Carter v. ALK Holdings, Inc.

United States Court of Appeals
for the Federal Circuit
__________________________

RANDALL B. CARTER,
Plaintiff-Appellant,

v.
ALK HOLDINGS, INC. (DOING BUSINESS AS
ACME SECURITY)
and MICHAEL D. HASSEBROCK,
Defendants-Appellees.
__________________________

2008-1168
__________________________

Appeal from the United States District Court for the
Northern District of Georgia in case No. 1:06-CV-2080,
Chief Judge Jack T. Camp.
___________________________

Decided: May 24, 2010
___________________________

ROBERT M. WARD, Kaplan Ward & Patel, LLC, of At-
lanta, Georgia, argued for plaintiff-appellant. Of counsel
were BARRY E. KAPLAN and ASHISH PATEL.

ELIZABETH G. BORLAND, Smith, Gambrell & Russell,
LLP, of Atlanta, Georgia, for defendant-appellees. With
her on the brief were KERRI A. HOCHGESANG, and TODD R.
WILLIAMS.
CARTER v. ALK HOLDINGS 2

__________________________

Before MICHEL, Chief Judge, NEWMAN, and DYK, Circuit
Judges.
Opinion for the court filed by Circuit Judge DYK.
Opinion concurring-in-part, dissenting-in-part filed by
Circuit Judge NEWMAN.

DYK, Circuit Judge.

Myers & Kaplan Intellectual Property Law, LLC
(“Myers & Kaplan”) appeals from an order of the United
States District Court for the Northern District of Georgia
imposing sanctions of $30,356.89 pursuant to Rule 11 of
the Federal Rules of Civil Procedure. 1 The district court
imposed the sanctions after it found that three claims
advanced by Myers & Kaplan on behalf of the plaintiff
Randall B. Carter (“Carter”), Counts I, VIII, and XI, were
baseless legal theories that had no chance of success and
for which no reasonable argument could be advanced.

We uphold the district court’s findings that Counts I
and XI were frivolous. However, we conclude that the
district court erred in finding Count VIII frivolous. We
therefore affirm-in-part, reverse-in-part, and remand for a
determination of whether sanctions should be imposed,
and, if so, in what amount.

BACKGROUND

The complaint alleges the following. From 1992 to
July 14, 2006, Carter was employed as Vice President and

1 Due to a technical defect in the Notice of Appeal
filed in this case, the named “Appellant” in the caption is
incorrect. Myers & Kaplan should have been named in
the caption as the “Appellant,” and Randall B. Carter’s
name should not have been included.
3 CARTER v. ALK HOLDINGS

General Manager of Acme Security, the trade name for
ALK Holdings, Inc. (“ALK”). During Carter’s period of
employment at Acme Security, he allegedly developed a
high security locking assembly for a safe deposit box door
on his own time and with his own resources. The lock
assembly included a customer lock mechanism that was
capable of at least five million actuation configurations.
Acme Security and Michael Hassebrock (“Hassebrock”),
the President of Acme Security at that time, initially
showed no interest in the invention. After a bank ex-
pressed an interest in acquiring a license to the invention,
Hassebrock proposed a “50/50 partnership” with Carter.
Hassebrock and Carter retained a patent attorney (re-
ferred to as “John Doe I”) to draft a patent application for
the invention. The provisional application listed Hasse-
brock, Carter, and Curtis P. Taylor (“Taylor”) 2 as co-
inventors. John Doe I then filed with the United States
Patent and Trademark Office (“PTO”) a non-provisional
patent application, Patent Application No. 11/299,853,
which claimed priority benefit to the earlier-filed provi-
sional patent application. The non-provisional application
listed Hassebrock and Carter as inventors. Taylor’s name
was not listed on it. Subsequently, Hassebrock allegedly
demanded that Carter assign his patent rights to Acme
Security. Carter refused, and Acme Security terminated
his employment.

