Federal Court has no jurisdiction over suit to recover patent-infringement litigation proceeds

General Technology Applications v. Exro (4th Cir. 2004).

GTA and Exro pursued a joint business venture to produce and market a drag reduction additive (DRA) for petrolium products.  The startup company, EXG, never successfully produced or marketed any DRA.  However, GTA successfully sued Conoco for infringement of its DRA patents — $60 million.  Neither EXG or Exro were parties to that litigation. 

Once Exro learned of the award, it demanded its share.  According to Exro, EXG held an exclusive license to the GTA patents, thus making the infringement award property of EXG.  However, the district court dismissed Exro’s claims on summary judgment.

On appeal, the 4th Circuit Court of Appeals reversed — finding that the district court lacked diversity jurisdiction over the claims.  The case remanded to Virginia state court.