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Ewert v. Netpulse, Ohnson Health Tech North America

United States District Court, D. Utah, Central Division

June 22, 2018

BRUCE M. EWERT, Plaintiff,
v.
NETPULSE, JOHNSON HEALTH TECH NORTH AMERICA, LIFE FITNESS, ACTIVE THEORY, Defendants.

          Clark Waddoups District Judge

          REPORT AND RECOMMENDATION

          BROOKE C. WELLS UNITED STATES MAGISTRATE

         District Judge Clark Waddoups referred this case to Magistrate Judge Brooke C. Wells pursuant to 28 U.S.C. § 636(b)(1)(B).[1] On September 15, 2017, the Court granted Bruce M. Ewert's (“Plaintiff”) application for leave to proceed in forma pauperis and waived the prepayment of filing fees pursuant to 28 U.S.C. § 1915 (“IFP Statute”).[2] Before the Court are the following motions: (1) Defendant Netpulse, Inc.'s (“Netpulse”) Motion to Dismiss;[3] (2) Defendant Johnson Health Tech North America, Inc.'s (“Johnson”) Motion to Dismiss;[4] and (3) Defendant Active Theory, Inc's (“Active”) Motion to Dismiss.[5] Plaintiff has failed to respond to any Defendant's motion and the time for doing so has passed. See DUCivR 7-1(b)(3)(A) (“A memorandum opposing motions [to dismiss] . . . must be filed within twenty-eight (28) days after service of the motion . . .”.) While the Court could summarily grant Netpulse's, Johnson's, and Active's (collectively, “Defendants”) motions without further notice, the Court determined the motions and Plaintiff's Complaint on the merits. See DUCivR 7-1(d) (“Failure to respond timely to a motion, other than for summary judgment, may result in the court's granting the motion without further notice.”) For the foregoing reasons, the Court recommends granting Defendants' motions to dismiss for lack of standing and/or improper venue.

         BACKGROUND

         Plaintiff invented dynamically variable rate video in 1995, and, on December 21, 1999, he was granted U.S. Patent No. 6, 142, 913 (“‘913 Patent”) for the invention.[6] The invention was for use in exercise equipment such that a video screen attached to the equipment, e.g., stationary bike or treadmill, would play videos that progress at the pace of the individual user.[7] On October 1, 2008, Balanced Fitness (its successor, Virtual Active, is a wholly owned subsidiary of Netpulse) entered into an Amended and Restated License Agreement (“License Agreement”) with IXR, Inc. (“IXR”), a Utah corporation for which Plaintiff was the CEO.[8] The License Agreement granted Balanced Fitness/Virtual Active an exclusive license under the ‘913 Patent to “make, have made, use, sell, offer to sell, and import any products, to practice any methods, processes, or procedures within the Patent Rights, to perform services and to otherwise exploit the Patent Rights under the terms” of the License Agreement, except in the field of the competition and/or gaming market.[9]

         In the License Agreement, IXR represented that it was the owner of the ‘913 Patent.[10] A search of the assignment records of the U.S. Patent and Trademark Office demonstrates that Plaintiff assigned all of the rights to the ‘913 Patent to IXR on November 2, 2002. SeeFed. R. Evid. 201(b) (“The court may judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”). The License Agreement stated that it was to be governed by the laws of California and that the licensee (Balanced Fitness/Virtual Active) may terminate the License Agreement “at any time by giving Licensor at least sixty (60) days prior written notice.”[11] The License Agreement also provided that “[a]ll disputes, controversies or differences which may arise between the parties hereto out of, in relation to or in connection with this Agreement, or the breach hereof, shall be settled by binding arbitration held in San Francisco, California, pursuant to the rules of the American Arbitration Association.”[12]

         On August 2, 2016, Virtual Active gave the required written notice that it was terminating the License Agreement effective in sixty days.[13] Notwithstanding the choice of law and arbitration provisions in the License Agreement, Plaintiff filed the instant lawsuit in the District of Utah on September 15, 2017, against Defendants asserting claims for patent infringement and/or breach of contract.[14]

         LEGAL STANDARDS

         As an initial matter, the Court recognizes that Plaintiff is proceeding pro se and that “[a] pro se litigant's pleadings are to be construed liberally and held to a less stringent standard than formal pleadings drafted by lawyers.”[15] At the same time, however, it is not “the proper function of the district court to assume the role of advocate for the pro se litigant, ”[16] and it “will not supply additional facts, nor will [it] construct a legal theory for [a pro se] plaintiff that assumes facts that have not been pleaded.”[17] Further,

[t]he broad reading of [a pro se] plaintiff's complaint does not relieve the plaintiff of the burden of alleging sufficient facts on which a recognized legal claim could be based. . . . [C]onclusory allegations without supporting factual averments are insufficient to state a claim on which relief can be based. This is so because a pro se plaintiff requires no special legal training to recount the facts surrounding his alleged injury, and he must provide such facts if the court is to determine whether he makes out a claim on which relief can be granted. Moreover, in analyzing the sufficiency of the plaintiff's complaint, the court need accept as true only the plaintiff's well-pleaded factual contentions, not his conclusory allegations.[18]

         With these standards in mind, the Court now turns to Defendants' Motions to Dismiss.

         DISCUSSION

         A. Standing

         Defendants move to dismiss Plaintiff's Complaint under Rule 12(b)(1) of the Federal Rules of Civil Procedure, asserting that Plaintiff does not have standing to bring this lawsuit. “Standing is a constitutional requirement pursuant to Article III and it is a threshold jurisdictional issue.” Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359, 1363 (Fed. Cir. 2010). “A court may exercise jurisdiction only if a plaintiff has standing to sue on the date it files suit.” Id. at 1364. Under Article III, Plaintiff must satisfy the following three elements to demonstrate standing. Plaintiff must show (1) an “injury in fact-an invasion of a legally protected interest, ” (2) “a causal connection between the injury and the conduct complained of, ” and (3) that it is likely rather than speculative that “the injury will be redressed by a favorable decision.” Paradise Creations, Inc. v. UV Sales, Inc., 315 F.3d 1304, 1309-10 (Fed. Cir. 2003) (quotations and citations omitted). In a patent infringement case, “the plaintiff must demonstrate that it held enforceable title to the patent at the inception of the lawsuit” to establish standing. Id. Accordingly, “‘if the original plaintiff lacked Article III initial standing, the suit must be dismissed, and the jurisdictional defect cannot be cured' after the inception of the lawsuit.” Abraxis Bioscience, 625 F.3d at 1364 (quoting Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 402 F.3d 1198, 1203 (Fed. Cir. 2005)).

         Thus, if a party previously held title to a patent, like Plaintiff, that party lacks standing to sue for patent infringement upon assignment of the patent to another entity. SeeLans v. DigitalEquip. Corp., 252 F.3d 1320, 1328 (Fed. Cir. 2001) (holding that plaintiff-inventor, who assigned his patent to a corporation in which he was the sole shareholder prior to filing the action, lacked standing to sue). An assignment transfers “all substantial rights” to the patent; “[w]hen a party holds all rights or all ...


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