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Declaratory action improper where DJ-defendant’s patent ownership was contingent on prevailing in state court

Declaratory action improper where DJ-defendant’s patent ownership was contingent on prevailing in state court

First Data v. Inselberg was decided on September 15, 2017 on appeal from the District of New Jersey. Inselberg is the inventor of various relevant patents formerly held by Inselberg Interactive. In 2011, Inselberg Interactive transferred “all right, title, and interest” in the patent portfolio to Bisignano, who eventually became CEO of First Data. In October 2014, Inselberg began claiming that the assignment to Bisignano was invalid. And in November 2014, Inselberg sent First Data a claim chart laying out First Data’s alleged infringement of the patents. Over the next year, Inselberg sent Bisignano and First Data, on two occasions, a draft of a state court complaint. Bisignano and First Data then filed a complaint in federal court seeking declaratory judgment regarding the agreement and the patent portfolio. Shortly thereafter, Inselberg filed a complaint in state court seeking, along with various business tort and contract remedies, declarations that the assignment agreement was invalid and that the patents were owned by Inselberg and Inselberg Interactive. In their answer, Bisignano and First Data included counterclaims requesting, inter alia, a declaratory judgment of noninfringement of the patents and a declaratory judgment of invalidity for one of the patents in the portfolio. Upon removal, the district court dismissed the federal claims and remanded the state law claims to state court. First Data and Bisignano appealed.

The Federal Circuit affirmed the dismissal of the federal claims for lack of subject matter jurisdiction.

Only a patent owner or an exclusive licensee can have constitutional standing to bring an infringement suit. And here, the parties agreed that “Bisignano remained the owner of the patent portfolio unless and until a state court invalidated the assignment agreement.” Unless Inselberg prevailed on his state law claims and regained ownership of the patents, he could not possess a federal claim of infringement. Inselberg’s threats of an infringement lawsuit could not confer declaratory judgment jurisdiction because Inselberg could not file an infringement action. “[F]ederal subject matter jurisdiction cannot attach based on frivolous allegations.” “First Data’s claims seeking declaratory judgment of noninfringement would be frivolous” because Inselberg does “not own any patents for which First Data could seek such judgment.”
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“[A]t the very least,” the counterclaims and the declaratory judgment claims were not ripe. “A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.” Because all parties agree that Inselberg did not at the time have an ownership interest in the patents at issue and could not obtain such an ownership interest absent relief from a court, any potential infringement claim by Inselberg in this case “relie[d] on the contingent future event of recovering title to the patents by having a court invalidate the assignment agreement and order that the patents be returned to Inselberg.” Until Inselberg is successful in recovering the patents, First Data’s and Bisignano’s noninfringement claims are not ripe.