Federal Circuit Feuds Over Finality

Federal Circuit Feuds Over Finality

SAN FRANCISCO — Nothing is final at the Federal Circuit when it comes to finality.

On Friday, the appellate court resumed a spirited internal debate over the finality of patent judgments, and whether they can be trumped by decisions from the U.S. Patent and Trademark Office.

A divided panel of the U.S. Court of Appeals for the Federal Circuit ruled that an injunction against infringing a patent, and an $18 million fine for violating it, can be wiped out years later by a PTO decision canceling the patent.

Judge Timothy Dyk wrote that the PTO’s decision on reexamination rendered an injunction against Minnesota-based Lawson Software void from the beginning. Because the $18 million fine hadn’t met final approval on appeal, it disappeared with the injunction, Dyk held. Chief Judge Sharon Prost concurred.

Dissenting Judge Kathleen O’Malley said Friday’s decision in ePlus v. Lawson Software will “further displace the critical role of district courts in patent infringement suits.”

A similar debate over finality fractured the entire court last year, when O’Malley and three other judges urged their colleagues to reconsider Fresenius v. Baxter International. “If we are bound by Fresenius II on these facts, I find Fresenius II even more troubling than I initially believed,” O’Malley wrote Friday.

Virginia-based IT service company ePlus Inc. sued Lawson Software Inc. in 2009 for infringing its patents on using electronic databases to search and select products from third-party vendors. A jury ruled that Lawson infringed on five claims, and U.S. District Judge Robert Payne of the Eastern District of Virginia enjoined Lawson from selling or supporting some of its products.

On appeal, the Federal Circuit held four of the five patent claims invalid, and remanded for Payne to determine “what changes are required to the terms of the injunction.” Payne left the injunction in place and held Lawson in contempt for continuing to violate it.

While Lawson appealed the $18 million fine, the PTO canceled ePlus’ sole remaining patent claim on reexamination.

All three Federal Circuit judges agreed Friday that the PTO decision means the injunction has no force going forward. The harder question was whether Lawson still has to pay the fine for its previous infringement.

Dyk pointed to U.S. Supreme Court and other circuit cases throwing out civil sanctions when the underlying injunction is reversed on appeal. “This case is not distinguishable on the ground that the injunction has been set aside as the result of the PTO proceeding rather than a court judgment,” Dyk wrote.

Just as in Fresenius, he wrote, the jury verdict and injunction weren’t final because the Federal Circuit had instructed Payne to reconsider the scope of relief.

O’Malley disagreed, saying the Federal Circuit had already signed off on validity and infringement, and its remand order had been extremely limited. The majority’s approach, she wrote, “ignores the role of Article III courts in our constitutional structure.”

Gibson, Dunn & Crutcher partner Mark Perry argued the appeal for Lawson. Goodwin Procter partner Michael Strapp argued for ePlus.

Contact the reporter at sgraham@alm.com.

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