[00:00:10] Speaker 02: Okay, the next argued case is number 16-26-77, First Data Corporation against Inselberg. [00:00:40] Speaker 02: Mr. Adams, when you are ready. [00:00:48] Speaker 00: May it please the Court, William Adams for Appellant's First Data and Frank Visignano. [00:00:53] Speaker 00: These cases began when appellants filed a declaratory judgment action in federal court seeking a declaration of non-infringement after Inselberg asserted for over a year that they were infringing patents that Inselberg reported to own. [00:01:07] Speaker 00: This is a classic circumstance in which declaratory relief is appropriate. [00:01:10] Speaker 00: But the district court dismissed the complaint as well as first status declaratory judgment counterclaims in an action that was filed subsequently by Inselberg, ruling that a dispute as the patent ownership required dismissal. [00:01:24] Speaker 00: This was error. [00:01:26] Speaker 03: But even if we accept all of your propositions, and we'll get back to these later, how is there really a case or controversy here when [00:01:39] Speaker 03: They don't claim ownership. [00:01:40] Speaker 03: They don't say that they could sue you today. [00:01:43] Speaker 00: At the time of the complaint, which is the operative time here, and at the time of removal, that was not their position. [00:01:51] Speaker 00: If you look, for example, at pages A879 to A971, they presented a claim chart alleging infringement of the 975 patent. [00:02:02] Speaker 00: They identified first data as an infringing party in correspondence with counsel. [00:02:06] Speaker 00: They were threatening a suit. [00:02:07] Speaker 03: But didn't they say that that was contingent on them nullifying these assignments? [00:02:12] Speaker 00: But at the same time they were making these threats of patent infringement, they were also saying that the assignment was void ab initio. [00:02:19] Speaker 00: They repeatedly referred to the assignment as invalid, null and void, void ab initio. [00:02:24] Speaker 00: But they knew they had to prove that, right? [00:02:27] Speaker 00: They knew they had to prove that. [00:02:29] Speaker 00: But Jim Arnold, isn't he? [00:02:30] Speaker 00: We disagree. [00:02:31] Speaker 00: We don't think Jim Arnold correctly creates ownership as a jurisdictional issue. [00:02:36] Speaker 00: But if you accept even the test, you take away the label, if you accept the test that's in Jim Arnold, Jim Arnold has an exception. [00:02:43] Speaker 00: And that exception is at 109 F3 at 1577, which says, an assignee may bring an infringement suit where the assignment may be declared null and void by operation of law. [00:02:56] Speaker 00: Now, that's distinct. [00:02:58] Speaker 00: from a claim or an assertion that an assignment is voidable and therefore needs to be equitably rescinded. [00:03:05] Speaker 00: There's a distinction between void, that's what the Jim Arnold exception is talking about, and voidable. [00:03:10] Speaker 00: And what my friends on the other side claimed in the lead up to us filing our declaratory judgment action, and even when they filed their subsequent state court claim, they claimed that the assignment agreement and the assignment which is incorporated therein was invalid, null and void, void ab initio, and therefore at A, 640, [00:03:28] Speaker 00: to allege that Inselberg retained an interest in the patents at all times since the assignment. [00:03:34] Speaker 03: Well, parties always confuse the language between void and voidable. [00:03:40] Speaker 03: But they knew they had to go to state court. [00:03:43] Speaker 00: I don't think there's any mistake, respectfully, Your Honor, with respect to void and voidable, because their argument is that the reason the contract, the assignment, is void is because there was a lack of consideration, that the contract was impermissibly indefinite. [00:03:57] Speaker 00: And if that was correct, that means there was no contract. [00:03:59] Speaker 00: There was no contract of assignment. [00:04:01] Speaker 00: And at that point, that's something that Jim Arnold recognizes can be litigated in the same context of a patent infringement claim. [00:04:07] Speaker 03: But the threat still to you was contingent, because they said that they recognized that they would have to ultimately void this thing first. [00:04:15] Speaker 03: I had a death threat from a litigant once, and he threatened to kill me after he was elected president. [00:04:21] Speaker 03: And so the marshal said, well, I don't have to protect you, because it's not a real threat, because it's contingent. [00:04:27] Speaker 03: upon something else happening. [00:04:29] Speaker 00: Certainly, they want a declaration that is void ab initio, but that declaration wouldn't change. [00:04:34] Speaker 00: That would just be a judicial recognition that the assignment was void from the beginning, that it never existed. [00:04:40] Speaker 00: Void ab initio means it did not come into existence. [00:04:42] Speaker 00: It was not a meeting of the minds or there was a contract that was improper for one of consideration, as they've expressly argued. [00:04:51] Speaker 00: This is their pleading. [00:04:52] Speaker 00: This is not only what they said to us in the lead up to our following declaratory judgment action. [00:04:56] Speaker 00: That's what they've said in their pleadings. [00:04:58] Speaker 04: So in your argument, it would depend on what the contingency is, how it is that they're going to show that they're the patent