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NCJC, Inc. v. Lawrence

United States District Court, D. Minnesota

May 8, 2018

NCJC, Inc. and Joseph Goche, Plaintiffs,
Rick Lawrence, Randy Main, and Main Transport, LLC d/b/a NutraBoss, Defendants.

          Daniel R. Hall and Norman J. Baer, Anthony Ostlund Baer & Louwagie PA, for Plaintiffs.

          Randall T. Skaar and Scott G. Ulbrich, Skaar Ulbrich Macari, for Defendants.



         This matter is before the Court on the Joint Status Report [Doc. No. 17] filed on April 26, 2018 by Plaintiffs NCJC, Inc. (“NCJC”) and Joseph Goche (collectively, “Plaintiffs”) and Defendants Rick Lawrence, Randy Main, and Main Transport, LLC (collectively, “Defendants”). On October 23, 2017 at the hearing on Defendants' Motion to Dismiss [Doc. No. 8], this Court ordered that this case be stayed pending action by the United States Patent and Trademark Office (“USPTO”) on U.S. Application No. 15/348, 672 (the “‘672 Application”) filed by Lawrence. (See Min. Entry for Oct. 23, 2017 Proceedings [Doc. No. 15].) In their Joint Status Report, the parties advise the Court that on February 20, 2018, the ‘672 Application issued as U.S. Patent No. 9, 894, 892 (the “‘892 Patent”). (Joint Status Report at 1.) For the reasons set forth below, the Court now lifts the stay, permits Plaintiffs to file a supplemental complaint, and denies, without prejudice, Defendants' Motion to Dismiss. See Section III.

         I. BACKGROUND

         A. Factual Background

         On June 29, 2017, Plaintiffs filed a Complaint initiating this action. (See Compl. [Doc. No. 1].) Briefly stated, the Complaint alleges that Goche, through NCJC-his “end-to-end farm service and consulting company”-hired Lawrence to invent a system for delivering nutrients to crops “in a more targeted manner.” (Id. ¶¶ 16, 26.) The Complaint alleges that Goche met with Lawrence, explained what he envisioned for the invention, and detailed some of the invention's specifications. (Id. ¶ 25-28.) NCJC then allegedly paid Lawrence to develop a prototype, (id. ¶ 29), and “provided sprayers, farm equipment, fields, and labor to develop the product, ” (id. ¶ 34). After the first prototype was unsuccessful, the Complaint alleges, Goche and Lawrence “jointly” and through an iterative process “invented a better system for applying nutrients to the roots of crops.” (Id. ¶ 32.) Furthermore, according to the Complaint, although NCJC hired Lawrence to invent the system, paid him, and provided the necessary support and materials for the invention, “Goche and Lawrence agreed that they would jointly benefit from any and all subsequent efforts to commercialize the invention.” (Id. ¶ 40.) To that end, the Complaint alleges, Goche and Lawrence agreed that Lawrence would “build[] and operat[e] a business to exploit the joint invention.” (Id. ¶ 41.)

         From this point, the parties' relationship went awry. The Complaint states that although Goche and Lawrence filed U.S. Provisional Application No. 62/074, 217 identifying both of them as joint inventors, (id. ¶ 36), and thereafter filed U.S. Patent Application No. 14/931, 842 (the “‘842 Application”) (a utility application) again listing both individuals as joint inventors, (id.), Lawrence subsequently and unbeknownst to Goche filed his own patent application-the ‘672 Application, (id. ¶ 54). The Complaint states that the ‘672 Application “is a continuing application, which claims the benefit of the priority date of the earlier filed ‘842 Application.” (Id. ¶ 55.) However, the Complaint alleges, “[a]lthough the ‘842 Application names Goche as a co-inventor, the ‘672 Application identifies Lawrence alone as the sole inventor.” (Id. ¶ 61.) Among many other allegations, the Complaint also states that although “Lawrence is a joint inventor, NCJC is the sole owner of the '842 Application because it hired and paid Lawrence for his contributions to the invention, ” and that therefore “Lawrence does not own, and . . . has no right to claim priority to, the '842 Application.” (Id. ¶ 63.) In addition to the dispute regarding the ‘842 Application, the Complaint also alleges that in violation of Goche and Lawrence's agreed-upon “joint venture to commercialize the invention, ” Lawrence partnered with Defendants Main and Main Transport to “manufacture and sell a product . . . that practices the joint invention without sharing the profits with Goche or NCJC.” (Id. ¶ 47).

