Evideo Owners v. United States

In the United States Court of Federal Claims

No. 15-413C

(Filed: March 31, 2016)

)

EVIDEO OWNERS, et al., )

)

Plaintiffs, ) Rule 12(b)(1), Subject-Matter

) Jurisdiction; RCFC 12(b)(6), Failure to

v. ) State a Claim; Implied Contract; RCFC

) 9(k); Illegal Exaction; Fifth Amendment

THE UNITED STATES, ) Due Process.

)

Defendant. )

)

Joseph J. Zito, Attorney of Record, Ditthavong & Steiner, P.C., Alexandria, VA, for

plaintiffs.

David A. Foley, Jr., Trial Attorney, John Fargo, Director, Intellectual Property Staff, and

Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Commercial Litigation

Branch, Civil Division, United States Department of Justice, Washington, DC, and Heidi

Bouregois, Of Counsel, Joseph Matal, Of Counsel, and Nicolas Oettinger, Of Counsel, United

States Patent and Trademark Office, Washington, DC, for defendant.

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

Plaintiffs, assignees or owners of certain patent applications submitted to the United

States Patent and Trademark Office (“USPTO”), allege that the USPTO has violated the Due

Process Clause of the United States Constitution, breached certain implied-in-fact contracts with

plaintiffs and illegally exacted certain fees from plaintiffs, by failing to inform plaintiffs of the

fact that their patent applications have been referred to the USPTO’s Sensitive Application

Warning System (“S.A.W.S.”) program. The government has moved to dismiss this matter for

lack of subject-matter jurisdiction and for failure to state a claim upon which relief may be

granted, pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the United States Court of

Federal Claims (“RCFC”). Plaintiffs have also moved for oral argument. For the reasons set

forth below, the Court (1) GRANTS the government’s motion to dismiss and (2) DENIES

plaintiffs’ motion for oral argument as moot.

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II. FACTUAL AND PROCEDURAL BACKGROUND 1

Plaintiffs, eVideo Owners, Mauro DiDomenico, Jr., Douglas Buerger, Craig Linden,

Realvirt LLC and Paul Barous, are either the owners or assignees of one or more patent

applications that have been filed with the United States Patent and Trademark Office. Am.

Compl. at ¶¶ 1, 17, 19-22. In their amended complaint, plaintiffs allege that the USPTO violated

their substantive due process rights under the United States Constitution, breached implied-in-

fact contracts with plaintiffs and illegally exacted certain fees from plaintiffs, by failing to notify

plaintiffs of the fact that the USPTO had referred their patent applications to the S.A.W.S.

program. Id. at ¶¶ 15, 42, 64, 68-74.

Specifically, plaintiffs allege that the USPTO flagged their patent applications for

additional review under the S.A.W.S. program after the applications had been submitted to the

USPTO for approval. Id. at ¶¶ 15, 46, 50, 54, 58. Plaintiffs further allege they have been

financially harmed and have experienced undue delay in the processing of these patent

applications, as a result of the USPTO’s decision to refer the patent applications to the S.A.W.S.

program. Id. at ¶¶ 15, 42, 46, 50, 54, 58.

In addition, plaintiffs allege that the USPTO violated 35 U.S.C. § 132(a) and its

implementing regulation, 37 C.F.R. § 1.104(a)(2)−which require that the USPTO notify patent

applicants of a rejection, objection, or requirement related to a patent application−by failing to

notify plaintiffs of the fact that their patent applications had been referred to the S.A.W.S.

program. Id. at ¶¶ 60-63. In this regard, plaintiffs allege that if they had been notified of the

referral to the S.A.W.S. program, they may have changed their strategy in pursuing the patent

applications. Def. Resp. to Pl. Supp. at 5; Pl. Supp. Rep. at 2. And so, plaintiffs seek to recover

all of the fees that they paid to the USPTO following the referral of their patent applications to

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The facts recited in this Memorandum Opinion and Order are taken from plaintiffs’ amended complaint

(“Am. Compl. at __”), defendant’s motion to dismiss (“Def. Mot. at __”), plaintiffs’ opposition thereto

(“Pl. Opp. at __”), defendant’s reply in support of its motion to dismiss (“Def. Rep. at __”), plaintiffs’

supplemental brief (“Pl. Supp. at __”), defendant’s supplemental brief (“Def. Supp. at __”), plaintiffs’

response to defendant’s supplemental brief (“Pl. Resp. to Def. Supp. at __”), defendant’s response to

plaintiffs’ supplemental brief (“Def. Resp. to Pl. Supp. at __”), plaintiffs’ reply in support of its

supplemental brief (Pl. Supp. Rep. at __”), and defendant’s reply in support of its supplemental brief

(“Def. Supp. Rep. at __”). Except where otherwise noted, the facts recited here are undisputed.

