508 U.S. 83 (1993), 92-114, Cardinal Chemical Company v. Morton International, Inc.

Docket Nº:No. 92-114
Citation:508 U.S. 83, 113 S.Ct. 1967, 124 L.Ed.2d 1, 61 U.S.L.W. 4461
Party Name:Cardinal Chemical Company v. Morton International, Inc.
Case Date:May 17, 1993
Court:United States Supreme Court

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508 U.S. 83 (1993)

113 S.Ct. 1967, 124 L.Ed.2d 1, 61 U.S.L.W. 4461

Cardinal Chemical Company

v.

Morton International, Inc.

No. 92-114

United States Supreme Court

May 17, 1993

Argued March 3, 1993

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

Syllabus

Since its 1987 decisions in Vieau v. Japax, Inc., 823 F.2d 1510, and Fonar Corp. v. Johnson & Johnson, 821 F.2d 627, the Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over appeals from all Federal District Courts in patent litigation, [113 S.Ct. 1968] has followed the practice of routinely vacating declaratory judgments regarding patent validity following a determination of noninfringement of the patent. Adhering to that practice in this and a similar case brought by respondent, the Federal Circuit affirmed the District Courts' findings that the particular defendants had not infringed respondent's two patents on chemical compounds used in polyvinyl chloride, and then vacated the entry of judgments, on the defendants' counterclaims, declaring the patents invalid. A third such case is still pending. Petitioners, the alleged infringers in this case, sought certiorari on the ground that the Federal Circuit has erred in applying a per se rule to what should be a discretionary matter. Respondent did not oppose the grant of certiorari, but instead pointed out that it also has an interest in having the validity issue adjudicated, in that its patents have been effectively stripped of any power in the marketplace by the Federal Circuit's refusals of substantive review on the two invalidity findings.

Held: The Federal Circuit's affirmance of a finding that a patent has not been infringed is not per se a sufficient reason for vacating a declaratory judgment holding the patent invalid. Pp. 89-103.

(a) The Vieau and Fonar opinions indicate that the practice of vacating such declaratory judgments is limited to cases in which the Federal Circuit is convinced that the finding of noninfringement has entirely resolved the controversy between the litigants by resolving the initial complaint brought by the patentee. The Federal Circuit has concluded that in such cases the declaratory judgment is "moot" in a jurisdictional sense, a conclusion that it considers dictated by this Court's earlier opinions in Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, and Altvater v. Freeman, 319 U.S. 359. Pp. 89-92.

(b) While both Electrical Fittings and Altvater are consistent with the Federal Circuit practice at issue, neither case required it. Electrical Fittings did not involve a declaratory judgment, and Altvater does

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not necessarily answer the question whether, in the absence of an ongoing infringement dispute between the parties, an invalidity adjudication would be moot. Pp. 93-95.

(c) This case did not become moot when the Federal Circuit affirmed the District Court's noninfringement finding. The practice at issue concerns the Federal Circuit's jurisdiction. Where, as here, the District Court has jurisdiction (established independently from its jurisdiction over the patentee's infringement charge) to consider an invalidity counterclaim, so does the Federal Circuit, which is not a court of last resort and is entitled to presume, absent further information, that federal jurisdiction continues. If, before the Federal Circuit had decided this case, either party had advised it of a material change in circumstances that entirely terminated their controversy, it would have been proper either to dismiss the appeal or to vacate the District Court's entire judgment. In fact, however, there was no such change. The Federal Circuit's decision to rely on one of two possible alternative grounds (noninfringement, rather than invalidity) did not strip it of power to decide the second question, particularly when its decree was subject to review by this Court. Even if it may be good practice to decide no more than is necessary to determine an appeal, it is clear that the Federal Circuit has jurisdiction to review the declaratory judgment of invalidity. Accordingly, the practice at issue is not supported by Article III's "case or controversy" requirement. Pp. 95-98.

(d) The Federal Circuit's practice cannot be supported on other grounds. Although the court's interest in the efficient management of its docket might support a rule requiring that the infringement issue always be addressed before validity, there are even more important countervailing concerns, including the successful litigant's interest [113 S.Ct. 1969] in preserving the value of its hard-won declaratory judgment; the public's strong interests in the finality of judgments in patent litigation and in resolving validity questions; and the patentee's interests in having the validity issue correctly adjudicated and in avoiding the loss of its patent's practical value that may be a consequence of routine vacatur. The practice in question denies the patentee appellate review, prolongs the life of invalid patents, encourages endless litigation (or at least uncertainty) over the validity of outstanding patents, and thereby vitiates the rule announced in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313. Pp. 99-102.

