CAFC Vacates Validity Holding Based on Agreement by the Parties [UPDATED 2:00pm]

Baychar v. Salomon North America (Fed. Cir. 2008)

As part of a settlement process, parties regularly agree to 'consent decrees' that include admissions that the patent is valid and/or infringed. When signed by a court, those judgments serve important purposes in later direct challenges via res judicata or collateral estoppel. A consent decree may also serve as evidence or a deterrent against other challengers.  It is rare, however, for the Federal Circuit to sign a consent decree on appeal.

Baychar sued Solomon for infringement of its snowboard boot liner patent that apparently teaches a better way for wicking moisture. The district court found the patent (1) not infringed based on an implied license and (2) invalid.  By the time of oral arguments on appeal, the parties had apparently come to an agreement that Baychar would waive its infringement argument if the court would vacate the invalidity finding.  In a short non-precedential opinion, the appellate panel (Judges Mayer, Plager, and Dyk) did just that: affirming that the patent was infringed based on an implied license while vacating the judgment of invalidity.

The business issue here is that Baychar has asserted its patent against multiple defendants, and the invalidity finding would have ruined its chances of success across the board. It was willing to admit defeat in this case as a way to save the patent for another fight.

Notes:

  • In its opinion, the CAFC noted that the issue of infringement will be resolved by the appellate court rather soon in Baychar v. Burton.

In a prior opinion in the Salomon case, the CAFC dismissed Baychar's appeal on a procedural issue — its notice of appeal was filed five days late. Federal Circuit rules require a notice of appeal of a patent case be filed within 30 days from the final judgment. [Link] Apparently, the district court issued a second final judgment giving Baychar the opportunity to appeal again.

11 thoughts on “CAFC Vacates Validity Holding Based on Agreement by the Parties [UPDATED 2:00pm]

  1. TJ, those cases are interesting and, well, not surprising. I mean, that’s the fair rule that one would expect. I’m baffled by this and I would expect the other defendants to have standing to appeal as you indicated. At present, ripeness would be a greater issue … once the CAFC finds the patent invalid, it’s all moot anyway.

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  2. Malcolm, to elaborate on my post before, there is “a law preventing invalidity findings from being vacated by this sort of agreement.”

    The Supreme Court held in U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership , 513 U.S. 18 (1994) that a lower court judgment cannot be vacated by settlement.

    The Supreme Court held in Cardinal Chemical Co. v. Morton Int’l, Inc. , 508 U.S. 83 (1993) that a lower court judgment of invalidity on a counterclaim cannot be vacated by the Federal Circuit after a finding of non-infringement.

    I cannot see how this decision can be reconciled with the Supreme Court decisions. The only question, I would suppose, is whether the other defendants in the related cases have standing to invoke the Supreme Court cases collaterally.

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  3. Mad Prosecutor

    I agree with your statement that “Patent examining is a difficult job, and it takes a knowledge of technology as well as law to do any sort of meaningful job. The average software engineer with an ax to grind against the issuance of software patents doesn’t have the expertise or patience to contribute anything meaningful to the examination process.”

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  4. Malcolm:

    In these post KSR days, I would expect the modern day examiner to find each of the various sublayers, and then indicate that it would be obvious both (i) to form the claimed layers, and (ii) to attach the so-formed layers as claimed.

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  5. Isn’t this a textbook violation of Bancorp and Cardinal Chemical?

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  6. For what it’s worth, here’s claim 1

    “1. A liner for a snowboard boot comprising:
    an inner liner; a cellular elastomeric composite being formed from a first layer foam backed by a non-woven top sheet, the cellular elastomeric composite being attached to the inner liner; and a second layer of foam material attached to the cellular elastomeric composite wherein the first layer of foam is one of a reticulated foam or a hydrophilic open-cell foam.”

    And what do you know? It doesn’t scream out “I’m invalid.” I can smell the obviousness arguments but it’s nonetheless refreshing.

    And then there’s claim 8:

    8. A liner comprising:
    an inner moisture transfer material;
    a first layer of foam attached to the inner moisture transfer material;
    a non-woven top sheet attached to the first layer of foam;
    and wherein the first layer of foam is treated to have reversible enhanced thermal properties.

    Those reversible enhanced thermal properties must be really really special.

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  7. “In a short non-precedential opinion, the appellate panel (Judges Mayer, Plager, and Dyk) did just that: affirming that the patent was not infringed based on an implied license while vacating the judgment of invalidity. The business issue here is that Baychar has asserted its patent against multiple defendants, and the invalidity finding ruins its chances of success across the board. It was willing to admit defeat in this case as a way to save the patent for another fight.”

    I’d be very much in favor of a law preventing invalidity findings from being vacated by this sort of agreement. Essentially the CAFC has just taken from the public what had previously been determined by a Fedearl court to rightfully belong to the public. The ONLY reason for doing so was that two corporations decided that it was in their best financial interests. WTF?

    “In its opinion, the CAFC noted that the issue of infringement will be resolved by the appellate court rather soon in Baychar v. Burton.”

    Dennis — that should be INVALIDITY, not infringement.

    Also, I assume that vacating the district court’s findings does not void Baychar’s arguments and positions regarding its claims in that particular case, i.e., those arguments can still be still be used as admissions against Baychar, correct?

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  8. The Peer to Patent project effort this past year was expended on just 65 patent applications of which 16 are still under P2P review. Even if it were a sparkling success for these few, what would it take to scale the effort up to 300,000+ applications (the number examined in FY07)? P2P did not even meet the stated objective of reviewing 250 applications. I do not think this pilot provides meaningful results on any aspect of the P2P concept.

    Reply
  9. The only 3rd party observations worth facilitating are those prepared professionally, as the mad prosecutor notes above. The only certainties in paying a professional to prepare and file 3rd party observations on patentability are 1) you are going to get his/her invoice for services rendered and 2) if issue is looming, it will be delayed. I too had thought that P to P had turned out to be an abject failure. At least the P to P system that has been running at the EPO since 1978 (Art 115 EPC) is routinely useful, to some corporate users of the European patent system, to slow down what would otherwise be rapid progress of their competitors’ cases to issue. Probably not what the PtoP advocates had in mind as its public benefit purpose. Law of unintended consequences strikes again.

    Reply
  10. On an unrelated topic, I read an article this morning praising the “success” of the Peer-to-Patent project. I have been strongly against the program for too many reasons to enumerate.

    Be that as it may, my analysis (i.e., averaging of numbers on the Peer-to-Patent website) points to unmitigated failure of the program, rather than success. Although I don’t have the numbers (or the interest to recalculate), if I recall correctly, the average application commented on in 2008:
    – cited less than 2 pieces of prior art;
    – generated 1 comment (an extremely high percentage of all comments are entirely inane and void of absolutely any meaningful content); and
    – generated no annotations on the prior art.

    This includes at least two applications with much, much higher than usual participation.

    Patent examining is a difficult job, and it takes a knowledge of technology as well as law to do any sort of meaningful job. The average software engineer with an ax to grind against the issuance of software patents doesn’t have the expertise or patience to contribute anything meaningful to the examination process.

    Reply
  11. Calling e6k, calling e6k, please report to your duty station.

    Huff huff huff

    I’m here.

    “The crime you see now, it’s hard to take its measure.”

    Reply

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