MARK FALK, Magistrate Judge.
Before the Court is Plaintiff's motion to remand this case to state court. [CM/ECF No. 25.] The motion is opposed. Oral argument was held on May 16, 2014. For the reasons set forth below, it is respectfully recommended that Plaintiff's motion be
Plaintiff, a self-described inventor and sports memorabilia dealer, has filed a wide-ranging complaint against the New York Football Giants, quarterback Eli Manning, co-owner John K. Mara and other Giants employees and defendants. (Compl., ¶ 1.) The Complaint, filed in state court, has two conceptual parts. Most of the Complaint alleges improprieties against the Defendants including racketeering, perjury, trade libel and more regarding alleged fraudulent Giants memorabilia, which caused Plaintiff to suffer damages. The memorabilia claims are purely state law claims.
The other part of the Complaint alleges that the Giants inappropriately used patented intellectual property invented by Mr. Inselberg relating to technology for wireless audience interaction at football games. Defendants removed the case to federal court based on Plaintiff's claims regarding his patented inventions.
Plaintiff then moved to remand the case, arguing that his patent-related claims were pleaded only under state law. Apparently, Plaintiff is no longer the owner of the patents he obtained and he states that he lacks standing to assert traditional patent infringement claims. (Pl.'s Br. 8.) Nevertheless, Plaintiff attempts to bring these patent-related claims under obscure New Jersey common law relating to misappropriation of trade secrets and unjust enrichment.
Plaintiff's purported state law "patented concepts" claims are really patent claims, no matter what they are called. Patent claims are quintessentially federal, creating model federal jurisdiction. But not only are patent claims federal, they are exclusively federal, and can only be brought in federal court. In patent matters, Congress has so completely preempted the field that any attempt to disguise them as state law claims cannot defeat federal jurisdiction. Thus, the motion to remand should be denied.
These jurisdictional concepts, which have, on occasion, been described as "confusing," will be fully addressed herein.
This case arises out of a Government investigation into fraud in the sports memorabilia business that focused on Plaintiff, Eric Inselberg, and employees of the New York Football Giants.
In addition to the Giants, Eli Manning (Giants quarterback), and John K. Mara (the President, CEO, and co-owner of the Giants), the other defendants are: William J. Heller, Esq. (Giants General Counsel); Christine Procops (Giants Senior Vice President and CFO); Ed Wagner, Jr., Joseph Skiba and Edward Skiba (Giants equipment managers); Park Cleaners Inc. (a dry cleaners in Rutherford, New Jersey); and Barry Barone (owner and operator of Park Cleaners) (collectively referred to as "Defendants") (Compl., ¶¶ 2-11.)
In or about 2006, the United States Attorney's Office for the Northern District of Illinois, in connection with the FBI, commenced a criminal investigation into fraud in the sports memorabilia business. (Compl., ¶ 57.)
In 2008, the Government focused on Inselberg as part of its investigation after it learned that he "may have sold game-issued or authentic jerseys to other memorabilia traders that were ultimately sold—fraudulently—as game-worn." (Compl., ¶ 58.) During the course of the FBI investigation, some Giants employees gave statements to FBI agents and testified under oath before a grand jury in Illinois, in which they allegedly downplayed the Giants' relationship to Inselberg and the amount of memorabilia he obtained from the team. (Compl., ¶¶ 60, 62-118.)
Inselberg was eventually indicted in Illinois for mail fraud, specifically that he had "misrepresented unused jerseys as game-worn or game used in order to obtain higher prices for the merchandise." (Compl., ¶ 136.) Inselberg says the indictment was the result of Giants employees giving false testimony. (Compl., ¶ 62.) The indictment against Inselberg was dismissed on May 2, 2013, at the request of the U.S. Attorney's Office. (Compl., ¶ 146.)
On January 29, 2014, Plaintiff filed a 16-count Complaint in New Jersey Superior Court. Inselberg contends, inter alia, that false testimony led to his indictment and ruined him personally and financially. Inselberg also alleges that Defendants were involved in game-used memorabilia fraud which ultimately damaged his reputation and business. (Compl., ¶¶ 119-121.)
