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America's Collectibles Network, Inc. v. The Genuine Gemstone Company, Ltd.

United States District Court, E.D. Tennessee, Knoxville

April 23, 2015

America's Collectibles Network, Inc., Plaintiff/Counterdefendant,
v.
The Genuine Gemstone Company, Ltd., Defendant/Counterplaintiff.

MEMORANDUM OPINION

PAMELA L. REEVES, District Judge.

America's Collectibles Network ("ACN"), who claims to own U.S. Patent No. 8, 370, 211 (the "211 Patent"), has brought this action against the Genuine Gemstone Company for allegedly infringing upon the 211 Patent. In response, Genuine Gemstone contends that it, in fact, is the rightful owner of the 211 Patent, and that ACN lacks standing to assert infringement.

On June 18, 2010, The Colourful Company Group acquired Gems TV (UK) Ltd-the then owner of the 211 Patent-through a share purchase agreement. After the transaction was completed, Gems TV (UK)'s former director, Anthony Hillyer, signed a document purportedly assigning Gems TV (UK)'s interest in the patent to a U.S. affiliate that was not part the sale. ACN traces its chain of title back to that assignment. If the assignment was valid, as ACN contends, then ACN is the rightful owner of the 211 Patent, and this suit may proceed. On the other hand, if the assignment was invalid as the defendant claims, then ACN is not the rightful owner of the 211 Patent, and it lacks standing to assert its infringement claim.

After being served, Genuine Gemstone filed a counterclaim seeking a declaration that it had not infringed upon the 211 Patent, that the 211 Patent is invalid, that the 211 Patent is not directed to eligible subject matter, and that the plaintiff lacks standing to assert infringement because it does not own the 211 Patent. Genuine Gemstone has moved for summary judgment on its counterclaim. Alternatively, it has moved to dismiss ACN's complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of standing. The issues have been extensively briefed, and are now ripe. For the reasons that follow, Genuine Gemstone's motion to dismiss will be granted. Its motion for summary judgment will be denied as moot.

I.

When a defendant challenges subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), the plaintiff bears the burden of proving that the court has jurisdiction. Madison-Hughes v. Shalala, 80 F.3d 1121, 1130 (6th Cir. 1996). A Rule 12(b)(1) motion may challenge the sufficiency of the complaint itself, in what is known as a facial attack, or it may challenge the factual existence of subject-matter jurisdiction, which is known as a factual attack. United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). In ruling on a facial attack, the court accepts as true the allegations of the complaint and construes them in a light most favorable to the plaintiff. DLX v. Kentucky, 381 F.3d 511, 516 (6th. Cir. 2004). On the other hand, when faced with a factual attack, the court does not presume that the complaint's allegations are true, and it may resolve factual disputes when necessary. Madison-Hughes v. Shalala, 80 F.3d at 1130.

This case involves a factual attack. Genuine Gemstone contends that ACN does not own the 211 Patent, and therefore lacks standing to assert infringement claims. Accordingly, ACN's allegations are not presumed to be true, and this Court must resolve whatever factual disputes are necessary to determine if the plaintiff has standing.

II.

While both parties have alleged numerous facts, some of which are disputed, and some of which are not, the facts necessary to resolve this matter are fairly straightforward. Prior to June 18, 2010, Gems TV (UK) Ltd., a British company, was a wholly-owned subsidiary of Gems TV Holdings Ltd., a Cayman Islands company. At that time, Gems TV (UK) owned multiple patents, including the 211 Patent. On May 5, 2010, Gems TV (UK) agreed to assign one of its other patents (the "Other Patent") to Gems TV Holdings. [R. 60-3, Fudger Aff. Ex. 3, Page ID 830]. A week later, on May 12, 2010, Gems TV (UK) entered into a share purchase agreement with the Colourful Company Group Limited (also a British company) whereby the Colourful Company would purchase Gems TV (UK), in its entirety, as a going concern.

The share purchase agreement prohibited Gems TV (UK) from granting, modifying, agreeing to terminate, or permitting the lapse of any of its intellectual property rights prior to completion of the sale without first obtaining written consent from the Colourful Group. [R. 73-7, Share Purchase Agreement, Page ID 1363]. Likewise, Gems TV (UK) was forbidden from entering into any agreement relating to any such intellectual property rights without the Colourful Group's written consent. [ Id. ].

Gems TV (UK) and the Colourful Group set June 18, 2010, as the completion date for the sale. On that date, Gems TV (UK) held an "Extraordinary General Meeting" of the shareholders at 3:00 a.m. UK time to complete the sale. The purpose of the early meeting and completion was to ensure that "all Friday's trading belongs to [the Colourful Group] and... [the new directors of Gems TV (UK)] have control of Gems UK by start of play that day." [R. 73-12, Bennett Affidavit, Page ID 1419]. As part of the transaction, and also to ensure that control of the Gems TV (UK) was in the hands of its new directors by the start of business on the completion date, Anthony Hillyer entered into a compromise agreement and resigned as a director of Gems TV (UK) effective at 6:45 a.m. UK time the morning of the completion.

The sale was completed by 7:13 a.m. UK time on June 18, 2010, when counsel for Gems TV Holdings Ltd emailed counsel for the Colourful Company to say "Congratulations - we have now completed on the share sale, and Coloured Rocks is now the beneficial owner of Gems [TV] (UK)." [R. 73-15, Bennett Affidavit Ex. 22, Page ID 1430]. Shortly thereafter, Daniel Thong, an associate of Jason Choo (the chairman of Gems TV Holdings) who worked on the sale sent an email to Anthony Hillyer, Jason Choo, and Richard Fudger (the financial director of Gems TV (UK) both before and after the sale) informing them that assignment of the 211 Patent had been "overlooked." Counsel for the Colourful Group was not copied. Mr. Thong attached an addendum to the email purportedly transferring the 211 Patent from Gems TV (UK) to Gems TV Holdings, and asked Anthony Hillyer to execute and return it. [R. 60-3, Fudger Affidavit, Ex. 3, Page ID 830]. Mr. Hillyer did so sometime after 8:00 a.m. UK time on June 18, 2010.

ACN's purported ownership of the 211 Patent at present day is based on tracing its chain of title back to the addendum executed by Mr. Hillyer after completion of the Gems TV (UK) sale. If the 211 Patent was not transferred to Gems TV Holdings, ACN has no claim to ownership of the ...


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