owner. [00:05:04] Speaker 04: Say they weren't arguing that it was void. [00:05:06] Speaker 04: They had some other argument for why it was that they had patent ownership. [00:05:11] Speaker 04: You would have this court delve into what that state law claim is for patent ownership first and see what kind of argument it is. [00:05:20] Speaker 04: And if it's null and void, then we consider the whole case. [00:05:23] Speaker 04: And if it's not, then we don't. [00:05:24] Speaker 00: I think that's what the framework that Jim Arnold sets out. [00:05:28] Speaker 00: But it's making the distinction between null and void. [00:05:31] Speaker 00: Void is a matter of law by operation of law versus voidable. [00:05:35] Speaker 04: What about under Arbaugh? [00:05:37] Speaker 00: In Arbaugh. [00:05:37] Speaker 00: So let's step back. [00:05:38] Speaker 00: Because I think, obviously, Jim Arnold precedes Arbaugh. [00:05:43] Speaker 00: And Arbaugh changes the landscape here. [00:05:46] Speaker 00: Because Arbaugh makes clear that Congress [00:05:49] Speaker 00: must have had a clear statement before a limitation in a statute becomes jurisdictional. [00:05:55] Speaker 00: And so in Jim Arnold, Jim Arnold treated ownership as a jurisdictional requirement. [00:06:01] Speaker 00: But Arvold has a clear statement rule, and so does subsequent decisions in Reed by the Supreme Court, which also interpreted 1338 in the same jurisdictional statute that's at issue here. [00:06:11] Speaker 00: And then in light cubes, this court applied Reed [00:06:14] Speaker 00: to say that the Territorial Act requirement in the PAD Act was not jurisdictional. [00:06:19] Speaker 03: But Arbaugh itself even has an exception, and the exception seems to read almost like the language in Jim Arnold, which talks about where something is wholly insubstantial and frivolous, which is the exact language that was actually used in Jim Arnold, even though it preceded Arbaugh. [00:06:38] Speaker 00: Arbaugh has that exception, doesn't it? [00:06:42] Speaker 00: Certainly. [00:06:43] Speaker 00: As a general matter, you cannot have a rising under jurisdiction based upon a frivolous, non-colorable, purported federal cause of action. [00:06:54] Speaker 00: That's absolutely correct. [00:06:55] Speaker 00: But here, it's certainly colorable that there would have been ownership. [00:07:03] Speaker 00: Because under Jim Arnold, as we just discussed, if the assignment can be null and void, then that would give rise to patent ownership and to a claim. [00:07:12] Speaker 03: I still don't even understand why we're here. [00:07:17] Speaker 03: I mean, they concede that they don't have ownership right now, that they have to have the state court grant them that ownership before they could ever bring an infringement action. [00:07:29] Speaker 03: So why do you want a DEC action? [00:07:33] Speaker 03: if you can fight them on that ownership claim? [00:07:35] Speaker 00: We can fight them on that ownership claim, but we have to go back. [00:07:38] Speaker 00: They said that we were improper at the time that we brought this case into federal court and removed it to federal court and have threatened to sanction us for that basis. [00:07:46] Speaker 00: And we think that perhaps maybe if they're walking away from their prior theories, maybe they'd be entitled to summary judgment. [00:07:52] Speaker 00: But we're on the pleadings here. [00:07:54] Speaker 00: And the pleadings, at the time that we filed the complaint and removed the state court action to federal court, [00:08:00] Speaker 00: It was, they were arguing, and I think it's still frankly in their complaint now, that it is null and void and invalid. [00:08:05] Speaker 03: So are you saying that there's a 285, a rule 11 sanctions hanging over your head? [00:08:10] Speaker 00: They filed a mistake in the federal district court. [00:08:14] Speaker 00: They filed a motion for 285, and I'm not sure if it was 285, but I think it was section 1927, because I take the view it's not a patent case, so it wouldn't be 285. [00:08:21] Speaker 00: It's a 1927 and inherent authority sanctions, which the district court has held in abeyance pending the result of this appeal. [00:08:30] Speaker 00: And so that to us, I mean, obviously subsequent events could change if there was a, could change whether we're entitled to release on our claims. [00:08:40] Speaker 00: But as properly pled based upon Jim Arnold, we think we were entitled to declaratory judgment action, given their year plus worth of threats that we were infringing their patents to the tune of hundreds of millions of dollars of damages. [00:08:52] Speaker 00: And the facts might not support us, the facts we might lose on the merits, but at the pleading stage, we're entitled to, [00:08:59] Speaker 00: We're entitled to proceed. [00:09:02] Speaker 00: I'd also like to talk about an alternative argument, an alternative ground that the other side has raised. [00:09:08] Speaker 00: I think our ball resolves whether ownership is actually jurisdictional or not. [00:09:13] Speaker 00: But the other side has raised Article III standing. [00:09:16] Speaker 00: And admittedly, this court on several occasions has talked about ownership or whether one's a patentee under the Patent Act in standing terms. [00:09:24] Speaker 00: And I think sometimes the court might have actually been speaking in terms of statutory standing, which is the equivalent [00:09:29] Speaker 00: of whether something is an element of the offense and not necessarily