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the S.A.W.S. program, as well as all attorney’s fees paid during the review of their applications

under the S.A.W.S. program. Am. Compl. at Prayer for Relief.

A. The eVideo Owners And DiDomenico Patent Applications

Plaintiff, Dr. Mauro DiDomenico, Jr., has owned patent application numbers 09/840,868

and 13/333,840 since September 27, 2002. Pl. Opp. at 19. Dr. DiDomenico is the inventor of

the technology underlying both of these patent applications. Am. Compl. at ¶ 2. These patent

applications involve systems and methods for providing video on demand services. Id. at ¶ 34.

Patent application number 09/840,868 (“DiDomenico Patent Application 1”) was filed

with the USPTO on April 25, 2001. Id. at ¶¶ 3, 36. On May 9, 2003, the USPTO issued a final

rejection of DiDomenico Patent Application 1. Id. The USPTO later acknowledged, however,

that the final rejection was premature and withdrew the rejection. Id. at ¶ 36. Subsequently, on

June 30, 2003, the USPTO issued a non-final rejection, which it also later withdrew. Id. On

May 10, 2004, the USPTO issued a second final rejection, which it again withdrew as improper.

Id. Finally, on June 3, 2009, the USPTO issued a final rejection of DiDomenico Patent

Application 1 based upon the doctrine of res judicata. Id. On October 21, 2011, an appellate

board of the USPTO reversed the patent examiner’s final rejection decision. Id. The amended

complaint does not state whether DiDomenico Application 1 is still pending before the USPTO.

See generally Am. Compl.

Plaintiffs allege that DiDomenico Patent Application 1 has been referred to the S.A.W.S.

program. Am. Compl. at ¶¶ 15, 39. Plaintiffs further allege that this patent application has been

“delayed by a series of contentious rejections by the Examiner assigned to the case.” Id. at ¶ 36.

In this regard, plaintiffs also contend that they have been waiting for more than thirteen years for

the final disposition of this patent application. Id. at ¶¶ 3, 38.

The second DiDomenico patent application, patent application number 13/333,840

(“DiDomenico Patent Application 2”), was filed with the USPTO on December 21, 2011. Id. at

¶ 37. On November 6, 2014, the USPTO issued a final rejection of DiDomenico Patent

Application 2, and the final rejection has since been appealed. Id. Plaintiffs allege that

DiDomenico Patent Application 2 has also been referred to the S.A.W.S. program. Id. at ¶¶ 15,

39.

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B. The Buerger, Linden, Realvirt And Barous Patent Applications

Plaintiffs Douglas Buerger, Craig Linden, Realvirt, LLC and Paul Barous are the owners

or assignees of several other patent applications filed with the USPTO. See Am. Compl. at ¶¶ 4-

7. Specifically, Douglas Buerger owns patent application number 13/602,835. Id. ¶¶ 4, 43.

Plaintiff Craig Linden is the assignee of patent application numbers 09/856,228, 10/469,800, and

12/172,993. Id. at ¶¶ 5, 48. Plaintiff Realvirt, LLC owns patent application numbers 07/773,161

and 13/368,316, which were filed with the USPTO on October 8, 1991. Id. at ¶¶ 6, 21, 52.

Plaintiff Paul Barous is the assignee of patent application number 10/397,778. Id. at ¶¶ 7, 22.

Plaintiffs do not state in the amended complaint whether the USPTO has accepted or rejected the

Buerger, Linden, Realvirt and Barous patent applications, or whether any of these patent

applications are currently pending before the USPTO. See generally Am. Compl. Plaintiffs

contend that the above-mentioned patent applications have been referred to the S.A.W.S.

program. Id. at ¶¶ 46, 50, 54, 58.

C. The S.A.W.S. Program

The USPTO’s S.A.W.S. program is a now-defunct program that was intended “to

increase the quality of issued patents.” Def. Mot. at 2. Under the S.A.W.S. program, patent

applications that were of “special interest to the USPTO would be flagged by the agency for

an additional internal quality assurance check.” Id. According to the government,

approximately 0.04% of pending patent applications fell within the S.A.W.S. program each

month, during the time period when the S.A.W.S. program was operational. Id. The USPTO

retired the S.A.W.S. program on March 2, 2015. Id.

D. Procedural Background

On April 24, 2015, plaintiffs filed the complaint in this matter. See generally Compl. On

June 17, 2015, plaintiffs filed an unopposed motion to amend the pleadings. See Mot. to Amend

Pleadings. The Court granted plaintiffs’ motion to amend the pleadings on June 17, 2015, and

plaintiffs filed their first amended complaint on that date. See June 17, 2015 Order; Am. Compl.