Plaintiff's Complaint asserts the following sixteen causes of action, all under state law: (1) New Jersey's Civil Racketeering Statute, N.J.S.A. 2C:41-1, et seq.; (2) Tortious Interference with Prospective Economic Advantage; (3) Tortious Interference with Contractual Relations; (4) Malicious Prosecution; (5) Abuse of Process; (6) Trade Libel; (7) Intentional Infliction of Emotional Distress; (8) Unjust Enrichment; (9) Quantum Meruit; (10) Unfair Competition — Idea Misappropriation; (11) Breach of Contract; (12) Civil Conspiracy; (13) Aiding & Abetting; (14) Negligent Supervision; (15) Negligent Retention; and (16) Respondeat Superior.
Inselberg was not just involved in the sports memorabilia business. He is also an inventor involved in the development and marketing of technology for wireless audience interaction at live events, such as football games. (Compl., ¶¶ 32-35; Pl.'s Br. 4.) Plaintiff eventually amassed more than twenty (20) "wireless-related patents" covering his inventions, and indeed, a list of the patents is attached as an exhibit to the Complaint. (Compl., Ex. A.)
Apparently while the Government's sports memorabilia fraud investigation was proceeding, Inselberg met with the Giants to promote his patented technology. (See generally Compl., ¶¶ 233-35.) At around the same time, Inselberg entered into a loan agreement with Frank Bisignano, who was then the Co-Chief Operating Officer for JP Morgan Chase and CEO of Mortgage Banking for JP Morgan Chase. This loan was collateralized by, inter alia, Inselberg Interactive's patents.
The Complaint alleges that the allegedly improper indictment, and other wrongful conduct by the Giants, caused Inselberg's patent business to collapse and caused him to default on the Bisignano loan and lose ownership of his collateral—the wireless patents, which are now owned by Bisignano. All agree that Plaintiff's allegations relating to the loss of his patents are purely state law claims that do not support federal jurisdiction.
The Complaint also includes two very different types of claims related to patents. These are set forth in Count 8, entitled "Unjust Enrichment," and Count 10, termed "Unfair Competition-Idea Misappropriation." Counts 8 and 10 are based on Plaintiff's allegation that Defendants wrongly "misappropriated" and "used" Inselberg's wireless patented marketing concepts and "integrated" them into the Giants' wireless platforms. (Compl., ¶¶ 233-35.)
Defendants removed this case to Federal Court on February 27, 2014, based on the allegation that Plaintiff has, in Counts 8 and 10, "asserted claims under the Patent Act" and therefore, that there is federal jurisdiction under 28 U.S.C. §§ 1331 and 1338. Defendants' arguments are: (1) that, on their face, Counts 8 and 10 are literally patent infringement claims arising under federal law; (2) to the extent Plaintiff hasn't straightforwardly pleaded patent claims, he has "artfully pleaded" them to appear as state law claims, and any attempt to do so cannot work since Congress has completely preempted patent infringement claims; and (3) that even if Counts 8 and 10 find their origins in state law, they nevertheless give rise to federal jurisdiction because they raise embedded federal patent issues, providing for federal jurisdiction under relevant Supreme Court authority.
The federal removal statute provides that "[e]xcept as otherwise provided by Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed . . . to the district court of the United States for the district and division embracing the place where such action is pending." 28 U.S.C. § 1441(a). "[T]he party asserting federal jurisdiction in a removal case bears the burden of showing, at all stages of the litigation, that the case is properly before the federal court."
Federal courts have original jurisdiction over cases that "arise under" federal law. See 28 U.S.C. § 1331, 1441(a). Because Defendants bear the burden of establishing federal question jurisdiction, they must demonstrate that one of Plaintiff's claims—in particular Count 8 or 10—arise under federal law. Whether federal question jurisdiction exists is determined solely by examining the plaintiff's "well-pleaded complaint."
Pursuant to what is referred to as the "well-pleaded complaint rule," a plaintiff is the "master of his complaint" and ordinarily entitled to remain in state court so long as the complaint does not allege a federal claim on its face.
First, a case "arises under" federal law when federal law expressly creates the cause of action asserted. See Franchise Tax Bd., 463 U.S. at 9. For example, Congress has authorized federal district courts to exercise original jurisdiction in "all civil actions arising under the Constitution, laws, or treaties of the United States, 28 U.S.C. § 1331, and, more particularly, over any civil action arising under any Act of Congress relating to patents, § 1338(a)."
Second, "arising under" jurisdiction can be established by the doctrine of "complete preemption," which is sometimes referred to as "artful pleading." Complete preemption has been described as an "exception" to the well-pleaded complaint doctrine that "creates removal jurisdiction even though no federal question appears on the face of the plaintiff's complaint."
