United States District Court, D. Colorado
MICHAEL E. HEGARTY UNITED STATES MAGISTRATE JUDGE
September 21, 2017, Plaintiff CPI Card Group, Inc.
(“CPI”) moved for substitution of the “real
Plaintiff in interest” under Federal Rule of Civil
Procedure 15(a)(2), contending that the patent at issue was
not actually assigned to CPI, but rather to its subsidiary,
CPI Card Group-Minnesota, Inc. (“CPI-Minnesota”).
See ECF No. 122. After briefing, I found that CPI
failed to demonstrate its constitutional standing in this
case, denied CPI's motion to substitute, and dismissed
CPI's claims without prejudice for the Court's lack
of subject matter jurisdiction. At the same time, in the
interest of ensuring the just, speedy, and inexpensive
resolution of this matter, I stayed the effect of the
dismissal order and permitted CPI-Minnesota an opportunity to
move for joinder in this action under Federal Rule of Civil
Procedure 17(a). See Order at 15 & n.8, ECF No.
158 at 15 (citing Procom Supply, LLC v. Langner, No.
12-cv-00391-MSK-KMT, 2012 WL 4856724, at *6 (D. Colo. Oct.
any motion for joinder was filed, Defendant Multi Packaging
Solutions, Inc. (“MPS”) filed a motion to dismiss
on December 1, 2017, arguing that the Court lacks subject
matter over all claims in this case, including
MPS's counterclaims, and seeking in the alternative to
voluntarily dismiss its counterclaims. See ECF No.
162. CPI-Minnesota then timely filed a motion for joinder
asserting that naming CPI, rather than CPI-Minnesota, as the
patent-owner Plaintiff at the commencement of this action was
an honest mistake and that there is no prejudice to MPS in
allowing CPI-Minnesota to join as the proper Plaintiff.
See ECF No. 165. Finding that the Court has
jurisdiction to address the pending motions, I grant
MPS's request for voluntary dismissal of its
counterclaims without prejudice. I also grant
CPI-Minnesota's motion for joinder.
Motion to Dismiss for Lack of Subject Matter
initiated this action on October 11, 2016, alleging generally
that MPS had infringed, and may continue to infringe, claims
of a U.S. Patent No. 8, 419, 889 patent (“the '889
Patent”), titled “Ultrasecure Card Package,
” by making, using, importing, offering to sell, and
selling its card packaging products. More specifically, CPI
contends that MPS used “ZED” machinery to create
the same patent-protected heat-sealing process used by CPI to
seal its packaged prepaid debit cards. On December 13, 2016,
MPS filed the operative amended answer and counterclaims for
declaratory judgment of noninfringement and invalidity of the
'889 Patent. The Court issued the governing Scheduling
Order in a Patent Case on December 8, 2016, and, after a
tutorial and hearing on August 29, 2017, the Court issued its
claim construction order on October 23, 2017, then modified
the Scheduling Order in accordance with the parties'
proposals on October 31, 2017.
after the Court issued its order dismissing CPI's claims
without prejudice but staying the effect of the dismissal
order to allow CPI-Minnesota to file a motion for joinder,
MPS filed the present motion to dismiss, asserting that the
Court lacks subject matter jurisdiction over all claims,
including MPS's counterclaims. MPS further asserts that
this lack of subject matter jurisdiction deprives the Court
of authority to even address the motion for joinder.
12(b)(1) empowers a court to dismiss a complaint for
“lack of subject-matter jurisdiction.”
Fed.R.Civ.P. 12(b)(1). Dismissal under Rule 12(b)(1) is not a
judgment on the merits of a plaintiff's case, but only a
determination that the court lacks authority to adjudicate
the matter. See Castaneda v. INS, 23 F.3d 1576, 1580
(10th Cir. 1994) (recognizing federal courts are courts of
limited jurisdiction and may only exercise jurisdiction when
specifically authorized to do so). A court lacking
jurisdiction “must dismiss the cause at any stage of
the proceedings in which it becomes apparent that
jurisdiction is lacking.” Full Life Hospice, LLC v.
Sebelius, 709 F.3d 1012, 1016 (10th Cir. 2013) (internal
quotation marks omitted).
the Court expressed its belief that the dismissal of
CPI's claims without prejudice for lack of jurisdiction
will not automatically destroy its jurisdiction over
MPS's counterclaims against CPI, which seek declaratory
judgment of (1) noninfringement and (2) invalidity of the
'889 Patent. See Nov. 29, 2017 Tr. 2: 7-11, ECF
No. 163; see also First Amended Answer, ECF No. 34
(listing counterclaims). MPS now argues that the Court did
not retain jurisdiction over the counterclaims after
dismissal of CPI's claims and requests dismissal of the
counterclaims if they are the sole reason that the Court has
jurisdiction. CPI counters that although its legal claims
will be dismissed for lack of standing, the Court has
retained jurisdiction over CPI's claims for equitable
relief (namely, an injunction). Opp'n to Mot. to Dismiss
at 2-3, ECF No. 166. In addition, CPI asserts that the Court
maintains jurisdiction over MPS's counterclaims because
there still exists “‘a substantial controversy,
between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a
declaratory judgment.'” Id. at 3-6
(quoting MedImmune, Inc. v. Genentech, Inc., 549
U.S. 764, 771 (2007)). CPI's opposing argument is
intertwined with the arguments raised in its Motion for
Joinder. Given this overlap, I will first address whether the
Court has jurisdiction over this case and, if so, whether it
is proper to grant MPS's motion to dismiss its
counterclaims. I will then analyze whether it is proper to
join CPI-Minnesota in this action.
