The New York Giants have won their bid to stay in federal court while defending a lawsuit alleging the team trafficked in bogus memorabilia, though the jurisdiction may be short-lived.
The basis of federal jurisdiction is a subset of claims alleging that the franchise misappropriated patented ideas. The claims “are really patent claims no matter what they are called,” said U.S. Magistrate Judge Mark Falk in denying a remand motion.
But because plaintiff Eric Inselberg no longer holds the patents for the wireless marketing concepts he claims the franchise stole, his standing is at issue, which subjects the counts to dismissal.
Inselberg—whose lawsuit is mostly concerned with alleged passing off of bogus memorabilia by the Giants that landed him in criminal trouble—also lodged claims stemming from an in-stadium wireless fan-participation program called “Tapt-In” that Inselberg allegedly invented and pitched to team officials in a 2010 marketing presentation.
Inselberg allegedly obtained 25 patents in connection with the program but allowed them to lapse when his team contacts stopped communicating. He claims the team nonetheless stole his idea and implemented many of the technologies at MetLife Stadium.
He used the patents as collateral for a loan but lost them after his patent business collapsed and he defaulted, according to Falk’s opinion. The patents now are held by Frank Bisignano, a former JPMorgan Chase executive.
None of the Jan. 29 complaint’s 16 counts are for patent infringement, but the Giants removed the case to federal court, claiming the Tapt-In issues are governed by the Patent Act.
Inselberg maintained that the patent issues are peripheral, characterizing the counts as common-law matters of unjust enrichment, quantum meruit, unfair competition and idea misappropriation.
Falk, who appeared to side with the Giants during the May 16 argument, issued a report andrecommendation on June 18 urging that Inselberg’s motion to remand to state court should be denied because the counts of unjust enrichment and idea misappropriation are completely preempted by patent law.
“If not expressly pleaded, patent infringement is certainly the essence of the claims,” the judge wrote. “Though the plaintiff is the master of his complaint, that mastery is not unlimited.”
He said calling them patent infringement claims on their face “is a stretch”—”these counts don’t look like most of the other patent complaints we have seen”—but they amount to “artful pleading.”
Such claims unequivocally belong in federal court: The Patent Act not only authorizes federal jurisdiction but takes “the unusual step of divesting state courts of jurisdiction,” Falk said.
“Congress has so completely preempted the field that any attempt to disguise them as state law claims cannot defeat federal jurisdiction.”
The ruling was also based on policy. “Permitting patent infringement claims to be brought under state common-law concepts, by persons without standing, would undermine the federal patent framework,” and “destroy the value of the patent and threaten the patent system,” the judge added.
When Inselberg patented Tapt-In, he forfeited the right to enforce his ideas under state law, Falk said.
Falk dispensed with Inselberg’s contention that the issue of patent law governance should have been raised in a motion to dismiss—that ignores the court’s gate-keeping duty to “determine not what plaintiff claims to have pleaded, but what he has actually pleaded.”
Falk added that Inselberg cited only distinguishable cases and no factually analogous ones.
Also, it’s “not material” that state law recognizes causes of action for idea misappropriation and unjust enrichment, he said.
The judge also was not persuaded by the fact that the counts, as determined to be patent-infringement claims, are subject to immediate dismissal.
“Litigants commonly plead claims they lack standing to bring,” Falk said. “That plaintiff’s patent claims may ultimately fail for lack of standing does not deprive the federal court of jurisdiction until they do.”
Brian Brook of Clinton Brook & Peed in New York, Inselberg’s lawyer, said he will object to Falk’s ruling and ask the assigned district judge, William Martini, to overturn it.
“I think it’s safe to say we are not going to withdraw these claims.” Brook said. “There’s not going to be any deference to what Judge Falk is recommending here.”
The Giants’ counsel, William O’Shaughnessy of McCarter & English in Newark, didn’t return a call.
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