Article 3 standing. [00:09:34] Speaker 00: But even if we were to accept that ownership or its patentee status does implicate Article 3 standing, the Supreme Court in Lujan was very clear that you need not prove your standing at the outset. [00:09:51] Speaker 00: It's just like any other element of proof. [00:09:53] Speaker 00: At the pleading stage, you can rely on, this is Lujan, at 504 U.S. [00:09:59] Speaker 00: and 561, general factual allegations of standing, that's okay, it must be accepted as true. [00:10:05] Speaker 00: Once you get to the summary judgment stage, you have to show facts that support your claim to standing, and once you get a judgment, you have to prove that you have standing. [00:10:12] Speaker 00: So even if my friends on the other side were correct that patentee and ownership concepts implicate Article III standing, we've done sufficient here [00:10:21] Speaker 00: because we showed that the other side could have brought their own patent infringement claim because it would have been, because of their allegations that it was null and void. [00:10:30] Speaker 03: Clearly the court could have dismissed under 12b6 because they didn't state that they have ownership of the patent, right? [00:10:37] Speaker 03: So you're just saying because the court went under 12b2 we should reverse even though it's so obvious that they would have to be dismissed anyway? [00:10:45] Speaker 00: I don't, I respectfully disagree, Your Honor, because however [00:10:49] Speaker 00: However you label the ownership issue, whether it's jurisdictional, whether it's an element of a claim or statutory standing, or whether it's an Article III issue, all you have to do at the pleading stage is to have a plausible basis for ownership. [00:11:09] Speaker 00: It doesn't require proof of ownership. [00:11:11] Speaker 00: And in their lead-up to our complaint, and ultimately in their state-filed complaint, they allege that the assignment is invalid, no-invoid, void-admin-issue, which would have allowed them, under Jim Arnold, to bring their own infringement claim. [00:11:27] Speaker 00: And because they could do that, we were entitled to bring our anticipatory declaratory judgment action. [00:11:32] Speaker 00: Otherwise, there's no form. [00:11:34] Speaker 00: Obviously, you can't take these claims to state court. [00:11:36] Speaker 00: You can't take the patent declaratory judgment claim to state court. [00:11:41] Speaker 00: 1338 deprived state court of jurisdiction. [00:11:44] Speaker 00: So there would be nowhere to vindicate these rights at the outset. [00:11:50] Speaker 00: If I turn last before to the remanded claims. [00:11:55] Speaker 00: So everything we've been talking about are claims that my clients filed either initially in federal court or- Well, can we really review that? [00:12:04] Speaker 03: I mean, I know you've tried to argue that we can, but even if we thought the courts [00:12:10] Speaker 03: jurisdictional decision was wrong, wrong on its face. [00:12:15] Speaker 03: We still can't review it, right? [00:12:17] Speaker 00: If in fact it was a jurisdictional decision, that's correct, Your Honor. [00:12:20] Speaker 03: The court said it was based on jurisdiction. [00:12:23] Speaker 00: The court said that it was remanding under 1447C, but it also says in footnote 12 on page 22 of the appendix that it's declined exercise jurisdiction [00:12:36] Speaker 00: or supplemental jurisdiction under 1367. [00:12:38] Speaker 03: Right, but he also said one of the reasons he wouldn't do that is because he didn't have any jurisdiction over the primary. [00:12:45] Speaker 00: Well, for him to have exercised any discretionary, to have any discretion to exercise under 1367C, there has to be some sort of claim within the federal court's original jurisdiction, because supplemental jurisdiction wouldn't even apply. [00:12:58] Speaker 00: If you don't have any original jurisdiction claims, there's nothing for supplemental jurisdiction to attach. [00:13:04] Speaker 00: So I think there's some inconsistency in his opinion. [00:13:06] Speaker 00: I don't think it's as clear, perhaps, as it could be, but this court [00:13:12] Speaker 00: Once you look at that footnote, and once you determine that, in fact, the dismissal of our claims weren't based on subject matter jurisdiction grounds, because ownership is not an issue of subject matter jurisdiction. [00:13:22] Speaker 00: It's an element of the claim. [00:13:24] Speaker 00: Once you recognize that, then it makes sense that why he declined to exercise subject matter jurisdiction. [00:13:29] Speaker 00: He wasn't kicking it. [00:13:30] Speaker 00: He might have cited 1467C, but he wasn't kicking it back to state court. [00:13:35] Speaker 00: Because of a lack of jurisdiction, he was simply declined to exercise subject matter jurisdiction. [00:13:39] Speaker 00: I'll reserve the balance of my time if there are no further questions. [00:13:42] Speaker 02: Thank you, Mr. Adams. [00:13:47] Speaker 02: Mr. Brook. [00:13:49] Speaker 01: Thank you, Judge Newman, and may it please the court. [00:13:55] Speaker 01: This is a little bit of a confusing situation for a lot of the reasons that already came up. [00:13:59] Speaker 01: But at the bottom line, the fact is that there is no threat of an infringement claim that is currently hanging over the head of first data like the Sword of Damocles. [00:14:10] Speaker 01: because there is no present ownership of any patents by my clients. [00:14:14] Speaker 03: Well, you did say to them