What happens when Patents Are Later Invalidated?

by Dennis Crouch

Prism Technologies LLC, v.  Sprint Spectrum L.P., dba Sprint PCS, SCT Docket No. 18-1397 (Supreme Court 2019)

The Supreme Court has received a new eligibility challenge from Prism Tech — although this one is in the form of a civil procedure question:

  1. Whether the Federal Circuit Court of Appeals may retroactively expand the scope of its appellate jurisdiction to invalidate patent claims under 35 U.S.C.
    § 101 when those claims were not raised in the petitioner’s appeal or necessary for its judgment?
  2. Whether a district court may disregard a mandate from the Federal Circuit for entry of judgment, and ignore this Court’s precedent, by retroactively applying
    the collateral estoppel doctrine based on a ruling in a subsequent action where there is no mutuality of claims or defenses?

Prism has parallel infringement lawsuits against Sprint and T-Mobile.

  • In the case against Sprint, the jury found infringement and awarded $30 million in damages.  Sprint did not challenge the patent’s validity at trial or on appeal — damages affirmed in a 2016 appellate decision.
  • In the case against T-Mobile, the jury sided with the defendant and found no-infringement.  Prism appealed, but ended up in a worse situation — with a 2017 holding from the Federal Circuit that the asserted claims are ineligible under 35 U.S.C. 101.

The basic question here is whether the late-stage invalidity in T-Mobile can be used to cancel Sprint’s adjudged liability.  So far, the courts have sided with Sprint, although it was important for Sprint’s case that it took pains to slow-walk its post-appeal activity (request for rehearing and petition for certiorari) so that the case still had some life by the time the T-Mobile decision was released.

June 23, 2017 – the Federal Circuit invalidated the patents in the T-Mobile decision. June 27, 2017 (two business days later) – Sprint filed a R.60(b) motion for Relief from Judgment based upon the Federal Circuit’s binding authority “that the patent claims underlying that judgment are invalid as unpatentable under 35 U.S.C. § 101.”  The district court complied and set-aside its prior verdict and the Federal Circuit affirmed — finding no abuse of discretion.

As part of the Sprint timeline, it is notable that the Federal Circuit issued its mandate in May 2017 (before the T-Mobile invalidity decision).  After the T-Mobile decision, Sprint unsuccessfully requested that the Federal Circuit recall the mandate.  However, the court did issue a statement that recall was “unnecessary” because the “mandate does not alter how the district court should decide the preclusive effect of the T-Mobile ruling, which did not exist in May 2017.”

Another important element here a big question about whether the T-Mobile invalidity applied to all of the claims at issue in Sprint (the Federal Circuit retrospectively said yes).

The new petition thus argues that “the Federal Circuit’s interpretation of the T-Mobile Invalidity Decision as covering the Sprint Only Claims is flawed [as a] retroactive expansion of appellate jurisdiction.”

38 thoughts on “What happens when Patents Are Later Invalidated?

  1. 8

    I have read a lot of the comments below, and it seems people have some basic misunderstandings about what happened.

    This is truly a nothing case. Almost guaranteed cert denied.

    This case doesn’t involve one court undermining the judgment of another court, or any appellate courts considering issues on its own, or any separation of powers issues. Federal Rule of Civil Procedure 60(b) allowed the Sprint district court to set aside its final judgment based on new evidence, intervening change in law, or a number of other discretionary factors. This is nothing new; Rule 60(b) has been in the Federal Rules since they were adopted in 1938, and that rule merely memorialized the power that courts of common law for centuries had to set aside otherwise “final” judgments in exceptional circumstances.

    Sprint filed such a motion after it exhausted all of its appeals, and the same district court that issued the judgment against Sprint, set aside its own judgment under its discretionary authority under Rule 60(b). Prism appealed that decision, and the CAFC affirmed, finding no abuse of discretion. End of story. There is nothing more to the decision, procedurally, than that. Prism’s cert petition tries mightily to transform this procedural ruling into something bigger, but it isn’t.
    It’s simply a case-specific application of well-established federal procedural rules.

