Federal Jurisdiction Extended Over State Business Tort Action Claims

The United States Court of Appeals for the Federal circuit in Hunter Douglas, Inc. v. Harmonic Design, Inc. recently held that federal courts have exclusive jurisdiction over state law causes of action in which a substantial question of federal patent law is pleaded as a necessary element of that claim. Harmonic Design owned several patents which claimed window blind technology. Hunter Douglas filed suit against Harmonic Design. In its complaint, Hunter Douglas pleaded federal and state causes of action. Hunter Douglas alleged that certain claims of the Harmonic Design patents were invalid as being anticipated, obvious, or neither enabled nor particularly pointed out and distinctly claimed under 35 U.S.C. §§102, 103 or 112. In addition, Hunter Douglas alleged that the Harmonic Design patents were unenforceable because of inequitable conduct of Harmonic Design before the U.S. Patent and Trademark Office.

Hunter Douglas' complaint had seven causes of action. One cause of action sought a declaratory judgement of non-infringement, invalidity, or unenforceability of the claim of the Harmonic Design patents. Six of the counts alleged that Harmonic Design violated California commercial tort law by obtaining patents with invalid and unenforceable claims. The six alleged violations of California law included counts for unfair competition and injurious falsehood. The court affirmed the lower district court decision to dismiss the declaratory judgement action of non-infringement, invalidity and unenforceability. The United States Court of Appeals for the Federal Circuit reaffirmed that to establish jurisdiction for a declaratory judgement, there must be an explicit threat or other action by the patentee that creates a reasonable apprehension on the part of the declaratory plaintiff (Hunter Douglas) that it will face an infringement suit and that there is present activity which constitutes infringement or concrete steps taken with the intent to conduct such activity. The court held that Harmonic Design did not signal an intention in any way to file suit claiming infringement of the Harmonic Design patents by Hunter Douglas' future product. Therefore, Hunter Douglas failed to allege any activity by which the defendant's created a reasonable apprehensive of suit. Therefore, there was no jurisdiction for a declaratory judgement action.

In regards to the state claims, the court held that to establish jurisdiction under 28 U.S.C. §1338(a), a determination must be made as to whether the state law cause of action necessarily depends on a resolution of a substantial question of federal patent law. The court noted that one of the state claims alleged that the defendant committed an injurious falsehood. The element of that falsehood was a false statement that the defendant held exclusive rights to make or sell window shades covered by the Harmonic Design patents. Hunter Douglas alleged that the above noted assertion was false because certain claims of the Harmonic patents were invalid and all of the claims were unenforceable due to inequitable conduct on the part of Harmonic Design. The court stated that questions of federal patent law, validity and enforceability are substantial enough to convey federal jurisdiction under 28 U.S.C. §1338(a). In addition the court held that once jurisdiction was established under 28 USC§1338(a), the federal courts have exclusive jurisdiction over the state causes of action.

Hunter Douglas provides a patent infringement defendants, a new tactic in forcing a patent owner into federal court. Even in situations where a declaratory judgment cannot be brought forth, in situations where fraudulent patent prosecution by the patentee is suspected, a patent infringement defendant can allege that the fraudulent conduct is in violation of a state commercial law statute and thereby bring the patentee to federal court to litigate such an issue. Looking at Hunter Douglas from the other side, Hunter Douglas teaches that it may be prudent for a patentee to be more offensive minded in going after an infringer rather than allowing a potential infringer to drag the patentee into the infringer's local federal district court.