United States District Court, Western District of Pennsylvania
May 30, 2001
84 LUMBER COMPANY, PLAINTIFF,
MRK TECHNOLOGIES, LTD., PSC SCANNING,INC. AND TELXON CORPORATION, DEFENDANTS.
The opinion of the court was delivered by: Maurice B. Cohill, Jr., Senior United States District Judge.
Memorandum Opinion and Order
For the reasons set forth below, we are satisfied that we have subject
matter jurisdiction over this matter and that it has been properly
removed to this court.
Defendants PSC Scanning, Inc. ("PSC"), and Telxon Corporation
("Telxon") manufacture hand-held laser devices which are used to scan bar
codes on merchandise. MRK Technologies, Ltd. ("MRK"), distributes Telxon
equipment. Plaintiff 84 Lumber Company ("84 Lumber") purchased equipment
from these companies (collectively "the defendants"), to use in its bar
code scanning system. Subsequently, 84 Lumber was one of a number of
defendants sued for patent infringement by the Lemelson Medical,
Education & Research Foundation, LP ("Lemelson"), in the United States
District Court for the District of Arizona (the "Lemelson Suit").
84 Lumber settled the Lemelson Suit for forty thousand dollars. It then
filed a one count complaint against the defendants in the Court of Common
Pleas of Washington County, Pennsylvania, alleging breach of the implied
warranty against infringement, 13 Pa.C.S.A. § 2312(c), and seeking
monetary damages in the amount of the settlement.
Defendants timely filed a notice of removal in this Court, asserting
federal jurisdiction under 28 U.S.C. § 1331, 1338, and 1441. Mindful
of our responsibility to ascertain our own jurisdiction, we ordered
briefs and heard argument on whether or not we have jurisdiction over the
plaintiffs' claims. Plaintiff contends that we are without subject matter
jurisdiction, and that the action must be remanded to state court.
Since jurisdiction is asserted based upon 28 U.S.C. § 1338, the law
of the Federal Circuit controls this case. Panduit Corp. v. All States
Plastic Manufacturing Co., 744 F.2d 1564, 1573 (Fed. Cir. 1984). The
statute provides, in pertinent part, that "[t]he district courts shall
have original jurisdiction of any civil action arising under any Act of
Congress relating to patents .Such jurisdiction shall be exclusive of the
courts of the states in patent cases." 28 U.S.C. § 1338(a).*fn1
In Christianson v. Colt Industries Operating Corp., 486 U.S. 800
(1988), the United States Supreme Court addressed the question of when a
case arises under federal patent law:
[I]n order to demonstrate that a case is one "arising
under" federal patent law "the plaintiff must set up
some right, title or interest under the patent laws, or
at least make it appear that some right or privilege
will be defeated by one construction, or sustained by
the opposite construction of these laws."
Christianson, 486 U.S. at 807 (citations omitted).
In any civil action, a district court's federal-question jurisdiction
extends over "only those cases in which a well-pleaded complaint
establishes either that federal law creates the cause of action or that
the plaintiff's right to relief necessarily depends on resolution of a
substantial question of federal law," in that "federal law is a necessary
element of one of the well-pleaded . . . claims." Franchise Tax Board of
California v. Construction Laborers Vacation Trust, 463 U.S. 1, 27-28
(1983). Under the well-pleaded complaint rule, as adapted to §
1338(a), "jurisdiction likewise extend[s] only to those cases in which a
well-pleaded complaint establishes either that federal patent law creates
the cause of action or that the plaintiff's right to relief necessarily
depends on resolution of a substantial question of federal patent law, in
that patent law is a necessary element of one of the well-pleaded
claims." Christianson, 486 U.S. at 809 (citations omitted).
Whether a claim "arises under" patent law "must be determined from what
necessarily appears in the plaintiff's statement of his own claim in the
bill or declaration, unaided by anything alleged in anticipation or
avoidance of defenses which it is thought the defendant may interpose."
Christianson, 486 U.S. at 809 (citations omitted). For that reason, a
case raising a federal patent law defense does not arise under patent
law, "even if the defense is anticipated in the plaintiff's complaint,
and even if both parties admit that the defense is the only question
truly at issue in the case." Id., (quoting Franchise Tax Board, 463 U.S.
84 Lumber contends that its claims arise solely under state contract
law, and that we therefore are without subject matter jurisdiction and
must remand to state court. The defendants argue that we have
jurisdiction because plaintiff's claims cannot be decided without
resolving a substantial question of federal patent law.
