Semiconductor Energy Laboratory Co. v. Nagata ( 2013 )

United States Court of Appeals
for the Federal Circuit
______________________
SEMICONDUCTOR ENERGY LABORATORY CO.,
LTD.,
Plaintiff-Appellant,
v.
YUJIRO NAGATA,
Defendant-Appellee.
______________________
2012-1245
______________________
Appeal from the United States District Court for the
Northern District of California in No. 11-CV-2793, Judge
Charles R. Breyer.
______________________
Decided: February 11, 2013
______________________
LEIGH C. TAGGART, Rader, Fishman & Grauer,
PLLC, of Bloomfield Hills, Michigan, argued for plaintiff-
appellant. With her on the brief were R. TERRANCE RADER
and JAMES F. KAMP.
JULIE S. TURNER, Turner Boyd, LLP, of Mountain
View, California, argued for defendant-appellee. With
him on the brief was JAMES W. BEARD.
______________________
2 SEMICONDUCTOR ENERGY v. YUJIRO NAGATA
Before LOURIE, BRYSON, * and WALLACH, Circuit Judges.
LOURIE, Circuit Judge.
Semiconductor Energy Laboratory Co., Ltd. (“SEL”)
appeals from the order of the United States District Court
for the Northern District of California dismissing SEL’s
complaint with prejudice pursuant to Fed. R. Civ. P.
12(b)(1) for lack of subject matter jurisdiction under 28
U.S.C. § 1338(a) and declining to exercise supplemental
jurisdiction over a number of state law claims. Semicon-
ductor Energy Lab. Co. v. Nagata, No. 11-02793, 2012 WL
177557, at *8 (N.D. Cal. Jan. 23, 2012). Because the
district court did not err in holding that there is no feder-
al cause of action based on assignor estoppel and did not
abuse its discretion in declining supplemental jurisdiction
over the state law claims, we affirm.
BACKGROUND
SEL owns U.S. Patent 6,900,463 (the “’463 patent”),
which names Dr. Yujiro Nagata (“Nagata”) as a co-
inventor. During prosecution in 1991, Nagata assigned
his rights to applications and patents related to the ’463
patent to SEL’s founder Dr. Shunpei Yamazaki, and
subsequently signed a substitute Declaration and As-
signment of those applications and patents. From 2002 to
2003, Nagata assisted SEL in a patent infringement suit
against another party and was paid for his cooperation
and services relating to that litigation.
In 2009, SEL brought suit for infringement of a num-
ber of patents, including the ’463 patent, against Sam-
sung, Inc. and others in the United States District Court
for the Western District of Wisconsin. SEL contacted
Nagata for further assistance, assuming that he would
cooperate as he had in the earlier case, but learned in-
Circuit Judge Bryson assumed senior status on
*
January 7, 2013.
SEMICONDUCTOR ENERGY v. YUJIRO NAGATA 3
stead that Nagata had agreed to assist Samsung in the
litigation as a fact witness. During the Wisconsin pro-
ceedings, Nagata gave testimony repudiating his signa-
ture on the 1991 Declarations and Assignments.
Samsung then claimed that the patents at issue, includ-
ing the ’463 patent, were unenforceable due to inequitable
conduct, alleging that the documents were forged. The
Wisconsin dispute eventually was settled, but SEL main-
tained that because Nagata’s testimony impugned the
enforceability of the ’463 patent, SEL settled for less
money than it would have otherwise.
SEL subsequently brought suit against Nagata in the
United States District Court for the Northern District of
California, asserting five causes of action in its amended
complaint: (1) Declaratory Judgment – Violation of Fed-
eral Patent Law, (2) Declaratory Judgment – Anticipatory
Breach of Contract, (3) Slander of Title, (4) Quiet Title,
and (5) Unjust Enrichment. Semiconductor, 2012 WL
17757, at *2. SEL’s first count seeking declaratory judg-
ment for a “Violation of Federal Patent Law,” indeed the
only supposed federal cause of action, was based on an
offensive application of the doctrine of assignor estoppel.
