USPPS, Ltd. v. Avery Dennison Corp.

Case: 10-50612 Document: 00512384684 Page: 1 Date Filed: 09/24/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 24, 2013
No. 10-50612 Lyle W. Cayce
Clerk
USPPS, LTD.,
Plaintiff–Appellant
v.
AVERY DENNISON CORPORATION; RENNER, OTTO, BOISELLE &
SKLAR, L.L.P.; NEIL DUCHEZ, Individually,
Defendants–Appellees
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:07-CV-963
Before DAVIS, PRADO, and OWEN, Circuit Judges.
PER CURIAM:*
The Fifth Circuit transferred this case to the Federal Circuit, which
rendered an opinion on the merits. The Supreme Court of the United States
vacated the Federal Circuit’s opinion, after which the Federal Circuit
transferred the case back to the Fifth Circuit. We adopt the Federal Circuit’s
reasoning and affirm the district court’s grant of summary judgment in favor of
the defendants because the plaintiff’s claim was untimely.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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No. 10-50612
I. FACTUAL HISTORY
In 1999, Joe Pat Beasley (“Beasley”) filed a patent application with the
United States Patent and Trademark Office (“PTO”) for personalized postage
stamps. While it was pending, he negotiated a licensing contract with Avery
Dennison Corporation (“Avery”). In March 2001, the PTO issued a notice of
allowance on Beasley’s patent application, pending payment of the required fees.
Thereafter, Avery agreed to assume responsibility for prosecuting Beasley’s
application and paying the required fees. Beasley subsequently appointed
attorneys from Avery’s law firm, Renner, Otto, Boiselle & Sklar, L.L.P.
(“Renner”), to act on his behalf. At some point, Beasley transferred his interest
to USPPS, a company he had formed presumably for that purpose.
Renner, acting pursuant to Beasley’s power of attorney, later discovered
relevant prior art that had not been disclosed to the PTO, and filed a
supplemental information disclosure with the PTO. Then, Avery and USPPS
entered into an agreement under which Avery would market and sell USPPS’s
stamps and pay royalties to USPPS. In the fall of 2002, the PTO issued a final
rejection of Beasley’s application. Subsequently, Avery notified USPPS that,
after the royalty agreement between USPPS and Avery expired, Avery intended
to sell personalized stamps independently.
II. PROCEDURAL HISTORY
In September 2004, Beasley brought suit against Avery and Renner,
alleging negligence, breach of fiduciary duty, and fraud. The district court
dismissed his claims, finding that Beasley lacked standing to sue because he had
transferred title to the patent applications to USPPS. He appealed to the Fifth
Circuit, but his appeal was dismissed for want of prosecution. Beasley v. Avery
Dennison Corp., No. 07-51311, 2008 U.S. App. LEXIS 28075, at *1 (5th Cir. Feb.
7, 2008).
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On November 27, 2007, plaintiff–appellant USPPS filed suit against
Avery, Renner, and DuChez, an attorney at Renner (collectively “the
defendants”), alleging breach of fiduciary duty and fraud. Specifically, USPPS
alleged that Avery made representations that “Beasley as owner of the patent
was the client of [Renner] with regard to the prosecution of his patent,” and that
the defendants failed to inform “USPPS that Avery Dennison (not [] Beasley or
USPPS) was the client.” USPPS, Ltd. v. Avery Dennison Corp,
SA-07-CA-963-FB, 2008 WL 7984968, at *3 (W.D. Tex. May 30, 2008) rev'd and
remanded sub nom. USPPS, Ltd. v. Avery Dennison Corp., 326 F. App'x 842 (5th
Cir. 2009).
The parties to this original case and the district court proceeded under the
assumption that diversity jurisdiction provided the only basis for federal
jurisdiction. Plaintiff USPPS is a Texas limited partnership whose principal
place of business is San Antonio, Texas. Defendant Avery is incorporated under
the laws of Delaware and has its principal place of business in California.
Defendant Renner is organized under Ohio law and has its principal place of
business in Ohio. Defendant DuChez is an Ohio lawyer with Renner, and does
not maintain regular practice in Texas. Thus, the plaintiff and defendants are
citizens of different states. The amount in controversy exceeds $75,000, making
diversity jurisdiction proper. See 28 U.S.C. § 1332(a).
In May 2008, the district court dismissed USPPS’s complaint as barred by
the applicable four-year statute of limitations. Id. at *12. On appeal, however,
a panel of this court reversed and remanded for further factual development on
the issue of whether the discovery rule or fraudulent-concealment doctrine might
delay the accrual of the claims. USPPS, Ltd. v. Avery Dennison Corp., 326 F.
App’x 842, 851 (5th Cir. 2009) (“[W]e cannot definitively say that the discovery
rule and fraudulent-concealment exceptions do not postpone the date of accrual
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until April 2004, when USPPS learned of the potential connection between the
failed patent applications and defendants’ alleged conflict of interest.”).
On remand, the district court, adopting the report and recommendations
of the magistrate judge, granted summary judgment. USPPS, Ltd. v. Avery
Dennison Corp., SA-Q7-CA-963-FB, 2010 WL 2802529, at *2 (W.D. Tex. June 4,
2010), aff’d, 676 F.3d 1341 (Fed. Cir. 2012) cert. granted, judgment vacated, 133
S. Ct. 1794 (2013). The district court found that neither the discovery rule nor
the fraudulent-concealment doctrine delayed the claims’ accrual, and that there
were no genuine issues of material fact on the causation element of USPPS’s
claims for fraud and breach of fiduciary duty. Id. at 1–2.