(e) It would be an abuse of discretion not to decide the validity issue in this case. Although factors in an unusual case might justify the Federal Circuit's refusal to reach the merits of a validity determination, and that determination might therefore be appropriately vacated, neither the finding of noninfringement alone, nor anything else in the record,

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justifies such a result here. The patents at issue have been the subject of three separate lawsuits, and both parties have asked the Federal Circuit to resolve their ongoing validity dispute. Pp. 102-103.

959 F.2d 948 (CA Fed.1992), vacated and remanded.

STEVENS, J., delivered the opinion for a unanimous Court with respect to Parts I, II, and III, and the opinion of the Court with respect to Part IV, in which REHNQUIST, C.J., and WHITE, BLACKMUN, O'CONNOR, KENNEDY, and THOMAS, JJ., joined. SCALIA, J., filed an opinion concurring in part and concurring in the judgment, in which SOUTER, J., joined, post, p. 103.

STEVENS, J., lead opinion

JUSTICE STEVENS delivered the opinion of the Court.

The question presented is whether the affirmance by the Court of Appeals for the Federal Circuit of a finding that a patent has not been infringed is a sufficient reason for vacating a declaratory judgment holding the patent invalid.

Respondent, Morton International, Inc. (Morton), is the owner of two patents on chemical compounds used in polyvinyl chloride (PVC).[1] In 1983, Morton filed this action in the

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United States District Court for the District of South Carolina alleging that petitioners, Cardinal Chemical Company and its affiliates (Cardinal), had infringed those patents. Cardinal filed an answer denying infringement and a counterclaim for a declaratory judgment that the patents are invalid. While this case was pending in the District Court, Morton filed two other actions against other alleged infringers of the same patents. One was filed in the Eastern District of Louisiana, the other in the District of Delaware. The defendants in both cases, like Cardinal, filed counterclaims for declaratory judgments that the patents were invalid. Of the three, the Louisiana case was tried first and, in 1988, resulted in a judgment for the defendant finding no infringement and declaring the patents invalid.[2] On appeal, the Federal Circuit affirmed the finding of no [113 S.Ct. 1970] infringement but vacated the judgment of invalidity.[3] The Delaware case is still pending.

In 1990, this case proceeded to a day bench trial. The South Carolina District Court concluded, as had the Louisiana District Court, that the patentee had failed to prove infringement and that the defendant-counterclaimant had proved by clear and convincing evidence that both patents were invalid.[4] Accordingly, the Court mandated two separate

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judgments: one dismissing the action for infringement with prejudice, and another on the counterclaim, declaring the patents invalid.[5]

Again, Morton appealed to the Federal Circuit, challenging both the dismissal of its infringement claim and the judgment of invalidity. Cardinal filed a cross-appeal contending that it was entitled to an award of fees pursuant to 35 U.S.C. § 285 and that Morton should be sanctioned for prosecuting a frivolous appeal. The defendant in the third, Delaware, case filed a brief amicus curiae urging the Court to affirm the judgment of invalidity.[6] Again, however, after affirming the dismissal of the infringement claim, the Federal Circuit vacated the declaratory judgment. It explained:

Since we have affirmed the district court's holding that the patents at issue have not been infringed, we need not address the question of validity. Vieau v. Japax, Inc., 823 F.2d 1510, 1517, 3 USPQ2d 1094, 1100 (Fed.Cir.1987). Accordingly, we vacate the holding of invalidity.

959 F.2d 948, 952 (CA Fed.1992). The court also ruled that Morton was not liable for fees because it had advanced an argument that "apparently it was not in a position to raise earlier." Ibid. Judge Lourie concurred in the result, but believed the parties were entitled

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to an affirmance of the invalidity holding "so that they can plan their future affairs accordingly." Id. at 954

Both parties then filed petitions for rehearing, arguing that the court should have decided the validity issue instead of vacating the District Court's declaratory judgment;[7] they also filed suggestions for rehearing en banc, urging the Court of Appeals to reconsider its post-1987 practice of routinely vacating a declaratory judgment of invalidity whenever noninfringement is found. Over the dissent of three of...

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