On August 31, 2006, Carter filed suit against ALK,
Hassebrock, and John Doe I. Carter’s complaint con-
tained fifteen claims: nine claims purportedly based on
federal law and six on state law. All of the claims related
to the allegedly improper listing of Hassebrock on the
patent application as a co-inventor with Carter, the
2 The Complaint does not identify who Taylor is or
what his relationship was to Hassebrock, Carter, or Acme
Security.
CARTER v. ALK HOLDINGS 4

purported true inventor of the locking mechanism. John
Doe I’s representation of both Hassebrock and Carter was
alleged to be a breach of duty because of their conflicting
interests. Carter also alleged that Carter’s interests were
sacrificed to those of Hassebrock. Count VIII in particu-
lar alleged that John Doe I had represented both Hasse-
brock and Carter in the drafting and filing of the patent
applications and had a fiduciary duty to both of them,
which he breached “in violation of 35 U.S.C. et seq., 37
CFR et seq., and the Manual of Patent Examination
Procedure (MPEP).” Supplemental App. 35 (capitaliza-
tion altered).

On June 5, 2007, the district court dismissed Carter’s
federal claims for failure to state a claim. Carter v. ALK
Holdings, Inc., 510 F. Supp. 2d 1299, 1308 (N.D. Ga.
2007). The court also declined to exercise supplemental
jurisdiction over his state-law claims and dismissed them
without prejudice. Id. The court expressed sympathy,
however, for Carter’s situation:

The Court is not unsympathetic to Carter’s
plight. His allegations related to the attempted
theft of his invention are troublesome and, if true,
will likely entitle him to relief. Unfortunately, this
Court is unable to provide Carter with the relief
he seeks. If Carter is to vindicate his rights, it
must be in the PTO for his claims related to in-
ventorship and in Georgia state courts for his
claims related to Defendants’ bad faith conduct.

Id. The district court then found sua sponte that the
following three claims were frivolous: (1) “COUNT I-
VIOLATION OF ARTICLE I, SECTION 8, CLAUSE 8 OF
THE UNITED STATES CONSTITUTION AND 35 U.S.C.
et seq.”; (2) “COUNT VIII- BREACH OF FIDUCIARY
DUTY BY JOHN DOE I IN VIOLATION OF 35 U.S.C. et
5 CARTER v. ALK HOLDINGS

seq., 37 CFR et seq., AND THE MANUAL OF PATENT
EXAMINATION PROCEDURE (MPEP)”; and (3)
“COUNT XI- VIOLATION OF 35 U.S.C. § 122.” 3 Id. at
1307-08. The three counts are set forth in an appendix to
this opinion. The court directed “counsel for Plaintiff” to
show cause as to why sanctions should not be imposed
pursuant to Rule 11 of the Federal Rules of Civil Proce-
dure. Id.

Myers & Kaplan replied to the district court’s show
cause order on June 19, 2007. On July 3, 2007, ALK filed
a response to Myers & Kaplan’s submission and a re-
newed motion for sanctions against Myers & Kaplan. 4 On
December 13, 2007, the district court granted the renewed
motion and imposed sanctions of $30,356.89 pursuant to
Rule 11 against “Plaintiff’s counsel.” 5 Carter v. ALK
Holdings, Inc., No. 06-2080, slip op. at 10 (N.D. Ga. Dec.
13, 2007) (order granting sanctions). The court empha-
sized that Count VIII “attempted to manufacture a fed-

3 The statute provides that “applications for patents
shall be kept in confidence by the Patent and Trademark
Office.” 35 U.S.C. § 122(a).
4 The original motion was dismissed as moot when
the district court issued the show cause order.
5 The parties dispute whether the district court
sanctioned individual partners at Myers & Kaplan or the
firm itself. Rule 11 provides that “[a]bsent exceptional
circumstances, a law firm must be held jointly responsible
for a violation committed by its partner, associate, or
employee.” Fed. R. Civ. P. 11(c)(1). The district court’s
order was ambiguous as to whether the sanction was
imposed against Myers & Kaplan alone, against individ-
ual partners alone, or jointly against Myers & Kaplan and
the individual partners.
CARTER v. ALK HOLDINGS 6

eral cause of action by couching a garden-variety malprac-
tice claim in terms of patent law.” Id. at 5.

Myers & Kaplan timely appealed, and we have juris-
diction under 28 U.S.C. § 1295(a)(1).