    People for decades have been using Rule 60(b) motions to set aside infringement judgments when the patents-in-suit were later found invalid in later proceedings, whether those later proceedings were the result of other court judgments or reexaminations. District courts have tons of discretion here, but generally, will set aside otherwise “final” judgments of infringement so long as too much time hasn’t gone by. Here, the district court would have probably been within its discretion had it chosen to grant or deny Sprint’s motion.

    This case does not involve separation of powers issues, appellate courts raising new issues on appeal, one court undermining the final judgment of another, or any of the other exotic stuff in the comments below.

    And people misunderstand Dennis’ comment that Sprint “took pains to slow-walk its post-appeal activity (request for rehearing and petition for certiorari) so that the case still had some life by the time the T-Mobile decision was released.” This had nothing to do with whether the decision in Sprint was “final.” By the time Sprint filed its 60(b) motion, the judgment was final. The true reason for Sprint’s slow-walk was judgment enforcement issues. Sprint no doubt had an appellate bond posted, which stopped enforcement of the $30 million judgment against it, pending the appeal. If Sprint had been forced to cough up those funds in judgment enforcement proceedings, and THEN filed its Rule 60(b) motion, it would have been too late. Prism was a patent troll that would have dissipated those funds instantly to third parties such that the funds could not easily be recovered. By slow-walking the appeal, they didn’t give Prism enough time to enforce its judgment before Sprint’s Rule 60(b) motion was brought.

  2. 7

    The basic question here is whether the late-stage invalidity in T-Mobile can be used to cancel Sprint’s adjudged liability. So far, the courts have sided with Sprint, although it was important for Sprint’s case that it took pains to slow-walk its post-appeal activity (request for rehearing and petition for certiorari) so that the case still had some life by the time the T-Mobile decision was released.

    So … the judgment against Sprint was *not*, in fact, truly final? And therefore the preclusive effect of the CAFC’s finding (in another case) that the patentee’s claims were ineligible wipes out the patentee’s case (and the non-final judgment) because “no patent, no rights”. I don’t think there’s any serious question about the CAFC’s ability to decide a case on grounds that it raises sua sponte, provided that the losing party has a chance to address the arguments.

    The thorniest issue here seems to arise (maybe?) from the relationship of the claims that the CAFC determined were ineligible to the claims that were at issue in the district court case. If those claims were not identical, something fishy might be going on in Denmark … but not necessarily if there’s no reasonable eligibility rescuing distinction that can be made between the two sets of claims.

    1. 7.1

      Both the USSC the Appellate Courts are allowed to resolve a federal claim irrespective of the parties arguments or whether it was a pressed issues or whether the lower court passed upon; Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) (is the most famous example in which an issue which was not pressed or passed upon below, and was first addressed by the Court’s own initiative/sua spone); Justice Butler points to this fact in his Dissent. We all remember that case.

      1. 7.1.1

        Interesting SC petitions on the appellate courts’ sua sponte power in the relationship between the executive and judicial branch, see Ochoa v. Holder, 10-920, and Gor v. Holder, 10-940, both petitions point out and seek to resolve a circuit split on whether federal courts of appeals have jurisdiction to review denials by the Board of Immigration Appeals of motions to reopen removal proceedings sua sponte “a question the Court expressly reserved” last Term in 2008 in Kucana v. Holder, 08-911. But the Court of Appeals’ inter-branch powers to sua sponte is limitless.

      2. 7.1.2

        Thanks Johnathan for the reminder of Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938) raising a major and controlling legal issue on the Court’s own initiative, sua sponte. Namely, that federal courts should be applying state law, not some kind of federal common law, on many issues. As previously noted, it amazes me that more attorneys have not taken the opportunity to raise that issue on appeal in Fed. Cir. cases involving employment agreements, assignments, and other contract law issues where the Fed. Cir. has been ignoring the rule of Erie v. Tompkins.

    2. 7.2

      but not necessarily if there’s no reasonable eligibility rescuing distinction that can be made between the two sets of claims.

