Respect for Judgment: Challenging the Federal Circuit’s Unique Finality Rule

by Dennis Crouch

My Civil Procedure class at Mizzou is now “Online Civil Procedure.”  The final topic in the course will be “respect for judgments.”

A basic setup of our  legal system is to offer substantial justice — giving all parties due process including an opportunity to be heard and judged by an impartial tribunal.  Once that process is complete, the result is then seen as final and further challenges regarding the same issues or claims are precluded.

In patent law, the sense of finality and respect for judgment has been substantially complicated with the rise of AIA trials.

A case-in-point is Chrimar Systems v. Ale USA (Supreme Court 2020).  Chrimar is typical of many contemporary cases because it involves parallel district court and PTAB litigation.

Here is a timeline of the district court litigation.

  • Chrimar sued ALE for infringement on four patents.
  • ALE admitted infringement and a jury rejected ALE’s invalidity defenses. The district court entered judgment awarding damages and ongoing royalties.
  • On appeal, the Federal Circuit affirmed except to claim construction of one term in one of the four patents. The appellate court particularly stated that the partial reversal was “immaterial to damages
    because any damages that would result from the alleged
    infringement of the [remanded] ’012 patent also results from
    the infringement of the ’107 and ’760 patents.”
  • Back on remand, Chrimar issued a covenant-not-to-sue on the ‘012 patent and the district court amended its final judgment favoring Chrimar – now  just include the other three patents with the same damage award.

Meanwhile at the PTAB:

  • After the original lawsuit was filed, Chrimar filed for IPR petitions — challenging each of the asserted patents.  The PTAB granted those petitions.
  • After the jury verdict and district court (original) final judgment, the PTAB sided ALE — cancelling the all of the asserted claims.

Finally at the Federal Circuit:

  • September 9, 2019: The Federal Circuit affirmed the PTAB Decisions in a R.36 Judgment Without Opinion
  • September 9, 2019: The Federal Circuit vacated the district court final judgment and “remanded for dismissal.” The court held that its simultaneous affirmance of the IPR decisions gives effect to the PTAB judgments that applies to all still pending cases. Since an appeal was still pending in the district court litigation, that it applies there. “Our affirmance of the Board’s decisions of unpatentability of the patent claims at issue in the present case has ian immediate issue-preclusive effect on any pending or copending actions involving the patent[s].’ XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1294 (Fed. Cir. 2018).

Now to the Supreme Court:

Chrimar has now petitioned the U.S. Supreme Court in the case with the basic argument that the lawsuit was already finally decided by the district court and an administrative agency (the PTO) does not have the right or power to reopen that final judgment.  The petition explains:

Chrimar brought an action for infringement against ALE under four patents. A jury rejected ALE’s invalidity defenses and awarded past damages. The District Court then awarded post-judgment ongoing royalties. The … Federal Circuit affirmed liability and damages, expressly holding that a partial remand to reconstrue one patent was “immaterial to damages because any damages that would result from the alleged infringement of the [remanded] ’012 patent also results from the infringement of the ’107 and ’760 patents.” App. 48a.

After the District Court’s entry of the eventually-affirmed judgment, the Patent Trial and Appeal Board (“PTAB”) (part of an Executive Branch agency) rendered final decisions finding unpatentable all asserted claims (a decision later affirmed). On this basis, the Federal Circuit ordered that the Article III damages judgment be vacated and remanded for dismissal. The Federal Circuit reasoned that the later Executive Branch administrative outcome required vacating the prior already-affirmed Article III judgment.

The questions presented are:

1. Whether the Federal Circuit may apply a finality standard for patent cases that conflicts with the standard applied by this Court and all other circuit courts in non-patent cases.

2. Whether a final judgment of liability and damages that has been affirmed on appeal may be reversed based on the decision of an administrative agency, merely because an appeal having nothing to do with liability, damages or the proper calculation of the ongoing royalty rate is pending.

The petition here is correct that the Federal Circuit’s preclusion principle here “is the sole invention of the Federal Circuit, having been adopted by no other court.”

This legal rule has earned sharp rebuke from academics and jurists alike. It is legally incorrect and conflicts with the decisions of all other circuits and of this Court. The legal rule incentivizes unfairness against patentees, motivates gamesmanship by accused infringers, leads to wasted judicial effort by trial and appeals courts, and disincentivizes innovation by undermining confidence in the patent system.

Petition at 4. See  Paul R. Gugliuzza, (In)valid Patents, 92 Notre Dame L. Rev. 271 (2016); Peggy P. Ni, Rethinking Finality in the PTAB Age, 31 Berk. Tech. L.J. 557 (2016)

7 thoughts on “Respect for Judgment: Challenging the Federal Circuit’s Unique Finality Rule

  1. 5

    Brings to mind the Translogic cases. If memory serves, one involved an appeal from a USPTO decision and the other was a parallel appeal from a district court decision. The Federal Circuit affirmed the USPTO decision (invalidity). The appeal from the district court decision was therefore ‘decided’ by the affirmance in the other case. Don’t recall at the moment whether the USPTO decision or the district court decision came first.

    1. 5.1

      Tranlogic (Fed. Cir. 2007) was when this this concept was conceived. But it there was no opinion.

      Fresenius (Fed. Cir. 2014) held that invalidation by the USPTO “extinguishes the underlying cause of action”, and the patent is “void ab initio“.

      Fresenius improperly relied on Moffitt (S. Ct. 1861). Moffitt held that in a reissue of a patent the patent owner must surrender the original patent in exchange for the corrected one. He cannot have a patent that changes scope and must choose between the original and the new one. If he takes the new one, he cannot assert the old one – to so would be inequitable. A surrendered patent is logically void ab initio.

      Fresenius was a shoddy 2-1 panel decision. It will have to be revisited and good law written at some point.

  2. 4

    Would someone please explain the ZOOM reference? Or do I have to write:

    Box 350
    Boston, Mass 02134

    ?

    1. 4.1

      ZOOM is the tech that I’m using for some of my online classes.

  3. 3

    It would seem that if at any point during the litigation, including post district court judgement, if the patents became invalid for any reason (IPR decision or otherwise), there would be a basic Article III standing problem.

    This circumstance would likely arise rarely in other forms of litigation, but IIRC, there was a case where a New York gun law was changed and the Supreme Court vacated and remanded for dismissal on mootness….

    Not seeing cert on this one…

  4. 2

    Judge Newman would side with the petitioner here, having expressed similar sentiments in other cases. Which suggests that SCOTUS will deny cert, because SCOTUS seems to think it needs to get it wrong every time.

  5. 1

    This seems to be a highly unlikely and abnormal situation. Namely a District Court suit decision, only on validity, that was for some reason NOT stayed for the IPR and was concluded [except for its appeal] BEFORE the IPR decision for the same party on the same patent, in spite of the one year IPR filing bar [for filing an IPR petition after more than one year from the service of the complaint and the usual length of an IPR]? District court patent trials just do not normally get decided that fast, especially with a pending IPR. Nor is any District court trial decision actually final if it is appealable and still being appealed.
    [Also, as a practical matter, I recall being told years ago that going to trial only on validity with an admission of infringement to the jury was practically inviting an adverse jury decision unless you had a prior product defense. That is not about second-guessing attorneys, it is just another abnormality observation.]

Leave a Reply

Your email address will not be published. Required fields are marked *

You can click here to Subscribe without commenting

Add a picture