DISCUSSION

We review the district court’s Rule 11 determination
for an abuse of discretion. See Cooter & Gell v. Hartmarx
Corp., 496 U.S. 384, 405 (1990); Antonious v. Spalding &
Evenflo Cos., 275 F.3d 1066, 1072 (Fed. Cir. 2002). A
court abuses its discretion when it makes a clear error of
law or fact in determining whether to impose sanctions.
Cooter, 496 U.S. at 405; Indus. Risk Insurers v. M.A.N.
Gutehoffnungshutte GmbH, 141 F.3d 1434, 1448 (11th
Cir. 1998). In reviewing Rule 11 sanctions, we apply the
law of the regional circuit. Intamin, Ltd. v. Magnetar
Techs., Corp., 483 F.3d 1328, 1337 (Fed. Cir. 2007) (citing
Antonious, 275 F.3d at 1072). Thus, we must apply the
law of the Eleventh Circuit here.

Under the Eleventh Circuit’s jurisprudence, Rule 11
sanctions should only be imposed in limited circum-
stances where the frivolous nature of the claims-at-issue
is unequivocal. The Eleventh Circuit has explained that:
“Rule 11 is intended to deter claims with no factual or
legal basis at all; creative claims, coupled even with
ambiguous or inconsequential facts, may merit dismissal,
but not punishment.” Davis v. Carl, 906 F.2d 533, 538
(11th Cir. 1990) (emphasis in original). Rule 11 sanctions
are appropriate when (1) a party files a pleading that has
no reasonable factual basis; (2) the party files a pleading
that is based on a legal theory that has no reasonable
chance of success and that cannot be advanced as a rea-
sonable argument to change existing law; or (3) the party
files a pleading in bad faith for an improper purpose.
7 CARTER v. ALK HOLDINGS

Worldwide Primates v. McGreal, 87 F.3d 1252, 1254 (11th
Cir. 1996) (quoting Jones v. Int’l Riding Helmets, Ltd., 49
F.3d 692, 694 (11th Cir. 1995)).

The central question on appeal is whether the district
court erred in finding that Counts I, VIII, and XI were
frivolous.

Count VIII

Count VIII alleged a “breach of fiduciary duty by John
Doe I in violation of 35 U.S.C. et seq., 37 CFR et seq., and
the Manual of Patent Examination Procedure (MPEP).”
Supplemental App. 35 (capitalization altered). The
district court found that “[t]he gravamen of Count VIII is
that Defendant John Doe I breached the fiduciary duty
owed to Plaintiff by representing two parties with conflict-
ing interests and by sacrificing the interests of one party
for another.” Carter, slip op. at 5. In evaluating this
claim, the district court stressed its concern that the
claim constituted an attempt “to manufacture a federal
cause of action by couching a garden-variety malpractice
claim in terms of patent law.” Id. In the district court’s
view, “[h]owever Plaintiff’s counsel couches it, no federal
cause of action exists for breach of fiduciary duty under
federal patent law or the MPEP.” Id. at 6.

Resolution of whether Count VIII is a frivolous federal
claim requires us to determine if Count VIII arises under
28 U.S.C. § 1338(a). Section 1338(a) provides that “[t]he
district courts shall have original jurisdiction of any civil
action arising under any Act of Congress relating to
patents, plant variety protection, copyrights and trade-
marks. Such jurisdiction shall be exclusive of the courts of
the states in patent, plant variety protection and copy-
right cases.” The Supreme Court has instructed that a
district court’s jurisdiction under § 1338(a) “extend[s] only
CARTER v. ALK HOLDINGS 8

to those cases in which a well-pleaded complaint estab-
lishes either that federal patent law creates the cause of
action or that the plaintiff’s right to relief necessarily
depends on the 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 Indus. Operating Corp., 486 U.S. 800, 808-09
(1988).

Myers & Kaplan contends that the district court erred
by failing to recognize that, even though malpractice is a
claim under state law, the claim here is dependent on
federal law. This is so, Myers & Kaplan asserts, because
the court must measure the scope of John Doe I’s fiduci-
ary duty to his clients as a patent practitioner under the
Patent Act, the Code of Federal Regulations (“CFR”), and
the Manual of Patent Examining Procedure (“MPEP”).