On August 14, 2015, defendant filed a motion to dismiss this matter pursuant to RCFC

12(b)(1) and RCFC 12(b)(6). Def. Mot. On September 14, 2015, plaintiffs filed a response and

opposition to the defendant’s motion to dismiss. See generally Pl. Opp. On September 23, 2015,

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defendant filed a reply in support of its motion to dismiss. See generally Def. Rep.

Subsequently, plaintiffs filed a motion for oral argument. See generally Pl. Mot. for Oral

Argument, Oct. 6, 2015.

On November 10, 2015, the Court ordered the parties to provide supplemental briefing on

whether the Court possesses jurisdiction to consider plaintiffs’ illegal exaction claim and whether

the Court’s Tucker Act jurisdiction with respect to plaintiffs’ illegal exaction claim is displaced

by the remedies available under 35 U.S.C. § 42(d) and 37 C.F.R. § 1.26. See Nov. 10, 2015

Order. On December 14, 2015, the parties filed their initial supplemental briefs. See generally

Pl. Supp.; Def. Supp. On January 11, 2016, the parties filed their supplemental responsive briefs.

See generally Pl. Resp. to Def. Supp.; Def. Resp. to Pl. Supp. On January 25, 2016, the parties

filed their supplemental reply briefs. See generally Pl. Supp. Rep.; Def. Supp. Rep. The matter

having been fully briefed, the Court resolves the pending motions to dismiss and for oral

argument.

III. LEGAL STANDARDS

A. RCFC 12(b)(1), Jurisdiction And Standing

When deciding a motion to dismiss upon the ground that the Court does not possess

subject-matter jurisdiction pursuant to RCFC 12(b)(1), this Court must assume that all

undisputed facts alleged in the complaint are true and must draw all reasonable inferences in the

non-movant’s favor. Erickson v. Pardus, 551 U.S. 89, 94 (2007); RCFC 12(b)(1). But, plaintiffs

bear the burden of establishing subject-matter jurisdiction and they must do so by a

preponderance of the evidence. Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748

(Fed. Cir. 1988). Should the Court determine that “it lacks jurisdiction over the subject matter, it

must dismiss the claim.” Matthews v. United States, 72 Fed. Cl. 274, 278 (2006).

In this regard, the United States Court of Federal Claims is a court of limited jurisdiction

and “possess[es] only that power authorized by Constitution and statute. . . .” Kokkonen v.

Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The Tucker Act grants the Court

jurisdiction over:

[A]ny claim against the United States founded either upon the Constitution, or any

Act of Congress or any regulation of an executive department, or upon any express

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or implied contract with the United States, or for liquidated or unliquidated

damages in cases not sounding in tort.

28 U.S.C. § 1491(a)(1). The Tucker Act, however, is a jurisdictional statute; it does not create

any substantive right enforceable against the United States for money damages . . . . [T]he Act

merely confers jurisdiction upon [the United States Court of Federal Claims] whenever the

substantive right exists.” United States v. Testan, 424 U.S. 392, 398 (1976). And so, to pursue a

substantive right against the United States under the Tucker Act, a plaintiff must identify and

plead a money-mandating constitutional provision, statute or regulation; an express or implied

contract with the United States; or an illegal exaction of money by the United States. Cabral v.

United States, 317 F. App’x 979, 981 (Fed. Cir. 2008); (citing Fisher v. United States, 402 F.3d

1167, 1173 (Fed. Cir. 2005)); see also Martinez v. United States, 333 F.3d 1295, 1302 (Fed. Cir.

2003). “[A] statute or regulation is money-mandating for jurisdictional purposes if it ‘can fairly

be interpreted as mandating compensation for damages sustained as a result of the breach of the

duties [it] impose[s].’” Fisher, 402 F.3d at 1173 (quoting United States v. Mitchell, 463 U.S.

206, 217 (1983)).

In addition, plaintiffs must also demonstrate that they have standing to bring this claim.

Aspex Eyewear, Inc. v. Altair Eyewear, Inc., 288 F. App’x 697, 704 (Fed. Cir. 2008); see also

Bannum, Inc. v. United States, 115 Fed. Cl. 148, 150 (2014). To establish standing, plaintiffs

must demonstrate: (1) injury in fact, (2) a causal connection between the injury and the conduct

complained of, and (3) that it is “‘likely,’ as opposed to merely ‘speculative,’ that the injury will

be ‘redressed by a favorable decision.’” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61

(1992) (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 38, 43 (1976)).

B. RCFC 12(b)(6)

When deciding a motion to dismiss based upon failure to state a claim pursuant to RCFC

12(b)(6), this Court must also assume that all undisputed facts alleged in the complaint are true

and draw all reasonable inferences in the non-movant’s favor. Erickson, 551 U.S. at 94; RCFC

12(b)(6). To survive a motion to dismiss pursuant to RCFC 12(b)(6), a complaint must contain

facts sufficient to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). And

so, when the complaint fails to “state a claim to relief that is plausible on its face,” the Court

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must dismiss the complaint. Iqbal, 556 U.S. at 678 (citation omitted). On the other hand,

“[w]hen there are well-pleaded factual allegations, a court should assume their veracity” and

determine whether it is plausible, based on these facts, to find against the defendant. Id. at 679.