Complete preemption generally arises in the context of purely federal areas of law, such as state claims barred by the Employee Retirement Security Act of 1974 (ERISA), 29 U.S.C. §§ 1132, et seq., or the Labor Relations Management Act (LMRA), 29 U.S.C. § 185(a).
The third and final category of "arising under" cases are casually referred to as
The concept of federal question removal jurisdiction is a deceptively complicated area of the law, described by United States Chief Justice John Roberts as a "canvas [that] looks like one that Jackson Pollock got to first." Gunn, 133 S. Ct. at 1065.
Plaintiff disagrees, primarily taking the position that any preemption issues that arise are defensive in nature and more appropriately addressed in the context of a motion to dismiss. He also states that he does not own the patents referenced in the Complaint and concedes that he lacks standing to assert patent infringement claims.
The Court concludes that federal arising under jurisdiction exists here and the case was properly removed. The Complaint alleges misappropriation and unauthorized use of patented technology and concepts. These claims are completely preempted by federal patent law.
Since the jurisdictional analysis starts with the "well-pleaded" complaint, it merits a look at what Plaintiff has actually pleaded in Counts 8 and 10:
(Compl., ¶¶ 222-236) (emphases added).
Defendants argue the Complaint alleges a patent infringement claim on its face. (Defs.' Br. 9.) Plaintiff maintains that he pleaded pure state law claims for unjust enrichment and misappropriation. Defendants' argument is credible, although not entirely persuasive. The Complaint does allege that the Giants misappropriated Plaintiff's patented inventions and used them without permission or compensation. The concepts are repeatedly referred to as "patented." Is that directly alleging a patent infringement claim? No definitive answer was found in precedent.
Conversely, there is no citation or reference to the Patent Act. The word infringement is not used. While there are no magic words needed to allege a patent claim, these counts don't look like most of the other patent complaints we have seen. Although the Court believes this is, in fact, a patent claim, finding it conspicuously alleged on the face of the Complaint is a stretch. This is why the Court's decision is more aptly premised on the "artful pleading" complete preemption route to federal jurisdiction.
If not expressly pleaded, patent infringement is certainly the essence of the claims. Though the Plaintiff is the master of his Complaint, that mastery is not unlimited. An inventor alleging injury from unauthorized use of a patented invention is tantamount to a patent infringement claim, no matter how pleaded. Plaintiff alleges that Defendants "misappropriat[ed] Insleberg's patented wireless concepts and integrat[ed] them into the Giants wireless platforms." (Compl., ¶ 223.) "Artfully" omitting words like "infringement" and substituting a synonym like "misappropriate" does not change the nature of the claim.
Having found that the Complaint alleges patent infringement, the complete preemption doctrine sweeps these claims into federal court. See Goepel, 36 F.3d at 306. Patent infringement exists solely by federal statute. See 35 U.S.C. § 271. In addition, there is no clearer Congressional intention of federal court exclusivity than 28 U.S.C. § 1338. Section 1338 is a separate jurisdictional statute governing only patents, and it expressly authorizes patent infringement suits in federal court while simultaneously taking the unusual step of divesting state courts of jurisdiction over such claims. In fact, patent claims are perhaps more federal than most any other claims, since many other federal claims, e.g., civil rights claims, are permitted to proceed in state court.
Permitting patent infringement claims to be brought under state common law concepts, by persons without standing, would undermine the federal patent framework. Patents are special. The defining hallmark of a patent is exclusivity. Once something is patented, the holder of the patent has exclusive right to use it — and to enforce it. The holder of the patent has the exclusive right to sue for the unauthorized use of intellectual property (i.e., the infringement). And pursuant to statute, the federal court has exclusive jurisdiction over the case.
To accept Plaintiff's premise — that the person who conceived of an idea retains the right to sue for misappropriation of it, after it was patented and he no longer holds the patent, would destroy the value of the patent and threaten the patent system. Why go to the trouble and expense of obtaining a patent if you don't get exclusivity? What of the patent holder's rights? Mr. Frank Bisignano supposedly owns the patents in this case. Can he also sue the Giants? Allowing a non-patent holder to sue for infringement under state common law would obliterate the patent holder's exclusivity and cannot be reconciled with exclusive federal patent jurisdiction.
