted.

[00:22:12] Speaker 04:
There was no order saying that that motion to amend was moved.

[00:22:16] Speaker 02:
No, Your Honor, I disagree.

[00:22:18] Speaker 02:
It is true, of course, that the state court eventually decided to grant a motion that had been filed in the federal court, which was captioned a conditional motion to amend.

[00:22:26] Speaker 02:
But the federal and state

[00:22:28] Speaker 02:
provisions for amended pleadings are different.

[00:22:30] Speaker 02:
The federal provision for amending a pleading has a time limit on it and in federal court we were out of time and needed permission to amend.

[00:22:39] Speaker 02:
In state court you can amend a complaint as a matter of rights until a response of pleading is filed.

[00:22:45] Speaker 02:
When we filed the conditional motion in federal court, we explained in that filing that if it was remanded without the motion being addressed, it would remand with the amendment pending and it would take effect as a matter of course.

[00:22:57] Speaker 02:
When we filed the amended complaint in state court, the filing letter said we were filing as a matter of right under the state rule.

[00:23:06] Speaker 02:
And in addition, MPHJ itself recognized in its own filings in state court that the amended complaint had been filed and was effective and had triggered its obligation to respond.

[00:23:20] Speaker 04:
So you can see that the date chosen by the district court was just wrong, the September.

[00:23:27] Speaker 02:
We disagree with the state court's point on this.

[00:23:29] Speaker 02:
And I think, respectfully, where the state court went wrong, or the federal court went wrong on that point, is that the district court was focused on what the state court judge had thought at the time about the motion.

[00:23:40] Speaker 02:
And I think that's a mistaken analysis.

[00:23:42] Speaker 02:
The question is, did the May 7th filing trigger, as a matter of federal law, MPHJ's removal period, if in fact the amendment complaint had provided a basis for removal?

[00:23:53] Speaker 02:
And clearly, MPHJ realized that.

[00:23:56] Speaker 02:
that the amended complaint was triggered.

[00:23:59] Speaker 02:
There's no suggestion at the state court hearing conference, the transcript of which is also in the record, that any party thought that there was a motion to amend pending.

[00:24:09] Speaker 02:
In fact, MPHA's counsel at that hearing says, we think they need to file a motion to amend, and they haven't.

[00:24:16] Speaker 02:
And the judge says, I think you're wrong, but if you want to move to strike the complaint, go ahead and maybe look at it.

[00:24:23] Speaker 02:
So we think it's uncontroverted based on the record.

[00:24:27] Speaker 02:
that any removal period that could have been connected to the amended complaint expired months before the second removal was filed.

[00:24:35] Speaker 04:
I know that it hasn't been raised on appeal, but I don't understand why the 1454 removal wouldn't have been both timely and appropriate.

[00:24:43] Speaker 02:
The 1454 removal is not appealable.

[00:24:48] Speaker 02:
So that issue is also not for this court.

[00:24:51] Speaker 02:
And NPHJ has acknowledged that in its brief.

[00:24:53] Speaker 04:
I understand that.

[00:24:55] Speaker 04:
Would you agree that if it were appealable, that it would have been both timely and appropriate?

[00:25:01] Speaker 02:
No, Your Honor.

[00:25:01] Speaker 02:
It was neither timely nor appropriate because if NPHJ had wanted to assert counterclaims, it could have done so in connection with the complaint and the first report.

[00:25:10] Speaker 04:
But 1454 depends on the assertion of a counterclaim, not the fact that you might be able to.

[00:25:16] Speaker 02:
There's very little case law on 1454, because it is so new.

[00:25:21] Speaker 02:
But the cases that we have briefed in the district court, because we did brief this issue in the district court, the cases that had been decided had recognized that the assertion of the counterclaim could not be the relevant time frame for removal, because it would promote delay and put the removal process into such uncertainty and in the control of the defendant.

[00:25:40] Speaker 02:
And so the couple of district court cases that we had found at the time of the briefing in district court

[00:25:46] Speaker 02:
I believe, had recognized that it had to be, again, the receipt of a pleading that would have prompted a defendant to ascertain that they had a basis to assert the counterclaim.

[00:25:58] Speaker 02:
And that would be the result that would be consistent with the purposes of the removal statute, which is to settle jurisdictional questions at the outset and quickly.

[00:26:06] Speaker 02:
And here, of course, the jurisdictional issues have been litigated for over two years.

[00:26:10] Speaker 02:
The state has not been able to litigate this case on the merits, despite two remands by the district court.

[00:26:19] Speaker 02:
I'd like to just briefly address the applicability of the federal officer removal statute here as well.

[00:26:26] Speaker 02:
Again, we think there are multiple reasons why the court did not reach that point, but there's no reason to believe that Congress intended this provision of removal law to have anything to do with patent issues.

[00:26:40] Speaker 02:
To begin with, sort of the end of the statute first, the statute does require

[00:26:45] Speaker 02:
that the underlying litigation affects the validity of a federal law.

[00:26:49] Speaker 02:
And again, here, as the district court correctly held, the dispute in this case about the relevance of federal law is a preemption question.

[00:26:57] Speaker 02:
It's a question of what federal law applies.

[00:26:59] Speaker 02:
Our complaint does not challenge the validity of any federal law, much less federal patent law.

[00:27:05] Speaker 04:
But you don't really claim that these aren't, that patent rights aren't rights conferred by a federal officer, do you?

[00:27:14] Speaker 02:
We dispute that this statute, which applies to property holders who derive title from a federal officer, was intended to sweep in patent owners.

[00:27:24] Speaker 04:
But on its face, it does, doesn't it?

[00:27:27] Speaker 04:
I mean, your argument that somehow they got their title from someone else because they got their patent later, that seems a little strange.

