Stoneeagle Services, Inc. v. Gillman

United States Court of Appeals
for the Federal Circuit
______________________
STONEEAGLE SERVICES, INC.,
Plaintiff-Appellee,
v.
DAVID GILLMAN, TALON TRANSACTION
TECHNOLOGIES, INC., A TEXAS CORPORATION,
AND TALON TRANSACTION TECHNOLOGIES, INC.,
AN OKLAHOMA CORPORATION,
Defendants -Appellants,
AND
NEXPAY INC.,
Defendant.
______________________
2013-1248
______________________
Appeal from the United States District Court for the
Northern District of Texas in No. 11-CV-2408, Judge
Jorge A. Solis.
______________________
Decided: March 26, 2014
______________________
BEVERLY A. WHITLEY, Bell Nunnally & Martin, LLP,
of Dallas, Texas, argued for plaintiff-appellee. With her
on the brief were CHRISTOPHER B. TROWBRIDGE, R. HEATH
CHEEK, and ROSS A. WILLIAMS.
2 STONEEAGLE SERVICES, INC. v. GILLMAN
JAMES ROBERT ARNETT, II, of Carter Stafford Arnett
Hamada & Mockler, PLLC, of Dallas, Texas, argued for
defendants-appellants. With him on the brief were EDGAR
LEON CARTER and SEAN T. HAMADA.
______________________
Before RADER, Chief Judge, MOORE and REYNA, Circuit
Judges.
RADER, Chief Judge.
On February 19 and March 20, 2013, the district court
issued orders purporting to clarify a preliminary injunc-
tion and enjoining David Gillman, and two entities named
Talon Technologies, Inc. (collectively Appellants) from
using various materials and processes first developed by
plaintiff StoneEagle Services, Inc. (StoneEagle). Because
the district court lacked jurisdiction over this case when
StoneEagle initiated this lawsuit, this court vacates the
proceedings below, including the preliminary injunction,
and remands with instructions to dismiss the case.
I.
In 2006, Robert Allen and Gillman teamed up to
adapt Allen’s electronic payment system, then used in the
automotive industry, to process health care claims. As
part of their collaboration, they entered into a number of
agreements governing confidentiality and the parties’
relationship. The agreements provided, in part, that
Allen’s company, StoneEagle, owned the technology in the
new health care payment system. See J.A. 96–115. As
part of the collaboration, StoneEagle also licensed the
technology to Appellants, who were responsible for mar-
keting the new health care payment system to potential
customers.
Allen also filed a patent application on the health care
payment system. The application listed Allen as the sole
STONEEAGLE SERVICES, INC. v. GILLMAN 3
inventor. The parties, while disputing the extent of his
involvement, do not dispute that Gillman had some role in
drafting the patent application. Id. at 68, 73. The parties
also agree that Gillman assisted Allen with the patent
application process. Id. StoneEagle asserts that, in the
course of Gillman’s involvement with the application,
Gillman never objected to Allen’s status as the sole inven-
tor. Id. at 73.
Although not listed as an inventor, Gillman enjoyed
an ownership interest in the patent application until at
least July 2010. Id. at 74. On July 15, 2010, Gillman
appears to have assigned his interest to StoneEagle. Id.
at 74. The patent application issued as U.S. Patent No.
7,792,686 (ʼ686 patent) a couple months later in Septem-
ber 2010.
By 2011, Allen and Gillman’s collaborative relation-
ship had soured. A meeting that occurred on or around
August 31, 2011, appears to have precipitated this deteri-
oration. Both Allen and Gillman attended the meeting;
Allen as a representative from StoneEagle and Gillman as
a representative of the license holder in the ʼ686 patent.
Id. at 80. They met with potential investors interested in
the health care payment system. According to StoneEa-
gle, the meeting showed that the potential investors
considered the ’686 patent very valuable. StoneEagle
alleges that Gillman became upset upon hearing that the
investors attributed so much value to the patent. At that
point, according to StoneEagle’s allegations, Gillman
“suddenly and falsely claimed that it is his patent, that he
wrote the patent, that it is on his computer, and that he
‘authored’ or ‘wrote’ it, or words to that effect.” Id. Gill-
man allegedly threw down his business cards and left the
meeting. Id.
