August 13, 2014

Litigation | Vermont v. MPHJ Technology Investments

Client Alert

United States Court of Appeals dismisses MPHJ Technology Investments appeal.

The United States Court of Appeals for the Federal Circuit, in Washington, D.C., has dismissed the appeal of MPHJ Technology Investments, LLC from an order of the United States District Court in Vermont that favored the State of Vermont. The Federal Circuit is an appellate court that has exclusive jurisdiction over appeals in patent cases.

The State sued MPHJ in state court under Vermont’s consumer protection law, for alleged “patent trolling” behavior – i.e., sending numerous letters to Vermont businesses and non-profit organizations accusing them of infringing MPHJ’s patent and threatening them with litigation if they did not pay a “licensing fee.”  MPHJ “removed” the case to federal court in Vermont, claiming that the case was fundamentally about its patent rights, over which the federal courts have exclusive jurisdiction. The State moved to have the case “remanded” back to state court on the grounds that the State was not challenging MPHJ’s patent rights, but only its alleged “trolling” activities. Judge Sessions of the Vermont federal court ruled, over MPHJ's strenuous objection, that this case did not belong in federal court because it was not fundamentally about the validity of MPHJ's patents.

MPHJ appealed to the Federal Circuit. In dismissing MPHJ’s appeal, the Federal Circuit made a straightforward decision that, under a clear federal statute (28 U.S.C. § 1447), federal appeals courts are without jurisdiction to review a lower court remand order. Once a lower federal court decides that the federal court system does not have jurisdiction over a case, and remands the case back to state court, a federal appeals court likewise does not have jurisdiction to review the lower court’s decision. The case is now back in superior court in Montpelier.

This legal development could have national implications for state efforts to challenge alleged patent trolls. Through the combination of Judge Sessions’ remand decision and the ensuing Federal Circuit decision that the remand order cannot be appealed, state attorneys general across the country might now feel that they have a free hand to sue alleged patent trolls in the favorable environment of their state courts, and keep the case there. For this reason, MPHJ might try to appeal the Federal Circuit’s decision.

In the meantime, the case is back in state court and the State of Vermont must proceed to prove its substantive case against MPHJ.

To view the order, click here.


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