[00:27:34] Speaker 04:
I mean, the patent itself is what was issued as the right that exists.

[00:27:38] Speaker 04:
And it derives from the act of a federal officer, correct?

[00:27:43] Speaker 02:
Again, Your Honor, I think the statute uses particular language about the title derived from a federal officer.

[00:27:52] Speaker 02:
And I think it would be really quite unlikely that Congress would have used a phrase like that, which is so rooted in property law, in real property law, and in the statute whose history clearly related to the conveyance of real property under the color of federal law.

[00:28:08] Speaker 02:
to apply to intellectual property rights.

[00:28:11] Speaker 02:
In addition, ownership interests in intellectual property rights are generally a matter of state law.

[00:28:17] Speaker 02:
Although the rights have an origin in federal law, to describe the title in intellectual property as deriving from a federal officer is quite strange.

[00:28:27] Speaker 02:
And I think that taken together with the fact that other provisions of federal law provide a basis for removal when cases arise under the patent law.

[00:28:35] Speaker 02:
And indeed, now there's 1454, which is specifically addressed to this issue.

[00:28:39] Speaker 02:
That to interpret this statute, which applies to federal officers and property derived from federal officers as somehow sweeping in patent issues, would be an unreasonable reading of the statute.

[00:28:55] Speaker 02:
Thank you.

[00:29:00] Speaker 00:
I'd like to make just a few points in rebuttal.

[00:29:03] Speaker 00:
First of all, the issue of whether we were timely, it's really decided by the fact that the state court granted their motion, and that's clear to the day from which it'd be triggered.

[00:29:11] Speaker 00:
We don't agree with what they say about what happened in the hearing before, and we think you can read in context and see what happened there.

[00:29:17] Speaker 00:
But it's decided by the fact that the court didn't dismiss the motion as moot, they granted it, and they waived their right to amend as a right once they followed the motion.

[00:29:24] Speaker 00:
We decided case law that effectively didn't respond.

[00:29:26] Speaker 00:
As to 1454, this clearly was removable under 1454 when follows counterclaims.

[00:29:31] Speaker 00:
The problem is that we read 1447D.

[00:29:34] Speaker 00:
It doesn't include, as one of the things that's repeatable, a decision to remand when it's removed into 1454.

[00:29:39] Speaker 00:
We think Congress overlooked that in the last reform law.

[00:29:42] Speaker 00:
We would suggest to the court that perhaps you'd recommend that we fix, but we didn't see that it was repeatable from what we could tell.

[00:29:47] Speaker 00:
I want to turn to the substance of the case.

[00:29:50] Speaker 00:
Vermont says they're not trying to affect legitimate patent owners' rights.

[00:29:53] Speaker 00:
And they say, we've made deceptive statements.

[00:29:55] Speaker 00:
Let's look at what their complaint actually says.

[00:29:57] Speaker 00:
Just go read paragraphs 56 and 57.

[00:30:00] Speaker 00:
Their allegation is that we violated Vermont consumer law because we sent letters inquiring about patent infringement to companies that were too small.

[00:30:07] Speaker 00:
There's no such defense as too small in the patent law.

[00:30:10] Speaker 00:
They say we inquired about patent infringement without having sufficient proof of the infringement.

[00:30:15] Speaker 00:
By definition, all we could have was a reasonable suspicion these companies were infringing and send an inquiry letter as this court required in June.

[00:30:21] Speaker 00:
We couldn't have proof of the infringement before sending a letter inquiring us to infringement.

[00:30:25] Speaker 00:
They say it violates Vermont law to use a license and subsidiary to license your patent.

[00:30:31] Speaker 00:
It's clearly something permitted by patent law.

[00:30:34] Speaker 00:
They say that you can't threaten suit unless you actually sue.

[00:30:37] Speaker 00:
Now we did intend to sue the people who were infringed, so we got disrupted by this case.

[00:30:41] Speaker 00:
But this court has an express case.

[00:30:43] Speaker 00:
Golon and GP Industries, one of the two, that specifically says you can threaten to sue even if you don't intend to sue in certain circumstances, which would apply here.

[00:30:52] Speaker 00:
Finally, this deceptive statement about the royalty.

[00:30:55] Speaker 00:
We had licenses with other companies based on the savings model of the royalty up to $1,200 per employee for a particular company.

[00:31:03] Speaker 00:
The average royalty had been $833 per employee.

[00:31:07] Speaker 00:
What the letter says, and you can read it, it says we've concluded that a fair royalty is $1,050 per employee.

[00:31:13] Speaker 00:
The state's position is that's deceptive to say we conclude that a fair roll is $1,050 an employee because you've averaged $833 per employee.

[00:31:20] Speaker 00:
Plainly, that's not deceptive.

[00:31:22] Speaker 00:
Fundamentally, the state says they can send some kind of letters and say some things and not others.

[00:31:25] Speaker 00:
They're editing a letter.

[00:31:27] Speaker 00:
That's what the First Amendment rights petition is about.

[00:31:29] Speaker 00:
The court reads Globetrotter and Direct TV, which is Sosa versus Direct TV, and Mac News.

[00:31:34] Speaker 00:
You'll see that the policy is to allow people the immunity and the freedom to send patent letters to encourage people to send letters and not litigate first.

[00:31:41] Speaker 00:
And that policy is violated if you don't protect our first member rights, which we think 1448-2 is meant to do.

[00:31:48] Speaker 03:
Thank you.

[00:31:49] Speaker 03:
Thank both counsels.

[00:31:50] Speaker 03:
The case is submitted and that concludes our proceedings for this morning.

[00:31:54] Speaker 03:
All rise.

[00:31:57] Speaker 03:
The Honorable Court is adjourned until tomorrow morning at 10 o'clock a.m.