before they filed exactly what you said in your state court pleading, which is that the assignment was void ab initio. [00:14:24] Speaker 01: The words void ab initio were, I think, incorrectly used by me in a letter before a draft complaint was ever sent, back before even researching case law, before citing the informed commercial code. [00:14:36] Speaker 01: while there were concerns about a lot of things, and before finding the Jim Arnold decision as well, but in the next round of communications and the thing that's been put into the record by First Data, which is a draft complaint, it explicitly cites to Jim Arnold twice, saying, this patent infringement claim is condition upon first getting ownership of the patents, because at the time of the, again, this is settlement talks, this is not a filing in court yet, [00:15:03] Speaker 01: You know, there's things like race judicata you've got to think about because the issue of infringement had been raised. [00:15:08] Speaker 01: There was concerns that maybe if we don't put in a complaint, we would never be able to raise it again later, if and when my clients get titled back to the patents. [00:15:15] Speaker 02: So let's say that the state court decides who owns the patent. [00:15:20] Speaker 02: Then you have to go back to federal court, right, to decide the patent issues. [00:15:26] Speaker 01: If we succeed. [00:15:27] Speaker 01: If not, I'm pretty sure that the... Exactly. [00:15:29] Speaker 02: I've never seen such a bifurcation. [00:15:33] Speaker 02: of the separation of a threshold question, even of ownership, whereby if in fact the owner is established, you then, you have to go to the state court and the ownership, then you go back to the federal on the patent claim. [00:15:47] Speaker 02: Here we are in the federal court with all of the issues together. [00:15:51] Speaker 01: I completely understand and agree. [00:15:53] Speaker 01: And I think that that's because in most patent cases, I think all the patent cases except for Jim Arnold and its progeny, the party that's claiming patent infringement [00:16:03] Speaker 01: has at least asserted a claim of current ownership. [00:16:06] Speaker 02: We've seen enough of those where the question was, was this validly assigned or invalidly or anything else to then separate it and go back and forth between these jurisdictions is something that I think is contrary to all of the premises of the processes of law when there's a federal question. [00:16:30] Speaker 01: Well, the thing is, we actually don't say that the assignment was not effective. [00:16:34] Speaker 01: In fact, one thing that I think has been overlooked here is that the claims that are asserted by my clients in their complaint actually require that the assignment was effective because it's alleged that Frank Bisignano, the CEO of First Data, who was a personal friend of my clients, mismanaged the patents by, among other things, not enforcing them. [00:16:55] Speaker 01: The reason why the issue of first data potentially infringing was first brought to his attention was not as a threat, but as an opportunity to monetize the patent. [00:17:04] Speaker 02: And this complaint seeks to enforce the patent? [00:17:08] Speaker 01: The complaint that was filed by my clients does not seek to enforce the patent in any way, shape, or form. [00:17:14] Speaker 01: That much is clear. [00:17:16] Speaker 01: And I think that there's a very realistic chance that if my clients get title to the patent back so that they could enforce it, they may not [00:17:23] Speaker 01: actually decide to go after First Data at the end of the day. [00:17:26] Speaker 01: One of the main reasons being that after that first draft complaint was issued, First Data's general counsel shoots me a copy of a license agreement between First Data and Frank Bisignano, showing that First Data is licensed to use the patents. [00:17:41] Speaker 01: Well, we can't sue someone for infringement, at least not in good faith in my understanding of things, when they're licensed to use it. [00:17:47] Speaker 01: So that's where the claims morphed, and we focused more on the Uniform Commercial Code, [00:17:53] Speaker 01: that's applicable here for reasons that are somewhat immaterial. [00:17:56] Speaker 01: But because the allegation is that there was mismanagement of property that was taken into possession as collateral for a loan. [00:18:05] Speaker 01: And so those mismanagement claims depend on the fact that Frank Bisognano and Frank Bisognano alone had complete dominion and control over the patents. [00:18:14] Speaker 01: And that was true before we filed the claim and when we filed the claim. [00:18:17] Speaker 01: There's no claim for damages based upon not enforcing the patents [00:18:22] Speaker 01: That's a claim we've made. [00:18:23] Speaker 01: That would not exist if my clients had the ability to enforce the patents themselves. [00:18:29] Speaker 01: The claims that have been made only work because my clients do not own the patents. [00:18:34] Speaker 01: That's why there is no sort of strategic involved here in terms of trying to claim that we don't own it when we really think that we do. [00:18:42] Speaker 01: My clients do not have title. [00:18:44] Speaker 01: If your honors go to the Google. [00:18:46] Speaker 03: So you couldn't sue anyone for patent infringement right now? [00:18:49] Speaker 01: Absolutely no. [00:18:50] Speaker 01: That's correct. [00:18:51] Speaker 01: The first thing that is required to have standing to get a