Slip Track Systems, Inc. v. Metal Lite, Inc.

• Decision Date: 14 September 1998
• Docket Number: No. 98-1349,98-1349
• Citation: 159 F.3d 1337,48 USPQ2d 1055
• Parties: SLIP TRACK SYSTEMS, INC. and Todd A. Brady, Plaintiffs-Appellants, v. METAL LITE, INC., Thomas R. Herren and Gene N. Carpenter, Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1337

159 F.3d 1337

48 U.S.P.Q.2d 1055

SLIP TRACK SYSTEMS, INC. and Todd A. Brady, Plaintiffs-Appellants, v. METAL LITE, INC., Thomas R. Herren and Gene N. Carpenter,

Defendants-Appellees.

No. 98-1349.

United States Court of Appeals, Federal Circuit.

Sept. 14, 1998.

Rehearing Denied Oct. 8, 1998.

R. Joseph Trojan, Trojan Law Offices, Beverly Hills, CA, argued for plaintiffs-appellants.

Charles H. Thomas, Cislo & Thomas LLP, Santa Monica, CA, argued for defendants-appellees. With him on the brief were Donald M. Cislo, Daniel M. Cislo, and Andrew S. Jordan.

Before NEWMAN, Circuit Judge, SKELTON, Senior Circuit Judge, and BRYSON, Circuit Judge.

BRYSON, Circuit Judge.

Appellants Slip Track Systems, Inc., and Todd A. Brady (collectively "Slip Track") brought an action against appellees Metal Lite, Inc., Thomas R. Herren, and Gene N. Carpenter (collectively "Metal Lite") in the United States District Court for the Central District of California. The district court entered an order staying the action pending the outcome of a reexamination of Slip Track's patent in the United States Patent and Trademark Office. Slip Track appeals the entry of the stay as well as the district court's refusal to enter a preliminary injunction in its favor. Metal Lite contends that we have no jurisdiction over this appeal and that, in any event, the district court was correct to enter a stay in the action before it. We conclude that we have jurisdiction over the appeal and that the stay must be vacated.

I

Slip Track and Metal Lite are competitors in the construction industry. Each holds a patent on building materials that provide enhanced stability under thermal or seismic stresses. Slip Track is the assignee of United States Patent No. 5,127,760 (the "Brady patent"), which issued on July 7, 1992. Appellant Brady, Slip Track's principal, is the inventor of the '760 patent. Metal Lite owns United States Patent No. 5,127,203 (the "Paquette patent"), which also issued on July 7, 1992. Metal Lite acquired its patent in September 1994 from the inventor, Robert Paquette. The application that matured into the Paquette patent was filed several months earlier than the Brady patent application. Although the claims of the two patents do not use identical language, the two patents claim identical subject matter. In other words, the PTO issued two patents for the same invention on the same day.

In August 1997, Metal Lite requested that the PTO conduct a reexamination of the Brady patent in light of the Paquette patent. The PTO determined that the Paquette patent raised a substantial new question concerning the patentability of the Brady patent and began a reexamination. See 35 U.S.C. §§ 303-305.

The first office action in the reexamination resulted in a rejection of all the claims of the Brady patent as anticipated by the Paquette patent. See 35 U.S.C. § 102(e). Slip Track's efforts to introduce evidence showing that it had invented the claimed subject matter before Paquette were dismissed as outside the scope of the reexamination proceeding. See Manual of Patent Examining Procedure (MPEP) § 706.02(b)(4) (6th ed.1997) (affidavit in reexamination may not be used to swear behind a United States patent claiming the same invention). The examiner did note, however, that Slip Track could file a reissue application and seek to provoke an interference with the Paquette patent.

Rather than file a reissue application, Slip Track filed an interfering patents suit in the district court against Metal Lite. See 35 U.S.C. § 291. In addition to asserting priority over the Paquette patent, Slip Track alleged in its complaint that Metal Lite had infringed the Brady patent and that certain letters sent by Metal Lite to Slip Track's customers constituted unfair competition under California law.

Shortly after filing its complaint, Slip Track filed an "Ex Parte Application for TRO and Motion for Preliminary Injunction," seeking to restrain Metal Lite from further advising Slip Track's customers that Slip Track's products infringe the Paquette patent or that the Brady patent is invalid or unenforceable. Slip Track submitted several declarations attesting to the dates of Brady's conception and reduction to practice of the invention. The district court denied Slip Track's motion without an opinion.

