The United States Court of Appeals for the Federal Circuit, in a case on remand from the United States Supreme Court, ruled that a district court abused its discretion in remanding a case to state court after declining to exercise supplemental jurisdiction over claims that arose under the federal patent laws, but also ruled that the case should be remanded to state court in any event after the district court dismisses such federal claims for failure to state a claim upon which relief can be granted. HIF Bio, Inc. v. Carlsbad Technology Inc., Case No. 06-1522 (Fed. Cir., Mar. 31, 2010) (Gajarsa, J.).

The plaintiffs originally filed this case in 2005 in California state court, alleging various state law causes of action and a single RICO claim under 18 U.S.C. §§1961-68. The entire case was removed to federal district court. Promptly upon removal, the district court dismissed the RICO claim, decided not to exercise supplemental jurisdiction over the remaining state-law claims and remanded the case back to state court. One of the defendants appealed to the Federal Circuit.

In the first appeal, the Federal Circuit dismissed the case, finding that the remand by the district court could not be reviewed under 28 U.S.C. §§1447(c) and (d) because it was “based on lack of subject matter jurisdiction.” The Supreme Court granted certiorari and concluded that such remand orders are not based on lack of subject-matter jurisdiction and instead are discretionary. The Supreme Court remanded the case back to the Federal Circuit for further proceedings. (See IP Update, Vol. 12, No. 5.)

On remand, the sole remaining issue was whether the district court abused its discretion in remanding plaintiffs’ amended complaint to California state court. Noting that a district court does not have discretion to remand claims that arise under federal laws, the Court first evaluated two causes of action that related to inventorship of two contradictory patent applications. The Federal Circuit found that the causes of action could only be resolved by “determining the true inventor(s) of competing patent applications.” The Federal Circuit further held that the claims arose under the federal patent laws and that the district court properly had jurisdiction, i.e., under 28 U.S.C. § 1338(a).

However, the Court found that, because the inventorship dispute involved pending applications, there was no private right of action because of 35 U.S.C. §116 does not provide a private right of action to challenge inventorship of a pending patent application.” (Emphasis added.)

Moreover, the Federal Circuit found that none of the remaining causes of action—ownership, conversion, actual and constructive fraud, intentional interference with contractual relations and prospective economic advantage, negligent interference with contractual relations and prospective economic advantage, breach of implied contract and unfair competition—arose under the federal patent laws and thus did not form a basis for district court jurisdiction.

The Federal Circuit held that the district court abused its discretion in remanding the case to state court because two of the causes of action arose under the patent laws for purposes of 28 U.S.C. §1338(a) jurisdiction. The Federal Circuit further held, however, that on remand the district court should dismiss both of those causes of action for failure to state a claim upon which relief can be granted. The Court directed the district court to remand the remaining causes of action to state court as they did not arise under federal law.