The principles discussed in Christianson have been
applied in a number of our cases involving state malprac-
tice claims where we have concluded that a state mal-
practice claim arises under federal law because federal
law is a necessary element of the claim. In Air Measure-
ment Technologies, Inc. v. Akin Gump Strauss Hauer &
Feld, L.L.P., 504 F.3d 1262, 1269 (Fed. Cir. 2007), we held
that the question of patent infringement was a necessary
element of a legal malpractice claim stemming from prior
litigation. In Immunocept, LLC v. Fulbright & Jaworski,
LLP, 504 F.3d 1281, 1283-84 (Fed. Cir. 2007), we held
that the district court had jurisdiction over a state mal-
practice claim based on alleged errors in patent prosecu-
tion because the determination of the scope of a patent
claim involved a substantial question of federal patent
law. 6

6 See also Univ. of W. Va Bd. of Trustees v. Van-
voorhies, 278 F.3d 1288, 1295 (Fed. Cir. 2002) (holding
9 CARTER v. ALK HOLDINGS

Similarly, federal law is a necessary element of Count
VIII. Count VIII alleged that the patent prosecuting
attorney, John Doe I, breached his fiduciary duties under
the patent laws and regulations, including the CFR and
the MPEP, by representing two inventors with conflicting
interests. The standards for practice before the PTO are
governed by federal law, as both the Supreme Court and
we have previously recognized. Sperry v. Fla. ex rel. Fla.
Bar, 373 U.S. 379, 385-86 (1963); Augustine v. Dep’t of
Veterans Affairs, 429 F.3d 1334, 1340 (Fed. Cir. 2005).

The PTO’s standards are codified in the CFR and in
the MPEP. The CFR regulates practice before the PTO,
and the MPEP incorporates language from the CFR. For
example, 37 C.F.R. § 10.66, which is incorporated into
Section 404 of the MPEP, limits a patent practitioner’s
ability to represent parties with conflicting interests.
Specifically, 37 C.F.R. § 10.66(a) generally requires a
patent practitioner to “decline proffered employment if
the exercise of the practitioner’s independent professional
judgment in behalf of a client will be or is likely to be
adversely affected by the acceptance of the proffered
employment, or if it would be likely to involve the practi-

that § 1338 jurisdiction exists where breach of duty to
assign a patent requires resolution of whether the dis-
puted patent application is a continuation-in-part of a
prior application); U.S. Valves, Inc. v. Dray, 212 F.3d
1368, 1372 (Fed. Cir. 2000) (holding that a breach of
contract claim requiring resolution of whether all valves
sold by licensor were covered by licensed patents provides
§ 1338 jurisdiction); Hunter Douglas, Inc. v. Harmonic
Design, Inc., 153 F.3d 1318, 1329 (Fed. Cir. 1998) (holding
that a state law claim of injurious falsehood presents a
substantial question of patent law where plaintiff had to
prove patent invalidity), overruled on other grounds by
Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d
1356, 1359 (Fed. Cir. 1999).
CARTER v. ALK HOLDINGS 10

tioner in representing differing interests.” Similarly, 37
C.F.R. § 10.66(b) generally prohibits a practitioner from
continuing “multiple employment if the exercise of the
practitioner’s independent professional judgment in
behalf of a client will be or is likely to be adversely af-
fected by the practitioner’s representation of another
client, or if it would be likely to involve the practitioner in
representing differing interests.” In addition, 37 C.F.R. §
11.18 governs representations to the PTO by practitioners
and non-practitioners. Specifically, 37 C.F.R. §
11.18(b)(1) requires that, when a party files a patent
application or other document with the PTO, that person
certifies that “[a]ll statements made therein of the party’s
own knowledge are true, all statements made therein on
information and belief are believed to be true.” A practi-
tioner who fails to comply with these PTO standards may
receive a suspension or disbarment. See 35 U.S.C. § 32.

Here, the determination of John Doe I’s compliance
with the MPEP and the CFR is a necessary element of
Carter’s malpractice cause of action because the CFR and
the MPEP establish John Doe I’s expected fiduciary
duties to his clients. Count VIII thus involves a substan-
tial question of federal patent law and is not frivolous. 7

Count I

While we conclude that Count VIII was not frivolous,
we reach a different result with regard to Counts I and
XI. Count I alleges a violation of Article I, Section 8,
Clause 8 of the U.S. Constitution, which grants Congress
the power to “promote the Progress of Science and useful
Arts, by securing for limited Times to . . . Inventors the

7 In light of our disposition, we need not determine
whether sanctions could have been imposed with respect
to Count VIII if we had determined that it did not arise
under federal law.
11 CARTER v. ALK HOLDINGS

exclusive Right to their respective . . . Discoveries.” The
district court rejected Myers & Kaplan’s assertion that
the Patent Clause creates a private cause of action on
behalf of inventors. Carter, slip op. at 4. The court noted
that Myers & Kaplan presented “no legal authority or
reasonable explanation as to how [the Patent Clause] does
confer a private cause of action.” Id. Myers & Kaplan
contends the district court erred because Count I presents
a non-frivolous argument for establishing new law, which
Rule 11(b)(2) expressly permits.