Slip Track subsequently filed a request for "reconsideration" of what it characterized as a denial of its motion for a preliminary injunction. Metal Lite, meanwhile, filed a motion to stay the district court proceedings pending the outcome of the PTO reexamination. The district court denied Slip Track's motion for reconsideration and granted Metal Lite's motion to stay the proceedings. With respect to Slip Track's motion, the district court noted that reconsideration was inappropriate "because a motion for a preliminary injunction was never ruled on such that anything is before the Court for reconsideration."

II

The first issue presented by this appeal is whether the district court's order staying the action is appealable. Ordinarily, only a final decision of a district court may be appealed, i.e., one that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945); see 28 U.S.C. §§ 1291, 1295(a). The final judgment rule is subject to exceptions, however, that allow litigants to challenge "interlocutory orders of serious, perhaps irreparable, consequence." Baltimore Contractors v. Bodinger, 348 U.S. 176, 181, 75 S.Ct. 249, 99 L.Ed. 233 (1955). One of the exceptions is for orders "granting, continuing, modifying, refusing or dissolving injunctions." 28 U.S.C. § 1292(a)(1); see id. § 1292(c)(1).

Slip Track contends that the district court's order staying the action is appealable under section 1292(a)(1) because it was coupled with a denial of Slip Track's request for a preliminary injunction. Slip Track argues that the Ninth Circuit has previously held that when a stay order accompanies a denial of injunctive relief, the entire order is subject to appellate review. See Privitera v. California Bd. of Med. Quality Assurance, 926 F.2d 890, 892-93 (9th Cir.1991). In this appeal, decisions of the Ninth Circuit on jurisdictional questions provide useful guidance, see Kahn v. General Motors Corp., 889 F.2d 1078, 1080 n. 3, 12 U.S.P.Q.2d 1997, 1999 n. 3 (Fed.Cir.1989), although we are bound only by our own precedent on the issue. See Woodard v. Sage Prods., Inc., 818 F.2d 841, 844, 2 U.S.P.Q.2d 1649, 1651 (Fed.Cir.1987) (in banc).

The problem with Slip Track's argument is that the district court expressly found that a request for a preliminary injunction had never been properly placed before the court and that Metal Lite had not received proper notice of the request. The local rules of the Central District of California require that a preliminary injunction be noticed through an order to show cause, and that the opposing party be given at least 21 days in which to respond. Slip Track's ex parte filing included a proposed order granting the temporary restraining order and setting a hearing on the preliminary injunction to be held at a date to be determined by the court. The court denied Slip Track's request for a temporary restraining order and therefore did not enter the proposed order. After that denial, Slip Track did not make any additional efforts to seek a show cause hearing, but instead filed a motion for "reconsideration of denial of preliminary injunction." As a result, no show cause hearing was ever held and the district court made no factual findings. Under those circumstances, the district court was correct in refusing to "reconsider" a motion that was never properly raised or ruled upon. For the same reason, we decline to consider the merits of Slip Track's lengthy argument urging us to enter a preliminary injunction in its favor.

Although not appealable as a denial of injunctive relief, the stay order is nonetheless subject to appellate review because it effectively puts Slip Track out of federal court. As Metal Lite points out, an order staying a case is generally not subject to appeal. See 15A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3914.13, at 733 (2d ed.1992). That general rule does not prevent review of a stay, however, when it is clear that no further action is contemplated by the district court following the stay. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 8-10, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); Gould v. Control Laser Corp., 705 F.2d 1340, 1341, 217 USPQ 985, 985-86 (Fed.Cir.1983). Thus, federal courts have often found jurisdiction to review stays in favor of state court suits when the state court judgment would have a fully preclusive effect on the federal action or moot the federal action entirely. See, e.g., Cone, 460 U.S. at 10, 103 S.Ct. 927; Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213, 1218-21 (3d Cir.1989). Stays in favor of administrative proceedings are similarly reviewed on an "effectively out of court" standard. See Gould, 705 F.2d at 1341, 217 U.S.P.Q. at 985-86; Hines v. D'Artois, 531 F.2d 726, 730-32 (5th Cir.1976).

The stay entered in this case is an appealable order because it effectively disposes of the district court action. As noted earlier, Slip Track cannot litigate priority issues in the PTO reexamination, nor can it swear behind the anticipatory Paquette reference. Under those circumstances, the reexamination, if carried to completion, is likely to result in the cancellation of all of the claims of the Brady patent. That in turn will require a dismissal of the interfering patents suit, since a necessary condition for such an action is the existence of two valid and interfering patents. As a result, the district court will have no occasion to consider the issue...