C. Implied-In-Fact Contracts And RCFC 9(k)

Plaintiffs bear the burden of proving the existence of a contract with the United States,

and plaintiffs must show that there is “something more than a cloud of evidence that could be

consistent with a contract to prove a contract and enforceable contract rights.” D & N Bank v.

United States, 331 F.3d 1374, 1376 (Fed. Cir. 2003). This Court has long recognized that the

Court’s Tucker Act jurisdiction does not extend to contracts that are implied in law. Hercules,

Inc. v. United States, 516 U.S. 471, 423 (1996); Trauma Serv. Grp. v. United States, 104 F.3d

1321, 1324 (Fed. Cir. 1997); Lion Raisins, Inc. v. United States, 54 Fed. Cl. 427, 431 (2002).

And so, for plaintiffs’ contract claim to fall within the Court’s Tucker Act jurisdiction, plaintiffs

must prove that they entered into an express or implied-in-fact contract with the United States.

Id.

To establish the existence of an implied-in-fact contract with the United States, a plaintiff

must allege “a mutual intent to contract, including an offer, an acceptance, and consideration.”

Trauma Serv. Grp., 104 F.3d at 1326. Plaintiffs must also allege that the government

representative who entered into the contract on behalf of the United States had actual authority to

contractually bind the government. Id. Rule 9(k) of the Rules of the United States Court of

Federal Claims further requires that, when pleading an express or implied-in-fact contract with

the government, plaintiffs must “identify the substantive provisions of the contract or treaty on

which the party relies.” RCFC 9(k). “In lieu of a description, [plaintiffs] may annex to the

complaint a copy of the contract or treaty, indicating the relevant provisions.” Id.; see also

Gonzalez-McCaulley Inv. Grp., Inc. v. United States, 93 Fed. Cl. 710, 715 (2010).

D. Illegal Exaction

While this Court typically does not possess subject-matter jurisdiction to consider due

process claims, the Court may consider claims that the government illegally exacted property

“without due process of law, in contravention of the Due Process Clause of the Fifth Amendment

to the Constitution.” Norman v. United States, 429 F.3d 1081, 1095 (Fed. Cir. 2005) (citing

Casa De Cambio Comdiv v. United States, 291 F.3d 1356, 1363 (Fed. Cir. 2002)); see also N.

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Cal. Power Agency v. United States, 122 Fed. Cl. 111, 115 (2015) (citing Aerolineas Argentinas

v. United States, 77 F.3d 1564, 1572 (Fed. Cir. 1996)); James v. Caldera, 159 F.3d 573, 581

(Fed. Cir. 1998). In this regard, the United States Court of Appeals for the Federal Circuit has

held that this Court possesses jurisdiction to consider illegal exaction claims “‘when the exaction

is based upon an asserted statutory power.’” Norman, 429 F.3d at 1095 (quoting Aerolineas

Argentinas, 77 F.3d at 1573); Casa De Cambio Comdiv, 291 F.3d at 1363; Caldera, 159 F.3d at

581; Sartori v. United States, 58 Fed. Cl. 358, 362 (2003).

The Federal Circuit has held that an illegal exaction occurs when a “‘plaintiff has paid

money over to the [g]overnment, directly or in effect, and seeks return of all or part of that sum’

that ‘was improperly paid, exacted, or taken from the claimant in contravention of the

Constitution, a statute, or a regulation.’” Aerolineas Argentinas, 77 F.3d at 1572-73 (quoting

Eastport S.S. Corp. v. United States, 372 F.2d 1002, 1007 (Ct. Cl. 1967)). In addition, the

Federal Circuit has further held that “[t]o invoke Tucker Act jurisdiction over an illegal exaction

claim,” a plaintiff must demonstrate that the exaction was directly caused by the misapplication

of a statute or regulation. Norman, 429 F.3d at 1095-96. Plaintiffs must also establish that the

statute or provision causing the exaction provides for a return of the money unlawfully exacted,

either by its express terms or by necessary implication, when the statute or provision is violated.

Id. at 1095-96 (citing Cyprus Amax Coal Co. v. United States, 205 F.3d 1369, 1373 (Fed. Cir.

2000)). And so, to assert a valid illegal exaction claim, plaintiffs must show that: (1) they

“[have] paid money over to the government, directly or in effect;” (2) the exaction was directly

caused by the misapplication of a provision of the Constitution, a statute or a regulation; and

(3) the violated law provides for “a return of [the] money unlawfully exacted.” Norman, 429

F.3d at 1095-96 (citations omitted); see also Aerolineas Argentinas, 77 F.3d at 1572-73.

