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Lockwood v. Sheppard

April 30, 2009


APPEAL from a judgment of the Superior Court for Los Angeles County, John Shepard Wiley, Jr. and Reginald A. Dunn, Judges. Vacated and Remanded. (Los Angeles County Super. Ct. No. BC372160).

The opinion of the court was delivered by: Willhite, J.


Plaintiff Lawrence B. Lockwood appeals from the orders granting special motions to strike his original complaint and first amended complaint under Code of Civil Procedure section 425.16 (hereafter, section 425.16), and the judgment entered in favor of defendants Sheppard, Mullin, Richter & Hampton and Jonathan Hangartner (collectively, Sheppard Mullin). Hangartner individually cross-appeals from the judgment denying him attorney fees arising from the special motions to strike. We conclude that Lockwood‟s complaint arises under the patent laws of the United States and therefore is subject to the exclusive jurisdiction of the federal courts under section 1338 of title 28 of the United States Code (section 1338). Therefore, we vacate the judgment and remand to the trial court with directions to dismiss the action for lack of subject matter jurisdiction.


Lockwood is an inventor. In the past three decades, he has obtained a dozen patents in the fields of multimedia search systems, interactive video computing terminals, as well as e-commerce and computerized financial services. Two of those patents are involved in the present case: U.S. Patent No. 5,576,951 C1 (the "951 patent), entitled "Automated Sales and Services System," and U.S. Patent No. 6,289,319 C1 (the "319 patent), entitled "Automatic Business and Financial Transaction Processing System." Lockwood applied for both patents in 1994; the "951 patent issued in 1996, and the "319 patent issued in 2001.

Lockwood believed that companies using e-commerce systems that included interactive, searchable computerized systems for finding, selecting, and ordering information, goods, or services infringed his patents. Therefore, in 2002 he (through his company, PanIP, LLC) instituted a patent enforcement program in which he offered licenses to companies he believed were infringing his patents; if a company declined, he filed a patent infringement lawsuit against it. He had some initial success, obtaining 24 license agreements in just over a year, but the program also resulted in dozens of patent infringement lawsuits filed in federal district court. Sheppard Mullin, through attorney Hangartner, represented at least 14 of the defendants in those lawsuits.

In response to the lawsuits, on May 5, 2003, Sheppard Mullin filed with the United States Patent and Trademark Office (USPTO) requests for reexamination of the "951 and "319 patents. The requests challenged the validity of the patents on the ground that the claims of the patents were anticipated by prior patents or publications (i.e., prior art).

Under the patent laws, any person may file a request for reexamination. (35 U.S.C. § 302). Within three months after a request is filed, the USPTO must determine whether the request raises "a substantial new question of patentability affecting any claim of the patent." (35 U.S.C. § 303.) The patent owner is not permitted to file a statement or response to the request within this three month period. (37 C.F.R. § 1.530.) If the USPTO determines that a substantial new question of patentability has been raised, it conducts a reexamination of the patent. (35 U.S.C. § 304.) At the conclusion of the reexamination, the USPTO issues a certificate canceling any claim of the patent determined to be unpatentable, confirming any claim determined to be patentable, and incorporating in the patent any proposed amended or new claim determined to be patentable. (35 U.S.C. § 307.)

In the present case, the USPTO determined that Sheppard Mullin‟s requests for reexamination each raised a substantial new question of patentability, and granted the requests on July 7, 2003 (for the "951 patent) and July 29, 2003 (for the "319 patent). It then conducted the reexamination over the next several years.

Once the USPTO granted the requests for reexamination, Lockwood‟s patent infringement lawsuits were stayed, and his enforcement program was ineffective because potential licensees refused to pay any licensing fees until the USPTO determined the validity of the patents. Lockwood ultimately agreed to settle the patent infringement lawsuits in the spring of 2004 and ended his enforcement program.

On June 6, 2006, the USPTO issued a "Notice of Intent to Issue Ex Parte Reexamination Certificate" that indicated the certificate would confirm the patentability of all claims of the "319 patent. That certificate was issued on July 17, 2007. The USPTO issued a similar notice of intent with regard to the "951 patent on September 24, 2007.

Meanwhile, on June 4, 2007, Lockwood, acting in propria persona, filed the instant lawsuit. He alleged that Sheppard Mullin made false representations in the requests for reexamination, by misrepresenting the date of one of the alleged publications and misrepresenting what the other publications actually disclosed. He also alleged that Sheppard Mullin intended that the USPTO would rely upon those misrepresentations to grant the requests, and that Sheppard Mullin was aware that Lockwood would be unable to enforce his patents during the pendency of the reexamination proceedings, which typically last for several years. Although the complaint does not set forth specific causes of action, it includes the following allegation: "Defendants‟ conduct was wrongful, and constituted willful and negligent interference with plaintiff‟s economic and prospective economic advantages. Defendant‟s [sic] wrongful conduct also constitutes common law and statutory unfair competition under the common and statutory law of California, including California Business and Professions Code, sections 17,200 [sic] et seq."

Sheppard Mullin filed a demurrer and a special motion to strike the complaint under section 425.16. Among other arguments, Sheppard Mullin asserted that all of Lockwood‟s causes of action were barred by the California litigation privilege, Civil Code section 47, subdivision (b) (hereafter, section 47(b)). Before his opposition was due, Lockwood retained counsel and filed an amended complaint. The amended complaint alleged causes of action for malicious prosecution, intentional interference with prospective economic relations, and fraudulent misrepresentations, all of which were based upon the same facts alleged in the original complaint.

Lockwood subsequently filed an opposition to Sheppard Mullin‟s special motion to strike. He argued that section 425.16 did not apply because the conduct upon which the causes of action are based was unprotected activity, and that federal law preempted section 47(b) and section 425.16 because application of those statutes conflicted with federal interests in enforcing ...

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