United States: No Federal Cause Of Action Based On Assignor Estoppel

In Semiconductor Energy Laboratory Co. v. Nagata, No. 12-1245 (Fed. Cir. Feb. 11, 2013), the Federal Circuit affirmed the district court's decision that there was no federal cause of action based on the affirmative application of assignor estoppel.  The Court also held that the district court did not abuse its discretion in declining supplemental jurisdiction over the state law claims.

Semiconductor Energy Laboratory Co., Ltd. ("SEL") owns U.S. Patent No. 6,900,463 ("the '463 patent"), which names Dr. Yujiro Nagata as a coinventor.  During prosecution of the '463 patent, Nagata assigned his rights in the '463 patent to SEL's founder, Dr. Shunpei Yamazaki.  SEL later brought suit for infringement of a number of patents, including the '463 patent, against Samsung, Inc. ("Samsung") and others in the U.S. District Court for the Western District of Wisconsin.  SEL contacted Nagata for assistance in the litigation, but Nagata had previously agreed to assist Samsung in the litigation as a fact witness.  During the Wisconsin proceedings, Nagata gave testimony repudiating his signature on the documents assigning rights to SEL, leading to an inequitable conduct claim by Samsung against SEL.  The Wisconsin dispute eventually settled.

SEL then brought suit against Nagata in the U.S. District Court for the Northern District of California, asserting five causes of action in its amended complaint:  (1) DJ for violation of federal patent law via assignor estoppel; (2) DJ for anticipatory breach of contract; (3) slander of title; (4) quiet title; and (5) unjust enrichment.  The district court dismissed SEL's complaint with prejudice for lack of subject matter jurisdiction under 28 U.S.C. § 1331 because the doctrine of assignor estoppel did not provide a cognizable federal cause of action.  SEL appealed.

On appeal, the Federal Circuit affirmed the district court's conclusion 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.  According to the Court, the only claim asserted by SEL purporting to arise under federal patent law—a DJ for violation of federal patent law—was premised on the doctrine of assignor estoppel.  The Court explained that "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."  Slip op. at 7 (citing Fed. R. Civ. P. 8(c)(1)). 

The Federal Circuit then turned to whether federal patent law was a necessary element of SEL's state law claims.  Again affirming the district court, the Court concluded that "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."  Id. at 9 (citing Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005)).  The Court continued, "'[T]he mere presence of a federal issue in a state cause of action does not automatically confer federal-question jurisdiction.'"  Id.  (alteration in original) (quoting Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 813 (1986)).

Lastly, with respect to supplemental jurisdiction under 28 U.S.C. § 1367(a), the Federal Circuit held that because the district court correctly dismissed SEL's purported federal law claim, the district court did not abuse its discretion in declining to exercise supplemental jurisdiction over SEL's remaining state law claims.  Thus, the Court affirmed the judgment of the district court.

Judges: Lourie (author), Bryson, Wallach

[Appealed from N.D. Cal., Judge Breyer]

This article previously appeared in Last Month at the Federal Circuit, March 2013.

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