On September 16, 2011, just a few weeks after this al-
leged outburst, StoneEagle sued Appellants. StoneEagle
sought a declaratory judgment that Allen was the sole
4 STONEEAGLE SERVICES, INC. v. GILLMAN
inventor and owner of the ʼ686 patent. StoneEagle also
asserted a number of state law trade secret misappropria-
tion claims, and requested a preliminary injunction. Less
than a month later, the district court issued a preliminary
injunction prohibiting Appellants from using or disclosing
StoneEagle’s trade secrets and confidential information.
Shortly afterwards, on October 17, 2011, StoneEagle
terminated its license agreement with Appellants.
According to StoneEagle, Appellants nonetheless set
out to start a competing venture that would allegedly
violate the injunction. Thus, in January 2012, StoneEa-
gle moved for contempt. The district court referred the
matter to a magistrate judge. The magistrate judge
recommended that the contempt motion be denied be-
cause the 2011 preliminary injunction violated Fed. R.
Civ. P. 65 by incorporating extraneous documents. In
February 2013, the district court adopted the magistrate
judge’s recommendation to deny the contempt order. The
district court also issued an initial order purportedly
clarifying the preliminary injunction and ordering Appel-
lants to refrain “from using any materials or processes—
tangible or intangible—first developed by StoneEagle” in
connection with the health care payment system. On
March 19, 2013, the district court also issued a second
order providing further clarification on the February 2013
order.
This appeal followed. On appeal, Appellants concede
that Gillman is not an inventor of the ’686 patent and
argue, in pertinent part, that the district court lacked
subject matter jurisdiction over the lawsuit because there
was no actual controversy regarding StoneEagle’s inven-
torship claim—the sole claim in StoneEagle’s original
complaint arising under federal law.
II.
As an initial matter, StoneEagle argues that this
court lacks appellate jurisdiction to review the February
STONEEAGLE SERVICES, INC. v. GILLMAN 5
2013 order because the order only clarified the 2011
preliminary injunction. This court disagrees. Under
applicable regional circuit law, the February 2013 order
modified the preliminary injunction because its terms are
not “implicit in the terms of the original injunction.” See
In re Seabulk Offshore, Ltd., 158 F.3d 897, 898 (5th Cir.
1998); see also Martin’s Herend Imps., Inc. v. Diamond &
Gem Trading U.S. Co., 195 F.3d 765, 770 (5th Cir. 1999)
(distinguishing between clarifications that merely “ex-
plain” the coverage of an earlier injunction and modifica-
tions that alter the language to “relax” the earlier
prohibitions). Whereas the original preliminary injunc-
tion covered all of StoneEagle’s trade secrets and confi-
dential information, including the jointly-developed
technology, the February 2013 order substantively
changed the scope by prohibiting Appellants from using
specific types of materials and software to the extent they
were “first developed” by StoneEagle. Accordingly, the
February 2013 order is appealable under 28 U.S.C.
§ 1292(a).
III.
Whether an actual controversy exists that is sufficient
to confer jurisdiction under the Declaratory Judgment Act
is a question of law that this court reviews de novo. Dey
Pharma LP v. Sunovion Pharms. Inc., 677 F.3d 1158,
1162 (Fed. Cir. 2012). “The burden is on the party claim-
ing declaratory judgment jurisdiction to establish that
such jurisdiction existed at the time the claim for declara-
tory relief was filed.” King Pharms. Inc. v. Eon Labs, Inc.,
616 F.3d 1267, 1282 (Fed. Cir. 2010).
As this court has recognized, the Declaratory Judg-
ment Act is not an independent basis for subject matter
jurisdiction. Prasco, LLC v. Medicis Pharma. Corp., 537
F.3d 1329, 1335 (Fed. Cir. 2008). Rather, it is a procedur-
al vehicle that provides a remedy which is available only
if the court has jurisdiction from some other source.
6 STONEEAGLE SERVICES, INC. v. GILLMAN
Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300
U.S. 227, 240 (1937). For that, this court considers
whether the hypothetical action that would be brought by
the declaratory judgment defendant would be properly
before a federal court, e.g., whether it presents a federal
question. Medtronic, Inc. v. Mirowski Family Ventures,
LLC, 134 S. Ct. 843, 848 (2014).
