Larson v. Correct Craft: Federal Circuit Finds No Federal Jurisdiction Over Patent Claim

Larson v. Correct Craft, June 5, 2009 No. 2008-1208, Opinion

On June 5, the Federal Circuit vacated the judgment of the district court in Larson v. Correct Craft and remanded with instructions to transfer the case back to state court based on lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1338(a).  The court held that because plaintiff Larson assigned his rights to the invention at issue, he did not have standing to sue to correct inventorship under 35 U.S.C. § 256.  The appeal came from the United States District Court for the Middle District of Florida, which granted summary judgment in favor of defendants Correct Craft, Inc., William Snook, and Robert Todd.

IP Watchdog provides an overview of the Federal Court's decision and PATracer gives an overview of the district court's ruling.

Borden Larson worked at defendant Correct Craft ("CCI") for many years, during which time he designed a new wakeboard tower for sports boats.  CCI liked the design, commercialized it, and obtained several patents on it.  CCI later had dealings with two other inventors, defendants Snook, who was also an employee of CCI, and Todd, an independent contractor. Todd apparently filed some patents on the side; eventually, disputes ensued and were ultimately settled with everyone named as inventors on all patents. Plaintiff Larson assigned his rights to CCI, then later filed suit to challenge rights of inventorship and assignments. At issue were several patents CCI had received for the wakeboard tower.

Larson sued his former employer for fraud, breach of contract, and other state law causes of action, and sought a declaratory judgment against his CCI and the co-inventors to establish Larson as the true and sole inventor of the patented wakeboard towers.  The suit was originally filed in Florida state court, but the defendants removed the case to federal court on the theory that the declaratory judgment claims were claims to correct inventorship under § 256 and therefore subject to federal jurisdiction. 

On appeal the Federal Circuit explained that there were two issues regarding whether there was a valid basis for federal jurisdiction. First, Larson's claims for declaratory relief did not actually invoke § 256.  Second, a question existed with respect to whether Larson had standing to pursue a claim for correction of inventorship in federal court because he had lost his ownership rights and any financial interest he had in the wakeboard-tower patents when he executed the assignment in favor of Correct Craft.

The court held that to establish subject matter jurisdiction, the declaratory judgment claims had to invoke § 256 and the inventor had to have standing. Under this holding, an inventor lacks constitutional standing to sue for correction of inventorship in federal court under § 256 when he has assigned the patent and has no "concrete financial interest" in the patent. The court affirmed the district court's ruling, which had found infringement under the doctrine of equivalents and rejected the accused infringer's ensnarement defense. The Federal Circuit also reversed the district court's award of attorneys' fees and sanctions.