Court Opinion

ID: 2995138
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:18:37.834604+00
Date Added: 2024-06-11T12:46:27.331502
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-2049

Ole K. Nilssen,

Plaintiff-Appellant,

v.

Motorola, Inc., and Motorola
Lighting, Inc.,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 93 C 6333--Milton I. Shadur, Judge.

Argued November 3, 2000--Decided June 25, 2001

  Before Flaum, Chief Judge and Easterbrook
and Williams, Circuit Judges.

  Easterbrook, Circuit Judge. When this case
accusing Motorola of violating patent,
contract, and trade secret rights became
one of the oldest on its docket, the
district court decided to expedite
matters by splitting the case in two: the
court required Ole Nilssen, the
plaintiff, to file a new patent action
(No. 96 C 5571) and retained the state-
law theories under the original docket
number (No. 93 C 6333), thinking that
these could be handled quickly.
Unfortunately this move backfired,
extending rather than abbreviating the
litigation. The patent action lingers on
the district court’s docket, though it
looks to the statisticians at the
Administrative Office of the United
States Courts like a new and independent
case. Meanwhile the contract and trade
secret theories of relief, dismissed by
the district court at the end of 1998,
have wandered among appellate courts,
looking for a home--a process complicated
not only by the division between the
regional circuits and the Federal
Circuit, but also by the fact that the
issues separated for appeal do not meet
the criteria for dispatch under Fed. R.
Civ. P. 54(b).
  Final decisions in all cases originally
based on federal patent law must be
appealed to the Federal Circuit. 28
U.S.C. sec. 1295(a)(1). Jurisdiction of
Nilssen’s suit was based on 28 U.S.C.
sec. 1338, so it looked like
sec. 1295(a)(1) directed appeals to that
court. Yet the district court had not
resolved the patent issues, and the
mitosis of this case produced one
offspring relying entirely on state law.
After concluding that jurisdiction in
this judicially created case fragment did
not arise under sec. 1338, a divided panel
of the Federal Circuit concluded that the
appeal should be transferred to the
Seventh Circuit. Nilssen v. Motorola,
Inc., 203 F.3d 782 (Fed. Cir. 2000).
After filing lengthy briefs in this
court, the parties discovered at oral
argument that we too were restive about
jurisdiction--both the district court’s
and ours. If one case really has become
two, that ensures appellate jurisdiction,
for the district judge entered a final
decision in the state-law fragment. But
if the proceedings now on appeal are a
distinct case arising under state law,
what is the basis of subject-matter
jurisdiction in the district court?
Motorola has its principal place of
business in Illinois, and the complaint
alleges that Nilssen is a "resident" of
Illinois. He sought to pursue the state-
law theories under the supplemental
jurisdiction--all well and good, as long
as the patent theory is in the case. But
if the patent issues are gone--not just
dismissed, after which the district court
could have retained supplemental
jurisdiction under 28 U.S.C. sec. 1367(c),
but missing in the sense that sec. 1338
never supplied jurisdiction to begin
with--then with no diversity of
citizenship the case does not belong in
federal court. And it looks like the
Federal Circuit’s decision establishes
that sec. 1338 just is not in the picture,
that the state-law fragment should be
treated as a free-standing case that had
never depended on sec. 1338 for federal
jurisdiction. Whether or not that is
right (Judge Rader’s dissenting opinion
in the Federal Circuit questioned it), it
is the law of the case. See Christianson
v. Colt Industries Operating Corp., 486
U.S. 800 (1988). If on the other hand
Judge Rader’s views were to prevail, then
the appeal is in the wrong circuit--and
probably should not be in any circuit,
for "the case" (viewed as the original,
pre-division unit invoking sec. 1338)
would still be live in the district
court.

  Responding to our request at oral
argument, the parties filed supplemental
memoranda concerning jurisdiction. The
first and most important revelation is
that the allegations of the complaint are
misleading: Nilssen may have been a
"resident" of Illinois when the complaint
was filed, but he was a domiciliary (and
hence a "citizen") of Florida. It is cit
izenship that counts for purposes of the
diversity jurisdiction. Steigleder v.
McQuesten, 198 U.S. 141 (1905); Denny v.
Pironi, 141 U.S. 121 (1891); Robertson v.
Cease, 97 U.S. 646 (1878). Nilssen has
tendered papers under 28 U.S.C. sec. 1653
to show the correct jurisdictional facts.
See Newman-Green, Inc. v. Alfonzo-
Larrain, 490 U.S. 826 (1989). Motorola
agrees that the new allegation of
"citizenship" is correct. We have no
reason to think that the parties are
collusively asserting jurisdiction, so we
grant Nilssen permission to amend his
complaint, as he proposes. That resolves
the question of subject-matter
jurisdiction--and incidentally resolves
appellate jurisdiction too, for even if
the district court should not have
divided the cases, the division is a fait
accompli and Nilssen had to appeal
immediately. It does not follow, however,
that we should allow the division to
continue. For reasons that will become
apparent, this case must be re-integrated
in the district court.

