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X-Ray Optical Systems, Inc. v. Institute for Roentgen Optics

May 30, 2008

X-RAY OPTICAL SYSTEMS, INC., PLAINTIFF,
v.
INSTITUTE FOR ROENTGEN OPTICS; MURADIN A. KUMAKHOV, DEFENDANT.



The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge

ORDER DENYING MOTION TO SET ASIDE DEFAULT

Defendants Institute for Roentgen Optics ("IRO") and Muradin A. Kumakhov move to set aside default judgment entered against them on December 28, 1998. Plaintiff X-Ray Optical Systems, Inc. ("XOS") opposes the motion. Pursuant to Local Rule 7.1(d)(1), this matter is appropriate for decision without oral argument. For the reasons set forth below, the motion to set aside default judgment is denied.

BACKGROUND

XOS, a Delaware corporation with its principal place of business in East Greenbush, New York, commenced this patent infringement action against Defendants on July 10, 1998. Defendant Kumakhov is a Russian citizen and the named inventor of several patents relating to optics technology for controlling x-rays, neutral particles, and charged particles and a shareholder in XOS. (Gibson Decl. ¶5). IRO is a non-governmental Russian research establishment under the control of its director, defendant Kumakhov. (Gibson Decl. ¶6).

In the early 1990s, the parties had active business dealings and participated in joint research projects. After about 1994, the business relationship deteriorated and Defendants allegedly began commercializing optics which were the subject of patents assigned to XOS. (Gibson Decl. ¶11). Defendants learned that Kumakhov would be attending two U.S. trade shows in 1997. At these trade shows, Defendants offered for sale optics and systems which infringed the patents in suit, and which they were previously selling to XOS. Id. In 1998, XOS learned that Defendants would again attend the two trade shows, including the SPIE International Symposium on optical science held in San Diego, California.

In order to prevent Defendants' alleged patent infringement, in June 1998 XOS commenced a patent infringement action against Defendants in the Northern District of New York. On July 10, 1998 this New York action was dismissed for lack of personal jurisdiction over Defendants. XOS subsequently voluntarily dismissed the New York action. (Gibson Decl. ¶15).

XOS learned that Defendants would attend the San Diego SPIE conference between July 19-25, 1998. Based upon XOS's representations, the court issued an Order to Show Cause requiring Kumakhov to appear on July 22, 1998 and to produce a sample of the infringing product. Defendants did not appear and the court calendared a second hearing on the OSC. Defendants failed to appear at that hearing and the Clerk of Court subsequently entered default on August 13, 1998.

XOS moved for entry of default judgment and, at the time of the December 14, 1998 hearing, attorney Mark Rabinovich specially appeared on behalf of Defendants and represented that Defendants would seek to set aside entry of default. Defendants failed to move to set aside default and the court, on December 28, 1998, entered default judgment against Defendants and permanently enjoined them infringing the patents in suit.

Over the years, the parties engaged in periodic negotiations to address business issues and resolve outstanding matters. (Gibson Decl. ¶22). On December 20, 2007 XOS commenced an action against Kumakhov in the Norther District of New York alleging claims for breach of contract, breach of fiduciary duty, misappropriation, unfair competition, conversion, unjust enrichment, and fraud. (Gibson Decl. Exh. I). The heart of XOS's claims relate to allegations that Kumakhov "acted to undermine [XOS's] intellectual property, including the intellectual property covered by the Assignment Contracts." (Gibson Decl. Exh. I, ¶33). On March 20, 2008, the same day Defendants filed the present motion, Defendants moved in the New York case to dismiss the complaint or, alternatively, to dismiss the action.

Defendants now move to set aside default judgment. XOS opposes the motion.

DISCUSSION

Subject Matter Jurisdiction

Federal courts are courts of limited jurisdiction. "Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause." Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94 (1998) (quoting Ex parte McCardle, 74 U.S. (7 Wall.) 506, 514, 19 L.Ed. 264 (1868)). Accordingly, federal courts are under a continuing duty to confirm their jurisdictional power and are even "obliged to inquire sua sponte whenever a doubt arises as to [its] existence. . . ." Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 278 (1977) (citations omitted).

Defendants challenge the subject matter of the court to entertain the underlying action on the ground that the assignments of the patents at issue were invalid. This argument misconstrues the nature of subject matter jurisdiction. Whether one party or the other may prevail on the asserted claims or defenses is not the appropriate inquiry. Subject matter jurisdiction refers to the power of the court to adjudicate the particular type of case involved in the suit - - a challenge that may be raised at any time. Kontrick v. Ryan, 540 U.S. 443, 454 (2004). Here, this court is authorized to entertain Plaintiff's claims pursuant to 28 U.S.C. §1331 and, more specifically, 28 U.S.C. §1338. Section 1338 specifically empowers district courts with original jurisdiction to entertain any claim related to patents. 28 U.S.C. §1338(a). The underlying complaint satisfies the pleading requirements of the Federal Rules of Civil Procedure and, among other things, ...


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