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Highland Supply Co. v. Klerk's Flexible Packaging

December 21, 2005

HIGHLAND SUPPLY COMPANY, AN ILLINOIS CORPORATION, AND PRIMA TEK II, L.L.C., AN ILLINOIS LIMITED LIABILITY COMPANY, PLAINTIFFS,
v.
KLERK'S FLEXIBLE PACKAGING, B.V., A NETHERLANDS CORPORATION, F/K/A KLERK'S PLASTIC INDUSTRIE, B.V., DEFENDANT.



The opinion of the court was delivered by: Herndon, District Judge

MEMORANDUM AND ORDER

I. Introduction

Before the Court is a motion to remand submitted by Plaintiffs Highland Supply Company and Prima Tek II, L.L.C. (together, "Plaintiffs") on August 5, 2005. (Doc. 17.) Defendant Klerk's Flexible Packaging, B.V. responds in opposition. (Doc. 25.) For the reasons below, the Court denies Plaintiffs' motion.

II. Background

This case arises out of a business relationship between Plaintiffs, affiliated companies holding several patents related to plant covers, and Defendant, a manufacturer and distributor. Plaintiffs originally filed this case in Madison County, Illinois Circuit Court. (Doc. 2.) Defendant timely removed. (Doc. 1.)

The relevant facts are as follows: On May 15, 1998, the parties entered into an agreement (the "1998 Agreement" or "Agreement") pursuant to which Defendant was to sell plant covers manufactured using Plaintiffs' patented technology. The parties began performing under the Agreement, but their relationship soon soured.*fn1 Plaintiffs now allege that Defendant breached Article X of the Agreement ("Article X") by conceiving, developing, and then "manufactur[ing] and/or sell[ing]" certain types of plant covers. (Doc. 2, Pls. Compl., ¶¶ 13-17.) Plaintiffs further assert that Defendant violated Article X by failing to inform them of these activities.

In pertinent parts, Article X states:

10.1 As part of [Defendant's] duties and without further compensation, [Defendant] may conceive of new developments and/or innovations and/or improvements and/or works of authorship . . . in products covered by the LICENSED PATENT . . . and all such developments and/or inventions and/or improvements and/or works of authorship . . . conceived of by [Defendant], either alone or with others, shall be the property of [Plaintiff Highland] or their designee. This paragraph 10.1 applies to such developments and/or inventions and/or improvements and/or works of authorship made and/or authored after termination of this Agreement if conception by [Defendant] occurred prior to termination . . . .

10.2 [Defendant] shall disclose promptly and in writing to [Plaintiff Highland's] President or the President's designee all developments and/or inventions and/or improvements and/or and [sic] works of authorship referred to this Article X.

10.3 When requested to do so, whether during [Defendant's] engagement hereunder or after termination thereof, [Defendant] shall . . . assign and convey to [Plaintiff Highland] or their designee the entire right, title and interest in the developments and/or inventions and/or works of authorship and confidential property referred to in Article X.*fn2 (Doc. 20.) Due to Defendant's alleged violations, Plaintiffs request an order (1) commanding Defendant to assign and convey its entire "right, title and interest in and to" plant covers falling under the Agreement; (2) permanently enjoining Defendant from further manufacturing or selling the plant covers; (3) requiring Defendant to provide an accounting of all sales of such plant covers; (4) imposing a constructive trust over all proceeds obtained by Defendant by wrongfully selling the plant covers; (5) granting costs; and (6) providing other relief. (Doc. 2, Pls. Compl., ¶ 20.)

III. Analysis

Defendant primarily premises its removal on 28 U.S.C. § 1338(a).*fn3 Under that statue, district courts "have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction [is] exclusive of the courts of the states in patent, plant variety and copyright cases." 28 U.S.C. § 1338(a). Defendant argues that although Plaintiffs frame their complaint in breach-of-contract terms, resolution of Plaintiffs' claims necessarily requires a court to determine whether the products in question are "covered" by the relevant patent [hereinafter the '938 patent]. Because section 1338(a) mandates that all patent-law claims give rise to federal jurisdiction, Defendant continues, Plaintiffs' action arises under federal patent law. Moreover, because federal courts have exclusive jurisdiction over patent claims, the Agreement's forum-selection clause is of no consequence. (Doc. 25, pp. 11-12.)

Plaintiffs, arguing for remand, insist that federal jurisdiction is improper. (Doc. 18.) First, they argue that under the well-pleaded complaint rule, the complaint determines whether federal jurisdiction lies, and because the complaint here pleads no federal claims, there is no federal jurisdiction. Second, they argue that there is no complete diversity here, and thus no federal diversity jurisdiction. Third and finally, they argue that because the ...


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