  Nilssen is an inventor--a litigious
inventor, as a check of Lexis or Westlaw
will reveal. He has been unsuccessful in
all published decisions and has been
threatened with sanctions for making
frivolous claims, see In re Nilssen, 851
F.2d 1401, 1402 n.1 (Fed. Cir. 1988); In
re Nilssen, 1991 U.S. App. Lexis 9796 at
*4 n.2 (Fed. Cir. May 8, 1991), but in
this case he hopes for a brighter day.
Formerly an employee of Motorola, Nilssen
was fired in 1972. That, plus his
penchant for litigation, might have led
Motorola to send him packing when, in
1982, Nilssen wrote to Robert Galvin,
Motorola’s ceo, with a proposal. Actually
Motorola did turn him away, several
times, but in 1987 it decided to
entertain Nilssen’s ideas for electronic
ballasts. (A ballast stabilizes
electrical current. Ballasts are vital to
the operation of fluorescent lamps,
providing the high voltage necessary to
ionize the gas and get the lamp going,
then limiting the current’s flow once the
lamp is lit. Standard ballasts use
electrical components such as
transformers, resistors, and capacitors;
an electronic ballast relies instead on
transistors.)

  Galvin’s decision to open negotiations
and receive information from Nilssen
under a promise of confidentiality,
coupled with Motorola’s later decision to
make and sell electronic ballasts without
paying Nilssen, led to this lawsuit--now
two lawsuits, plus at least one related
suit against another firm. See Nilssen v.
MagneTek, Inc., 130 F. Supp. 2d 985 (N.D.
Ill. 2000). Nilssen contends that when
Motorola entered the electronic-ballast
business in 1989 it either stole his
ideas (reflected in patents plus trade
secrets revealed during the negotiations)
or, by making ballasts without using his
ideas, broke a promise to share with him
a substantial portion of any profits.
Nilssen contends that his technology was
worth at least $50 million to Motorola,
and he demands that sum in damages.

  Since the 1970s Galvin had been
evaluating electronic ballasts as a line
of business that Motorola might want to
enter. Until 1989, however, Motorola
thought its chances of success dim.
Nilssen believes that the technology he
disclosed to Motorola during negotiations
in the late 1980s made the difference;
Motorola, by contrast, contends that
Nilssen’s ideas did not pan out and that
it is now using technology developed by
Carlile Stevens without any reliance on
Nilssen’s patents or trade secrets. After
diverting the patents into a separate
suit, the district judge turned to
Nilssen’s state-law theories. In April
1997 the court concluded that several of
Nilssen’s theories are preempted by the
Illinois Trade Secrets Act, 765 ILCS
1065/1 to 1065/9, but that theories under
this statute were viable. 963 F. Supp.
664 (N.D. Ill. 1997). In August 1997 the
judge removed several varieties of trade
secret theories from the case. 1997 U.S.
Dist. Lexis 12899 (N.D. Ill. Aug. 22,
1997). A year later the court carved off
still more elements of Nilssen’s trade-
secret theories. 1998 U.S. Dist. Lexis
12882 (N.D. Ill. Aug. 12, 1998). Next it
entered an order barring testimony by
Horace DePodwin, Nilssen’s principal
damages expert. 1998 U.S. Dist. Lexis
19161 (N.D. Ill. Nov. 30, 1998).
DePodwin’s testimony would be useless,
the court concluded, because he did not
try to identify those portions of
Nilssen’s loss that flowed from the
theories of liability remaining in the
case. Instead, the judge observed,
DePodwin tried to estimate Motorola’s
gains (and thus areasonable royalty) from
using all of Nilssen’s intellectual
property to which Motorola had access,
including the patented inventions that
had been carved off for the separate suit
and the trade secrets that had been dealt
with in the August 1998 opinion (which
had been filed after DePodwin prepared
his report). Because this ruling left
Nilssen with no practical way to recover
damages, the district court concluded
that he was no longer entitled to a jury
trial; the only remaining theories were
equitable. At a status conference on
December 29, 1998, Nilssen withdrew his
request for injunctive relief. The next
day, reading an opinion from the bench,
the judge explained that this left
Nilssen with no case and entered judgment
for Motorola.