patent infringement claim made is enforceable title to it, at least a tolerable allegation. [00:19:00] Speaker 03: Well, what about Arbaugh? [00:19:01] Speaker 03: I mean, there's lots of overlays here. [00:19:04] Speaker 03: But this court, the trial court, did dismiss under 12-2. [00:19:08] Speaker 03: So it's subject matter jurisdiction. [00:19:11] Speaker 03: Correct. [00:19:12] Speaker 03: And Arbaugh seems to say, you know, courts and parties historically are misunderstanding [00:19:18] Speaker 03: jurisdictional concepts and confusing jurisdictional concepts with elements of claim, prerequisite elements of a claim. [00:19:29] Speaker 03: So why doesn't Arbaugh tell us that Jim Arnold went too far to characterize this as a jurisdictional question? [00:19:37] Speaker 01: I think for the reason that Your Honor went into earlier, you quoted footnote 10, I believe, of the Arbaugh decision where it made the point that was made in Jim Arnold, which is that if there's not [00:19:47] Speaker 01: even a colorable claim, essentially, that there is standing to sue, a federal right that has been implicated, then it's not an issue of, as in Arbaugh, where there's a jurisdictional element. [00:20:00] Speaker 01: This isn't a jurisdictional element, but to have a rising under jurisdiction, the well-pleaded complaint rule is what governs that. [00:20:08] Speaker 01: And under the well-pleaded complaint rule, the basis for a claim and a federal right has to appear. [00:20:13] Speaker 01: That's what Jim Arnold is facing. [00:20:15] Speaker 03: So here's the problem. [00:20:16] Speaker 03: The well-pleaded complaint rule in this case applies to the DEC action. [00:20:21] Speaker 03: So the DEC action says, I've been threatened with an infringement suit, and I've been told that what I thought was my assignment, my right, under these patents doesn't really exist. [00:20:35] Speaker 03: So why isn't that well-pleaded complaint enough to arise under the Declaratory Judgment Act? [00:20:41] Speaker 01: Because that same well-pleaded complaint [00:20:44] Speaker 01: affirmatively alleges that ownership belongs to someone other than the parties who's being sued. [00:20:50] Speaker 01: That's one of the things that's sort of crazy about this case is because they're affirmatively alleging ownership belongs to Frank Bisognano, not to my clients. [00:20:59] Speaker 01: And so they are essentially trying to muddy the waters by trying to say, well, decide all of this at once, even though what they're really asking for is what Judge McNulty characterized as a contingent declaratory judgment. [00:21:12] Speaker 01: Don't declare the patents invalid. [00:21:14] Speaker 01: necessarily, but if you find that they own the patents and not our CEO, then declare them invalid. [00:21:21] Speaker 01: Otherwise, it's this sort of bizarro world of a party asking a court to invalidate his own patents, which is effectively what's sort of happening here in order to try to make what's really a non-ripe claim for patent infringement or non-infringement a basis to get into federal court. [00:21:38] Speaker 01: And to be clear, [00:21:39] Speaker 01: If there's a basis to be in federal court, my clients would be happy to be in federal court. [00:21:43] Speaker 03: Was rightness a jurisdictional question? [00:21:46] Speaker 01: It's part of Article III's standing. [00:21:47] Speaker 01: And that's fundamentally what undergirds a lot of what Judge McNulty's decision is about, even though he framed it in terms of statutory standing. [00:21:56] Speaker 01: Because in the context of this element of ownership of a patent, it is fundamentally different from those issues in Arbaugh, [00:22:04] Speaker 01: and in the Reed case in 2010, because it actually goes to whether there's a federal right at all. [00:22:11] Speaker 04: Didn't the judge, though, say that he wasn't going to address Article III standing? [00:22:15] Speaker 04: I mean, he said that explicitly. [00:22:17] Speaker 01: He said he would use the framework for statutory standing rather than Article III. [00:22:21] Speaker 01: But the thing is, he also said in, I believe it was the last footnote or so of his opinion, that if he were to try to decide these state law claims, [00:22:32] Speaker 01: now or decide notes, decide the federal claims before addressing the ownership issue and the ownership issue gets addressed, he'd be issuing an advisory opinion. [00:22:41] Speaker 01: And that kind of language indicates and implicates Article III necessarily. [00:22:45] Speaker 01: That is the concern. [00:22:46] Speaker 01: Because the thing is here, with our clients surely not able to file a patent infringement claim now or any time before intervening judicial action, vest them with title. [00:22:57] Speaker 02: Did you say the advisory opinion? [00:22:59] Speaker 02: related to ownership or related to infringement? [00:23:03] Speaker 01: I'm not sure I can recall exactly. [00:23:05] Speaker 01: Unless state law issues, this is page Appendix 22, footnote 13, bottom of that paragraph on page 22. [00:23:17] Speaker 01: Unless the state law issues were disposed of, this court would find itself in the position of rendering an impermissible advisory opinion as to the patent issues. [00:23:26] Speaker 02: But he didn't say his [00:23:29] Speaker 02: If he had decided ownership, that that would be advisory? [00:23:32] Speaker 01: No, the ownership would not be advisory. [00:23:34] Speaker 02: The issue of ownership. [00:23:36] Speaker 02: And so let's say ownership