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Drews v. Patterson

October 27, 2009

JOHN DREWS, INVIRION DIAGNOSTICS, LLC, AND INVIRION SPAIN, LLC, PLAINTIFFS,
v.
BRUCE PATTERSON AND INVIRION, INC., DEFENDANTS.



The opinion of the court was delivered by: Robert W. Gettleman United States District Judge

Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER

Plaintiffs John Drews ("Drews"), Invirion Diagnostics, LLC ("ID"), and Invirion Spain, LLC ("IS")(collectively, "plaintiffs") have brought an eight count "First Amended Complaint for Declaratory Judgment and Other Relief" ("Amended Complaint") against defendants Dr. Bruce Patterson, M.D. ("Patterson") and Invirion, Inc. ("Invirion")(collectively, "defendants") alleging: (Count I) breach of contract with regard to the operation of two Illinois limited liability companies, as well as the patents, trademarks, and trade secrets owned by the companies; (Count II) breach of fiduciary duty; (Count III) patent infringement; (Count IV) unfair competition in violation of the Lanham Act and the making of fraudulent misrepresentations to the United States Patent and Trademark Office ("PTO"); (Count V) trade secret misappropriation; (Count VI) request for declaratory judgment regarding the ownership, control, management, and use of the limited liability companies, and the patents, trademarks, and trade secrets at issue; (Count VII) conversion; and, (Count VIII) a demand for an accounting of the defendants' uses of the patents, trademarks, and trade secrets.

Defendant Patterson has moved to dismiss the Amended Complaint for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). In the alternative, Patterson has moved to dismiss: the patent infringement claim for lack of standing pursuant to Fed. R. Civ. P. 12(b)(1); the 15 U.S.C. § 1120 Lanham Act claim for lack of jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1); or, to stay this action pending resolution of his state claims filed in California.*fn1

For the reasons stated below, this court grants the motion to dismiss the complaint.

BACKGROUND

Dr. Patterson is the sole inventor of several patents for the early detection of the Human Papilloma Virus ("HPV") and the Human Immunodeficiency Virus ("HIV"). In 2000, Patterson established Invirion, a medical services company, to market HPV and HIV testing kits based on his patented methods. Plaintiff Drews, an attorney, acted as counsel in resolving certain legal matters related to Patterson's business.

On December 20, 2004, Patterson executed an "Assignment of Invention," by which Patterson assigned to Drews a thirty three percent interest in five patents and two pending patent applications in exchange for a payment of $40,000. That same day, Patterson and Drews signed a "Letter Agreement" expressing their mutual intent to form a new company that together they would co-own and co-manage. The Letter Agreement contained a provision stating that "Patterson and Drews will sell their Patents to [the new company] under a contract that will have performance requirements for [the new company] to reach."

In September 2005, Articles of Organization were filed establishing ID and IS as Illinois Limited Liability Companies to be co-managed by Patterson and Drews. Patterson and Drews now dispute their rights and obligations regarding these two businesses.

On May 21, 2009, defendant Patterson filed a complaint in California state court seeking, among other claims, declaratory judgments to dissolve these two businesses and to re-establish sole ownership of his patents. Drews filed the instant action thirteen days earlier, on May 8, 2009, but withheld service of process until after he learned of Patterson's complaint. Drews' original complaint, with jurisdiction founded upon diversity of citizenship, asserted only state law claims and sought several remedies including a declaratory judgment that ID owned the patents in dispute. Faced with a motion to dismiss for a lack of complete diversity, on June 16, 2009, plaintiffs filed the Amended Complaint asserting federal question jurisdiction based on their added claims of patent infringement and Lanham Act violations. Defendant Patterson has now moved for dismissal of the Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction.*fn2

DISCUSSION

I. Standard of Review

Rule 12(b)(1) motions to dismiss are premised as either facial or factual attacks on jurisdiction. Publications Int'l., Ltd. v. Leapfrog Enter., Inc., 2008 WL 5142286 (N.D. Ill. Dec. 4, 2008). Facial attacks challenge the sufficiency of the pleadings, as compared to factual challenges wherein "the complaint is formally sufficient but the contention is that there is in fact no subject matter jurisdiction." United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003) (emphasis in original). "If the Rule 12(b)(1) motion denies or controverts the pleader's allegations of jurisdiction, . . . the movant is deemed to be challenging the factual basis for the court's subject matter jurisdiction." Cedars-Sinai Med. Ctr. v. Watkins,11 F.3d 1573, 1583 (Fed. Cir. 1993). In either case, the party asserting jurisdiction bears the burden of proof on a Rule 12(b)(1) issue. United Phosphorus, 322 F.3d at 946.

In the instant case, Patterson disputes the factual basis underlying plaintiffs' assertion of subject matter jurisdiction. The Seventh Circuit instructs that different methods of review apply to facial and factual challenges to a district court's subject matter jurisdiction. See Id. When presented with a facial challenge, "the court does not look beyond the allegations in the complaint, which are taken as true for purposes of the motion." Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009). In contrast, when presented with a factual challenge to jurisdiction, "[t]he district court may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Apex Digital, 572 F.3d at 443--44. In a factual Rule 12(b)(1) motion, "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Id. "The Court may ...


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