Last week the United States Court of Appeals for the Federal Circuit issued a decision in State of Vermont v. MPHJ Technology Investments, LLC. The decision, which was really not much of a decision because the Federal Circuit concluded they lacked jurisdiction, is interesting for at least several reasons.
First, MPHJ Technology Investments is the company that New York Attorney General Eric T. Schneiderman reached a settlement with in January 2014. See NY Attorney General Settles Investigation into Patent Troll. The other reason this case is of interest is because of Vermont’s extremely aggressive stance against the bad actors in the patent litigation industry. See Vermont Approves Patent Troll Legislation.
While Vermont’s actions are undoubtably laudable, despite what some conclude I suspect that when challenged the legislation will fall because it pre-empts patent law, which is federal. For example, one of the factors that would suggest a bad faith patent enforcement under the Vermont statute is if there has previously been a lawsuit or threatened lawsuit based on the same or similar claim of patent infringement.
While that probably sounds logical to the general public, there is no basis in the patent laws to say that you cannot sue or threaten suit on multiple similar patents. You may threaten to sue or sue on an issued patent and then subsequently obtain another patent that shares the same disclosure. This happens all the time, it is the right of the patentee to obtain multiple patents and build a portfolio and do so in no way suggests foul play. This is but a single instance where the Vermont legislation would upset the substantive rights granted by the federal government. But the Vermont patent troll legislation was not at issue in this case, although I suspect it will eventually be reviewed at some point.
The facts that set off this particular dispute arose out of allegedly false and misleading demand letters, which is an enormous problem in the patent industry. While the general public, popular press and many politicians want to believe there is a so-called “patent troll problem,” the reality is the problem is one of abusive litigation and abusive pre-litigation tactics. There is no place for false and misleading demand letters, and they should be stopped.
Here, on May 8, 2013, the State of Vermont through the Vermont Attorney General, filed suit against MPHJ in Vermont state court. The State alleged MPHJ engaged in unfair and deceptive trade practices under the Vermont Consumer Protection Act, stating that the letters con- tained threatening, false, and misleading statements. MPHJ subsidiary licensees wrote to various business and non-profit organizations operating in Vermont, requesting the recipient to confirm it was not infringing MPHJ’s patents or, alternatively, to purchase a license. If the offeror did not receive a response, a Texas law firm sent follow-up correspondence stating that an infringement suit would be filed.
MPHJ removed the case to the United States District Court for the District of Vermont on June 7, 2013, asserting federal question jurisdiction and diversity jurisdiction. The State moved to remand the case back to state court for lack of subject matter jurisdiction. Ultimately, the district court granted the State’s motion to remand the case back to State Court. MPHJ appealed to the Federal Circuit.
The Federal Circuit, per Judge Newman and with Chief Judge Prost and Judge Hughes, found that the Federal Circuit lacked jurisdiction to hear the appeal from a decision to remand the case back to State court, citing 28 U.S.C. 1447(d), which makes unreviewable “[a]n order remanding a case to the State court from which it was removed…”
Judge Newman went on to explain:
Section 1447(d) precludes this court from second-guessing the district court’s jurisdiction determination regarding subject matter. If the § 1447(d) bar applies, “review is unavailable no matter how plain the legal error in ordering the remand.” Briscoe v. Bell, 432 U.S. 404, 413 n.13 (1977) (citing Gravitt v. Sw. Bell Tel. Co., 430 U.S. 723 (1977)).
Therefore, in order for the Federal Circuit to review the Vermont statute or any others it will be necessary for a case removed to federal court to remain in federal court and not remanded back to State court, which would effectively make appellate review by the Federal Circuit impossible. Section 1447(d) seems, and the outcome likely unfair, although no one will likely shed a tear for MPHJ.