is decided in favor of this plaintiff. [00:23:40] Speaker 02: That ends it, right? [00:23:41] Speaker 02: That ends the question as to whether the case is properly in federal court. [00:23:46] Speaker 02: Is it not? [00:23:46] Speaker 01: The only reason I hesitate to answer is because of the two cases. [00:23:51] Speaker 01: I'm not sure which plaintiff, Your Honor, is referring to. [00:23:55] Speaker 01: If the ownership issue is decided in favor of bisognata, [00:23:59] Speaker 01: the first data CEO, then that's it. [00:24:02] Speaker 01: So if that happens, any decision on the issues of invalidity or infringement would have been purely advisory. [00:24:09] Speaker 02: Well, yes. [00:24:10] Speaker 02: So the question before us is whether the district court can make that decision. [00:24:17] Speaker 02: Right. [00:24:17] Speaker 02: On the understanding that if we now again return it to the state court and the decision is made as to who the owner is, then [00:24:26] Speaker 02: The patent issue goes back to the district court, right? [00:24:29] Speaker 01: Potentially. [00:24:30] Speaker 01: I think that there's, there's still issues under Medtronic, or is it Medimu, about whether at that point there would really be any threat of an impending lawsuit. [00:24:41] Speaker 02: Let's say the threat continues. [00:24:43] Speaker 02: That that would be something of course to be argued as to whether there's a threat. [00:24:47] Speaker 02: The question is before whom does it get argued? [00:24:51] Speaker 01: Well that, at that point in time, if, [00:24:53] Speaker 01: If this complaint had an allegation that our clients owned enforceable title to the patents, we wouldn't be here. [00:25:01] Speaker 01: The problem is that the declaratory judgment complaint and the counterclaims as well allege exactly the opposite and then attempt to say that my clients argue that they may have title and they try to rely on this language from Jim Arnold that has been totally dissected and blown out of proportion [00:25:23] Speaker 01: about when an assignment is operative by operation of law, when title to the patent transfers by operation of law. [00:25:33] Speaker 01: Well, by operation of law is stuff like probate proceedings. [00:25:36] Speaker 01: Say two people have ownership of a patent. [00:25:40] Speaker 01: Again, I apologize if I'm not going to get this right. [00:25:43] Speaker 01: I'm not a patent attorney, per se, contracts and such. [00:25:46] Speaker 01: But I believe two people can own a patent. [00:25:49] Speaker 01: And there may be state law issues that govern what happens when one of them dies. [00:25:53] Speaker 01: So operation of law might give one person who didn't have authority to file a patent infringement claim that authority. [00:25:58] Speaker 01: And you don't have to wait for a court to intervene to get jurisdiction over that. [00:26:03] Speaker 01: But the issue in Jim Arnold is really about someone- Why not? [00:26:07] Speaker 02: You'd have to decide the threshold question. [00:26:10] Speaker 02: Yes. [00:26:12] Speaker 02: Assuming that the threshold question has to be asked. [00:26:14] Speaker 02: The question is not how to decide the question, but who decides it when you have a complaint or a declaratory statement [00:26:23] Speaker 02: that plainly arises under the patent statute. [00:26:26] Speaker 01: Yes, Your Honor. [00:26:26] Speaker 01: And that's precisely what the Jim Arnold case has held and has been reaffirmed on multiple occasions, is that when the allegation of ownership is on the face of the complaint, expressly contingent upon an intervening judicial action, regardless of which judge does it, if judicial action is required before title is held, [00:26:49] Speaker 01: then there is no federal question jurisdiction, because applying the well-pleaded complaint rule to it, there is not an allegation of current ownership that appears, and that is a necessary element for a patent infringement claim and for standing. [00:27:01] Speaker 01: So that's why when a complaint explicitly says that we don't have title, but we want to get title, it falls within the Jim Arnold rule. [00:27:12] Speaker 01: And that's what Jim Arnold has held has to be decided by [00:27:16] Speaker 01: either a state court or if there's another basis for federal jurisdiction, another federal court. [00:27:20] Speaker 01: And I believe it was the Nolan case in 2012, this court applied Jim Arnold again to transfer a case to the Fifth Circuit. [00:27:28] Speaker 01: So it goes to the fundamental issue of whether there is a claim arising under the patent laws. [00:27:33] Speaker 03: What's the status of the state court litigation? [00:27:36] Speaker 01: The status of the state court litigation is one of the many reasons why we would be happy to be in federal court if it wasn't for our concern that [00:27:43] Speaker 01: there is just, we don't want to litigate for years and have a vacated judgment. [00:27:47] Speaker 01: But the state court rendered a decision where he did not, the judge assigned to it did not dismiss any claims, but he did make some rulings about the nature of things. [00:27:58] Speaker 01: And fundamentally it favored the appellants in this case by saying that basically we're going to have to appeal that decision before we can possibly get ownership or get reconsideration down the line somehow, which may not happen. [00:28:11] Speaker 01: It's even more contingent now than it was before that my clients will be able to bring a patent infringement