SEL charged that “Federal law bars an assignor of a U.S.
Patent from conduct that attacks the U.S. Patent subject
to that assignment on grounds of invalidity or inequitable
conduct” and that when Nagata signed the Declarations
and Assignments at issue in 1991, he “intentionally
relinquished any right to attack the enforceability of the
patents subject to his assignment by virtue of Federal
patent law estopping such attacks.” Id. at *3. SEL
sought damages for Nagata’s action and posited that such
relief from Nagata’s allegedly wrongful conduct “neces-
sarily depend[ed] on the resolution of one or more sub-
stantial questions of Federal patent law, resolution of
which [was] essential to each of the claims.” Id.Nagata moved to dismiss SEL’s complaint under Fed.
R. Civ. P. 12(b)(1), which authorizes a party to seek
4 SEMICONDUCTOR ENERGY v. YUJIRO NAGATA
dismissal of an action for lack of subject matter jurisdic-
tion. 1 The court granted Nagata’s motion, dismissing
SEL’s complaint with prejudice for lack of subject matter
jurisdiction because the doctrine of assignor estoppel does
not provide a cognizable federal cause of action. Id. at *8.
The court further held that SEL’s “artful pleading” of the
state law claims did not give rise to subject matter juris-
diction under 35 U.S.C. § 1338(a) because (1) there was no
federal law central to each of the counts, as the doctrine of
assignor estoppel did not even apply to the facts of this
case, and (2) federal patent law was not essential to those
claims as they were supported by alternative state law
theories. Id. at *7. Thus, the court declined to exercise
supplemental jurisdiction over the state law claims. Id.
at *8.
SEL timely appealed the district court’s rulings. We
have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
A district court’s grant of a motion to dismiss for lack
of subject matter jurisdiction under Fed. R. Civ. P.
12(b)(1) is a question of law that we review de novo.
Pennington Seed, Inc. v. Produce Exch. No. 299, 457 F.3d
1334, 1338 (Fed. Cir. 2006); see also Xechem Int’l, Inc. v.
Univ. of Tex. M.D. Anderson Cancer Ctr., 382 F.3d 1324,
1326–27 (Fed. Cir. 2004). We review a district court’s
decision declining to exercise supplemental jurisdiction
over state law claims after all federal claims have been
dismissed for abuse of discretion. HIF Bio, Inc. v. Yung
Shin Pharm. Indus. Co., 600 F.3d 1347, 1352 (Fed. Cir.
2010); see also Carlsbad Tech, Inc. v. HIF Bio, Inc., 556
U.S. 635, 640 (2009).
1 Nagata also moved to dismiss for failure to state a
claim upon which relief could be granted under Fed. R.
Civ. P. 12(b)(6), but the district court did not reach that
question.
SEMICONDUCTOR ENERGY v. YUJIRO NAGATA 5
I. Federal Subject Matter Jurisdiction
Federal courts may hear only those cases over which
they have subject matter jurisdiction. See Dow Jones &
Co., Inc. v. Ablaise Ltd., 606 F.3d 1338, 1348 (Fed. Cir.
2010) (“Subject matter jurisdiction is a threshold re-
quirement for a court’s power to exercise jurisdiction over
a case.”); see also Willy v. Coastal Corp., 503 U.S. 131, 137
(1992) (“A final determination of lack of subject-matter
jurisdiction of a case in a federal court, of course, pre-
cludes further adjudication of it.”). Subject matter juris-
diction may be based upon either diversity of citizenship
or federal question jurisdiction, and where, as here,
appellants do not claim diversity of citizenship, there
must be federal question jurisdiction. ExcelStor Tech.,
Inc. v. Papst Licensing GmbH & Co. KG, 541 F.3d 1373,
1375 (Fed. Cir. 2008).
