Blawgletter®

My Oh Myopia: Federal Circuit Views Forum Consent Clause

The inventor from New Jersey, Thomas Sullivan, tried to charm a Tennessee company, Radio Systems, into paying him for a license to make and sell his invention. Radio Systems at length agreed to let Mr. Sullivan drop by to show them his device, which he called "Wedgit" and on which he held a U.S. Patent. But first he had to sign a Confidential Disclosure Agreement.

The CDA included a "Choice of Law" clause, which in fact did more than select the law that would govern. It said:

The Parties agree that this Agreement is to be construed in accordance with the laws of the State of Tennessee in the United States of America and Disclosing Party [the inventor guy] consents to the personal jurisdiction of, and agrees that exclusive jurisdiction shall reside in, all courts of the State of Tennessee and the U.S. District Court for the Eastern District of Tennessee regarding any cause of action under this Agreement or arising out of the subject matter relating to this Agreement.

Radio Systems never followed up on the visit by Mr. Thomas, but in a short while it did apply for a patent covering its SmartDoor pet door. That drew Mr. Sullivan's attention. His lawyer in due course made threats, and the SmartDoor folks responded by suing Mr. Sullivan in Knoxville federal court. Radio Systems asked for a judgment declaring that it didn't infringe Mr. Sullivan's patent. He moved to dismiss on the ground that the district court hadn't the power to bind him to a decision because it lacked personal jurisdiction over him. The district court granted the motion.

The Federal Circuit upheld the dismissal. It first held that, under its tests for the "minimum contacts" necessary to the exercise of personal jurisdiction, the inventor hadn't done enough in Tennessee to try to enforce his patent. Sure, he'd worked to get the Tennessee company to license his invention, but that doesn't count as enforcing the patent, the court ruled.  Radio Systems Corp. v. Accession, Inc., No. 10-1390 (Fed. Cir. Apr. 25, 2011).

Yawn.

The thing that intrigued Blawgletter came near the end of the opinion. The panel there got to the forum selection and consent clause that appeared in the "Choice of Law" paragraph. The court deemed "cause of action . . . arising out of the subject matter relating to this Agreement" as referring only to claims concerning "Confidential Information" that the inventor in fact imparted in Tennessee.

Oh, yeah? While the court conceded that the CDA defined its "stated purpose" as to "facilitate 'discussions'", it didn't regard the "discussions" as the "subject matter" of the CDA and concluded therefore that the declaratory judgment claim didn't arise out of them. Id., slip op. at 13. But plainly the "discussions" did form the subject matter of the CDA -- not just the Confidential Information. The outcome thus should have turned on whether a claim of infringement by Mr. Sullivan would have arisen out of the discussions about possible licensing of the patent for Mr. Sullivan's Wedgit device and like products. The court didn't answer that question.

We would guess the panel felt the Volunteer State outfit had played foul by suing the nice Garden State fellow after he'd tried so hard to deal with them in a nice way. Bad facts make bad law?

Snappy and Bitey Discuss Italian Cowboy

Scene:  A cafe in Uptown Dallas. Noonish. Sunlight streams through half-open vertical blinds. The beams hurt your eyes. Or they would if you hadn't left as soon as Bitey started talking about the Italian Cowboy case.

Bitey:        Just think, Snappy, the Supreme Court of Texas just ruled for plaintiffs last week! Shazaam!

Snappy:    Imagine my surprise.

Bitey:        A landlord told a nice tenant that the space they leased for a new restaurant didn't have any problems, but in fact the landlord knew about a BAD problem.

Snappy:    Truly, your real estate story so far has whetted my appetite. I can only pray it somehow concerns the rule against perpetuities.

Bitey:        No interest is valid unless it must fest, if at all, within 21 years of a life in being at the time of the creation of the interest.

Snappy:    You amaze me. Did you say "fest"? Surely you meant "vest". And did the problem in Italian Cowboy involve a lease that went more than 21 years after the life in being?

