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Landmark Screens, LLC v. Morgan

March 29, 2010

LANDMARK SCREENS, LLC, PLAINTIFF AND APPELLANT
v.
MORGAN, LEWIS & BOCKIUS, LLP ET. AL., DEFENDANTS AND RESPONDENTS.



(Santa Clara County Super. Ct. No. CV053568), Hon. James P. Kleinberg.

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

CERTIFIED FOR PUBLICATION

Landmark Screens, LLC (Landmark) appeals from a judgment of dismissal following the sustaining of a demurrer in favor of respondents Thomas Kohler and his law firm, Morgan, Lewis & Bockius, LLP. Landmark contends that its complaint for legal malpractice in patent prosecution raised no substantial issue of federal patent law and the superior court therefore erred in ruling that it lacked subject matter jurisdiction. We agree with the lower court's ruling on the facts presented and must therefore affirm the judgment.

Background

Because this appeal arises from the sustaining of a demurrer, we summarize the underlying facts as they are stated in the operative pleading, the first amended complaint. "Our only task in reviewing a ruling on a demurrer is to determine whether the complaint states a cause of action. Accordingly, we assume that the complaint's properly pleaded material allegations are true and give the complaint a reasonable interpretation by reading it as a whole and all its parts in their context." (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) Our summary further includes judicially noticeable facts contained in the record.

Landmark developed an "electronic billboard," a two-sided, electronically controlled, highly visible outdoor light-emitting diode (LED) display. It began operating the billboard in December 2000 along Highway 101 in San Carlos. In November 2000 Landmark retained Thomas Kohler, then a partner in the Pennie & Edmonds law firm, to pursue patent protection for its invention. Kohler filed a patent application on January 9, 2002 with the United States Patent and Trademark Office (PTO). This application, referred to by the abbreviated number '096, included 72 claims pertaining to different aspects of the billboard. In May 2003, however, the PTO restricted the application, leading Kohler to pursue only claims 26-31 and claims 56-72. The remaining claims he canceled and re-filed on August 13, 2003 as a divisional application, which Landmark calls the '916 application.

The divisional application was incomplete, however. Kohler failed to include a copy of the specifications and drawings, submitted an obsolete transmittal letter that failed to contain a statement incorporating by reference the specifications and drawings filed with the '096 application, and failed to utilize a "postcard receipt" method by which the PTO could have notified Kohler of the missing portions of the application.

On October 28, 2003, the '096 application was issued as U.S. Patent No. 6,639,574 (the '574 patent). Because the divisional application was incomplete, however, it could not claim the same January 9, 2002 filing date. Consequently, Landmark alleged, "to the extent any of the subject matter claimed in the '916 divisional application was in public use, sold or offered for sale, or disclosed in a printed publication greater than one year prior to the filing date of the '916 divisional application, including disclosure by the '574 patent, Landmark could now not obtain patent protection on such novel and valuable subject matter."

In February 2004 Kohler left Pennie & Edmonds and joined respondent Morgan, Lewis & Bockius, LLP (MLB). In June 2004 the PTO notified Kohler that the '916 application was incomplete. Kohler failed to disclose this development to Landmark. On August 23, 2004, he filed a petition in an effort to persuade the PTO to grant the divisional application the earlier filing date (January 9, 2002) of the '574 patent.*fn1

In its decision the PTO considered 37 Code of Federal Regulations section 1.183, which permits suspension of its filing rules in "an extraordinary situation, when justice requires." The PTO found no such circumstances and dismissed the petition in late 2004, based on "applicants' failure to exercise due care, or lack of knowledge of, or failure to properly apply, the patent statutes or rules of practice." The divisional application was instead given a filing date of August 23, 2004, the date on which Kohler submitted the missing parts of the application.

According to the complaint, it was only in December 2004, after receiving the PTO's dismissal decision, that Landmark learned about the incomplete filing of the '916 divisional application and the subsequent petition. Between the June 2004 notification by the PTO and the December 2004 dismissal, Kohler and MLB engaged in a "deceptive course of action" by "actively conceal[ing] from Landmark" the negligent filing of the divisional application. Kohler and MLB continued to represent Landmark until November 2, 2005.

Landmark initiated this action on November 30, 2005, naming as defendants Pennie & Edmonds, MLB, and Kohler in his capacity as partner in each firm. In the first amended complaint, filed December 7, 2005, Landmark alleged legal malpractice, negligence, and breach of fiduciary duty. In the first and second causes of action, Landmark asserted that it had lost "valuable and pioneering patent rights" from defendants' failure to draft the patent claims properly, their failure to file a complete divisional application or correct its inadequacies, and their intentional or negligent failure to inform Landmark about the status of the divisional application. The third cause of action more generally asserted damages resulting from defendants' violation of Landmark's trust and confidence by "failing to properly and diligently perform legal services for Landmark and by intentionally concealing and failing to fully and properly inform Landmark of the status of the '916 divisional application and Defendants' Petition to the PTO."*fn2

All of the defendants answered, but only Pennie & Edmonds raised subject matter jurisdiction as an affirmative defense. On September 26, 2006, the superior court granted the motion of Pennie & Edmonds and Kohler to compel arbitration pertaining to the work Kohler had performed while at Pennie & Edmonds. The court stayed the entire action until the conclusion of that proceeding, but it denied MLB's request for joinder in the motion to compel arbitration.

The case against Pennie & Edmonds and Kohler (in his prior capacity as partner there) was resolved by settlement and the stay was lifted on March 17, 2008. On April 28, 2008, MLB and Kohler (as an MLB partner) demurred to all three causes of action, asserting lack of subject matter jurisdiction, and sought a protective order staying discovery. In opposition Landmark contended that the demurrer was untimely and that it was without merit, as the superior court had jurisdiction to decide the issues pertaining to MLB and Kohler's conduct. The superior court disagreed, however, overruling Landmark's untimeliness objection and sustaining the demurrer ...


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