We agree with the district court that the Patent
Clause does not create private rights of action on behalf of
inventors. Myers & Kaplan’s assertion that no sanctions
should be imposed under Count I because this count
presents an argument for establishing new law ignores
the fact that the argument for creating new law must be
non-frivolous. There is no basis for inferring that Article
I, Section 8, Clause 8 provides rights to inventors without
congressional action, and we long ago made clear, in the
context of the Copyright Clause, that it does not. In In re
Cooper, our predecessor court rejected the argument that
the Clause itself required trademark protection for book
titles. 254 F.2d 611, 616 (C.C.P.A. 1958). The court
explained that “Article I, Section 8, eighth clause, of the
Constitution . . . does no more than grant power to Con-
gress to secure certain rights to authors and inventors
insofar as it elects to do so. The cited clause grants no
rights to authors and has nothing to do with the registra-
tion of trademarks.” Id. at 616-17.

The Constitution’s acknowledgement that inventors
possess rights to their inventions does not confer constitu-
tional protection over those rights any more than it does
for other types of intellectual property. Because we agree
with the district court that Myers & Kaplan’s argument
regarding Count I contains no legal merit and is not
CARTER v. ALK HOLDINGS 12

supported by any reasonable explanation, we conclude
that Count I is frivolous.

Count XI

We reach a similar result with regard to Count XI.
Count XI alleges a violation of 35 U.S.C. § 122. Section
122(a) provides that “applications for patents shall be
kept in confidence by the Patent and Trademark Office.”
Count XI alleged that through the unlawful listing of
Curtis P. Taylor and Hassebrock as co-inventors of all the
subject matter of the patent application, despite the fact
that Carter was the one true inventor, the subject matter
of the patent application was intentionally disclosed to an
unauthorized individual in violation of 35 U.S.C. § 122(a).
In concluding that Myers & Kaplan failed to show ade-
quate cause to avoid sanctions for bringing Count XI, the
district court rejected the theory that “Section 122 creates
a cause of action against attorneys practicing before the
PTO” and held that the “plain language of Section 122
shows that it applies only to the actions of the PTO itself.”
Carter, slip op. at 7.

We agree with the district court that § 122 only ap-
plies to the actions of the PTO. Myers & Kaplan contends
on appeal, however, that the theory of Count XI is not
that the defendants violated § 122, but that their conduct
fraudulently induced the PTO to violate § 122. Even if we
were to assume that inducing a violation of § 122 could
somehow create a private cause of action (an issue we do
not reach), any parties that may have become aware of
the contents of the application did so because of a disclo-
sure by the patent practitioner John Doe I, not because of
a disclosure by the PTO. Because Myers & Kaplan has
failed to proffer any reasonable explanation for bringing
Count XI, we hold that Count XI is frivolous.
13 CARTER v. ALK HOLDINGS

Motion for Sanctions

ALK and Hassebrock have requested that we grant an
additional award of sanctions against Myers & Kaplan
pursuant to Rule 38 of the Federal Rules of Appellate
Procedure for pursuing an allegedly frivolous appeal. As
we have determined that Count VIII is not frivolous, the
appeal is not frivolous. We therefore deny their motion.
We also reject the contention that the appeal should be
dismissed for failure to file a proper appendix.

In summary, we conclude that, while the district court
correctly determined that Counts I and XI are frivolous,
the court erred by finding Count VIII frivolous. We
remand for the district court to determine whether sanc-
tions should be imposed, and, if so, in what amount. We
note that the district court’s primary concern in imposing
sanctions appeared to have been that Myers & Kaplan
was attempting to make an impermissible claim to federal
jurisdiction. Since we have established that Count VIII
contains a non-frivolous allegation of federal jurisdiction,
the district court’s previous concern no longer exists.
Under the circumstances, the district court may appro-
priately conclude that no sanctions should be imposed.