      Hmm, I am not sure that the “can be” suffices for due process (and seems to conflict with your own earlier caveat of “provided that the losing party has a chance to address.”

      It’s one thing for the court to simply declare by edict “no __ distinction can be made” and quite another to ALLOW the parties to attempt to make a distinction.

    3. 7.3

      MM: With respect, I don’t think the identity of the claims in the two cases is a “thorny issue” at all for the Supreme Court appeal. It is instead a poison pill that will all but guarantee that ceriorari is denied. I agree this was Prism’s best merits argument in its appeal before the CAFC, but it’s way too granular and fact-specific to this case to have any interest to the Supreme Court.

  3. 6

    Re: “it was important for Sprint’s case that it took pains to slow-walk its post-appeal activity (request for rehearing and petition for certiorari) so that the case still had some life by the time the T-Mobile decision was released.”

    Translation: what happened here could only happen because the two cases were co-pending.

    1. 6.1

      Maybe, but as the USSC case law teaches a later final civil judgement voiding a patent wipes-out an earlier damages award, if the damages award in the earlier final civil judgment is based on the patent which was later declared invalid.

      1. 6.1.1

        IIRC, the “finality” aspect has some interesting nuances, and that sometimes earlier final civil judgments MUST STAND regardless of whether or not a later and different (same judicial branch but different matter) nullifies the patent.

        1. 6.1.1.1

          Anon, you are correct that there numerous nuances and exceptions to the concept of “finality”; but I think the focus has to be adjudiated claim and the effect of the civil judgment itself. One way to get around these old USSC cases (starting with Moffitt v. Garr, 66 U.S. 273, 283 (1861) to Allen v. Culp, 166 US 501, 504 (1897); and some later USSC cases), is to applied a more contemporaneous and well-established “doctrine of merger”, which provides that upon judgment the underlying “claim is extinguished and rights upon the judgment are substituted for it.” Restatement (Second) of Judgments §18 cmt. A (1982); the problem is the SC has never endorsed the “merger” doctrine;

          1. 6.1.1.1.1

            excellent point.

      2. 6.1.2

        ? J, are you suggesting a later judgment of patent invalidity by a different defendant could allow a defendant who already had a FINAL judgement against them on that same patent to get their damages back? [If not, why the “maybe” about needing co-pendency?]

        1. 6.1.2.1

          Paul, based (at least) on the old USSC case law, the later invalidity of a patent has ominous effect (effect against the whole world) and is with ex tunc effect; thus a third party’s earlier final civil judgment on damages award relying on the later voided patent would be come wiped-out too. This is the case because there are inherent limits to “finality”.

          Wisconsin v. Pelican Ins. Co., 127 U.S. 265, 292–93 (1888) (“The essential nature and real foundation of a cause of action are not changed by recovering judgment upon it; and the technical rules, which regard the original claim as merged in the judgment, and the judgment as implying a promise by the defendant to pay it, do not preclude a court, to which judgment is presented for affirmative action, (while it cannot go behind the judgment for the purpose of examining into the validity of the claim,) from ascertaining whether the claim is really one of such a nature that the court is authorized to enforce it.”); and more recent: John Simmons Co. v. Grier Bros. Co., 258 U.S. 82, 89 (1922) (“As to the claim of patent infringement, the [validity] decree evidenced a quasi definitive decision adverse to plaintiffs, which, if nothing occurred to prevent, would in due course be carried into the final decree. But it did not constitute a separation of the cause, nor dismiss defendant from the jurisdiction for any purpose; necessarily this decision remained in abeyance until the cause should be ripe for final decree; there was nothing to take the case out of the ordinary rule that there can be but one final decree in a suit in equity.”).

          1. 6.1.2.1.1

            I meant obviously “Erga omnes” how silly of me.

          2. 6.1.2.1.2

            Johnathan, I am impressed with your ability to dig up so many ancient Sup. Ct. cases. But recent Sup. Ct. patent decisions on IPRs, etc., have demonstrated that the current Court is not that impressed with such old Sup. Ct. decisions, even though some commentators here thought were real winners. “Distinguishing” old cases is a litigator and judicial talent.