When Plaintiff elected to patent his ideas and concepts, he forfeited the right to enforce them under state common law. It is the quid pro quo for patent protection. This has been unequivocally confirmed by both the Federal and Third Circuits:
Based on the above, it would seem impossible for Plaintiff to proceed with common law claims based on the misappropriation of anything that has been patented. Yet, Plaintiff admits that's exactly what he is doing. (Tr. 20:5-9.) Plaintiff's retort is that such arguments are merely "defensive" arguments and should be raised in a motion to dismiss the claims, not used to re-characterize the common law claims he has supposedly pleaded.
As previously described, Grable jurisdiction is narrow and only employed when a purely state law claim includes an embedded federal issue that is actually disputed and substantial. See Grable, 545 U.S. at 314. Defendants partially base their removal on asserted Grable jurisdiction. Specifically, they assert four purported embedded federal issues. (Defs.' Br. 7.) The most plausible is that it is "for this Court to determine the extent of patent infringement claims included in Counts 8 and 10 and whether there is anything left over under state law." (Defs.' Br. 7.) It is quite possible that deciding the contours of the patented concepts at issue would be necessary to determine the extent to which Plaintiff would have a viable state law misappropriation claim for non-patented concepts. But, Plaintiff's Complaint (and his concession at oral argument) demonstrate he is suing for the use of his patented concepts. Further, the Grable argument is not fleshed out. Therefore, no speculative consideration of Grable jurisdiction is required. This is especially so in light of the Supreme Court's Opinion in Gunn, in which the Court concluded that Grable requires a truly substantial issue of federal law, even if patents are collaterally part of the mix.
Plaintiff cites a variety of state and federal cases in an effort to avoid preemption. All of Plaintiff's cases and arguments are thoroughly distinguishable. The parties have cited no cases factually analogous to this case and conceded at argument that none could be found. A simple example illustrates the difference. There are cases in which A, an inventor, has an idea and approaches B, confidentially, for help in developing the idea. B then misappropriates the idea and secures a patent for the invention.
No one has cited a case allowing a state law cause of action when A has an idea and has it patented, then contacts B about his patent, and then B steals (i.e., infringes) the patent and uses the patented idea without authority. That is effectively an infringement complaint which cannot proceed in state court. And that is essentially this case.
Plaintiff's cases can also be summarily distinguished on other grounds. One, it is not material that there are generally recognized state law causes of action for misappropriation and unjust enrichment. Breach of contract is also a recognized common law claim. But, as the Supreme Court noted in Metro. Life Ins., breach of contract claims under common law are preempted when the claim is being brought by a ERISA plan beneficiary against a plan provider, see Metro. Life Ins., 481 U.S. at 63. Similarly "breach of contract" claims are preempted when they are brought by a labor union against an employer and there is a collectively bargained agreement involved. See Avco Corp., 390 U.S. at 557. It is not the existence of the common law cause of action that matters, but the circumstances in which the cause of action is being asserted. Applying that logic here, it does not much matter that unjust enrichment and idea misappropriation are legitimate New Jersey causes of action. Like the breach of contract claims in Met Life Ins. and Avco, Plaintiff's claims are displaced when they are really artfully alleging patent infringement, an exclusively federal claim.
Two, Plaintiff's Grable related arguments are not relevant because the Court has not decided the case on that basis.
Three, Plaintiff contends that any preemption issues that arise are defensive in nature. That is, that defensive or conflict preemption may result in the dismissal of Plaintiff's claims, but that must be done through a motion to dismiss in state court. This argument fails to acknowledge the function of the Court in interpreting the "well-pleaded complaint," which discloses that this case involves complete preemption.
Four, Plaintiff repeatedly states that he lacks standing to bring patent infringement claims, and that if Count 8 or 10 are found to be patent infringement claims, they would be subject to immediate dismissal. (See, e.g., Pl.'s Reply Br. 5; Tr: 33:8-13; 69:17-24.) Litigants commonly plead claims they lack standing to bring. That Plaintiff's patent claims may ultimately fail for lack of standing does not deprive the federal court of jurisdiction until they do. Moreover, if Plaintiff owned the patents and thus had standing, is there really any doubt that he would have pleaded infringement more clearly?
The Court finds that Count 8 (Unjust Enrichment) and Count 10 (Unfair Competition-Misappropriation) are completely preempted by federal patent law. Therefore, Defendants' removal of the case to federal court was proper. For these reasons, it is respectfully recommended that Plaintiff's motion to remand should be