To invoke federal question jurisdiction, a complaint
must either plead a federal cause of action or necessarily
implicate a substantial issue of federal law. In pertinent
part, 28 U.S.C. § 1338(a) provides that “district courts
shall have original jurisdiction of any civil action arising
under any Act of Congress relating to patents.” The
Supreme Court has interpreted the “arising under” lan-
guage of § 1338(a) in the same fashion as that of 28 U.S.C.
§ 1331, which governs the federal courts’ original jurisdic-
tion over federal questions. The Court thereby incorpo-
rated the principles underlying the “well pleaded
complaint” rule into the root of our patent law jurisdic-
tion, stating:
[Section] 1338 jurisdiction . . . extend[s] only to
those cases in which a well-pleaded complaint es-
tablishes either that federal patent law creates
the cause of action or that the plaintiff’s right to
relief necessarily depends on resolution of a sub-
stantial question of federal patent law, in that
6 SEMICONDUCTOR ENERGY v. YUJIRO NAGATA
patent law is a necessary element of one of the
well-pleaded claims.
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800,
808–09 (1988) (citations omitted); see also Cedars-Sinai
Med. Ctr. v. Watkins, 11 F.3d 1573, 1577–78 (Fed. Cir.
1993). In appropriately dismissing SEL’s complaint for
lack of subject matter jurisdiction, the district court
correctly held that SEL neither established that federal
patent law created a cause of action as pleaded nor that
federal patent law was a necessary element of its claims.
The only claim asserted by SEL that purports to arise
under federal law, which SEL labeled “Declaratory Judg-
ment – Violation of Federal Patent Law,” was premised
on the doctrine of assignor estoppel. As we explained in
Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220,
1224 (Fed. Cir. 1988), assignor estoppel is an equitable
doctrine that prohibits an assignor of a patent or patent
application, or one in privity with him, from attacking the
validity of that patent when he is sued for infringement
by the assignee. See also Checkpoint Sys., Inc. v. All-Tag
Sec. S.A., 412 F.3d 1331, 1336 (Fed. Cir. 2005) (“The
doctrine of assignor estoppel prevents a party that assigns
a patent to another from later challenging the validity of
the assigned patent.”). Assignor estoppel is thus a de-
fense to certain claims of patent infringement.
On appeal, SEL relies on Diamond Scientific for the
proposition that the doctrine of assignor estoppel is “not
merely a defense,” but that it “embodies fundamental
principles of federal patent law and policy” by imposing a
“duty of fair dealing . . . on an inventor who assigns
intellectual property rights that are protected by the
Constitution.” Appellant Br. 25–26. SEL argues that, by
repudiating his assignment relating to the ’463 patent
during the course of the Wisconsin litigation, Nagata
violated federal patent law as reflected by that legal duty
pursuant to § 1338(a). But SEL cites no precedent or
SEMICONDUCTOR ENERGY v. YUJIRO NAGATA 7
statute establishing assignor estoppel as a federal cause
of action. SEL thus effectively invites us to create a new
federal cause of action recognizing a supposed violation of
the assignor estoppel doctrine under the Declaratory
Judgment Act, 28 U.S.C. §§ 2201, 2202. For his part,
Nagata insists that federal jurisprudence does not recog-
nize an affirmative cause of action based on violation of
the assignor estoppel doctrine and that establishing one
would be “an affront to public policy.” Appellee Br. 17.
We agree that our jurisprudence does not create a federal
cause of action for assignor estoppel.
Despite SEL’s contentions, assignor estoppel is a form
of estoppel, and with rare exception, estoppel is a shield;
it is an affirmative defense, not a claim for relief on its
own. See, e.g., Fed. R. Civ. P. 8(c)(1) (estoppel is an af-
firmative defense). Indeed, the Supreme Court has explic-
itly recognized assignor estoppel to be “the functional
equivalent of estoppel by deed.” Diamond Scientific, 848
F.2d at 1225 (citing Westinghouse Elec. & Mfg. Co. v.