claim. [00:28:16] Speaker 01: And coming back to the practicalities of this, which I think certainly undergirded some of what we argued to Judge McNulty and Judge McNulty's decision here, is it makes no sense to require a party who does not yet own a patent to go into full-blown patent litigation, which is extremely expensive, [00:28:38] Speaker 01: And they don't have necessarily the concrete interests that you need. [00:28:42] Speaker 01: That's one of the things that is really a reason why Article III does come into play here, because it's so contingent. [00:28:48] Speaker 04: Can I just go back for a minute to the idea that the district court did not address Article III? [00:28:52] Speaker 04: Just because of your reference to the other footnote. [00:28:54] Speaker 04: I just wanted to point out the footnote 10 on appendix page 20. [00:28:59] Speaker 04: Now there, the court says specifically that it's not considering standing in Article III, because there's a clear marked path. [00:29:08] Speaker 04: through statutory jurisdiction. [00:29:09] Speaker 04: I just want to make sure that you agree with that, right? [00:29:12] Speaker 01: I do. [00:29:13] Speaker 01: And I think that, again, a decision can be affirmed on any basis, even one that the district court did not use. [00:29:19] Speaker 01: And certainly here, we had argued below that this was a matter of standing, and Article III jurisdiction, and the court. [00:29:28] Speaker 04: But did you argue that on appeal as well? [00:29:30] Speaker 01: I'm fairly certain that we did. [00:29:32] Speaker 01: I think that the first lines of our belly brief basically said that even assuming arguing that [00:29:39] Speaker 01: This right here, what did we say? [00:29:44] Speaker 01: Basically, somewhere, I'm fairly sure that we said that there is no federal jurisdiction. [00:29:49] Speaker 01: We have to consider it anyway. [00:29:51] Speaker 04: Sure. [00:29:51] Speaker 04: It's something we have to consider. [00:29:53] Speaker 04: But anyway, it would be more adequacy of the brief than would be the question. [00:29:58] Speaker 01: No, certainly I can understand that. [00:30:00] Speaker 01: But I think that we certainly did argue that, [00:30:05] Speaker 01: Article 3 jurisdiction is missing here because even if the element as a statutory matter is not a jurisdictional element, there always needs to be standing. [00:30:14] Speaker 01: And without ownership, there is no right that could be at issue here. [00:30:19] Speaker 01: There's no injury to that. [00:30:20] Speaker 01: It's precisely because there is no potential benefit to my clients now to litigate patent infringement or validity. [00:30:28] Speaker 01: That's why it's not ripe, is one way to put it. [00:30:31] Speaker 01: You could say there's no standing. [00:30:32] Speaker 02: Well, the risk of repeating ourselves [00:30:34] Speaker 02: You're not saying that the district court is prohibited from deciding ownership, are you? [00:30:42] Speaker 02: Is that your position? [00:30:45] Speaker 02: That because it's a state question, the district court absolutely cannot decide that question? [00:30:51] Speaker 01: I think that if there's a way for that to happen, again, I would like to see that. [00:30:58] Speaker 01: But I think the answer is that I believe that that's not correct, that the judge cannot [00:31:03] Speaker 01: decide state law claims in the absence of a federal basis for jurisdiction. [00:31:08] Speaker 01: And that under Jim Arnold, where a complaint does not allege that the party either asserting an infringement claim or, in this case, being the target of a declaration for non-infringement claim, that that party has the basis to bring an infringement claim sometime soon, that that missing element [00:31:30] Speaker 01: means that there's no well-pleaded complaint. [00:31:33] Speaker 02: The answer to my question is no, the district court cannot decide the question of ownership. [00:31:40] Speaker 02: Is that right? [00:31:40] Speaker 02: I believe that is correct. [00:31:42] Speaker 02: Okay, thank you. [00:31:44] Speaker 02: Any questions for Mr. Brook? [00:31:46] Speaker 02: Anything else? [00:31:46] Speaker 02: Thank you, Mr. Brook. [00:31:48] Speaker 02: Okay, Mr. Adams. [00:31:53] Speaker 00: Just a few points, Your Honor. [00:31:56] Speaker 00: Judge Newman, I think you're absolutely correct. [00:31:58] Speaker 00: This court very often has claims, entertains infringement claims where there's disputes as to ownership. [00:32:06] Speaker 00: They don't bifurcate, have this two-court, two-step process. [00:32:09] Speaker 00: And in fact, Judge Stoll, in your recent decision in Reardon, you recognize [00:32:13] Speaker 00: that an infringement claim is a compulsory counterclaim in a declaratory judgment action regarding ownership. [00:32:21] Speaker 00: Recognizing the factual overlap on factual disputes as to ownership overlap makes it such that an infringement claim in that context is compulsory. [00:32:33] Speaker 03: That was assuming that there was federal jurisdiction over the declaratory judgment action. [00:32:37] Speaker 00: That's correct. [00:32:39] Speaker 00: They would have to [00:32:40] Speaker 00: Well, it would be supplemental jurisdiction as a declaratory judgment action, because the patent infringement claim would have provided a racial jurisdiction, whether it's a counterclaim or not. [00:32:55] Speaker 00: So the disputes over infringement and ownership are commonly litigated in infringement disputes. [00:33:04] Speaker 