By Donald Zuhn --
Last week, in Pappalardo v. Stevins, the Federal Circuit affirmed-in-part, vacated-in-part, and remanded a decision by the U.S. District Court for the Middle District of Florida granting a motion to dismiss filed by Defendant-Appellee Samantha Stevins, in which Ms. Stevins sought to dismiss an amended complaint filed by Plaintiff-Appellant Michael Pappalardo for lack of subject matter jurisdiction. Mr. Pappalardo had filed suit against Ms. Stevins asserting state law claims of fraud and negligent representation and seeking a declaratory judgment naming him as sole inventor of U.S. Patent Application No. 15/275,597.
As alleged in Mr. Pappalardo's complaint, he met Ms. Stevins at a pharmaceutical products trade show, where he disclosed to her a product related to liquid and solid cannabis delivery systems. As also alleged in the complaint, Ms. Stevins indicated that she had access to funding from a network of investors for the product, and the two entered into a business relationship to commercialize the product. The complaint further alleges that Ms. Stevins recommended filing the '597 application, which names Ms. Stevins as a joint inventor. Mr. Pappalardo's complaint further alleges that Ms. Stevins attempted to independently exploit his technology, and he responded by filing suit against her asserting claims of fraud and negligent representation and seeking declaratory judgment of sole inventorship. The District Court dismissed the declaratory judgment claim on the grounds that it lacked jurisdiction to hear claims for correction of inventorship for a pending patent application, and dismissed the state law claims on the grounds that they were contingent on the U.S. Patent and Trademark Office's determination on the '597 application.
On appeal, Mr. Pappalardo argued that the District Court erred in dismissing his claims because the District Court had both federal question and diversity jurisdiction over all three claims, and all three claims were pleaded with requisite specificity. With respect to Mr. Pappalardo's declaratory judgment claim, the Federal Circuit agreed with the District Court that the claim should be dismissed, albeit on different grounds. Rather than dismissing the declaratory judgment claim for lack of subject matter jurisdiction, as the District Court had done, the Federal Circuit determined that the claim should have been dismissed with prejudice for failure to state a claim for plausible relief pursuant to Rule 12(b)(6).
The Federal Circuit explained that although Mr. Pappalardo pleaded the request for declaratory judgment under Florida state law, asserting that Ms. Stevins falsely filed a declaration with the USPTO that she was a joint inventor on the '597 application and that he should be declared the sole inventor, "the 'true nature' of Mr. Pappalardo's inventorship claim is for relief pursuant to federal law, specifically 35 U.S.C. § 256." The Court therefore accepted that Mr. Pappalardo pleaded an action for correction of inventorship, and determined that "the District Court had subject matter jurisdiction over this claim '[b]ecause inventorship is a unique question of patent law,'" citing HIF Bio, Inc. v. Yung Shin Pharm. Indus. Co., 600 F.3d 1347, 1353 (Fed. Cir. 2010). Nevertheless, the Federal Circuit agreed with the District Court's dismissal of the declaratory judgment claim because the claim failed to allege a cause of action upon which relief can be granted. More specifically, the Federal Circuit noted that a § 256 claim for correction of inventorship does not accrue until the patent issues, and that there are no other private causes of action available to a litigant to challenge inventorship of a pending patent application. The Federal Circuit also noted that "[s]hould a patent issue from the '597 application, nothing prevents Mr. Pappalardo from seeking declaratory judgment relief on a correction of inventorship claim at that time," explaining, however, that "[a]t this time . . . Mr. Pappalardo's claim must be dismissed with prejudice pursuant to Rule 12(b)(6)." The Federal Circuit therefore vacated-in-part and remanded with instructions for the District Court to dismiss the declaratory judgment claim with prejudice.
As for Mr. Pappalardo's state law claims, the Federal Circuit noted that the District Court had determined that Mr. Pappalardo's assertion that his damages exceeded $75,000, based on the loss of his exclusive right to his invention, hinged on whether the USPTO issues the patent with Ms. Stevins as a named inventor, and the alleged damages were "speculative at best and contingent on a matter for which the [District] Court lacks the authority to consider." The Federal Circuit found no error in that conclusion.
The District Court had also determined that it lacked diversity jurisdiction over Mr. Pappalardo's state law claims. The Federal Circuit noted, however, that because the District Court had original jurisdiction over a federal question in the declaratory judgment claim, it could have exercised supplemental jurisdiction to hear the state law claims because they were so related to claims in the action that they formed part of the same case or controversy. The Federal Circuit also noted that because that authority is generally discouraged where a court has dismissed all claims over which it has original jurisdiction, and because the District Court stated that it was "hard-pressed to find that [Mr.] Pappalardo has adequately plead[ed] damages and causation—both elements needed to state an actionable claim for fraud and negligent misrepresentation—with the requisite particularity," the Federal Circuit would interpret that statement as a decision declining to exercise supplemental jurisdiction over the state law claims. The Federal Circuit therefore affirmed the District Court's dismissal of the state law claims.
Pappalardo v. Stevins (Fed. Cir. 2018)
Panel: Circuit Judges Lourie, O'Malley, and Wallach
Opinion by Circuit Judge Wallach