But even where a federal question is raised, the fed-
eral courts’ jurisdiction is still limited by the “Cases” or
“Controversies” requirement of Article III of the Constitu-
tion. Prasco, 537 F.3d at 1335. Relevant to the present
case, the Supreme Court has explained that the phrase
“case of actual controversy” in the Declaratory Judgment
Act refers to this constitutional requirement. See
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127
(2007). Accordingly, to demonstrate a sufficient contro-
versy for a declaratory judgment claim that satisfies the
requirements of Article III, “the facts alleged, under all
the circumstances, [must] show that there is a substantial
controversy, between parties having adverse legal inter-
ests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.” Id.
In this case, StoneEagle’s declaratory judgment claim
involves both ownership and inventorship. However,
ownership is typically a question of state law. Jim Arnold
Corp. v. Hydrotech Sys., Inc., 109 F.3d 1567, 1572 (Fed.
Cir. 1997) (“[T]he question of who owns the patent rights
and on what terms typically is a question exclusively for
state courts.”). In contrast, inventorship is a federal
question. E.g., Univ. of Colo. Found., Inc. v. Am. Cyana-
mid Co., 196 F.3d 1366, 1372 (Fed. Cir. 1999). Thus,
jurisdiction in this case turns on whether StoneEagle’s
complaint alleges a sufficient controversy concerning
inventorship. It does not.
Even accepting StoneEagle’s allegations of fact as
true, and drawing all inferences in its favor, StoneEagle’s
STONEEAGLE SERVICES, INC. v. GILLMAN 7
complaint does not allege a sufficient controversy concern-
ing inventorship. Here, StoneEagle only alleges that
Gillman “suddenly and falsely claimed that it is his
patent, that he wrote the patent, that it is on his comput-
er, and that he ‘authored’ or ‘wrote’ it, or words to that
effect.” J.A. 80. These allegations may give rise to a
dispute concerning ownership, but they do not implicate
inventorship. Indeed, StoneEagle does not allege that
Gillman claimed he invented the health care payment
system, much less conceived of the idea or contributed to
its conception. Rather, StoneEagle only alleges that
Gillman claims to have written the patent application.
This court has stated that assistance in reducing an
invention to practice generally does not contribute to
inventorship. E.g., Ethicon, Inc. v. U.S. Surgical Corp.,
135 F.3d 1456, 1460, 1465 (Fed. Cir. 1998). In this case,
the most favorable inference from the record in favor of
StoneEagle shows only that Gillman assisted in construc-
tively reducing an invention to practice. See Solvay S.A.
v. Honeywell Int’l, Inc., 622 F.3d 1367, 1376 (Fed. Cir.
2010). Those activities confer no more rights of inventor-
ship than activities in furtherance of an actual reduction
to practice. Otherwise, patent attorneys and patent
agents would be co-inventors on nearly every patent. Of
course, this proposition cannot be correct.
As StoneEagle’s only factual allegations concerning
inventorship are that Gillman authored the patent appli-
cation, the complaint, viewed in its totality, has not
alleged a controversy over inventorship that satisfies
Article III. Prasco, 537 F.3d at 1338 (“Considering the
totality of the circumstances, Prasco has not alleged a
controversy of sufficient ‘immediacy and reality’ to create
a justiciable controversy.”). Additionally, StoneEagle did
not allege any other facts existing at the time this com-
plaint was filed which would give rise to a federal ques-
tion or other cause of action properly before a federal
court. See GAF Bldg. Materials Corp. v. Elk Corp. of
8 STONEEAGLE SERVICES, INC. v. GILLMAN
Dallas, 90 F.3d 479, 483 (Fed. Cir. 1996). For these
reasons, the district court lacked jurisdiction over this
case. Id.
IV.
Because StoneEagle did not allege an actual contro-
versy over the inventorship of the ’686 patent, the district
court lacked jurisdiction over StoneEagle’s declaratory
judgment claim. Additionally, because StoneEagle’s
complaint did not plead any facts existing when StoneEa-
gle initiated this lawsuit that would give rise to another
cause of action properly before a federal court, the district
court lacked subject matter jurisdiction over the case.
Accordingly, this court vacates the proceedings below,
including the preliminary injunction, and remands to the
district court with instructions to dismiss.
VACATED AND REMANDED