In addition, this Court has recognized illegal exactions that are direct, as well as illegal

exactions that are “in effect.” Aerolineas Argentinas, 77 F.3d. at 1573. A direct illegal exaction

occurs when money is paid directly to the government as a result of the application of a statute or

a regulation. Id.; see also Casa de Cambio Comdiv, 48 Fed. Cl. 137 at 144-45. By contrast, an

“in effect” illegal exaction may occur when the government requires a plaintiff to make a

payment on its behalf to a third-party or when the government exacts property which it later sells

and for which it receives money. Aerolineas Argentinas, 77 F.3d at 1573-74 (citing Clapp v.

United States, 127 Ct. Cl. 505, 512-13 (1954)); Bowman v. United States, 35 Fed. Cl. 397, 401

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(1996) (stating that “cases such as the instant one—where the [g]overnment exacts property

which it later sells and for which it receives money—must necessarily qualify for consideration

under the established illegal exaction jurisdiction”).

E. Relevant USPTO Statutes And Regulations

Pursuant to title 35, United States Code, section 132(a), the USPTO must notify a patent

applicant “[w]henever, on examination, any claim for a patent is rejected, or any objection or

requirement made.” 35 U.S.C. § 132(a). Section 132(a) further requires that the USPTO state

“the reasons for such rejection, or objection or requirement, together with such information and

references as may be useful in judging of the propriety of continuing the prosecution of his

application.” Id. If after receiving such information the patent applicant “persists in his claim

for a patent . . . the application shall be reexamined.” Id.

In addition, the USPTO’s regulations define when notice to applicants is required and

what information shall be provided to the applicant. 37 C.F.R. § 1.104. The relevant regulation

requires that patent applicants “be notified of examiner’s action” and that the USPTO issue an

Office action, stating the reasons for the adverse action and providing “such information or

references . . . as may be useful in aiding the applicant . . . to judge the propriety of continuing

the prosecution.” Id.

IV. DISCUSSION

The government has moved to dismiss plaintiffs’ amended complaint for lack of subject-

matter jurisdiction and for failure to state a claim upon which relief may be granted, pursuant to

RCFC 12(b)(1) and RCFC 12(b)(6). See Def. Mot. For the reasons set forth below, the Court

grants the government’s motion to dismiss.

A. Plaintiff eVideo Owners Lacks Standing To Bring Its Claim

As an initial matter, plaintiff eVideo Owners lacks standing to pursue its claim because

eVideo Owners has never owned any of the patent applications at issue in this matter. As

established above, plaintiffs must demonstrate: (1) injury in fact; (2) a causal connection between

the injury and the conduct complained of; and (3) that it is “‘likely,’ as opposed to merely

‘speculative,’ that the injury will be ‘redressed by a favorable decision’” to establish standing.

Lujan, 504 U.S. at 560-61 (quoting Simon, 426 U.S. at 38, 43); Pl. Opp. at 20 n.6.

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In its motion to dismiss, the government argues that eVideo Owners lacks standing to

bring this action, because eVideo Owners has never owned DiDomenico Patent Application 1 or

DiDomenico Patent Application 2. Def. Mot. at 4. In this regard, the government further argues

that another entity−eVideo, Incorporated−is the owner of these patent applications. Id. Plaintiffs

do not dispute that eVideo Owners never owned, nor served as an assignee of, DiDomenico

Patent Application 1 or DiDomenico Patent Application 2. Pl. Opp. at 19-20. 2 It is also without

dispute that eVideo Owners does not own any of the other patent applications at issue in this

case. See generally Am. Compl. Given this, eVideo Owners simply could not have suffered any

injury related to the processing of the patent applications at issue in this case. See Lujan, 504

U.S. at 560-61. And so, eVideo Owners lacks standing to bring its claim. RCFC 12(b)(1).

B. Plaintiffs Fail To Establish An Implied-In-Fact Contract

The Court must dismiss the remaining plaintiffs’ breach of contract claim because

plaintiffs have not established the existence of an implied-in-fact contract with the United States.

RCFC 12(b)(1) and 12(b)(6). It is well established that plaintiffs bear the burden of proving the

existence of an express or implied contract with the United States. See D & N Bank, 331 F.3d at

1376. To satisfy this burden, plaintiffs must allege “a mutual intent to contract, including an

offer, an acceptance, and consideration.” Trauma Serv. Grp., 104 F.3d at 1326. Plaintiffs must

also show that the government representative who entered into the contract on behalf of the

United States had the authority to contractually bind the government. Id. In addition, this Court

has long recognized that the Court’s Tucker Act jurisdiction does not extend to contracts that are

implied in law. Hercules, Inc., 516 U.S. at 423; Id. at 1324; Lion Raisins, 54 Fed. Cl. at 431.