As other courts faced with making this distinction have noted, "[t]he
line between cases that `arise under' the patent law and those that
present only state law contract issues is `a very subtle one.'" Rustevader
Corp. v. Cowatch, 842 F. Supp. 171, 173 (W.D.Pa. 1993) (quoting Arthur
Young & Co. v. City of Richmond, 895 F.2d 967, 969 n. 2 (4th Cir. 1990);
Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice
& Procedure § 3582 at 307 (1984)).
Under the well-pleaded complaint rule and Christianson, we turn first
to the plaintiff's complaint. The one-count complaint includes the
¶ 13. By virtue of Defendants' sale to 84 Lumber
of the Scanning Equipment, Defendants impliedly
warranted to 84 Lumber that the Scanning Equipment
would be free from any rightful claim concerning
intellectual property infringement. 13 Pa.C.S.A.
¶ 14. Defendants have caused damage to 84 Lumber by way of
Defendants' breach of their implied warranty against infringement.
¶ 17. Defendants have breached the implied warranty against patent
infringement that goods shall be delivered free of the rightful claim of
any third person.
On its face, then, the complaint states claims sounding only in state
law. Therefore we have jurisdiction only if 84 Lumber's right to relief
"necessarily depends on resolution of a substantial question of federal
patent law, in that patent law is a necessary element of one of the
well-pleaded claims." Christianson, 486 U.S. at 809.
Plaintiff seeks relief under the implied warranty of infringement,
13 Pa.C.S.A. § 2312. The statute provides, in pertinent part, as
§ 2312. Warranty of title and against infringement;
obligation of buyer against infringement
(c) Warranty of merchant regularly dealing in goods.
— Unless otherwise agreed a seller who is a
merchant regularly dealing in goods of the kind
warrants that the goods shall be delivered free of the
rightful claim of any third person by way of
infringement or the like . . . .
Pa.C.S.A. § 2312(c).
To prove that defendants breached this warranty, then, 84 Lumber must
show (1) that the defendants were merchants regularly dealing in goods of
the kind; (2) that the goods were delivered; and (3) that the goods were
not delivered free of the rightful claim of infringement of any third
party. For the purposes of the jurisdictional question before us, the
parties do not dispute the first two elements. They disagree, however, as
to whether we must decide a substantial question of federal patent law in
order to determine that the goods were delivered free of a rightful claim
of infringement, and, in particular on the meaning of "rightful claim."
The phrase has not been construed in this specific context.
Defendants refer us to several cases where claims brought under state
law were successfully removed to federal court under § 1338 because
they arose under federal patent law. In Additive Controls & Measurement
Systems, Inc. v. Flowdata, Inc., for example, plaintiff filed a claim of
business disparagement under a Texas state statute. 986 F.2d 476
(Fed.Cir. 1993). The district court denied plaintiff's motion to remand
because, under Texas law, a claim of business disparagement required
proof of the falsity of the alleged statements. The allegedly disparaging
statement was Flowdata's accusation that the plaintiff had infringed
Flowdata's patent. Since proof relating to patent infringement was a
necessary element of plaintiff's claim, the claim was one arising under
federal patent law and jurisdiction was proper under § 1338. Id. at
Similarly, the plaintiff in U.S. Valves, Inc. v. Dray sued for breach
of contract under Illinois law, claiming that Dray was manufacturing and
selling valves covered by licensed patents. 212 F.3d 1368 (Fed. Cir.
2000). Since Dray sold a number of different types of valves, in order to
determine whether some of the valves were covered by the licensed patents
the court had to interpret the patents and determine whether the valves
infringed. Thus patent law was a necessary element of the breach of
contract action, and appellate jurisdiction was proper in the Federal
Circuit. Id. at 1372.
Defendants contend that "rightful claim" is "a just or legally
established claim," or "[a] legally enforceable claim". Reply Br. at 4,
n. 5 (quoting Webster's Ninth New Collegiate Dictionary, 1015 (9th ed.
1990); Black's Law Dictionary, 1324 (6th ed. 1990)). Defendants' argument
here is that a court cannot determine whether or not they must indemnify
84 Lumber for the value of its settlement of the Lemelson Suit, without
first finding that Lemelson had a rightful, legally enforceable claim of
infringement. Patent law, therefore, is a necessary element of
plaintiff's breach of contract action, and it has been properly removed to
The gist of the plaintiff's argument that we should remand to state
court is that a "rightful claim" does not require a determination of
actual liability, and thus disposition of the complaint does not require
the resolution of a substantial question of federal patent law. Any
patent issues that may need to be addressed are merely tangential, and may
be competently adjudicated by the Pennsylvania state courts.
