Federal Circuit Determines It Does Not Have Jurisdiction to Address Dispute With Heinz

Under the America Invents Act (“AIA”), the Federal Circuit has jurisdiction over appeals based on a civil action “in which a party has asserted a compulsory counterclaim arising under any Act of Congress relating to patents.” Recently, however, the Federal Circuit made clear that its jurisdiction to hear cases under 28 U.S.C. § 1295, as set forth in the AIA, only applies in actions commenced on or after September 16, 2011, the date of enactment of the Act, and that the date of the filing of the initial complaint governs. Furthermore, consistent with precedent, the Federal Circuit refused jurisdiction over counterclaims where it decided that the claims were not rooted in a real case or controversy.  This case provides an example of why practitioners should always keep in mind the operative dates of the various provisions of the AIA.

Specifically, in Wawrzynski v. H.J. Heinz Co., No. 2012-1624 (Fed. Cir. Sept. 6, 2013), Mr. Wawrzynski brought suit against the Heinz Company (“Heinz”) in Michigan state court. Mr. Wawrzynski had developed a “method for dipping and wiping a food article in a specially configured condiment package,” which was ultimately patented. After some communications between Mr. Wawrzynski and Heinz regarding Mr. Wawrzynski’s product ideas, Heinz released its Dip & Squeeze® packet. Heinz alleged it had been developing its product at the same time Mr. Wawrzynski was developing his method. After Mr. Wawrzynski filed his initial complaint, alleging breach of implied contract and unjust enrichment, Heinz successfully removed the case to the U.S. District Court for the Eastern District of Michigan based on diversity jurisdiction. Thereafter, Mr. Wawrzynski filed an amended complaint that referenced U.S. Patent No. 5,676,990 (“’990 patent”), entitled “Method of Food Article Dipping and Wiping in a Condiment Container.” However, Mr. Wawrzynski did not raise specific claims for patent infringement.

Heinz successfully sought to have the case transferred to the U.S. District Court for the Western District of Pennsylvania and filed an answer, affirmative defenses, and a counterclaim that alleged, inter alia, Heinz did not infringe the ’990 patent and that the ’990 patent was invalid. Mr. Wawrzynski challenged Heinz’s counterclaim arguing that because he did not allege infringement of the ’990 patent, there was no case or controversy and that the counterclaim should therefore be dismissed. Despite this pending motion to dismiss, however, the case was transferred to the Western District of Pennsylvania’s Patent Pilot Program. In answering the counterclaim, Mr. Wawrzynski again said that he was not alleging infringement of the ’990 patent, and thereafter entered into a covenant not to sue on the ’990 patent. Nevertheless, the district court denied Mr. Wawrzynski’s motion to dismiss the declaratory judgment action. Heinz followed this with a motion for summary judgment that Mr. Wawrzynski’s state law claims were preempted by federal patent law, which the district court granted. Mr. Wawrzynski appealed the district court’s ruling that his claims were preempted and that the district court had subject matter jurisdiction over Heinz’s counterclaim.

Accordingly, as a threshold question, the Federal Circuit had to determine whether it had subject matter jurisdiction over the appeal. Both parties argued that the Federal Circuit had jurisdiction; however, the Court ultimately concluded that it did not. Specifically, Mr. Wawrzynski argued that the Federal Circuit had jurisdiction under 28 U.S.C. § 1295, as amended by the AIA, which gives the Court jurisdiction “over appeals based on a civil action ‘in which a party has asserted a compulsory counterclaim arising under any Act of Congress relating to patents.’” However, the Court held that even if the counterclaims were compulsory, the governing date is the date the complaint was filed and the action commenced. The Court rejected Mr. Wawrzynski’s argument that the filing date of the counterclaim was controlling. In this case, the complaint was filed prior to the operative date of this provision of the AIA, but the counterclaim was filed after the operative date.  Although the Court acknowledged that while it can have jurisdiction under certain “evolving circumstances,” such circumstances did not exist in this case. Indeed, Mr. Wawrzynski had moved on two occasions to dismiss the counterclaim based on lack of jurisdiction having argued that there was no case or controversy and he admitted that Heinz did not infringe the ’990 patent. This undercut any suggestion that there was a legitimate case or controversy.

In contrast, Heinz argued for jurisdiction based on the notion that Mr. Wawrzynski had in fact alleged patent infringement. Heinz argued that the district court’s jurisdiction existed pursuant to 28 U.S.C. § 1338, and therefore the Federal Circuit’s jurisdiction existed under 28 U.S.C. § 1295(a)(1). The Federal Circuit rejected Heinz’s argument, however, because it concluded that the complaint did not allege patent infringement. ”Construing Mr. Wawrzynski’s complaint to the contrary would turn the well-pleaded complaint rule on its head, making Mr. Wawrzynski the ‘master of nothing.’”

As the facts of the case reveal, both sides argued that the Federal Circuit had jurisdiction, but for different reasons. The Federal Circuit, however, concluded neither party was correct and that it did not have jurisdiction. This case underscores the point that in order for the Federal Circuit to have jurisdiction in a case like this, where a defendant raises a compulsory counterclaim for declaratory judgment in response to claims that may potentially touch on patent infringement, an actual case or controversy must still exist.