And so, the Court does not possess subject-matter jurisdiction to consider claims based upon an

implied-in-law contract. Id.

The Court must dismiss plaintiffs’ breach of contract claim here, because plaintiffs allege

that they have entered into implied-in-law−rather than implied-in-fact−contracts with the United

States. In the amended complaint, plaintiffs allege that they entered into an implied-in-fact

2

Plaintiffs attach a document styled as an assignment of rights and reversion agreement, dated March 27,

2001, to their opposition to the government’s motion to dismiss. Pl. Opp. at Ex. 3. In that document, Dr.

DiDomenico assigns his ownership rights in DiDomenico Patent Application 1 and DiDomenico Patent

Application 2 to eVideo, Incorporated. Id. Plaintiffs acknowledge that eVideo, Incorporated dissolved in

2009. Pl. Opp. at 20.

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contract with the United States each time that plaintiffs submitted a patent application to the

USPTO. Am. Compl. at ¶ 74; Pl. Opp. at 5-8. In this regard, plaintiffs contend that the USPTO

breached these implied-in-fact contracts by failing to notify plaintiffs of the fact that their patent

applications had been referred to the S.A.W.S. program. Am. Compl. at ¶ 41; Pl. Opp. at 8, 10,

17.

A plain reading of the amended complaint makes clear that plaintiffs rely upon the

USPTO’s notice statute and its implementing regulation to establish the existence of their alleged

contracts with the government. Am. Compl. at ¶ 64; see also Pl. Opp. at 5-6, 9-10. In this

regard, plaintiffs state in the amended complaint that they and other patent applicants “were not

notified, in accordance with 35 U.S.C. § 132(a) . . . [about the] reasons for a rejection, or

objection or requirement associated with the S.A.W.S. designation [of their patent applications].”

Am. Compl. at ¶ 63 (emphasis supplied). Plaintiffs further state that they “were denied notice

under 35 U.S.C. § 132(a) and 37 C.F.R. § 1.104(a)(2)” prior to paying the official fees and

attorney’s fees necessary to prosecute their patent applications after the referral to the S.A.W.S.

program. Id. at ¶ 64. In addition, in their opposition to the government’s motion to dismiss,

plaintiffs also contend that:

35 U.S.C. §132(a) sets a mandatory performance condition that is incumbent upon

the USPTO for its fulfillment of the implied-in-fact contracts between patent

applicants and the USPTO. Breaches by the USPTO arose in the USPTO’s

intentional omissions and, in some cases, outright refusals to notify Plaintiffs of the

S.A.W.S. program designation applied to their patent applications. Notification to

patent applicants of any type of objection and/or rejection by the USPTO during

the examination process of a patent application is mandated by 35 U.S.C. §132(a)

and 37 C.F.R. §1.104(a)(2).

Pl. Opp. at 5-6.

This Court has long recognized that “a duty imposed by law [does] not create a contract

within the Tucker Act jurisdiction of the [C]ourt.” See Lion Raisins, Inc., 54 Fed. Cl. at 432; see

also City of Cincinnati v. United States, 153 F.3d 1375, 1377 (Fed. Cir. 1998) (“Implied-in-fact

contracts, which are within the jurisdiction of the Court of Federal Claims, differ significantly

from implied-in-law contracts, which impose duties that are deemed to arise by operation of law

and are outside the jurisdiction of the Court of Federal Claims.”). Here, it is clear that plaintiffs

point to a duty that arises by operation of law to establish the alleged contracts with the United

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States. See 35 U.S.C. § 132(a); 37 C.F.R. § 1.104(a)(2). Such a duty cannot create an implied-

in-fact contract that would fall within the Court’s jurisdiction under the Tucker Act. Lion

Raisins, 54 Fed. Cl. at 432. And so, the Court must dismiss plaintiffs’ breach of contract claim

for lack of subject-matter jurisdiction. RCFC 12(b)(1). 3

C. The Court Must Also Dismiss Plaintiffs’ Illegal Exaction Claims

Plaintiffs similarly fail to establish that the Court may entertain their illegal exaction

claims. And so, for the reasons discussed below, the Court must dismiss these claims pursuant to

RCFC 12(b)(1) and 12(b)(6).

1. The Court Does Not Possess Jurisdiction To Consider Plaintiffs’

Illegal Exaction Claim Regarding The Payment Of Official Fees

As an initial matter, the Court does not possess jurisdiction to consider plaintiffs’ illegal

exaction claim related to their payment of official fees to the USPTO. In this regard, it is well

established that an illegal exaction claim exists when a “‘plaintiff has paid money over to the

[g]overnment, directly or in effect, and seeks return of all or part of that sum’ that ‘was

improperly paid, exacted, or taken from the claimant in contravention of the Constitution, a

statute, or a regulation.’” Aerolineas Argentinas, 77 F.3d at 1572-73 (quoting Eastport S.S.

