Noninfringement Winner Must File Contingent Cross-Appeal of Patent Validity Judgment

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By Tony Dutra  


“Rules are rules,” and an alleged patent infringer's failure to follow them may end up reversing its victory at the district court according to a 2-1 decision on April 19 by the U.S. Court of Appeals for the Federal Circuit (Lazare Kaplan International Inc. v. Photoscribe Technologies Inc., Fed. Cir., No. 2012-1247, 4/19/13).

The first result at the lower court had been a finding of no invalidity but also noninfringement. On appeal of the noninfringement judgment, the Federal Circuit changed construction of a key patent claim term, but the defendant did not cross-appeal the validity judgment.

Now on appeal for the second time, the majority reversed a decision by the lower court to reconsider validity on remand, faulting the defendant for failing to file a contingent cross-appeal.

The dissent argued that the result--the district court must now construe the term one way for infringement purposes and a different way for validity purposes--violates the best established principle of patent law, which should take precedence.

Round Trip to Federal Circuit

Lazare Kaplan International Inc. holds a patent (U.S. Patent No. 6,476,351) on methods and systems for using lasers to make micro-inscriptions on gemstones.

Lazare filed a patent infringement lawsuit in 2006 against Photoscribe Technologies Inc. and the Gemological Institute of America.

Judge Thomas P. Griesa of the U.S. District Court for the Southern District of New York construed the term “controlling the directing” of laser energy favorable to Lazare for purposes of defeating anticipation and obviousness challenges.

However, the construction also required an automatic feedback limitation lacking in the accused Photoscribe machines. The district court granted summary judgment of no literal infringement and a jury found that Photoscribe did not infringe under the doctrine of equivalents.

The court issued a final judgment of no invalidity and noninfringement. Lazare appealed the noninfringement judgment. Photoscribe did not cross-appeal the validity judgment.

In 2010, the Federal Circuit broadened the construction of “controlling the directing” and consequently vacated the noninfringement decision. 628 F.3d 1359, 97 U.S.P.Q.2d 1437 (Fed. Cir. 2010) (01 PTD, 1/3/11). Judge Alan D. Lourie joined the court's opinion, which remanded the case for further consideration of infringement issues.

On remand, the district court agreed with Photoscribe that the validity issue was reopened by the change in claim construction. The court relieved Photoscribe from the prior judgment of no invalidity, granting the defendant's motion under Fed. R. Civ. P. 60(b), and further granted Photoscribe's motion for summary judgment of invalidity. Lazare appealed again.

Cross-Appeal Was Required

Lourie, who heard the instant matter with two new panelists, wrote the court's opinion this time.

“Here, the issue is whether, on remand, a district court may reopen a prior final judgment as to patent validity, not appealed by either party, based on a claim construction modified by this court,” the court said.

The court first described the “cross-appeal rule,” requiring a filing by a successful party below if “the party seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights,” citing El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479 (1999). It thus found error in the district court's reliance on the fact that issues of noninfringement and validity “are closely interrelated.” The court said:  

Whether or not the concepts of invalidity and infringement are “closely interrelated” is irrelevant; the relevant issue is whether a ruling reversing the validity holding would expand Photoscribe's rights or lessen Lazare Kaplan's rights. It certainly would, as a holding of invalidity would extend beyond the determination that Photoscribe's accused machines do not infringe the asserted claims of the '351 patent.  




Rule 60(b) Cannot Save Photoscribe

The court rejected the idea that Rule 60(b) could save Photoscribe from its failure to cross-appeal, saying that both have “the common repose” as an underlying rationale.

The court quoted the rule as providing that a “court may relieve a party … from a final judgment, order, or proceeding for the following reasons: … (5) the judgment … is based on an earlier judgment that has been reversed or vacated … ; or (6) any other reason that justifies relief,” the court said.

The court's opinion analyzed Photoscribe's argument only under Rule 60(b)(6), which, it said, is applied only in an “extraordinary circumstance.”

The court acknowledged the circumstance here--a result against the requirement of the same claim construction for validity and infringement analyses--but said, “That axiom, however, does not trump the Federal Rules or the cross-appeal rule.”

“Moreover, reversal of a claim construction is hardly an 'extraordinary circumstance,' ” the court said, an indisputable statement given the court's de novo review of district courts' claim construction decisions.

The court distinguished cases where it affirmed use of Rule 60(b) because they involved “the mandate rule--a concept relating to, but distinct from, the cross-appeal rule.” The mandate rule “governs only that which was actually decided,” the court said, citing Exxon Chemical Patents Inc. v. Lubrizol Corp., 137 F.3d 1475, 1477-79, 45 U.S.P.Q.2d 1865 (Fed. Cir. 1998). In contrast here, the court said, “Photoscribe failed to file a cross-appeal from the judgment adverse to it.”

The majority acknowledged the predicament of the district court in its decision to reconsider validity, including the district court's contention that it “makes no sense” not to do so.

“Nonetheless, rules are rules, and the cross-appeal rule is firmly established in our law,” the court concluded.

It thus reversed the ruling granting relief under Rule 60(b), vacated the invalidity finding, and remanded for reconsideration of infringement under the original judgment on validity.

The court, however, rejected Lazare's request that the case be reassigned to another judge on appeal. Lazare's arguments involved issues that were now resolved and not to be addressed on remand, the court said, and it concluded that “preservation of judicial resources” favored allowing Griesa to continue to preside in the proceeding.

Judge Jimmie V. Reyna joined the opinion.

Dissent: Claim Construction Must Be Reconciled

“No principle of patent law is better established than that 'claims must be interpreted and given the same meaning for purposes of both validity and infringement analyses,' ”Judge Timothy B. Dyk said in dissent, quoting from Inc. v. Inc., 239 F.3d 1343, 1351, 57 U.S.P.Q.2d 1747 (Fed. Cir. 2001).

Dyk saw Photoscribe's Rule 60(b) motion as merely an attempt to reconcile the inconsistent interpretations. He relied on Rule 60(b)(5), which, in additional language the majority did not quote, allows relief from an earlier judgment if “applying it prospectively is no longer equitable.”

“That latter portion of the rule also appears to allow relief from a judgment where circumstances have changed such that continued application of the judgment would be inequitable,” Dyk said.

He also rejected the majority's view that the cross-appeal rule was as strict as the majority determined. He noted that Photoscribe's cross-appeal would have been contingent, while each of the precedents the majority relied on “involved situations in which the Rule 60(b) movant had lost entirely and failed to appeal.”

In this case, Dyk said, “It was only after this court altered the district court's original judgment that the accused infringer had any objection.” Thus, Photoscribe in the first appeal sought only to “preserve” the rights it established under the district court's judgment, not to modify them, he concluded. “In such circumstances, there is no requirement that a party file a conditional cross-appeal.”

Deanne E. Maynard of Morrison & Foerster, Washington, D.C., represented Lazare. John Allcock of DLA Piper, San Diego, represented Photoscribe.

By Tony Dutra  

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