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R & N Check Corp. v. Bottomline Technologies, Inc.

United States District Court, First Circuit

November 15, 2013

R & N Check Corp., Plaintiff,
Bottomline Technologies, Inc., Defendant. Opinion No. 2013 DNH 154.


STEVEN J. McAULIFFE, District Judge.

R & N Check Corp. filed this suit in the New Hampshire Superior Court, alleging that Bottomline Technologies breached a settlement agreement the parties had reached in earlier litigation. Before it was formally served with the state court writ of summons, Bottomline appeared in state court and removed the suit to federal court. R & N asserts that removal was improper and moves the court to remand the case to state court. For the reasons stated, that motion is granted.


In 2005, R & N sued Bottomline, alleging that Bottomline's product known as Legal eXchange infringed a patent held by R & N (the "'128 Patent"). The parties resolved that litigation in January of 2006, and memorialized the terms of their settlement in a "Patent Purchase and Settlement Agreement." The Settlement Agreement provides that R & N would transfer title to the '128 Patent to Bottomline. In exchange, Bottomline agreed to pay to R & N, for the duration of the patent's term, a portion of its annual revenue earned each year from the sale of "Covered Products." Subsequently, Bottomline acquired Allegiant Systems, Inc. The parties currently dispute whether an Allegiant product (in its various iterations) falls within the scope of the Settlement Agreement's definition of "Covered Products" (and, therefore, whether sales of that product augment - quite substantially - the annual payments that Bottomline is obligated to make to R & N).

The Settlement Agreement defines the phrase "Covered Products" as follows:

"Covered Product(s)" means (a) the version of BT's product known as Legal eXchange that is commercially available on the Effective Date, and (b) any other product owned or made available for use or license by BT or its Affiliate and designed to permit U.S. users to manage spending on legal services provided by outside U.S. law firms via an electronic data transfer system or any other process that is covered in whole or in part by U.S. Patent No. 6, 622, 128.

Patent Purchase and Settlement Agreement (document no. 1-1) at Section 1(d) (emphasis supplied). In short, the parties dispute whether the highlighted language means that "Covered Products" include: (a) essentially any product sold by Bottomline that allows users to manage spending on legal services via an electronic data transfer; or, more narrowly, (b) only those products that are covered by the '128 patent.

In 2011, R & N sued Bottomline in the New Hampshire Superior Court (Rockingham County), alleging that it had breached the Settlement Agreement. After filing the writ of summons in state court, R & N's counsel contacted counsel for Bottomline and asked whether he was authorized to accept service on behalf of his client, or whether he wanted R & N to formally serve his client. Prior to responding (and before his client was formally served), counsel for Bottomline removed the case to this forum, asserting that this court has subject matter jurisdiction on two independent grounds: first, because the parties' settlement agreement resolved a patent dispute, Bottomline invokes the court's jurisdiction under 28 U.S.C. §§ 1331 (federal question) and 1338(a) (original jurisdiction to resolve patent disputes); and, second, because the parties are diverse and the amount in controversy exceeds $75, 000, Bottomline says the court may properly exercise its diversity jurisdiction pursuant to 28 U.S.C. § 1332.[1]


I. Federal Question/Patent Jurisdiction.

Bottomline says that "[a]lthough R & N asserts a state breach of contract action, its claim necessarily raises patent law issues sufficient to establish jurisdiction under 28 U.S.C. § 1338." Defendant's Memorandum (document no. 10-1) at 7. The court disagrees.

The Supreme Court has established that, in the patent context, the subject matter jurisdiction of federal district courts under 28 U.S.C. § 1338(a) extends:

only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.

Christianson v. Colt Industries Operating Corp. , 486 U.S. 800, 809 (1988) (emphasis supplied). Neither of those situations are presented in this case. The sole claim in R & N's complaint arises out of New Hampshire's common law, not federal patent law. And, its right to relief ...

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