USPPS again appealed to this court. Our Court issued an opinion
transferring the case to the Federal Circuit. USPPS, Ltd. v. Avery Dennison
Corp., 647 F.3d 274, 284 (5th Cir. 2011). Our Court, in transferring the case,
noted that the Federal Circuit has exclusive jurisdiction of an appeal where the
district court’s jurisdiction was based, in whole or in part, on 28 U.S.C. § 1338,
which vests exclusive jurisdiction in patent cases to the district court. Id. at 277.
Because USPPS could not prove causation without proving the patentability of
its invention, the Fifth Circuit determined that federal patent law was a
necessary element of its claims. Id. at 280. In essence, because patent law was
necessary to resolve USPPS’s state claims, that necessity was sufficient for the
Federal Circuit’s jurisdiction to be exclusive. Id. at 282.
The Federal Circuit, finding the transfer plausible, reached the merits and
held that the district court correctly determined that USPPS’s complaint was
untimely because neither the discovery rule nor the fraudulent-concealment
doctrine served to delay the accrual of USPPS’s claim. USPPS, Ltd. v. Avery
Dennison Corp., 676 F.3d 1341, 1346–49 (Fed. Cir. 2012) cert. granted, judgment
vacated, 133 S. Ct. 1794 (2013). Soon after the Federal Circuit’s decision, the
Supreme Court issued Gunn v. Minton, 133 S. Ct. 1059 (2013). In Gunn, the
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plaintiff brought a malpractice action in state court based on the theory that his
lawyer’s failure to raise a particular argument had resulted in summary
judgment based on the invalidity of his patent. Id. at 1062–63. After the state
court granted summary judgment for the defendants, the plaintiff appealed. Id.
at 1063. He argued that, because his legal malpractice claim was based on an
alleged error in a patent case, the federal courts had exclusive jurisdiction. Id.because his claim arose under federal patent law for purposes of 28 U.S.C.
§ 1338, the plaintiff argued that the state court did not have jurisdiction and his
unfavorable decision should be vacated and dismissed.1 Id.The Texas Court of Appeals rejected the plaintiff’s argument, holding that
the federal interests of his state law claim were not sufficiently substantial to
trigger § 1338 “arising under” jurisdiction. Id. The Supreme Court of Texas
reversed, holding that his claim involved a substantial federal issue because the
success of his state claim relied on the viability of a patent law exception. Id.
The U.S. Supreme Court reversed, stating that rarely, if ever, will state legal
malpractice claims based on underlying patent matters “arise under” federal
patent law for purposes of § 1338. Id. at 1065. The Supreme Court counseled
that just because patent law was necessary to resolving a state law issue, it did
not necessarily follow that there was exclusive federal jurisdiction. Id. at
1065–66. Specifically, although resolving a patent law question was necessary
to resolving the underlying state case, the federal issue was not substantial “to
the federal system as a whole.” Id. at 1066. Thus, the state court had
jurisdiction to decide the merits. Id. at 1068.
1
Gunn makes clear that “arising under” is interpreted identically in the § 1331 federal
question jurisdiction context and the § 1338 patent jurisdiction context, except that for cases
falling within the patent-specific arising under jurisdiction of § 1338, Congress eliminated
state jurisdiction. Gunn, 133 S. Ct. at 1065.
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The United States Supreme Court then granted certiorari in the present
case in order to vacate and remand this case to the Federal Circuit for further
consideration in light of Gunn. USPPS, Ltd. v. Avery Dennison Corp., 133 S. Ct.
1794 (2013). On remand, the Federal Circuit ordered the parties to show cause
why, in light of Gunn, the case should not be returned to the Fifth Circuit, and
warned that “[f]ailure to respond to [the] order will be understood to be a
concession that it is appropriate to return the case” to the Fifth Circuit. No
party argued that a transfer was inappropriate. The Federal Circuit then
transferred the appeal back to our court, without written opinion.
III. JURISDICTION
We asked the parties to provide supplemental briefing on whether, in light
of Gunn, this Circuit has jurisdiction, or whether exclusive appellate jurisdiction
rested in the Federal Circuit under 28 U.S.C. §§ 1295(a) and 1338(a). The
parties agree that, after Gunn, the Federal Circuit does not have exclusive
jurisdiction in the case. We agree. The state law claims asserted by USPPS do
not arise under federal patent law so there is no exclusive appellate jurisdiction
in the Federal Circuit under 28 U.S.C. § 1295. The only substantive difference
between this case and Gunn is that USPPS’s state law claims are for fraud and
breach of fiduciary duty, not malpractice. That distinction does not command
a different outcome than Gunn’s because it does not cause the underlying
hypothetical patent issues to be of substantial importance to the federal system
as a whole, as required for exclusive federal jurisdiction under Gunn. The
hypothetical patent issues between the parties to this case are fact-specific and
of no importance to the federal system. As discussed above, the Fifth Circuit
nonetheless retains jurisdiction because USPPS filed suit on the basis of
diversity jurisdiction. 28 U.S.C. §§ 1291, 1332(a).
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IV. TIMELINESS
Having affirmed that this Court has jurisdiction over the dispute, we now
address the merits of the suit. The Federal Circuit, in its now-vacated opinion,
held that the district court correctly determined that USPSS’s complaint was
untimely. After conducting an independent inquiry of the record, we affirm the
judgment of the district court. USPPS filed suit more than four years after the
injury occurred, and neither of Texas’s two exceptions to the rule that the statute
of limitations begins to run when a legal injury occur—the discovery rule and the
fraudulent- concealment doctrine—applied. Although the opinion has since been
vacated, we are persuaded by its reasoning with regard to the timeliness issue
and hold that the district court correctly determined that USPPS’s complaint
was untimely.
V. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s grant of
summary judgment for defendants. We DENY plaintiff–appellant’s opposed
motion requesting a second oral argument.
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