NJ Law Limiting Patentee’s Capacity to Sue Upheld on Appeal
By: Dennis Crouch
on August 24, 2020 at 2:59 am
Publication: Patent – Patently-O

by Dennis Crouch

This is a quirky case, but the holding is troubling — that a patent owner’s state of residence can prohibit the patentee from using the federal courts to assert their patent rights.  I would think the 14th Amendment is on point: “nor shall any State deprive any person of life, liberty, or property, without due process of law.”

Walter Tormasi v. Western Digital Corp. (Fed. Cir. 2020)

Tormasi is serving a live sentence at the Maximum Security New Jersey State Prison in Trenton for murdering his mother. Tormasi is also a patentee — his U.S. Patent No. 7,324,301 covers a particular disk drive construction — and the claims appear quite broad.

In 2019, Tormasi sued Western Digital in N.D. Cal. for patent infringement seeking $5 billion in damages.  The district court quickly dismissed the case — holding that Tormasi lacks the capacity to sue to enforce his patent rights.  On appeal, the Federal Circuit has affirmed.  Here is the logic:

  • FRCP 17(b)(1) indicates that an individual’s capacity to sue or be sued is determined “by the law of the individual’s domicile.” For Tormasi, that is New Jersey.
  • Although N.J. has a broad capacity-to-sue statute, N.J. law also prohibits inmates from “commencing or operating a business … without the approval of the Administrator.” N.J. Admin. Code § 10A:4-4.1.  No approval has been granted.
  • Joining these two laws together, the court held that Tormasi’s lawsuit here is a continuation of his business activities and thus prohibited by the “no business” provision. And, the court tied this to his capacity-to-sue — holding that his enforcement lawsuit is simply prohibited.

Truthfully, this holding makes very little sense from a statutory construction approach.  It is not surprising that neither judge in the majority (Wallach or Chen) were willing to sign as the opinion author.

Judge Stoll penned a short dissent — explaining that New Jersey’s capacity to sue statute should govern here, and there is no indication that the prohibition of in-prison business was designed to further limit someone’s capacity to use the Federal Court system. “It makes little sense to narrow the New Jersey statute on capacity to sue in light of the ‘no business’ rule, which is an administrative rule of the Department of Corrections that prescribes sanctions for certain ‘prohibited acts.’”

We also have the particular issue here of Federal Patent Rights and the state’s role in limiting a patent owner from asserting and enforcing those rights.

Rather than really addressing the issue, the unsigned majority opinion concluded that Tormasi had waived the argument:

  • Majority: Mr. Tormasi did not argue to the District Court that the “no business” rule cannot generally limit the scope of an inmate’s capacity to sue. The argument is, accordingly, waived, and Mr. Tormasi has therefore conceded that the no business rule may limit his capacity to sue.
  • Dissent: To the contrary, in his briefing to the district court, Mr. Tormasi asserted that the “no business” rule “was never intended to supersede [his] right to file civil lawsuits in his personal capacity.”

The majority also explained that Tormasi abandoned his constitutional arguments on appeal.

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