            1. 6.1.2.1.2.1

              Paul,

              If it were truly “distinguishing,” I WOULD be impressed.

              However, the modern Court more often than not (and most always in patent cases) simply does NOT distinguish, but rather merely adds layers to its Gordian Knot decrees.

            2. 6.1.2.1.2.2

              Two other examples of why one cannot so easily rely on 120+ year old Sup. Ct. patent cases are Blonder-Tongue v. Univ. of Ill. (1971) and Lear v. Adkins (1969).

              1. 6.1.2.1.2.2.1

                Yes but there are some indications that the Roberts Court would follow my analysis, may be;

                1. We can all dream, I suppose. I look forward to Gil Hyatt – the inventor of nothing – paying back the money he owes, with interest.

                2. And there are some indications that the Roberts Court could apply the Kavanaugh Scissors to cut the Court’s mess of a Gordian Knot that it has created (with 35 USC 101).

                  One shear of those scissors is the Schein holding.

                  The other shear of those scissors comes from the oral arguments in the California Franchise Tax Board v Hyatt case.

    2. 6.2

      Evidently I was posting the same thought while you were.

  4. 5

    Supporting the second lines of cases (separations of powers) see also Mevs v. Conover, 131 U.S., appx. cxlii, 23 L.Ed. 1008 (Mar. 13, 1877). There, the Court said in dicta that a judgment’s vulnerability to administrative cancellation of the underlying patent does NOT extend to appeal. In Conover, the infringer argued that the case should be dismissed because “the patentee had surrendered the patent upon which the decree was founded” as part of USPTO reissue proceedings while the case was on appeal. The Conover Court held that the surrender was “immaterial” because “a surrender after final judgment or decree can have no effect upon a right passed previously into judgment … The right of the patentee then rests on his judgment or decree, and not on his patent.” Here is a list of cases following Conover, subsequently approved by Brown Bag Filling v. Drohen, 171 Fed. 439. Note Mevs v. Conover, 131 U.S. 142 (1877), affirmed Conover v. Mevs, 6 F. Cas. 322 (1868) and Conover v. Mevs, 11 Blachf. 197 (1873); and thus implicitly Cawood Patent, 94 U.S. 695, reversing in part Turrill v. Illinois Central Railroad Company, 24 F. Cas. 383 (C.C.N.D.Ill. 1867), 24 F. Cas. 385 (1871), and 24 F. Cas. 387 (1873).

  5. 4

    These are indeed two very challenging, complex and intriguing legal questions; however, the answers are quite straight forward too; Regarding the first question: the appellate court can decide a legal question on any grounds, whether or not presented by either party; long standing case law by the USSC; the second answer is equally clear: because a final civil judgment has generally presumptive retroactive effect (i.e., ab initio or ex tunc) the declaration/finding of patent invalidity in a later final judgment wipes-out a prior final judgment damages award based on the later invalidation of the underlying paten-in-suitt; see Moffitt v. Garr, 66 U.S. 273, 283 (1861) to Allen v. Culp, 166 US 501, 504 (1897); however, there is one line of cases which goes in the opposite direction, see once a patent is found invalid, the cancellation cannot render a prior judgment for damages invalid. See Pa. v. Wheeling & Belmont Bridge Co., 59 U.S. 421, 431 (1856) (“If the remedy in this case had been an action at law, and a judgment rendered in favor of the plaintiff for damages, the right to these would have passed beyond the reach of the power of Congress”); and similar McCullough v. Virginia, 172 U.S. 102, 123–24 (1898) (The Court proclaimed, though not in a patent case, that “it is not within the power of a legislature to take away rights which have been once vested by a judgment.”);

    1. 4.1

      Nice food for thought (both posts).

      1. 4.1.1

        Thank you Anon.

      2. 4.1.2

        No case law more recent than 1898 in either post?

