Andrew J. Dhuey, solo, Berkeley, CA
Andrew J. Dhuey, solo, Berkeley, CA ()

For 15 years, a controversial opinion has allowed the U.S. Court of Appeals for the Federal Circuit to second-guess trial courts when the district courts make crucial decisions in patent infringement disputes—to the frustration of litigants. And the Federal Circuit will continue to retain that power, according a recent decision by the en banc court.

The Federal Circuit granted review last year to Lighting Ballast Control v. Universal Lighting Technologies, a patent infringement appeal from a Northern District of Texas trial court, in which litigants had mounted an attack on Cybor Corp. v. FAS Technologies.

Cybor is a seminal 1998 opinion from the Federal Circuit allowing the Federal Circuit to review claim construction rulings de novo [See " Cybor Warrior: Fort Worth Lawyer Targets Federal Circuit Precedent," Texas Lawyer, March 11, 2013, page 1.]

Cybor has been a source of frustration for many patent litigants who spend enormous amounts of time and legal fees litigating the key terms in patent infringement claims in trial courts, only to have the Federal Circuit overturn them.

As the Federal Circuit considered Lighting Ballast, it attracted the attention of 38 groups, including major technology companies, intellectual property attorneys, academics and the U.S. government, leading to 21 amici briefs filed in the case.

According to the Federal Circuit’s 6-4 majority decision in the Feb. 21 en banc opinion in Lighting Ballast, the hot question—whether the court should overrule Cybor—divided the amici into three categories.

The first view, favored by the appellants in Lighting Ballast, is that Cybor is an incorrect decision that the Federal Circuit should discard entirely. This group argued that the appellate court should give deference to findings of fact that a trial court makes when making claim construction decisions that determine the appropriate meanings of key words in a patent claim.

The second view, favored by some amici, including the U.S. government, advocated a hybrid of de novo review and deferential review of trial court rulings. While arguing that claim construction rulings are a “purely legal” matter, those in this camp argued that the correct appellate approach is for the Federal Circuit to review factual aspects of claim construction on a “clearly erroneous standard” while the final legal conclusion receives review as a matter of law.

The third view, held by other amici, is that Cybor is a reasonable and correct opinion because claim construction rulings are a “purely legal” decision that should receive de novo review on appeal. Proponents of this view argued that the 15-year history of Cybor has provided stability in the law and there isn’t a good reason for the Federal Circuit to back off of that precedent.

Stare Decisis

A majority of the court ultimately agreed with the third view—that Cybor should remain the law of the land.

“Over these fifteen years this court has applied Cybor to diverse subject matter, and the body of precedent has grown large. Deferential review does not promise either improved consistency or increased clarity,” Judge Pauline Newman wrote in the majority opinion. She was joined by judges Alan Lourie, Timothy Dyk, Sharon Prost, Kimberly Moore and Richard Taranto.

“We have been offered no argument or public policy, or changed circumstances, or unworkability or intolerability, or any justification for changing Cybor methodology and abandoning de novo review of claim construction,” Newman wrote.

Not so, wrote Judge Kathleen O’Malley. The majority’s conclusion will come as a surprise to a “majority of intellectual property lawyers and academics around the country,” according to O’Malley’s dissenting opinion in Lighting Ballast. And that’s because claims construction rulings at times require district courts to resolve questions of fact, according to her dissent.

The majority decision also puts the Federal Circuit at odds with U.S. Supreme Court precedent, according to the dissent.

“Criticism of and debate over Cybor have been wide-spread since it issued—not only among legal scholars and patent practitioners, but also among members of this court,” O’Malley wrote in dissent joined by Chief Judge Randall Rader and judges Jimmie Reyna and Evan Wallach. “Despite this fact, the majority suggests, for the first time in the ongoing debate over it, that Cybor is too firmly established in our case law to be rethought. In fact, it appears that some members of the today’s 6-4 majority believe the pull of stare decisis is so strong that it prevents them from acting on their long-term convictions that Cybor was wrongly decided. No reasoned application of stare decisis principles supports that conclusion.”

Judges Raymond Chen and Todd Hughes, the Federal Circuit’s newest jurists, did not participate in the decision.

Steven Routh, a partner in the Washington, D.C., office of Orrick, Herrington & Sutcliffe who represents Universal Lighting Technologies, said he is “delighted” with the decision because it ultimately concludes that the patent claim asserted against his client was invalid.

The decision will continue to bring uniformity to the way the appellate court handles claims construction appeals and affirms one of the major reasons the Federal Circuit exists—to make hard calls on patent infringement cases, Routh said.

“The court relied on the importance of having uniformity in the patent system. And Cybor virtually assures, in patent cases, that a patent will be given the same construction regardless of where it’s litigated or how many times it is litigated,” Routh said.

“We’re in a situation where the Federal Circuit has the final word, and the patent is evaluated, and the patent is given the same construction in all contexts,” he said. “That’s one of the reasons the Federal Circuit was created because Congress decided that patents were so important to our economy that it was no longer acceptable that there may be different constructions of patents between circuits or in litigation in the same circuit.”

The ruling “flabbergasted” Andrew Dhuey, a Berkeley, Calif., solo who represents Lighting Ballast on appeal and helped gather amici support for his client’s challenge to Cybor.

“It doesn’t respect the hard work of district judges, and it makes the proceedings at the trial court a mere dress rehearsal for the real show, which is at the Federal Circuit,” Dhuey said of the majority decision in Lightning Ballast.

“I honestly have no idea what happened here,” said Dhuey, who previously believed there enough votes to overturn Cybor.

“Judge Newman was in the dissent in Cybor, and Judge Moore has criticized it several times along the way in opinions,” Dhuey said. “Who would have thought that judges Newman and Moore would do a complete 180 and say, ‘We’re keeping Cybor.‘ “

While Dhuey said his client has not yet decided whether to appeal the Federal Circuit’s decision, “A lot of people are expecting this to go to the Supreme Court, and I don’t think they’re unreasonable in thinking that.”

Bottom Line for EDTX?

The ruling in Lighting Ballast will mean business as usual in the Eastern District of Texas—one of the busiest patent litigation jurisdictions in the nation, said U.S. District Judge Rodney Gilstrap, who presides over the Marshall Division.

“It’s an important opinion from the Federal Circuit, and most of us active in this area have known it has been coming,” Gilstrap said.

“In years past there were a fairly large number of reversals from the Federal Circuit on claim construction. And, for whatever reason, those reversals have declined,” he said. “The current opinion from the Federal Circuit looks like it keeps the current system in place. So, it looks like we’ll keep going forward the way we have.”

Andy Tindel, a Tyler patent attorney who practices in the Eastern District, said Lighting Ballast is a great decision for appellate attorneys but not so great for litigators.

“I know our judges in the Eastern District put in a tremendous amount of effort on their Markman [claim construction] orders. They are going to continue to keep doing that,” Tindel said. “But it’s deflating to know that’s given very little deference at the Federal Circuit.”