Plastronics Socket Partners Ltd. v. Highrel Inc.

Citation: 391 F. Supp. 3d 896Docket: No. CV-18-03201-PHX-SMB

Court: District Court, D. Arizona; May 22, 2019; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Honorable Susan M. Brnovich, United States District Judge, is considering a Motion to Dismiss for Lack of Subject-Matter Jurisdiction filed by Defendants HighRel, Inc. and HiCon USA, LLC, opposed by Plaintiffs Plastronics Socket Partners Limited and Plastronics H-Pin Limited. The factual background reveals that Plastronics Socket is a semiconductor technology provider. Defendant Dong Weon Hwang, initially an engineer in Korea, became Plastronics’ Chief Technology Officer in 2004 and created a contact pin that led to U.S. Patent No. 7,025,602 (the "602 Patent"), issued in 2006. A Royalty Agreement executed in September 2005 mandated that Plastronics pay for the Invention's development and assigned joint patent rights with Hwang, prohibiting any licensing without mutual consent. An Assignment Agreement followed in October 2005, splitting patent rights evenly between Hwang and Plastronics while also requiring written consent for any transfers or licenses. In 2008, Hwang resigned and established HiCon Ltd. and later HiCon Co. to produce competing products. In 2016, he partnered with Paul Schubring to create HiCon USA, which secured a distribution agreement for North America. Plaintiffs filed a patent infringement suit in October 2018, alleging violations against HiCon USA and HighRel, alongside tortious interference claims. Defendants argue that Plaintiffs lack standing because the suit was not filed by both patent owners. The legal standard under Federal Rule of Civil Procedure 12(b)(1) states that a motion can be made for dismissal due to lack of subject-matter jurisdiction, with standing being a critical aspect of this jurisdiction under Article III. The concept of standing consists of constitutional and prudential components, limiting federal judicial authority.

Constitutional standing necessitates that a plaintiff demonstrates an injury-in-fact, a causal link between the injury and the defendant's actions, and that the injury can be remedied by a court ruling, as established in *Lujan v. Defenders of Wildlife*. In addition to these requirements, prudential limits may constrain jurisdictional exercise. The Patent Act grants civil remedy for infringement only to patentees, necessitating all co-owners to join in a lawsuit for infringement. A co-owner can limit another's ability to sue by not participating voluntarily. However, exceptions exist: a patent owner granting an exclusive license may be involuntarily joined in a suit brought by the licensee, and a co-owner may be compelled to join if they have previously waived their right to refuse. A third potential exception allows an exclusive licensee without all substantial rights to sue to prevent a failure of justice, especially if the patentee is the infringer.

In the current case, both parties, Plastronics and Hwang, are co-owners of the '602 patent, and neither disputes Plastronics' constitutional standing to sue. The central issue is whether Plastronics possesses prudential standing to initiate a patent infringement claim without Hwang. Established law requires that all co-owners be joined in such actions. The defendants argue that Plastronics lacks standing for two reasons: Hwang's status as a defendant does not equate to granting standing, and none of the recognized exceptions for not including all co-owners apply here.

Hwang's status as a defendant does not give Plastronics standing in the case, according to the defendants. They argue that the precedent set in Evident Corp. v. Church, Dwight Co., where a licensee brought a suit against an alleged infringer and the patent owner was joined as a third-party defendant, is not applicable here. In Evident, the court ruled that a patentee should be joined in any infringement suit brought by an exclusive licensee, primarily to avoid multiple lawsuits and ensure the patentee's interests are protected against invalidation or unenforceability. However, in this case, Hwang, as a co-defendant, has interests that conflict with those of Plastronics, unlike the aligned interests seen in Evident. Plaintiffs counter that the Evident decision did not hinge on the alignment of interests, noting significant factual differences: Evident involved a patent owner and a licensee as defendants, both defending the patent, while here, Hwang is only involved due to a breach of fiduciary duty claim unrelated to the infringement allegations. Hwang’s limited role raises questions about standing, as he can be dismissed from the case, leaving Plastronics as a co-owner without the necessary participation of Hwang in the broader infringement claims.

The Court expresses concern over the potential for litigation to progress without co-owner Hwang's involvement. It notes a lack of precedent extending the ruling in Evident to cases where a co-owner is merely a defendant in a separate claim not related to the patent. Although Plaintiffs argue that Morrow v. Microsoft Corp. supports their position, the Court finds this argument flawed, as Morrow does not address the scenario of one co-owner refusing to join a patent infringement suit. Morrow identifies three categories of plaintiffs regarding standing in patent cases, with Plaintiffs claiming to fit into category two, which typically applies to exclusive licensees. However, the Court concludes that Plaintiffs more likely belong in category one, requiring all co-owners to join as plaintiffs for standing. 

The Court rejects the notion that Hwang's status as a defendant provides standing and declines to recognize a new exception to the joinder rule. Additionally, while the parties discuss an exception allowing co-owners to be compelled to join a suit based on an agreement, the Court notes that neither the Royalty Agreement nor the Assignment and Agreement mandates Hwang's involvement. Although Plaintiffs claim the Assignment obligates Hwang to join, the Court refrains from examining this potential waiver since Plastronics has not sought to join him as a plaintiff, and procedural complications may arise from Hwang's current role as a defendant.

Count 10, alleging Tortious Interference with Business Expectancy and Prospective Business Relations, is dismissed as it is based on patent infringement, which has already been dismissed by the Court. Plaintiffs argue that their claims against HighRel and HiCon USA extend beyond patent infringement, but the Court indicates that any such allegations were previously dismissed. Consequently, Count 10 is dismissed along with Counts 1 and 2 (pertaining to patent infringement) due to lack of subject-matter jurisdiction, and all counts are dismissed without prejudice. Plaintiffs are granted leave to file a second amended complaint by June 22, 2019. The motion is specifically filed by Defendants HighRel, Inc. and HiCon USA LLC, excluding Defendants Hwang or Shubring. Additionally, it is noted that Plastronics Socket formed Plastronics HPin through a divisive merger in December 2012, and that HiCon USA is an Arizona LLC and a wholly owned subsidiary of HighRel.