  Two features of this history show why
the separation of the patent from the
state-law theories has led to trouble.
One is the effect of the split on the
damages calculation. The district judge
demanded that DePodwin calculate trade-
secret damages independently of patent
damages. That task was necessitated by
the segregation of legal theories into
separate lawsuits, yet the district judge
concluded that DePodwin had been unable
to accomplish it (though DePodwin tried).
The district judge never explained how it
would have been possible (or practical)
to calculate trade-secret damages on the
assumption that Motorola did not infringe
any of Nilssen’s patents, or patent
damages on the assumption that Motorola
did not use any of Nilssen’s trade
secrets. In the parties’ negotiations--
and, Nilssen insists, in Motorola’s
creation of its electronic ballasts--the
trade secrets and patents were tied
together, if only because the trade
secrets concern the use of ideas
reflected in the patents.
  Second was the effect on the merits of
the district court’s rejection of
DePodwin’s damages report. This left
Nilssen without a claim for legal relief
and scuttled his request for a jury,
which in turn sank the suit. But if the
patent and trade secret theories were
united in a single suit, damages claims
would have remained, and Nilssen would
have been entitled to a jury--at least on
whatever elements survived summary
judgment. When legal and equitable
theories are joined in one suit, the
jury’s resolution of questions common to
the two branches controls. Beacon
Theatres, Inc. v. Westover, 359 U.S. 500
(1959); Dairy Queen, Inc. v. Wood, 369
U.S. 469 (1962). The district judge’s
order cleaving the case in two had the
practical consequence of nullifying
Nilssen’s entitlement to a jury trial on
issues common to its legal and the
equitable aspects.
  There is a third consideration--one
apparent from the opening paragraphs of
this opinion. By splitting the patent and
trade-secret theories into two suits, the
district court also directed the eventual
appeals to two different courts. If
things remain as they are, we will hear
the state-law theories, and the Federal
Circuit the patent theories. This would
be bad enough if it required two
appellate courts to master the
intricacies of electronic ballasts, the
Nilssen-Motorola negotiations, and the
differences between the Nilssen and
Stevens proposals for ballast design. The
joint appendix in this appeal exceeds
4,000 pages, the record is very much
longer, and we do not doubt that the
patent appeal to the Federal Circuit will
sacrifice additional reams of paper.
Squandering judicial resources by
requiring six appellate judges (at least
two panels of two circuits) to master
this material should be avoided.
Moreover, as the district judge himself
recognized when dismissing the suit (at
least, the state-law fragment that the
judge had created), Nilssen has only one
"claim for relief." He does not have a
patent claim based on one set of events
and a trade secret claim based on
different events. There is only one
series of negotiations, disclosures, and
product-design decisions. Nilssen
contends that what Motorola did violates
several statutes and common-law
doctrines, but there is only one nucleus
of operative facts, and thus only one
"claim." See NAACP v. American Family
Mutual Insurance Co., 978 F.2d 287, 291-
92 (7th Cir. 1992). That is why the
state-law theories came within the
supplemental jurisdiction, which depends
on such a tight link among state and
federal theories that they form part of a
single controversy. 28 U.S.C.
sec. 1367(a). It makes no sense to send
patent-law theories to the Federal
Circuit and state-law theories to the
regional circuit, when only one "claim"
is involved, and one circuit’s decision
may have preclusive effect on issues
within the scope of the other’s
jurisdiction. Avoiding claim-splitting
(with the waste of judicial resources and
the potential for inconsistent appellate
decisions) is why sec. 1295(a)(1) provides
that, if jurisdiction is based on
sec. 1338 even in part, then the Federal
Circuit resolves all issues on appeal.
The Federal Circuit concluded that the
district court had all but defeated this
aspect of sec. 1295 by turning one case
into two; but it is within our power to
pull victory from the jaws of defeat by
turning the two cases back into one. See
28 U.S.C. sec. 2106.

  Because sensible handling of this case
includes only one appeal, to only one
circuit--which means, to the Federal
Circuit--we resist all temptation to
comment on the issues covered in the
current round of appellate briefs.
Everything will be open to consideration
on a new appeal after the patent issues
have been wrapped up. But we do think
that it would be prudent for the district
court to take a fresh look at the
admissibility of DePodwin’s testimony
once patent and trade-secret theories are
reunited. In other words, Judge Darrah,
who took over the patent-law fragment of
the suit on his appointment to the bench
last year, should not block DePodwin’s
testimony solely by invoking the law of
the case. Moreover, it might make sense
for thedistrict court to allow DePodwin
to submit a new damages report in light
of Judge Shadur’s rulings in August 1998
and any later developments with respect
to the patent theories.

  The judgment of the district court is
vacated, and the case is remanded with
instructions to consolidate this
proceeding with the patent-law proceeding
that had been spun off as No. 96 C 5571.
The cases must be rejoined for all
purposes, including any appeal from the
final judgment. The district court should
endeavor to consolidate all of Nilssen’s
actions concerning electronic ballasts
before a single judge; Judge Darrah can
and should initiate that process under
local rules.