        1. 4.1.2.1

          Paul, yes there are, but the more modern cases deal with to the relationship between the executive and judicial branches and the effect of later judicial civil final judgments on earlier administrative cancellations/adjudication; you may recall there was a big shift starting in the 1940s; Chicago & Southern Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103 (1948) (“Judgments, within the powers vested in courts by the Judiciary Article of the Constitution, may not lawfully be revised, overturned or refused faith and credit by another Department of Government.”);

          1. 4.1.2.1.1

            The “judicial on judicial” part may well be reflected in the shear of the California Franchise Tax Board v Hyatt (three elements to be present for the Court to sua sponte correct itself).

            Quite arguably, those three elements are very much present in the current mess of re-scrivened 35 USC 101.

  6. 3

    To my knowledge, Rule 60(b) applies to all final judgments without regard to the source of the final judgment. The District Court did not disturb the Federal Circuit’s infringement ruling that Spring infringed the patents. In fact, absent the Federal Circuit’s infringement ruling, there wouldn’t be a final judgment from which to seek relief. While the effect is the same from Sprint’s perspective, the District Court did not declare the claims invalid in Sprint’s case, it relied on a ruling of invalidity in another case to relieve Sprint of the effect of the judgment in its case.

  7. 2

    Surely Prism has to win this one in front of the SCotUS, no? To hold otherwise would violate Hayburn’s Case 2 U.S. 409 (1792). Once the Art. III court pronounced judgment for the patentee, that is that. An Art. I tribunal cannot come along after the Art. III judgment and undo the Art. III tribunal’s work.

    1. 2.1

      Whoops. I misunderstood the case here. I thought that the later invalidation came in a CBM.

      My point about Hayburn’s does not really obtain if the later decision came in a second Art III tribunal. Still and all, it does still seem to violate considerations of finality of judgment and judicial efficiency to let the T-Mobile court to undo the Sprint court’s work.

      1. 2.1.1

        It doesn’t violate separation of powers at all. The invalidity judgment in T-Mobile was not self-executing. Federal Rule of Civil Procedure 60(b) allows the district court to set aside a final judgment based on a number of circumstances, including new evidence or intervening change in law. Sprint filed such a motion, and the district court — the same Article III court that issued the original judgment against Sprint — set aside its own judgment under its discretionary authority under Rule 60(b).

        So to use your words, the “T-Mobile court” did not undo the “Sprint court’s work.” The Sprint court instead decided, using its own discretionary authority, to set aside its own earlier judgment based on a finding of invalidity of the asserted patent in the T-Mobile case. Big difference.

        There is absolutely nothing new here, this scenario happened many times during the days of reexamination. The law is clear the district court could have exercised its discretion to deny the motion and retain the judgment, although most district courts will set aside a judgment in these situations.

        This petition is a pretty easy cert denied. It raises nothing new.

  8. 1

    … because the Ends justifies the Means….

    (subtitled: why would Law be concerned with Means, anyway?)

    (sub-subtitled: Meh, if the result is ok, it doesn’t matter how you got there)

    1. 1.1

      “Derp ends don’t justifies derp derp means except derp when it does derp!”

      Bildo’s lighter-than-air vapidity is truly something to behold.

      1. 1.1.1

        Malcolm’s Derp Dance and number one meme of Accuse Others.

        Happy 14 years of blight.

        1. 1.1.1.1

          I’m not accusing you of anything.

          It’s a fact that you communicate this silly aphorism about “the ends never justify the means” (whether directly, or indirectly with sarcasm) over and over and over again as if it is some sort of profound truth (it’s not) or as if you actually believe it (you don’t).

          1. 1.1.1.1.1

            “I am not accusing you” contrasts with [Name]’s lighter-than-air-vapidity…

            You seem unable to understand just what you are even doing.

            The plain fact of the matter is that the adage DOES have meaning, and DOES apply.

            It is a simple and direct English statement – the very type of thing that you exhort others to use (except — apparently — when that use is rather inconvenient to your feelings).

            Too bad.
            So sad.

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