Do state courts have jurisdiction over patent licensing disputes? MEDTRONIC v. SASSO

Do state courts have jurisdiction over patent licensing disputes? MEDTRONIC v. SASSO

A patent grants its owner the exclusive right to make, use, sell and import an invention in the United States.  If someone other than the patent owner attempts to exercise one of these exclusive rights, without authorization, that can be considered patent infringement.  If a patent owner feels that their patent is being infringed on, the patent owner can file a lawsuit in United States Federal Court.

When a patent owner files a patent infringement lawsuit, no matter how strong their patent infringement case is, there are various requirements that must be met.  If these requirements are not met, a patent infringement case can be dismissed in favor of the defendant before the facts of the case are reviewed.  A fundamental aspect of litigation in the United States is that a court can only hear a case if the court has jurisdiction.  Two factors in jurisdiction are subject matter jurisdiction and personal jurisdiction.  With respect to subject matter jurisdiction, United States Federal District Courts have exclusive jurisdiction over patent infringement cases, this means that if a patent lawsuit is filed in state court, the case will be dismissed.

A patent is a form of intellectual property.  Like other forms of property, a patent can be rented or licensed to other parties without the patent owner giving up ownership of the patent.  Such a license would be a form of a contract, and state courts handle contract disputes on a regular basis.  Generally a contract case can be removed from a state court to a federal district court if certain requirements are met.  However, the grant of removal is not guaranteed.  Abstention is a doctrine under which federal courts may choose not to hear a case, even if all the formal jurisdiction requirements are met.  The question then becomes, if a contract involves a patent license can a federal district court abstain from hearing the case?

MEDTRONIC, INC., v. RICK C. SASSO, M.D., 2019-1583 (C.A.F.C. 2020) is a case which touches on the complex issues of jurisdiction in patent licensing cases.

Plaintiff in this case is a medical device manufacturer that licensed patents from the Defendant.  A contract dispute broke out between the two parties.  Dr. Sasso filed suit in Indiana state court, which was then appealed within the state court system.

Plaintiff then filed a declaratory judgment complaint in federal court.  The district court dismissed Plaintiff’s request for declaratory judgement, without prejudice.  The district court applied the doctrine abstention because there was presently a case in Indiana state court between the same parties concerning the same dispute.  Plaintiff appealed the district court’s decision to the Court of Appeals for the Federal Circuit.

Plaintiff’s primary argument on appeal was that the district court’s “abstention” was an abuse of discretion, because the federal courts have exclusive jurisdiction over patent cases, and patent validity is fundamental to resolution
of this dispute. Therefore, Plaintiff argued that the district court had an obligation to receive and resolve the dispute.

The Federal Circuit affirmed the district court’s decision. District courts possess significant discretion to dismiss or stay claims seeking declaratory relief, even though they have subject matter jurisdiction over such claims.  The Federal Circuit found that the district court’s abstention was reasonable, because there had already been a trial in the state court and that case was presently on appeal at the Indiana Court of Appeals.  The Federal Circuit concluded that conclude that the district court exercised common-sense accommodation of judgment, and did not abuse its discretion in abstaining and dismissing without prejudice

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