Plaintiff adopts a definition of "rightful claim" as a reasonable
belief that the alleged infringement will be upheld, which is quoted in a
leading treatise on the Uniform Commercial Code. White & Summers §
9-12 at 538 (4th ed. 1995). Addressing § 2-312(3), White and Summers
pose, but do not answer, the question of whether the warranty against
infringement is breached whenever a buyer "incurs litigation expenses in
successfully defending against an infringement claim?" They continue,
"[o]ne commentator has opined: `A rightful claim is one where the buyer
or seller reasonably believes that a third party's infringement charge
would probably be upheld by the courts.'" Id. (quoting Dundine,
Warranties Against Infringement Under the Uniform Commercial Code, 36
N YS.B.F. 214, 219 (1964)). White and Summers reinforce the fact that
there is a dearth of precedent to guide our decision here. After quoting
Dundine's proposed definition of a rightful claim, the commentators
emphasize that this is a problem yet to be worked out by the courts,
"which have hardly been inundated with 2-312(3) cases." Id.
The plaintiff also refers us to Cover v. Hydramatic Packing Co., Inc.,
83 F.3d 1390 (Fed. Cir. 1996), a case in which the Federal Circuit
assessed the relationship between the patent code and § 2312(c) of
the Pennsylvania statutes. Cover, however, is inapposite. To begin with,
the opinion analyzed the last clause of subsection (c), which states:
"but a buyer who furnishes specifications to the seller must hold the
seller harmless against any such claim which arises out of compliance
with the specifications." 13 Pa.C.S.A. § 2312(c). The hold harmless
clause is not at issue in the case at bar. Furthermore, Cover was solely
concerned with the question of preemption, an issue which is not
presented by the case before us. And, contrary to plaintiff's assertion
that the case was remanded to state court "as the only claim remaining
was one for indemnity against another alleged infringer," the action was
initially filed in federal court as a patent infringement action, and
remanded back to the Eastern District of Pennsylvania which entered
judgment for Hydramatic Packing Co. Pl.'s Br. at 5; Cover v. Hydramatic
Packing Co., 42 U.S.P.Q.2d 1305 (E.D.Pa. 1997). The court of appeals in
Cover does not construe the phrase "rightful claim." In dicta, however,
the Federal Circuit suggests that a rightful claim does not require a
finding of absolute patent liability, a construction with which we do not
disagree. 83 F.3d at 1394.
If claims of patent infringement are seen as marks on a continuum,
whatever a "rightful claim" is would fall somewhere between purely
frivolous claims, at one end, and claims where liability has been
proven, at the other.
However, we need not decide precisely what constitutes a rightful claim
of patent infringement in order to conclude that plaintiff's claims, as
stated in the complaint, cannot be addressed without inquiring into the
nature of Lemelson's allegations that 84 Lumber's use of the scanning
equipment infringed his patents. Even if we were to adopt plaintiff's
contention that because it had a reasonable belief that Lemelson would
succeed, this establishes that Lemelson had a "rightful claim" under
§ 2312(c), we cannot analyze the reasonableness of such belief
without comparing the scope of the patents at issue with the allegedly
infringing products. We must have some indicia that Lemelson's claim that
the defendants infringed his patents had merit. We cannot impose
liability on the defendants based solely upon the plaintiff's subjective
belief and representation that it thought Lemelson was likely to win.
Plaintiff seeks indemnification, under the Pennsylvania statute,
because Lemelson asserted a rightful claim of patent infringement against
it. Thus plaintiff's claims cannot be resolved without also deciding a
substantial issue of federal patent law, namely, that there was an
adequate basis for Lemelson's assertion that defendants' products
infringed his patents. This would involve, at a minimum, comparing
Lemelson's patents with the defendants' goods.
For the foregoing reasons, we find that we have jurisdiction over this
matter under 28 U.S.C. § 1338(a), and the action will proceed in this
An appropriate Order follows:
AND NOW, to-wit, this ___ day of May, 2001, it is hereby ORDERED,
ADJUDGED, and DECREED that we have jurisdiction over this matter under
28 U.S.C. § 1338(a) and it has been properly removed to this federal