HIF Bio, Inc. v. Yung Shin Pharmaceuticals Co., Ltd., 600 F.3d 1347 (Fed. Cir. 2010) (GAJARSA, Michel & Holderman, district judge) HIFBio03312010
MAJOR ISSUES: declaratory judgment of inventorship; federal law preemption of state law claims; inventorship on pending patent applications; PTO inventorship correction as exclusive remedy
COMMENT. The interplay between state and federal law, both on substantive law and on the allocation of jurisdiction between state and federal courts, is a fascinating aspect of the United States legal system. In no area is this more true than with the resolution of disputes about the ownership of patent rights. Ownership, traditionally, a matter left to state laws on contracts, employment rights, and property, is linked to the proper determination of inventorship of patentable and patented inventions, a matter governed by patent law, which is exclusively federal.
In this case, a claim for a declaratory judgment of inventorship regarding a pending patent application was held to arise under federal patent law for jurisdiction purposes. Such a claim did not state a “valid state law claim” because federal patent law preempts state law on the definition of inventorship. See Univ. of Colo. Found. v. Am. Cyanamid Co., 196 F.3d 1366, 1372 (Fed. Cir. 1999). Despite being within federal court jurisdiction, the claim was dismissed for failure to state a claim. For pending applications, the avenues for contesting inventorship are limited to Section 116 corrections and Section 135(a) interferences, both under the authority of the Patent and Trademark Office (PTO), not a district court. Contrariwise, inventorship of an issued patent may be contested in a court action under Section 256.
The court noted that a state law claims necessarily requiring a determination of inventorship arises under federal law. However, it noted that a state law claim by a putative inventor that can be established without necessarily proving inventorship, as by proof of misappropriation of the putative inventor’s unpublished research results, does not arise under federal patent law.
1. The invention ownership dispute concerned the effect of a chemical YC-1 on a protein, HIF
2. STATE COURT SUIT REMOVED TO FEDERAL COURT. Two plaintiffs, Park and Chun, filed suit in a California state court against defendants, including, inter alia, a scientist Teng and a company, Carlsbad Technology (CIT). The defendant CIT removed the suit to federal district court.
3. ALLEGATIONS IN COMPLAINT; DISCOVERY AND INVENTION OF YC-1 INHIBITION OF HIF-1 PROTEIN; TUMOR SUPPRESSION. In their complaint, the plaintiffs Park and Chun alleged that, in 1999, they hypothesized that a chemical compound YC-1 inhibited activity of a protein HIF-1 in a way that would suppress tumors. The complaint further alleged:
a. From 1999 to 2002, plaintiffs Park and Chun undertook laboratory experiments on their hypothesis and submitted research papers to journals. In 2003, they filed a United States patent application.
b. Meanwhile, Park and Chun had shared their research results with another scientist, Teng. Teng disclosed the result to a Taiwanese pharmaceutical company, Yung Shin. Yung Shin filed a U.S. provisional application in 2002 and a PCT application in 2003. Yung Shin engaged Carlsbad Technology (CTI) to commercialize YC-1 in the United States.
c. 12 CAUSES OF ACTION. The complaint stated twelve causes of action concerning the “INVENTION.”
i. DEFINITION OF THE “INVENTION”; DISCOVERY OF YC-1 POTENTIAL AS FIRST ANTI-ANGIOGENIC, ANTI-CANCER AGENT TO HIF-1. The complaint defined the “INVENTION” as: “the discovery that `YC-1 had the potential to become the first anti-angiogenic, anti-cancer agent to HIF-1.’ ”
ii. FIRST AND SECOND CAUSES OF ACTION: DECLARATORY JUDGMENT ON OWNERSHIP AND INVENTORSHIP OF “INVENTION.” The first and second were for declaratory judgments on ownership and inventorship of the “INVENTION.”
iii. THIRD: FEDERAL “RICO.” The third was a federal claim based on violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”).
iv. FOURTH THROUGH ELEVENTH: STATE LAW; TWELFTH: INJUNCTION. The fourth through eleventh causes of action were state law theories, including “slander of title” (fourth) and “unjust enrichment-constructive trust” (eleventh). The twelfth “cause of action” was for an “injunction,” which was actually for a remedy rather than a cause of action.