Bitey:        Nay. It concerned sewage. Rather the odor of sewage.

Snappy:    Go. On.

Bitey:        The landlord said that, even if it did commit fraud, the fraud wouldn't count because the lease said the landlord hadn't "made any representations or promises with respect to the Site, the Shopping Center or this lease except as expressly set forth herein."

Snappy:    So?

Bitey:        So, the lease said bupkes about the nasty smell, and the court of appeals held that the clause negated the awful-aroma-as-fraud claim as a matter of law.

Snappy:    Of course it did. You can't sign one of those lease things that says X and later win a lawsuit where you say not-X. That'd make a court party to a lie. To a lie, I tells ya!

Bitey:        Uh, not according to six of the nine justices. They said the clause did nothing more than make the oral "representations or promises", which the lease said didn't exist, unenforceable as part of the lease contract.

Snappy:    Huh?

Bitey:        The majority felt that, if you want to negate fraud with contract language, you have to do it pretty plainly. Something like "I don't care if you did lie to me about not hooking up the sewage pipes to the grease trap before I signed this contract. I disclaim any reliance on stuff you said before. I waive any fraud claim against you. I don't care if the place does stink to high heaven. I'll fix it myself if I have to. Go hence without day."

Snappy:    Well, that has the virtue at least of making things clear.

Bitey:        And how.

Snappy:    What gives with that court, by the way. A couple of years ago Italian Cowboy would have gone the other way.

Bitey:        Beats me. But do you plan to eat the rest of those cheese fries, Snappy? My doctor says I need the calcium.

Exit Snappy and Bitey.

Italian Cowboy Partners, Ltd. v. The Prudential Ins. Co. of Am., No. 08-0989 (Tex. Apr. 15, 2011).

Quote of the Day: Holman W. Jenkins, Jr.

Stop wasting your money on antitrust lawyers. Hire patent lawyers instead.

Holman W. Jenkins, Jr., "The Trustbusters' Last Meal Ticket", The Wall Street Journal, Apr. 16, 2011 (fussing again about those durn antitrust laws).

Quote of the Day: Alex Kozinski

At some point, litigation must come to an end. That point has now been reached.

The Facebook, Inc. v. Pacific Northwest Software, Inc., No. 08-16745, slip op. at 12 (9th Cir. Apr. 11, 2011) (affirming summary judgment against Winkelvoss twins on ground they Should Have Known Better -- and probably did -- than to trust people they'd sued for fraud) (Kozinski, C.J.).

Killer Patent App: Fifth Circuit Holds That Filing for Patent Destroys Secrecy Part of Trade Secret Claim

Doesn't the whole world know that, if you publish info you regard as a trade secret, you lose any right to complain about others' use of the info?

The man who came up with a way to pack meat with zero oxygen in the package seems not to have gotten the memo. He -- Dr. Gustav Tewari -- claimed that a vendor of fresh lamb cuts stole his method despite the fact that he'd filed patent applications on his oxygen-free meat-packing process and that anyone with a computer and browser could read the applications online.

The district court held that, as a matter of Texas law, the public airing spoiled the secrecy element of a trade secret claim. A panel of the Fifth Circuit affirmed:

There can be no dispute that a published patent application, like a patent, is readily available—the United States Patent and Trademark Office and Google both allow free online searching of published patent applications. Under Texas law, information that is generally known or readily available by independent investigation is not secret for purposes of trade secrecy.

 

 

 

Tewari De-Ox Systems, Inc. v. Mountain States/Rosen, L.L.C., No. 10-50137, slip op. at 10 (5th Cir. Apr. 5, 2011) (citations omitted).

You should note that, as the court pointed out, the filing of the applications came before any misappropriation. The outcome might have changed if Tewari had disclosed the info after the bad deeds, if any.

Bear in mind as well that the panel still reversed summary judgment against Tewari because the applications seem not to have told all about Tewari's method, which he said involved combining processes that all the world knew about in a way that all the world didn't know about.

Quote of the Day: National Public Radio

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