Corp, 372 F.2d at 1007). The United States Court of Appeals for the Federal Circuit has also

held that to assert a valid illegal exaction claim, plaintiffs must show that: (1) they “[have] paid

money over to the government, directly or in effect;” (2) the exaction was directly caused by the

misapplication of a provision of the Constitution, a statute, or a regulation; and (3) the violated

law provides for “a return of [the] money unlawfully exacted.” Norman, 429 F.3d at 1095-96

(citations omitted); see also Aerolineas Argentinas, 77 F.3d at 1572-73. 4

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For the same reason, the Court must also dismiss plaintiffs’ breach of contract claims for failure to state

a claim pursuant to RCFC 12(b)(6).

4

In the amended complaint, plaintiffs cite to 35 U.S.C. § 132(a), 37 C.F.R. § 1.104(a)(2) and 37 C.F.R. §

1.17 to establish jurisdiction. Am. Compl. at ¶ 16. But, none of these provisions “mandate compensation

for damages sustained as a result of the breach of the duties they impose.” Fisher v. United States, 402

F.3d 1167, 1173 (Fed. Cir. 2005). Plaintiffs also cite to various USPTO’s fee regulations set forth in

37 C.F.R. §§ 1.16, 1.17, 1.18, 1.19, 1.20, 1.445, 1.492 and 1.482. Pl. Supp. at 1; Pl. Resp. to Def. Supp.

at 1. But, plaintiffs do not contend that the misapplication of these regulations caused the illegal exaction

alleged in the amended complaint. And so, plaintiffs cannot rely upon these regulations to establish

jurisdiction under the Tucker Act. Norman v. United States, 429 F.3d 1081, 1095-96 (Fed. Cir.

2005).

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Plaintiffs fail to establish that the Court possesses jurisdiction to consider their illegal

exaction claim to recover official fees in this case, because they do not show that the alleged

misapplication of the USPTO’s notice statute and its implementing regulation directly caused the

illegal exaction. Norman, 429 F.3d at 1096. In their supplemental briefs, plaintiffs argue that an

illegal exaction has occurred in this case, because they might have taken a different approach to

the prosecution of the patent applications had plaintiffs been notified of the referral to the

S.A.W.S. program. 5 Pl. Supp. at 3. Plaintiffs further argue that one or more of the different

approaches that they might have taken could have reduced the amount of the official fees paid to

the USPTO. Id. at 4.

But, plaintiffs also acknowledge that, had they actually been notified of the referral to the

S.A.W.S. program, they may not have ceased the prosecution of their patent applications. See Pl.

Supp. at 3; Def. Resp. to Pl. Supp. at 5; Pl. Rep. to Supp. at 2. In fact, four of the five options

that plaintiffs outline in their briefs to show how they might have prosecuted their patent

applications differently involve continuing with the prosecution of these patent applications−and

apparently paying the official required fees for doing so. Pl. Supp. at 3. Given this, plaintiffs

have simply not shown how the alleged misapplication of the USPTO’s notice statute and its

implementing regulation could have directly resulted in the illegal exaction of the official fees

paid to process their patent applications. Norman, 429 F.3d at 1096. And so, plaintiffs have not

satisfied the jurisdictional requirement under Norman to show that the violation of these notice

provisions directly caused the illegal exaction alleged in this case. Id.; RCFC 12(b)(1).

Plaintiffs also fail to establish that the Court possesses jurisdiction to entertain their

illegal exaction claim related to official fees because the USPTO’s notice statute and

implementing regulation do not provide for the return of money unlawfully exacted. Id. (citing

Cyprus Amax Coal Co., 205 F.3d at 1373). As discussed above, an illegal exaction claim

brought under the Tucker Act must also pertain to a statute or regulation that if violated provides

for the “return of money unlawfully exacted.” Norman, 429 F.3d at 1095 (“a claimant must

demonstrate that the statute or provision causing the exaction itself provides . . . that ‘the remedy

5

Plaintiffs also allege a substantive due process claim in the amended complaint. Am. Compl. at ¶¶ 27,

68-74. This Court has long recognized that substantive due process claims do not fall within the limited

jurisdiction of this Court. United States v. Connolly, 716 F.2d 882, 887 (Fed. Cir. 1983). And so, the

Court does not possess jurisdiction to entertain that claim. RCFC 12(b)(1).