4. DISTRICT COURT. In the district court, CTI moved to dismissed the complaint under Rule 12(b)(1) and Rule 12(b)(6).
a. FEDERAL RICO CLAIM: DISMISSED FOR FAILURE TO STATE A CLAIM. The district court dismissed the RICO claim for failure to state a claim.
b. INVENTORSHIP AND OWNERSHIP: VALID STATE LAW CLAIMS. The district court ruled that the inventorship and ownership claims stated valid state law claims.
c. SUPPLEMENTAL JURISDICTION DECLINED; REMAND TO STATE COURT. The district court declined to exercise supplemental jurisdiction over the state law claims and remanded the case to the state court.
d. The defendant CTI appealed.
5. FEDERAL CIRCUIT; REMAND ORDERS NOT APPEALABLE. The Federal Circuit dismissed the appeal for lack of jurisdiction, reasoning that “28 U.S.C. § 1447(d) barred appellate review of a remand order based on declining supplemental jurisdiction.” HIF Bio, Inc. v. Yung Shin Pharm. Indus. Co., 508 F.3d 659, 667 (Fed. Cir. 2007), rev’d & remanded sub nom., Carlsbad Tech., Inc. v. HIF Bio, Inc., 129 S. Ct. 1862 (2009).
5. SUPREME COURT: APPEALABILITY OF REMAND ORDER. The Supreme Court reversed and remanded, holding the Section 1447(d) did not bar appellate review.
6. SOLE REMAINING ISSUE: DID DISTRICT COURT ABUSE ITS DISCRETION BY REMANDING? After the remand, the sole issue for the Federal Circuit was: did the district court abuse its discretion by remanding the complaint to the state court? HELD: the district court abused its discretion. Two causes of action arose under federal patent law but must be dismissed for failure to state a claim. The rest of the causes of action arose under state law and must be remanded to state court.
a. The district court erred in holding that the second cause of action, which was for a declaratory judgment on inventorship, was a valid state cause of action. Federal law preempted any state cause of action purportedly determining inventorship.
b. The fourth cause of action, for slander of title, also invoked federal court jurisdiction because the sole theory for supporting the claim required a determination of who invented the “INVENTION.”
c. Both the second and fourth causes of action must be dismissed for failure to state a claim. Sections 116 and 135(a) of the Patent Act limit the avenues by which inventorship on a pending patent application can be contested. The only avenues are correction of inventorship (Section 116) and an interference (section 135(a), both of which are by the Patent and Trademark Office (PTO), not a district court. There is a private right to challenge inventorship only after a patent issues. See 35 U.S.C. Section 256.
d. STATE CAUSES OF ACTION: PROOF WITHOUT DETERMINING INVENTORSHIP. The other nine the causes of action are state law claims and do not arise under federal patent law because the claims could be established without proving patent law inventorship. For example, the plaintiff could prove misappropriation of unpublished research results.
e. UNIVERSITY OF COLORADO (1999) DISTINGUISHED. A precedent, Univ. of Colo. Found. v. Am. Cyanamid Co., 196 F.3d 1366 (Fed. Cir. 1999), held that a state law unjust enrichment arose under federal patent law because inventorship was essential to the cause of action, the plaintiff not having alleged “any alternative, non-patent facts which would entitle it to relief.” Here, the plaintiff alleged “an alternative, non-patent theory in which the misappropriated `property and assets’ consist of plaintiffs’ `experiments, pre-publication experimental data, and non-public, pre-publication drafts of papers’.”
1. On the law of inventorship and inventorship correction remedies, see Chisum Patent Law Digest 1850; Chisum on Patents 2.04.
2. On state and federal court jurisdiction in suits relating to patent owership, see Chisum Patent Law Digest 8112; Chisum on Patents 21.02[c].