This is the first of several intended posts on the so far unexamined “Orders of Significance” handed down by the NC Business Court. This one focuses on several Orders from Chief Judge Bledsoe on whether a case was properly designated to the Court. It is embarrassingly long, sorry.
Intellectual Property Cases
A handful of these Orders involved a designation per G.S. § 7A-45.4(a)(5), which gives the Court jurisdiction over cases which relate to a “dispute involving the ownership, use, licensing, lease, installation, or performance of intellectual property. . . . ”
You would think that a Complaint which mentioned intellectual property would be enough to support a Designation to the Court, but that’s not the case. Chief Judge Bledsoe makes it clear that the mere presence of an agreement concerning intellectual property is not enough to support a Designation.
In Innovative Agriproducts, LLC v. Fins & Feathers Charter And Commercial Fishing, LLC, 2019 NCBC Order 11, the case involved an exclusive license granted to Plaintiff to extract oil from “any and all hemp harvested by Defendants.” This case might have survived the Opposition to the Designation if Chief Judge Bledsoe had been persuaded that “hemp plant clones” were intellectual property. He was not, although Chief Judge Bledsoe observed that plants could constitute intellectual property. Order ¶14.
Although he ruled that there had been no showing that the hemp plant clones were intellectual property, he also ruled that the lawsuit was not proper for designation to the Business Court since the substance of the allegations were contract-based, essentially a claim for failing to pay money owed.
He held that a party seeking designation of an intellectual property case must show that it “involves a material issue relating to a dispute that is ‘closely tied to the underlying intellectual property aspects’.” Order ¶15.
The same fault resulted in the rejection of a Designation in Grifols Therapeutics LLC v. Z Automation Co., 2019 NCBC Order 18. The intellectual property involved there was a “cartoner,” which is “an automated machine that inserts products into their outer-packaging.” Order ¶1. Since the claims`only involved “the application of contract principles,” Chief Judge Bledsoe ruled that:
the mere fact that intellectual property (i.e, the cartoner here) is the subject of a purchase agreement is insufficient to permit designation under section 7A-45.4(a)(5).
Order at ¶6. He rejected the Designation because:
the cartoner at issue here is simply a piece of equipment Plaintiff contends that it sold to Defendant and for which Defendant has failed to pay―any intellectual property aspects of the cartoner are not germane to the dispute as it is currently cast.
You might be befuddled at how to determine whether the dispute is “closely tied” to the “underlying intellectual property aspects.” That language comes from a 2018 Opinion authored by then Chief Business Court Judge Gale, who said in an intellectual property case involving pharmaceuticals that:
It is. . . difficult to define a bright line test to determine when a dispute is closely tied to the intellectual property aspects of a pharmaceutical. Rather, the determination requires an allegation-specific inquiry that will vary from case to case.
I doubt that this language clarifies when a case involving intellectual property is appropriate for designation to the Business Court. Clearly, simply using the words “intellectual property” in your Complaint is not enough.
A procedural mistake led to the rejection of a designation in MDG Constr. Servs. v. MDG Roofing & Contracting LLC, 2019 NCBC Order 12. The Plaintiff filed its Complaint on April 24, 2019, but did not file its Notice of Designation until two days later, on April 26th.
The Designation statute, G.S. sec. 7A-45.4(d)(1) requires a Notice of Designation to be filed “contemporaneously with the filing of the complaint.” Chief Judge Bledsoe observed that this contemporaneous filing requirement “is mandatory” and that the Notice of Designation therefore was untimely.
Doing things two days apart is not doing them “contemporaneously.” Two hours? Presumably yes. The Business Court requiring that the Designation be filed at the same time as the Complaint is nothing new. Judge Jolly issued a published Order to that effect in 2012, in Kight v. Ganymede Holdings II, Inc., 2012 NCBC 46.
Last of these Significant Orders on the subject of designation is Brown v. Caruso Homes, 2019 NCBC Order 30. This Order reminds me that there is an alternative path to designating a case to the Business Court other than those specified in the designation statute (G.S. sec. 75A-45.4). That path lies in Rule 2.1 of the General Rules of Practice.
You can still get a case into the Business Court (per Rule 2.1) by persuading a non-Business Court Judge in the County where the case originated that he or she should recommend to the Chief Justice of the NC Supreme Court that the case be treated as a complex business case.
The factors to be taken into account are:
the number and diverse interests of the parties; the amount and nature of anticipated pretrial discovery and motions; whether the parties voluntarily agree to waive venue for hearing pretrial motions; the complexity of the evidentiary matters and legal issues involved; whether it will promote the efficient administration of justice; and such other matters as the Chief Justice shall deem appropriate.
The Plaintiff in Brown had filed a Complaint against his employer alleging a single violation of the North Carolina Wage and Hour Act. He designated the case to the Business Court the same day relying upon the discretionary factors set out in Rule 2.1. Chief Judge Bledsoe rejected the arguments that the case was “complex,” that it would be “fact-intensive,” and that it would require “voluminous and complex” discovery and would need “focused judicial attention and oversight.”
Chief Judge Bledsoe didn’t mention that these arguments should have been addressed to a regular Superior Court Judge, not to a Business Court Judge.
In any event, he returned the case to the regular docket of the Wake County Superior Court.
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The next post in this series on the Orders of Significance should drop next week.