Procedural Posture 1
Plaintiff buyer filed suit against defendant sellers, alleging they sold equipment that was the source of a patent infringement claim against the buyer by a third party. The Superior Court of Santa Clara County, California, sustained the sellers' demurrers, finding, inter alia, insufficient facts to state a cause of action for fraud or unfair competition and lack of subject matter jurisdiction on a breach of contract claim. The buyer appealed.
Overview:
The buyer argued that its claims were erroneously dismissed because they were properly brought in state court and stated viable causes of action. The court was not convinced that the claims based on the parties' purchase contracts had to be adjudicated in federal court pursuant to 28 U.S.C. § 1338(a). It was not necessary to determine whether the buyer actually infringed the patent of the third party, an entity not involved in the present action. If the matter went to trial, the central question would be only whether the sellers breached the contract with the buyer, which turned upon a judicial construction of the purchase orders in dispute and the application of contract law to the specific facts surrounding the controversy. Accordingly, the contract-based causes of action could proceed in state court. The buyer did not allege that any defendant made a representation that was incomplete or misleading; it did not assert concealment of material facts known or accessible only to the sellers; and it did not claim active concealment preventing discovery of the litigation. The cause of action for unfair competition could not be sustained on the allegations of the complaint.
Outcome
The court reversed the trial court's judgment and remanded the matter for further proceedings solely on the contract-related causes of action.