Globeranger Corp. v. Software A.G., 691 F.3d 702 (Fifth Circuit August
17, 2012). Plaintiff developer of
passive radio frequency identification (RFID) system including software for a
method of tracking objects like the EZ-Pass system for cars at toll booths sued
over losing a Navy contract due to underhanded practices including improper
relationship with the Navy and stealing Plaintiffs technology. Defendant removed the action to federal
court, alleging that the claims set forth in the complaint were preempted by
the Copyright Act. The district court
denied a motion to remand to state court and dismissed the claims. On appeal, the Fifth Circuit reversed the
dismissal and remanded to the federal district court, not the state court. This decision is important because for the
first time the Fifth Circuit joins the Second, Fourth and Sixth Circuits’
approach and adopts the “complete
preemption” doctrine. Under the complete
preemption doctrine, state law actions preempted by Section 301(a) of the
Copyright Act are deemed to “arise under” federal law. The practical significance is that if a
plaintiff files a complaint in state court alleging only state law claims, if
the defendant can show a federal court that any of the state law claims have
been preempted, the defendant may properly remove the action from state to
federal court. Ordinarily, a plaintiff
is entitled to be master of the complaint and may choose the state forum by
choosing not to plead federal claims.
This is known as the “well-pleaded complaint rule” – unless federal claims
appear on the complaint’s face, the action stays in state court. In Globeranger,
the Fifth Circuit found that the state law conversion claim was probably just a
copyright infringement claim and thus probably preempted and permitted the
action to stay in federal court.
Although the complaint referenced “tangible property” it did not do so
specifically, so at this jurisdictional stage the Fifth Circuit left the
question for a federal factfinder, without prejudice to a later finding that no
such tangible property exists, thus depriving the federal court of subject
matter jurisdiction. However the Fifth
Circuit also found that other claims based on “procedures, processes, systems
and methods of operation” are excluded from the protection of the Copyright Act
and thus claims based on those factual allegations, if proven true, would not
be preempted. An important case for
business processes and applications involving software, important to read for
those pleading such claims and trying to navigate the removal/remand process.
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