AFFIRMED-IN-PART, REVERSED-IN-PART, and
REMANDED

COSTS

No costs.
CARTER v. ALK HOLDINGS 14

APPENDIX

COUNT I- VIOLATION OF ARTICLE I, SECTION 8,
CLAUSE 8 OF THE UNITED STATES CONSTITUTION
AND 35 U.S.C. et seq.

28. The Plaintiff repeats and incorporates by refer-
ence the averments set forth in Paragraphs 1 through 27
above.

29. John Doe I is registered to practice as a patent at-
torney before the United States Patent and Trademark
Office.

30. Acme had retained John Doe I to draft and file a
provisional application on the Carter invention, as alleged
in Paragraph 18, and shortly thereafter Acme hired John
Doe I as its in-house attorney.

31. John Doe I filed the patent application that
claimed priority to the provisional application, listing
both Michael D. Hassebrock and Randall B. Carter as co-
inventors. Michael D. Hassebrock surreptitiously at-
tempted to defraud Randall B. Carter into signing an
assignment to Acme as a part of the filing of the nonpro-
visional application, inter alia, by placing the Assignment
among a group of other documents to be signed, including
in such papers the Declaration and a copy of the patent
application.

32. Michael D. Hassebrock continued to attempt to
intimidate Randall B. Carter into signing an assignment
and/or the new employment agreement, threatening
Randall B. Carter with termination if Randall B. Carter
did not sign either.

33. Because Randall B. Carter was under no obliga-
tion to assign his inventive rights in and to the patent
15 CARTER v. ALK HOLDINGS

application to Acme, Randall B. Carter’s interests were
adverse to those of Acme, and thus John Doe I did and at
all times continued to represent the conflicting interests
of both Michael D. Hassebrock and Randall B. Carter.
Thus, an actual conflict of interest existed and continues
to exist between Randall B. Carter and Michael D.
Hassebrock/ Acme.

34. Despite the presence of an actual conflict of in-
terest, at no time did John Doe I remove himself from
representation, nor did John Doe I counsel Randall B.
Carter to seek independent counsel. In fact, several times
John Doe I, while acting as Randall B. Carter's attorney,
falsely advised Randall B. Carter that it was, supposedly,
in Randall B. Carter’s best interest to assign his rights
away to John Doe I’s other and conflicting client, Acme.

35. John Doe I has additionally continued to refuse all
requests for a copy of the patent application, whether
made by Randall B. Carter or his attorneys. Nor has
John Doe I allowed Randall B. Carter to participate in the
prosecution of the patent application, as all correspon-
dence from the United States Patent and Trademark
Office is currently received exclusively by John Doe I.

36. Randall B. Carter is entitled to an order from this
Court declaring that John Doe I, by acting as a licensed
patent attorney under the authority of the United States
Patent and Trademark Office and through the Patent
Laws of the United States, has violated Randall B.
Carter’s Constitutional Rights by depriving Randall B.
Carter of his right to join in the prosecution of his patent
application and to secure his Constitutional right of the
exclusive right to his invention, and moreover by contin-
ued, improper and oppressive threats of termination
unless Randall B. Carter would acquiesce in such intimi-
dation and hence assign his rights to Acme.
CARTER v. ALK HOLDINGS 16

COUNT VIII- BREACH OF FIDUCIARY DUTY BY
JOHN DOE I IN VIOLATION OF 35 U.S.C. et seq., 37
CFR et seq., AND THE MANUAL OF PATENT
EXAMINATION PROCEDURE (MPEP)

77. The Plaintiff repeats and incorporates by refer-
ence the averments set forth in Paragraphs l through 76
above.

78. At all times John Doe I, as the patent attorney
representing both Michael D. Hassebrock and Randall B.
Carter, owed a fiduciary duty to both Michael D. Hasse-
brock and Randall B. Carter.

79. John Doe I has repeatedly engaged in the course
of conduct of representing clients with actual or potential
conflicting interests. For example, John Doe I repre-
sented both Acme and the design company retained by
Acme without revealing the potential conflict of interest
and obtaining written permission by each company to
continue representation.

