By Jason Rantanen
The Ohio Willow Wood Company v. Thermo-Ply, Inc. (Fed. Cir. Order 2011)
Panel: Rader (author), Newman (additional views), Moore (concurrence)
When a patentee is faced with an judgment of invalidity or inequitable conduct, it is a relatively common tactic to settle with the accused infringer who, as a condition of the settlement agreement, then joins the patentee in a joint motion for vacatur of the adverse decision. Although vacatur requires exceptional circumstances, it is sometimes granted by the district court. See e.g., Gracenote, Inc. v. MusicMatch, Inc.; Block Financial v. LendingTree; New Medium v. Barco.
The situation becomes more complex, however, when settlement occurs while the case is on appeal. Willow Wood involves an appeal of an Eastern District of Texas judgment invalidating the asserted claims of Patent No. 7,291,182. While the appeal was pending, the parties settled and filed a motion for remand to the district court for consideration of a motion for vacatur. In July 2010, the CAFC issued an order pointing out the high standard for vacatur and ordered the parties to explain what extraordinary circumstances would be presented to the district court that would justify vacatur. Ohio Willow Wood Co. v. Thermo-Ply, Inc., (Fed. Cir. Order July 29, 2010) (nonprecedential).
After considering the parties' response, along with an intervention request by a third party also being sued for infringement of the patent, the panel granted the request for "the limited purpose of the district court's consideration of the parties' motion for vacatur." Ohio Willow Wood Co. v. Thermo-Play, Inc. (Fed. Cir. Order 2011) (Willow Wood II). The CAFC retained jurisdiction, however, "so that any of the parties may seek appellate review by notifying the Clerk of the Court within thirty days of entry of the district court’s decision on remand." Id. at 3.
Concerned about the remand's potential imprimatur on the joint vacatur motion, Judge Moore, writing in concurrence, expressed the opinion that vacatur of existing invalidity opinions should be a rare and disfavored event, particularly in the patent context. Citing U.S. Bancorp Mortgate Co. v. Bonner Mall Partnership, 513 U.S. 18, 29 (1994), the judge reiterated the high threshold for justifying vacatur following settlement: "[o]nly in 'exceptional circumstances' should a district court grant vacatur at the request of the litigants." Willow Wood II concurrence at 2. This is particularly true with respect to patents:
In this case, for example, the patentee has already sued another party on the patent in question. If the decision that invalidated the patent at issue is not vacated, then the patentee will be collaterally estopped from asserting this patent in this and other suits, thereby saving courts and litigants the time and money it takes to proceed with patent litigation. Patent litigations are among the longest, most time-consuming types of civil actions. As of 2009, 384 patent cases had been pending in the district courts for three years or more. 2009 Admin. Off. U.S. Cts. Ann. Rep., at Table S-11. Moreover, the costs of patent litigation are enormous with an average patent case costing upwards of $3 million for each side. See American Intellectual Property Law Association, Report of the Economic Survey 2009 I-129 (2009). If the district court vacates its invalidity judgment then other defendants and other district courts will be forced to proceed with infringement suits, as there would likely be no collateral estoppel. Even if there were no other suits pending, these concerns should still weigh heavily against vacatur, as the only reason the patentee would want an invalidity judgment vacated is to potentially enforce the patent against others.
Concurrence at 3-4.
Judge Moore's decision to weigh in on the merits of the vacatur issue was criticized by Judge Newman, however, who wrote separately "to point out that the views of our colleague in separate concurrence are not the court’s remand order." Willow Wood II, additional views at 2. Although favoring the remand on the basis that the district court is in the better position to rule on the issue of vacatur, Judge Newman declined to endorse Judge Moore's proffer of judicial advice, commenting that "[o]ur remand should be unencumbered by even the appearance of prejudgment or of the weight to be given to various considerations. Indeed, the issues on which our colleague in concurrence offers judicial advice are more complex than is here recognized." Id.