00: I think Jim Arnold is actually very clear [00:33:08] Speaker 03: notwithstanding my friend's statements, that his clients could have sued, could have brought an infringement claim, and therefore that allowed us to... When you say that's very clear, we have had cases that talk about what operation of law means, and those cases are, for instance, where someone dies and the will [00:33:30] Speaker 03: passes the ownership rights automatically by operation of law, for instance. [00:33:34] Speaker 00: Absolutely. [00:33:34] Speaker 00: But the rest of the quote is not just by operation of law. [00:33:38] Speaker 00: It says, where the assignment may be declared null and void by operation of law. [00:33:43] Speaker 00: And where something is passing, I'm not a probate attorney, but I think where something is passing following death, it's not that the original assignment was null and void, void ab initio. [00:33:53] Speaker 00: It's just by operation of law. [00:33:55] Speaker 00: And so I think what Jim Morrow is saying here, we don't have to have this ridiculous two-step process [00:34:00] Speaker 00: where one side is saying that the assignee or is saying that the assignment is null and void. [00:34:06] Speaker 00: You can go to federal court and vindicate your rights, whether in an infringement action or in an anticipatory declaratory judgment action. [00:34:17] Speaker 00: Counsel also said that the claim to the assignment being void of an issue was very early on. [00:34:27] Speaker 00: But the reality is that, [00:34:29] Speaker 00: Even if they didn't use the void ab initio words later, even in their state-filed complaint, they referred to the assignment agreement as invalid and null and void. [00:34:41] Speaker 00: And if I could read from appendix page 642, which is the state-filed complaint, paragraph 209, it says at the bottom of 642, they allege, even in their state-filed complaint, which comes after we filed our declaratory judgment action, [00:34:57] Speaker 00: But the absence of a valid and fully formed contract constituting an acceptance of collateral and partial satisfaction of secured loan means that plaintiffs have retained an interest in the patents at all times since they were assigned to Bisignano. [00:35:12] Speaker 00: So even at the time they filed their state court complaint, their position was that they retained an interest in the patents at all times. [00:35:22] Speaker 00: That's sufficient to bring us within the Jim Arnold language. [00:35:28] Speaker 00: Turning to standing and Article III issues, I didn't hear any response to my citation to Lujan and how Lujan shows that at the pleading stage, you don't have to prove standing. [00:35:41] Speaker 00: So even if ownership goes to Article III standing, you don't have to prove ownership at the pleading stage. [00:35:47] Speaker 00: Under Lujan, this court is required to accept all well-pleaded allegations of standing. [00:35:53] Speaker 00: And certainly putting together their pre-complained allegations and their allegation in their actual state complaint, to which we responded by filing counterclaims, shows that they considered the ownership issue to be disputed and that they had a culpable claim to ownership. [00:36:11] Speaker 00: Rightness is in the same box. [00:36:13] Speaker 00: And just to close, I understand these facts are unusual. [00:36:17] Speaker 00: It's a complicated back and forth. [00:36:22] Speaker 00: But at bottom, we were responding to threats of patent infringement claim over the course of a year and reasonably went to federal court to vindicate our rights to show that we did not infringe the patents in suit. [00:36:38] Speaker 04: Do you agree with the characterization of the state court action that right now there's been a determination that there [00:36:45] Speaker 04: That the contract was valid, I guess? [00:36:47] Speaker 00: There has been an interlocutory determination that the assignment is valid, which shows obviously we're not forum shopping here. [00:36:53] Speaker 00: We have a good result presently in the state court. [00:36:58] Speaker 00: It's an interlocutory decision, so we don't know where that's going. [00:37:01] Speaker 00: He didn't dismiss any of our claims. [00:37:03] Speaker 00: He held that it's an interlocutory matter that the assignment is valid under New Jersey law. [00:37:10] Speaker 00: And the case of proceeding didn't dismiss any of the claims. [00:37:12] Speaker 00: There's presently discovery going on as to the valuation of the patents, which is an issue we think, frankly, as a wise whole case, should be in federal court because they're doing a valuation of the patents. [00:37:23] Speaker 00: But again, that's all outside the complaint. [00:37:26] Speaker 00: That's all ex post. [00:37:28] Speaker 00: We're here because we reasonably went to federal court and certainly think we have a valid federal claim and most certainly think we shouldn't be sanctioned as they're seeking to do. [00:37:39] Speaker 00: for having to try to avail ourselves of the federal forum to which we think we're entitled. [00:37:43] Speaker 00: If there are no further questions, I ask you to reverse. [00:37:46] Speaker 02: Any more questions? [00:37:47] Speaker 02: OK. [00:37:47] Speaker 02: Thank you both. [00:37:48] Speaker 02: The case is taken under submission. [00:37:50] Speaker 02: That concludes our argued cases for this session. [00:37:55] Speaker ?: All right. [00:38:19] Speaker 02: The honorable court is adjourned from day to day.