80. As alleged previously, at no time did John Doe I
(a) suggest that Randall B. Carter obtain separate and
independent legal advice, or (b) remove himself from
representation. Instead, several times John Doe I falsely
suggested that it was purportedly in Randall B. Carter’s
best interest to assign his rights to Acme.

81. Despite an actual conflict of interest introduced by
his illusory representation of the individual inventor,
Randall B. Carter, when he actually represented Acme,
John Doe I continued to offer legal advice against the best
interests of his client, Randall B. Carter, and in favor of
his conflicting clients Michael D. Hassebrock and Acme.
17 CARTER v. ALK HOLDINGS

82. John Doe I has breached his fiduciary and legal
duties by continuing representation of two parties with
conflicted interests and by sacrificing the rights of one
party, Randall B. Carter, for the benefit of the other
party, Acme.

COUNT XI- VIOLATION OF 35 U.S.C. § 122

102. The Plaintiff repeats and incorporates by ref-
erence the averments set forth in Paragraphs 1 through
101 above.

103. As alleged above in the Complaint, Randall B.
Carter is the one and true inventor of all the subject
matter of the patent application.

104. This knowledge was known at all times by Mi-
chael D. Hassebrock, John Doe I, and Curtis P. Taylor,
the listed co-inventors to the provisional application.

105. 35 U.S.C. § 122 provides that “applications for
patents shall be kept in confidence by the Patent and
Trademark Office.”

106. Through the unlawful listing of co-inventors
Curtis P. Taylor and Michael D. Hassebrock, the subject
matter of the patent application was intentionally dis-
closed to an unauthorized individual in contravention of
35 U.S.C. § 122.

107. The intentional act by John Doe I and Michael
D. Hassebrock has caused significant harm to the right of
Randall B. Carter to have his application remain confi-
dential for a certain period of time.
 United States Court of Appeals
for the Federal Circuit
__________________________

RANDALL B. CARTER,
Plaintiff-Appellant,

v.
ALK HOLDINGS, INC. (DOING BUSINESS AS
ACME SECURITY)
and MICHAEL D. HASSEBROCK,
Defendants-Appellees.
__________________________

2008-1168
__________________________

Appeal from the United States District Court for the
Northern District of Georgia in Case No. 1:06-CV-2080,
Chief Judge Jack T. Camp.
__________________________

NEWMAN, Circuit Judge, concurring-in-part, dissenting-
in-part.

I join the court’s holding that Count VIII of the com-
plaint, as filed on behalf of Randall B. Carter, does not
violate Rule 11; this of itself suffices to establish federal
jurisdiction of the related issues presented in Count I and
Count XI, removing the foundation of the Rule 11 sanction.
Thus I write separately because the sanction based on
Counts I and XI should now also be reversed, instead of
remanded for reconsideration.
CARTER v. ALK HOLDINGS 2

Although I strongly support the authority of the trial
court to enforce the highest standards of attorney discipline,
I cannot discern a supportable basis for violation of Rule 11
in the invocation of the Constitution in Count I of the com-
plaint; or in seeking support in the Patent Act, in Count XI,
for the asserted violation of the inventor’s right of secrecy.
The Eleventh Circuit has explained that “Rule 11 is in-
tended to deter claims with no factual or legal basis at all;
creative claims, coupled even with ambiguous or inconse-
quential facts, may merit dismissal, but not punishment.”
Davis v. Carl, 906 F.2d 533, 538 (11th Cir. 1990). While my
colleagues have invited reconsideration by the district court
of the basis for the Rule 11 sanction, now that a basis for
federal jurisdiction has been recognized in the complaint as
filed, I see no reason to prolong this satellite litigation on
Rule 11.

The district court dismissed Count I under Federal Rule
of Civil Procedure 12(b)(6), having concluded that Mr.
Carter’s “allegations related to the attempted theft of his
invention are troublesome and, if true, will likely entitle
him to relief,” Carter v. ALK Holdings, Inc., 510 F. Supp. 2d
1299, 1308 (N.D. Ga. 2007), but that these allegations did
not state claims for relief under the Constitution or the
patent statute. The paragraphs of the complaint presented
in support of Count I recite the assertedly improper acts of
the defendants: filing a patent application naming a non-
inventor as a joint inventor (¶31); barring Mr. Carter from
access to the prosecution of his patent application (¶35);
attempting to deceive or coerce Mr. Carter into assigning his
invention to his then employer (¶¶31, 32, 34); and conflict of
patent attorney interest (¶¶31–36). The relief requested in
Count I is summarized in the count’s culminating para-
graph:

