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The Fifth Circuit revisits federal jurisdiction under the doctrine of “complete preemption.”

On August 17, 2012, the Fifth Circuit handed down GlobeRanger Corp. v. Software A.G., __ F.3d __, 2012 WL 3538494 (5th Cir. Aug. 17, 2012).  GlobeRanger had “developed a passive radio frequency identification (RFID) system for commercial use.”  Id., 2012 WL 3538494, *1.  RFID systems are ones that allow radio frequency remote detection of data, for example, allowing motorists to “pay tolls at highway speeds as their cars pass under RFID readers.”  Id.  Defendant Software AG develops “Middleware” – which is technology that “helps different computer systems work together.”  Id.

In 2008, the U.S. Navy sought to acquire certain new RFID technology.  GlobeRanger bid, but lost the contract.  Id., 2012 WL 3538494, *2.  Among other reasons, GlobeRanger contended it lost the contract because Software AG misrepresented that it “developed the Navy’s [existing] RFID system.”  Id.  GlobeRanger then:

sued the defendants in Texas state court. Its petition alleged five counts: (1) misappropriation of trade secrets; (2) conversion; (3) unfair competition; (4) conspiracy; and (5) tortious interference. The defendants removed to the United States District Court for the Northern District of Texas. They alleged the district court had jurisdiction because GlobeRanger’s claims were preempted by the Copyright Act. See 28 U.S.C. § 1338. The defendants also moved to dismiss GlobeRanger’s petition. GlobeRanger moved to remand to state court and opposed the defendants’ motion to dismiss. On August 11, 2011, the district court denied GlobeRanger’s motion to remand. On August 15, the district court granted the defendants’ motion to dismiss. GlobeRanger timely appealed.

Id.

All of GlobeRanger’s claims were state law claims – no federal claims were pled.  Accordingly, the issue before the Fifth Circuit – one of first impression in that circuit – was whether or not the federal Copyright Act worked a “complete preemption” of GlobeRanger’s state law claims, conferring federal jurisdiction under 28 U.S.C. § 1338, which grants federal district courts “original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks [and further provides that “No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.”  28 U.S.C. § 1338.

The Fifth Circuit concluded that some of GlobeRanger’s claims, for example its claims related to RFID “solutions at client sites …[which] include the types of procedures, processes, systems, and methods of operation[,] are excluded from copyright protection under [17 U.S.C. § 102(b)].”  However, focusing on GlobeRanger’s conversion claim, the Fifth Circuit held that some of those allegations did not relate to “tangible property. Thus, for the purposes of jurisdictional analysis, the defendants make a sufficient argument to keep this case in federal court at the motion to dismiss stage [based on complete preemption by the federal Copyright Act.]”  GlobeRanger, 2012 WL 3538494, *7.

While the Fifth Circuit ultimately sent the case back affirming federal jurisdiction, it left the door open for the district court to reconsider jurisdiction, after a “more developed record” on the exact nature of GlobeRanger’s conversion claims. Id.  What is significant; however, is the holding that under the right factual circumstances, the federal Copyright Act is one of the few federal acts – like ERISA, for example – that can provide federal jurisdiction under the doctrine of “complete preemption.”

-Barney Robinson