First Data Corporation v. Inselberg
870 F.3d 1367
Fed. Cir.2017Background
- Inselberg (inventor) and Inselberg Interactive originally owned a portfolio of patents; Interactive borrowed $500,000 from Bisignano in 2010 and granted him a security interest; an assignment purportedly transferred "all right, title and interest" to Bisignano.
- Inselberg later defaulted and claimed the assignment was invalid after criminal charges and other events; he threatened litigation and sent claim charts asserting First Data (where Bisignano became CEO) infringed the patents.
- Bisignano and First Data filed a declaratory-judgment action in federal court seeking declarations of noninfringement/invalidity; Inselberg and Interactive filed a state-court complaint asserting only state-law claims to reclaim ownership of the patents.
- Bisignano and First Data removed the state action to federal court and asserted counterclaims including declaratory patent claims; Inselberg moved to dismiss the federal claims and to remand the state-law claims.
- The district court dismissed the federal patent-related claims for lack of subject-matter jurisdiction (finding patent issues contingent on state-law rescission of the assignment) and remanded the state-law claims to state court under 28 U.S.C. § 1447(c).
- The Federal Circuit affirmed: the patent claims were immaterial/contingent (no present patent ownership for Inselberg/Interactive), Jim Arnold controls, and the remand order is not reviewable under § 1447(d).
Issues
| Issue | Plaintiff's Argument (First Data/Bisignano) | Defendant's Argument (Inselberg/Interactive) | Held |
|---|---|---|---|
| Whether federal court had jurisdiction over declaratory noninfringement/counterclaims | Ownership is a merits question; federal court can adjudicate noninfringement without resolving state-law assignment | Inselberg lacks present patent ownership; any patent claim is contingent on state-law rescission and thus not a federal question | Dismissed for lack of subject-matter jurisdiction: ownership is jurisdictional here because patent claims are contingent and not colorable |
| Whether Jim Arnold remains good law after Arbaugh and Reed Elsevier | Jim Arnold is inconsistent with Supreme Court's merits/jurisdiction distinction and should not control | Jim Arnold fits within Arbaugh/Bell exceptions for claims that are immaterial, insubstantial, or frivolous | Jim Arnold remains valid for cases where assignor lacks present title and cannot in good faith allege ownership |
| Ripeness and standing of declaratory noninfringement claims | There is an actual controversy because Inselberg threatened suit and First Data faces alleged infringement exposure | Threats are insufficient when the putative patentee admits it has no present title; claim depends on contingent future event (rescission) | Claims are not ripe and likely frivolous/insubstantial; no standing or ripe controversy now |
| Reviewability of district court's remand of state-law claims | Remand was under §1367(c) (discretionary supplemental jurisdiction), so appellate review is available | District court actually remanded under §1447(c) for lack of jurisdiction | Remand was based on lack of subject-matter jurisdiction and thus is not reviewable on appeal under §1447(d) |
Key Cases Cited
- Jim Arnold Corp. v. Hydrotech Systems, Inc., 109 F.3d 1567 (Fed. Cir. 1997) (assignor lacks federal jurisdiction to sue for infringement absent equitable restoration of title)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (distinguishes jurisdictional conditions from merits elements; courts should treat statutory limitations as nonjurisdictional absent clear statement)
- Bell v. Hood, 327 U.S. 678 (1946) (exception for suits dismissed for want of jurisdiction when federal claim is immaterial or frivolous)
- Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010) (further clarifies jurisdictional vs. merits analysis for statutory prerequisites)
- Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635 (2009) (standard for reviewing remand decisions when supplemental-jurisdiction issues arise)
- Spine Sols., Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305 (Fed. Cir. 2010) (only a patent owner or exclusive licensee has constitutional standing to sue for infringement)