36. Randall B. Carter is entitled to an order
from this Court declaring that John Doe I,
3 CARTER v. ALK HOLDINGS

by acting as a licensed patent attorney un-
der the authority of the United States Pat-
ent and Trademark Office and through the
Patent Laws of the United States, has vio-
lated Randall B. Carter’s Constitutional
Rights by depriving Randall B. Carter of his
right to join in the prosecution of his patent
application and to secure his Constitutional
right of the exclusive right to his invention,
and moreover by continued, improper and
oppressive threats of termination unless
Randall B. Carter would acquiesce in such
intimidation and hence assign his rights to
Acme.

The issue on this appeal is not whether Count I was
properly dismissed under Rule 12(b)(6); the issue is whether
counsel should be sanctioned for presenting this count at all.
It is not that unusual to invoke the Constitution in patent
cases. In Figueroa v. United States, 466 F.3d 1023, 1029–34
(Fed. Cir. 2006), this court reviewed the merits of a claim
that congressional diversion of patent fees violates Article I,
Section 8, Clause 8 because the fees are used for non-patent-
related purposes. In Association for Molecular Pathology v.
U.S. Patent & Trademark Office, __ F. Supp.2d __, 2010
WL1233416 (S.D.N.Y. Mar. 29, 2010), the court responded
to the plaintiff’s claim that patenting of genetic material
violates Article I, Section 8, Clause 8 by citing the “doctrine
of constitutional avoidance,” which provides that “if a case
can be decided on either of two grounds, one involving a
constitutional question, the other a question of statutory
construction or general law, the Court will decide only the
latter,” Ashwander v. TVA, 297 U.S. 288, 347 (1936)
(Brandeis, J., concurring). The court held that since the
issue was resolved on other grounds, the court need not
reach the constitutional claim, and dismissed the constitu-
tional claim without prejudice. Ass’n for Molecular Pathol-
CARTER v. ALK HOLDINGS 4

ogy, 2010 WL 1233416, at *51. In a parallel holding, the
district court here stated that application of state law could
resolve the questions of inventorship, coercion, and attorney
misfeasance that are the bases of Count I. This view does
not convert the pleading of the constitutional claim into a
Rule 11 violation.

The Eleventh Circuit has explained that Rule 11 “is not
intended to chill an attorney’s enthusiasm or creativity in
pursuing factual or legal theories.” Donaldson v. Clark, 819
F.2d 1551, 1561 (11th Cir. 1987) (quoting Rule 11 Advisory
Committee Notes, 1983). Amendments to Rule 11 have
been made to “place[] greater constraints on the imposition
of sanctions” and to “reduce the number of motions for
sanctions presented to the court.” Rule 11 Advisory Com-
mittee Notes, 1993. Such tolerance is warranted here,
where there is no issue of fraud, misrepresentation, bad
faith, abuse of process, or other egregious act in presenting
this pleading. It may be that invoking the Patent Clause of
the Constitution to support the inventor’s claim of exclusive
right to this invention is a “creative claim,” but it is not so
outré as to warrant the blot of Rule 11 attorney sanction.

Count XI of the complaint presents the theory that the
secrecy of Mr. Carter’s patent application was violated by
John Doe’s disclosures to the persons who were improperly
named as joint inventors. The district court dismissed this
count on the ground that 35 U.S.C. §122 is directed only to
secrecy within the Patent and Trademark Office. Again, the
issue on appeal is not the merits of the dismissal; the issue
is whether the pleading of Count XI was “egregious” and
should be sanctioned. See Davis, 906 F.2d at 538 (“Although
we have in the past viewed certain claims as legally ground-
less, we have done so only in circumstances far more egre-
gious than those involved here.”).
5 CARTER v. ALK HOLDINGS

The district court attributed its overall levy of Rule 11
sanction to counsel’s attempt to bring a garden-variety state
court action into the federal system. Now that this court
has determined that a substantial question of patent law
was implicated, such that the case could have been pursued
in the federal system, I see no need to prolong the Rule 11
debate, for its premise no longer exists. I would reverse the
sanctions ruling.