Formica Insulation Co., 266 U.S. 342, 348–49 (1924)).
Under the doctrine, an assignor sued for infringement
may not defend or counterclaim that the patent he as-
signed is invalid or unenforceable. Id. at 1226 (“When the
inventor . . . has assigned the patent rights to another for
valuable consideration, he should be estopped from de-
fending patent infringement claims by proving that what
he assigned was worthless.”). That is not the case here,
and we are not inclined to transform the shield into a
sword. The relief requested by SEL is akin to seeking a
declaratory judgment of patent validity, which is not a
viable cause of action. As the district court fittingly
noted, “it simply makes no sense to use a doctrine intend-
ed to estop a party from advancing a particular claim or
defense in a legal case as a way to sue a non-party who
has made no claim or defense in a legal case.” Semicon-
ductor, 2012 WL 17757, at *4 (citation omitted).
8 SEMICONDUCTOR ENERGY v. YUJIRO NAGATA
The dispute before us is one between a plaintiff in an-
other, separate litigation and a witness for the defendant
in that proceeding. The appropriate remedy, if any, for
SEL to foreclose Nagata’s relevant, factual testimony
might have been to challenge his credibility in the cruci-
ble of cross-examination during the Wisconsin case, not to
bring collateral litigation against him under a non-
existent independent cause of action. Moreover, we have
routinely rejected the proposition that assignors should be
prohibited from testifying as fact witnesses in cases where
they are neither a party to a case nor in privity with the
defendant, and we will not now devise a cause of action to
preclude such testimony. See, e.g., Verizon Servs. Corp. v.
Cox Fibernet Va., Inc., 602 F.3d 1325, 1339–40 (Fed. Cir.
2010) (holding no error by district court in allowing inven-
tors to testify about patents they invented and declining
to address argument that assignor estoppel barred such
testimony); Checkpoint Sys., 412 F.3d at 1337 (rejecting
argument that non-party assignor should be barred from
submitting testimony regarding failure to name inventors
under doctrine of assignor estoppel).
Accordingly, we conclude that the district court did
not err in ruling that SEL’s complaint did not invoke
federal subject matter jurisdiction on the ground that SEL
stated no claim arising under federal law.
Even where a plaintiff does not state a federal cause
of action, a federal court may still have subject matter
jurisdiction if the plaintiff’s claims implicate a substantial
issue of federal law. Grable & Sons Metal Prods., Inc. v.
Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005); Franchise
Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 13
(1983). Thus, a well-pleaded complaint presents a federal
question only when the federal issue is sufficiently sub-
stantial; there is no federal question when the federal law
claim is insubstantial, implausible, or otherwise devoid of
merit. Franchise Tax Bd., 463 U.S. at 8–9; Oneida Indian
Nation v. Cnty. of Oneida, 414 U.S. 661, 666–67 (1974).
SEMICONDUCTOR ENERGY v. YUJIRO NAGATA 9
SEL contends that the application and enforcement of
the legal duty imposed on inventors by the assignor
estoppel doctrine relates to a federal cause of action, viz.,
patent infringement; thus resolution of Nagata’s alleged
violation of that legal duty is sufficiently central to each of
the counts of its complaint so as to invoke subject matter
jurisdiction over the state law claims under the “artful
pleading” rule. Specifically, beyond the first count dis-
cussed above seeking declaratory judgment that Nagata
violated the assignor estoppel doctrine as a matter of
federal law, SEL argues that we should find federal
subject matter jurisdiction over its remaining state law
claims because Nagata’s allegedly wrongful repudiation
amounted to a breach of contract, slander of title, and
unjust enrichment, the effects of which may be cured by
application of a putative reverse assignor estoppel doc-
trine.