Does the Court Have Jurisdiction to Address the Pending
outset, the Court notes that no party has cited a binding
case directly addressing whether the Court loses jurisdiction
to hear a motion to amend and/or join a patent owner when a
plaintiff learns during litigation that it is not the true
motion to dismiss and its opposition to CPI-Minnesota's
motion for joinder, MPS focuses heavily on the continued
viability of MPS's counterclaims and their effect, if
any, on subject matter jurisdiction. MPS posits that upon
dismissal of CPI's infringement claim the Court will
automatically lose jurisdiction over MPS's counterclaims
for invalidity and noninfringement because the counterclaims
“sought declaratory judgment of MPS's rights
against CPI as owner of the '889 patent asserting
infringement by MPS.” Mot. to Dismiss at 1, ECF No.
162. Stated otherwise, MPS's counterclaims must also be
dismissed for CPI's lack of standing.
cites H.R. Technologies, Inc. v. Astechnologies,
Inc., 275 F.3d 1378, 1386 (Fed. Cir. 2002), for the
proposition that when a patent plaintiff lacks standing,
“the defendant's corresponding patent counterclaims
should be dismissed.” Mot. to Dismiss, ECF No. 162 at
3. That case is readily distinguishable, though, because the
Federal Circuit only upheld the dismissal of a counterclaim
of noninfringement. It reasoned that such claim was
asserted against the wrong party because the named plaintiff
could not defend a claim of noninfringement on behalf of the
patentee, who was the real party in interest at that time.
See H.R. Techs., 275 F.3d at 1386. Here, by
contrast, MPS has also asserted a counterclaim for
invalidity of the ‘889 Patent. H.R.
Technologies provides no insight on the fate of that
separate claim. Furthermore, at least one other district
court has declined to dismiss a declaratory-judgment claim
where the plaintiff “faced a real and imminent threat
of infringement suit” that was “ultimately
traceable” to a party who lacked technical standing to
bring or join an infringement lawsuit. See Simmons
Bedding Co. v. Leggett & Platt, Inc., No.
11-cv-232-wmc, 2012 WL 11909449, at *10 (W.D. Wis. Mar. 27,
2012) (internal quotation marks omitted).
also cites Bishop v. Smith, 760 F.3d 1070, 1091 n.13
(10th Cir. 2014), emphasizing that as part of the
redressability requirement, a declaratory-judgment action
must be brought against a defendant who can, if ordered to do
so, remedy the alleged injury. This argument disregards
CPI's ability to control CPI-Minnesota by virtue of the
parties' corporate relationship. In any event,
Bishop is not a patent case so the Tenth Circuit did
not apply the relevant standard. See MedImmune, 549
U.S. at 771 (articulating the standard for
declaratory-judgment actions in the patent context to be
whether “there is a substantial controversy, between
parties having adverse legal judgments, of sufficient
immediacy and reality to warrant the issuance of a
declaratory judgment” (internal quotation marks
citation to Fina Research, S.A. v. Baroid Limited,
141 F.3d 1479, 1480-81 (Fed. Cir. 1998), is equally
unavailing. That case examined whether there was an actual
controversy between the parties in a declaratory judgment
action when the plaintiff's only potential liability was
for inducing patent infringement. Although Fina
Research did not involve counterclaims, MPS seems to be
arguing that if a claim would fall for lack of subject matter
jurisdiction, so would a counterclaim on the same topic.
See Opp'n to Mot. for Joinder at 2, ECF No. 158
(pairing the citation to Fina Research with a
reference to Maryland Casualty Co. v. Pacific Coal &
Oil Co., 312 U.S. 270, 273 (1941), an insurance case
stating that the inquiry in a declaratory judgment action is
the same even if the positions of the parties in the
conventional suit are reversed).
jurisdictional authority requires the Court to make
significant inferences. At the same time, MPS is unable to
point to a patent case in which both noninfringement and
invalidity counterclaims were dismissed as a direct result of
a finding of lack of subject-matter jurisdiction over the
primary claims, nor has this court located one. MPS has not
presented a convincing argument that the Court does not have
subject matter jurisdiction over either of its counterclaims.
the Court did lack subject matter jurisdiction over the
counterclaims, MPS has not persuaded the Court that the
jurisdictional defect cannot be cured in any way such that
immediate dismissal of the entire case is required. MPS
continues to rely on Schreiber Foods, Inc. v. Beatrice
Cheese, Inc., 402 F.3d 1198, 1203 (Fed. Cir. 2005), for
the proposition that “if the original plaintiff lacked
Article III initial standing, the suit must be dismissed, and
the jurisdictional defect cannot be cured by the addition of
a party with standing.” Notably, Schreiber did
not actually address this issue: the plaintiff there had
constitutional standing at the time the suit was commenced.
Instead, the court addressed whether a party with standing at
the outset of litigation could lose, then regain, standing
before the entry of judgment by assigning, then reacquiring,
a patent. Id. Referencing its previous holding
“that the temporary loss of standing during patent
litigation can be cured before judgment, ” the court
concluded that the jurisdictional defect that existed due to
the patent's transfer during litigation was cured.
Id. at 1204 (citing Insituform Techs., Inc. v.
Cat Contracting, Inc., 385 F.3d 1360, 1371-72 (Fed. Cir.
reliance on Schreiber is strained for another reason
too. Schreiber cites Paradise Creations, Inc. v.
UV Sales, Inc., 315 F.3d 1304, 1309 (Fed. Cir. 2003), to
support the proposition that “the jurisdictional defect
cannot be cured by the addition of a party with
standing.” But Paradise Creations also
involved an entirely different scenario: whether a state
statute could retroactively confer standing on the plaintiff
corporation, which claimed its patent rights under a contract
executed at a time when it was administratively dissolved.
See Id. at 1305. In any event, the Federal Circuit
specifically noted that the district court's order
denying the plaintiff's motion to amend and to join the
purported patent owners to the action was not before the
court on ...