Federal Circuit Summary

Before Prost, Wallach, and Hughes. Appeal from the U.S. District Court for N.D. Ohio.

Summary: On a Rule 12(b)(6) motion, a district court cannot judicially notice facts that are subject to reasonable dispute. Also, when a Plaintiff “knew or should have known” of its claim is a fact-specific inquiry that cannot be resolved on a motion to dismiss based on the statute of limitations.

Mr. Hrabal, Coda’s CEO, alleged to have invented certain self-inflating tire (“SIT”) technology. Coda entered an NDA with Goodyear, and the parties met twice to discuss the technology. Following the meetings, Goodyear stopped communicating with Coda. Goodyear then filed its own patent application directed to SIT technology, without naming Mr. Hrabel as an inventor. Coda and Hrabel sued to correct inventorship on the SIT patents and for trade secret misappropriation. Goodyear moved to dismiss under Rule 12(b)(6). Goodyear argued that Plaintiffs failed to plead facts supporting Hrabel’s conception of the claimed inventions. Goodyear also argued that Plaintiffs’ trade-secret claim was time-barred because Plaintiffs should have known of Goodyear’s published patent application more than four years before filing suit. And for the first time in its reply brief, Goodyear pointed to a previously published article by Hrabel, and argued that the article disclosed everything that Hrabel claimed to have invented. The district court denied Plaintiffs’ motion to strike the article and without explanation denied Plaintiffs’ request to file a sur-reply to address the article. The district court determined Plaintiffs’ correction of inventorship claims were implausible, and dismissed them. The district court also dismissed Plaintiffs’ trade secret claim as time-barred. Plaintiffs moved to amend the judgment under FRCP 59(e) and also for leave to file an amended complaint with additional factual allegations, but the district court denied the motions stating that the factual details should have been in the original complaint.

The Federal Circuit vacated the decision and remanded. On correction of inventorship, the Federal Circuit held that the pleaded facts plausibly stated a claim. The Federal Circuit also held that the district court improperly considered the 2008 Hrabel article, without converting Goodyear’s motion into one for summary judgement and without giving Plaintiffs an opportunity to respond. While a district court may judicially notice matters outside the pleadings on a Rule 12(b)(6) motion, the facts may not be subject to reasonable dispute. Whether the 2008 Hrabel article actually disclosed novel trade secrets was a reasonably disputed factual issue. The Federal Circuit also held that the district court erred in dismissing the trade-secret-misappropriation claim. The issue of whether Plaintiffs should have discovered their claim earlier was a fact-specific inquiry that could not be resolved at the pleading stage. The Federal Circuit also commented that leave to amend should be freely given, and denying Plaintiffs an opportunity to amend in this case was troubling and improper.