         The Complaint alleges five Counts. Count I is a claim for declaratory judgment. (See Id. ¶¶ 72-86.) This Count avers that a “judicial declaration is necessary for NCJC to ascertain his rights with respect to the two pending applications;” that “NCJC is entitled to an order determining that he is the owner of the inventions claimed in both the '842 Application and the '672 Application;” and that pursuant to “35 U.S.C. § 100 et seq. and 28 U.S.C. §§ 2201 and 2202, NCJC is entitled to an order compelling the assignment of the '672 Application to NCJC.” (Id. ¶¶ 84-86.) Counts II-V, in turn, allege breach of contract, breach of fiduciary duty, unjust enrichment, and tortious interference with contract, respectively. (Id. ¶¶ 87-111.)

         As a basis for federal jurisdiction, the Complaint states that “[t]his action arises under the patent laws of the [U.S.]” and/or “necessarily depends on the resolution of a substantial question of federal patent law, in that the claims and relief sought involve a determination of patent claim scope and a determination of the rightful inventor of pending U.S. patents.” (Id. ¶ 11 (citing 28 U.S.C. §§ 1331, 1338(a) and 35 U.S.C. §§ 100, 116, 152, and 261).)

         B. Procedural Posture

         On September 11, 2017, Defendants filed their Motion to Dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted. (See Defs.' Mem. [Doc. No. 10].) With regard to jurisdiction, Defendants argued, in essence, that this Court lacked federal question jurisdiction because no patents on the various applications had yet issued. (See Id. at 2-3.) Specifically, Defendants averred that although NCJC requested that this Court “ascertain[] NCJC['s] rights under the pending patent applications, ” “declar[e] NCJC the owner of the inventions, ” and “compel[] the assignment of the ‘672 application to NCJC, ” there is “no basis in federal law for correcting inventorship or ownership regarding a patent application, or, for that matter, compelling its assignment.” (Id. at 2.) Plaintiffs disagreed, generally arguing that “[t]his case involves a cause of action founded on federal common law, ” and that “[c]ourt[s] recognize that the obligation to assign ownership of an invention arises as a matter of federal common law.” (Pls.' Mem. Opp'n Mot. Dismiss [Doc. No. 13] at 10.)

         At the hearing on the motion, this Court expressed doubts about whether it had subject matter jurisdiction because no patent on the applications in dispute had yet been issued. Plaintiffs' counsel notified the Court, however, that it was likely that a patent would issue on the ‘672 Application in the coming weeks. Plaintiffs' counsel indicated that a “Notice of Allowance” had been issued by the USPTO, which generally gives the applicant three months to pay the patent issue fee and indicates that a patent will be issued in the near future. See 35 U.S.C. § 151. However, failure to pay the fee results in the application “be[ing] regarded as abandoned.” Id. § 151(b). In light of the impact that Lawrence's decision to pay the patent issue fee or abandon the application would have on the case, this Court suggested to the parties that the action be stayed to allow Lawrence to make this decision. The parties agreed. This Court thus stayed the action and directed counsel to keep the Court apprised of relevant developments.

         On December 30, 2017, the parties filed a joint status report alerting this Court that as of that date, Lawrence “ha[d] not decided whether to pay the issue fee for the ‘672 Application, ” but that if he ultimately did, a patent would be expected to issue in approximately two months. (See Joint Status Report of Dec. 30, 2017 [Doc. No. 16].) Then, on April 26, 2018, the parties filed the present Joint Status Report, alerting the Court that on February 20, 2018, the ‘672 Application issued as the ‘892 Patent. (Joint Status Report at 1.) With respect to the impact that the issuance of the patent had on the case, the parties took divergent positions. Plaintiffs argue that “[n]ow that the ‘892 [P]atent has issued, the Court should lift the stay” and allow Plaintiffs “to file an Amended Complaint asking to compel the assignment of the now-issued '892 patent” and “to add a claim to correct the inventorship of the ‘892 patent to include Goche as a named inventor pursuant to 35 U.S.C. § 116 and 256.” (Id.) Plaintiffs further contend that regardless of how this Court might have decided Defendants' Motion to Dismiss before the stay, it now “has jurisdiction to determine the proper owner of the now-issued patent and to address Plaintiffs' claim to correct the inventorship.” (Id.) Defendants disagree. They ...

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