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for its violation entails a return of money unlawfully exacted’” (quoting Cyprus Amax Coal Co.,

205 F.3d at 1373) (emphasis supplied)). In the amended complaint, plaintiffs allege that the

USPTO violated 35 U.S.C. § 132(a) and 37 C.F.R. § 1.104(a)(2). Am. Compl. at ¶¶ 42, 64. But,

neither of these notice provisions expressly, or by necessary implication, provide for “a return of

money unlawfully exacted.” 35 U.S.C. § 132(a); 37 C.F.R. § 1.104(a)(2); see also Norman, 429

F.3d at 1095. And so, plaintiffs have not established that the Court possesses jurisdiction to

consider their illegal exaction claim with respect to the payment of official fees. Id. at 1095-96

(citing Cyprus Amax Coal Co., 205 F.3d at 1373). 6

2. Plaintiffs Do Not Allege A Plausible Illegal

Exaction Claim Regarding The Payment Of Attorney’s Fees

The Court must also dismiss plaintiffs’ illegal exaction claim related to payment of

attorney’s fees for failure to state a claim. In the amended complaint, plaintiffs allege that the

USPTO illegally exacted certain fees that plaintiffs paid to their attorneys in connection with the

prosecution of their patent applications. Am. Compl. at ¶¶ 42, 64, 72. Because this claim

involves the payment of money to plaintiffs’ attorneys, rather than to the government, the Court

construes plaintiffs’ claim to be a claim involving an illegal exaction “in effect.” See Aerolineas

Argentinas, 77 F.3d at 1573-74.

It is well established that to allege a plausible claim of an illegal exaction in effect,

plaintiffs must show either that the government requested the payment of these attorney’s fees,

or that the government benefitted from the payment of the fees. Id.; see also Bowman, 35 Fed.

Cl. at 401. Plaintiffs make no such showing here. Rather, the amended complaint makes clear

that the payment of these fees was at the behest of, and for the benefit of, plaintiffs in the

prosecution of their patent applications. Am. Compl. at ¶ 64, Prayer for Relief; see Aerolineas

Argentinas, 77 F.3d at 1573-74. Given this, plaintiffs simply do not state a plausible illegal

exaction claim with respect to the payment of attorney’s fees. And so, the Court must dismiss

plaintiffs’ illegal exaction claim related to these fees for failure to state a claim. RCFC 12(b)(6).

6

Because the Court dismisses plaintiffs’ illegal exaction claim related to the payment of official fees upon

other grounds, the Court does not reach the issue of whether dismissal of this claim is also warranted due

to the fact that the Court’s Tucker Act jurisdiction is displaced by the statutory and regulatory scheme for

refunding official fees provided for in 35 U.S.C. § 42(d) and 37 C.F.R. § 1.26. Def. Mot. at 13; see also

35 U.S.C. § 42(d); 37 C.F.R. § 1.26.

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D. Plaintiffs’ Motion For Oral Argument Is Moot

Plaintiffs have also filed a motion for oral argument. See Pl. Mot. for Oral Argument.

Because the Court has determined that dismissal of this matter is warranted for lack of subject-

matter jurisdiction and for failure to state a claim upon which relief may be granted, the Court

denies plaintiffs’ motion as moot. See, e.g., Wojtczak v. United States, No. 12-449C, 2012 WL

4903025, at *4 (Fed. Cl. Oct. 17, 2012) (“Because plaintiff . . . has not raised allegations over

which this court has jurisdiction, the court denies these motions as moot.”).

V. CONCLUSION

In sum, when reading the amended complaint in the light most favorable to plaintiffs and

drawing all reasonable inferences in plaintiffs’ favor, the Court must conclude that dismissal of

this case is warranted.

Plaintiffs have simply not met their burden to show that the Court possesses jurisdiction

to consider their claims. It is without dispute that plaintiff eVideo Owners never owned any of

the patent applications at issue in this matter. And so, eVideo Owners lacks standing to bring its

claim. It is similarly without dispute that plaintiffs rely upon the USPTO’s notice statute and its

implementing regulation to show existence of their alleged contracts with the government and

that the Court does not possess jurisdiction to consider claims based upon such implied-in-law

contracts.

The Court is also without jurisdiction to consider plaintiffs’ illegal exaction claim to

recover official fees, because plaintiffs have not demonstrated that the alleged misapplication of

the USPTO’s notice statute and regulation directly caused the illegal exaction alleged by

plaintiffs, or that these notice provisions provide for the return of money. In addition, plaintiffs

fail to state a plausible illegal exaction claim with respect to the payment of attorney’s fees,

because they cannot show that the government requested, or benefitted from, the payment of

these fees.

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And so, for the foregoing reasons, the Court GRANTS defendant’s motion to dismiss

and DENIES, as moot, plaintiffs’ motion for oral argument.

The Clerk is directed to enter judgment accordingly.

Each party to bear its own costs.

IT IS SO ORDERED.

s/Lydia Kay Griggsby

LYDIA KAY GRIGGSBY

Judge

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