Disputes Over Product Ownership Are Not Appealable To The Federal Circuit Unless They Require Resolution Of A Substantial Question Of Patent Law

In Krauser v. BioHorizons, Inc., No. 13-1461 (Fed. Cir. June 4, 2014), the Federal Circuit held that it lacked jurisdiction over the district court's decision that Jack T. Krauser did not have any ownership rights to a dental implant system manufactured by BioHorizons, Inc., BioLok International, Inc. ("BioLok"), and BioHorizons Implant Systems, Inc. (collectively "BHI"). The Court then transferred the appeal to the Eleventh Circuit.

Krauser is the named inventor of U.S. Patent No. 5,316,476 ("the Krauser patent"), which claims a component of a dental implant system that Krauser allegedly developed with Leon Shaw, President of Minimatic Implant Technology, Inc. ("Minimtic"), BHI's predecessor. Minimatic also secured two patents covering dental implant systems, naming Shaw as the sole inventor ("the Shaw patents"). Following a dispute over royalties, Krauser filed multiple lawsuits against Minimatic, including a suit for ownership rights in state court, all of which settled after Minimatic filed for bankruptcy. Under the settlement, Krauser conditionally granted Minimatic a ten-year license to the Krauser patent and to "any and all rights he may have . . . [to] the dental implant system currently before manufactured by [Minimatic]" in exchange for royalties from sales of the dental implant products. Slip op. at 5 (alterations in original) (citation omitted). Minimatic emerged from bankruptcy as BioLok and later issued several patents on dental implant systems ("the BioLok patents").

After BHI allegedly failed to pay royalties, Krauser sued BHI in Florida state court, seeking a declaration that Krauser was the inventor and owner of subject matter set forth in the Shaw and BioLok patents. BHI removed the case to federal district court based on diversity of citizenship and patent jurisdiction based on Krauser's inventorship claims. After removal, Krauser filed a Second Amended Complaint, withdrawing his inventorship claims and restricting his claims to ownership rights in BHI's dental implant system. After the district court granted BHI's motion for SJ, Krauser appealed to the Eleventh Circuit, which transferred the case to the Federal Circuit based on the Court's exclusive appellate jurisdiction over matters arising under federal patent law.

"Given that there is no federal issue in this case, an exercise of federal question jurisdiction would certainly disrupt 'Congress's intended division of labor between state and federal courts.'" Slip op...