We disagree, because the asserted federal issue was
insubstantial, implausible, and without merit. For the
same reasons that reliance on the doctrine of assignor
estoppel does not present a substantial issue of federal
law in connection with SEL’s purported federal claim, it
likewise fails to provide a substantial issue of federal law
justifying federal jurisdiction over SEL’s state law claims.
SEL’s contrived federal issue is not a necessary element of
its state law claims, which are each independent issues of
state law, separately supported by alternative state law
theories that do not necessarily require resolution of any
disputed substantial question of federal patent law. See
Grable, 545 U.S. at 314. “[T]he mere presence of a federal
issue in a state cause of action does not automatically
confer federal-question jurisdiction.” Merrell Dow Pharm.
Inc. v. Thompson, 478 U.S. 804, 813 (1986). The district
court was therefore correct in holding that SEL’s artful
pleading did not give rise to federal subject matter juris-
diction.
10 SEMICONDUCTOR ENERGY v. YUJIRO NAGATA
Furthermore, in support of its analysis, the district
court also determined that, even if SEL had invoked
federal subject matter jurisdiction, it nevertheless failed
to state a claim under its own count for “Violation of
Federal Patent Law” based on the requirements for the
application of the doctrine of assignor estoppel. Semicon-
ductor, 2012 WL 17757, at *5–7. In particular, the dis-
trict court determined that, under our precedent, the
assignor estoppel doctrine would not bar Nagata’s testi-
mony because (1) he was neither in privity with the
defendant nor a party to the Wisconsin proceedings; and
(2) his conduct in repudiating his signature on the as-
signment documents in that case merely challenged the
veracity of those underlying contracts, not the validity of
the ’463 patent itself. Id. (citing Univ. W. Va. Bd. of Trs.
v. VanHoorhies, 278 F.3d 1288 (Fed. Cir. 2002); Intel
Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d, 821 (Fed. Cir.
2001); Mentor Graphics Corp. v. Quicktum Design Sys.,
Inc., 150 F.3d 1374 (Fed. Cir. 1998); Shamrock Techs. v.
Med. Sterilization, Inc., 903 F.2d 789 (Fed. Cir. 1990)).
Nonetheless, because we conclude that the district court
did not err in dismissing SEL’s complaint for lack of
subject matter jurisdiction as insubstantial and without
merit in the first instance, we need not address this
alternative basis of decision.
II. Supplemental Jurisdiction
Under 28 U.S.C. § 1367(a), a federal district court
shall have supplemental jurisdiction over all claims that
are so related to claims over which the court does have
jurisdiction that they form part of the same case or con-
troversy. However, pursuant to 28 U.S.C. § 1367(c)(3), a
district court also has discretion to decline supplemental
jurisdiction over any pendent state law claims if it has
first dismissed all claims over which it has original juris-
diction. See also United Mine Workers of Am. v. Gibbs,
383 U.S. 715, 726 (1966) (“It has consistently been recog-
nized that pendent jurisdiction is a doctrine of discretion,
SEMICONDUCTOR ENERGY v. YUJIRO NAGATA 11
not of plaintiff’s right.”); HIF Bio, 600 F.3d 1347 as
amended on reh’g in part (June 14, 2010) (“Pursuant to 28
U.S.C. § 1367(c), the district court has discretion to decide
on remand whether to exercise supplemental jurisdiction
over the remaining causes of action.”). Accordingly,
because the district court correctly dismissed SEL’s
purported federal law claim, it did not abuse its discretion
in declining to exercise supplemental jurisdiction for
SEL’s remaining state law claims.
CONCLUSION
For the reasons stated above, the district court did not
err in holding that SEL failed to invoke federal subject
matter jurisdiction because there was no federal cause of
action based on the affirmative application of the doctrine
of assignor estoppel and because disposition of the state
law claims did not necessarily require resolution of a
substantial issue of federal patent law; nor did the district
court abuse its discretion in declining supplemental
jurisdiction over the state law claims. The judgment of
the district court is therefore
AFFIRMED