Morton Intern., Inc. v. Cardinal Chemical Co., s. 91-1174

• Decision Date: 24 June 1992
• Docket Number: 91-1175,Nos. 91-1174,s. 91-1174
• Citation: 23 USPQ2d 1362,967 F.2d 1571
• Parties: MORTON INTERNATIONAL, INC., Plaintiff-Appellant, v. CARDINAL CHEMICAL COMPANY, a partnership, W.M. Quattlebaum, Jr., Dorothy Quattlebaum, and W.M. Quattlebaum, III, individuals, Cardinal Manufacturing Co., and Cardinal Stabilizers, Inc., Defendants/Cross-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1571

967 F.2d 1571

23 U.S.P.Q.2d 1362

MORTON INTERNATIONAL, INC., Plaintiff-Appellant, v. CARDINAL CHEMICAL COMPANY, a partnership, W.M. Quattlebaum,

Jr., Dorothy Quattlebaum, and W.M. Quattlebaum, III,

individuals, Cardinal Manufacturing Co., and Cardinal

Stabilizers, Inc., Defendants/Cross-Appellants.

Nos. 91-1174, 91-1175.

United States Court of Appeals, Federal Circuit.

June 24, 1992.

Appealed from United States District Court for the District of South Carolina; William M. Catoe, Jr., United States Magistrate Judge.

Gordon R. Coons, John E. Rosenquist and Jeffrey S. Ward, Leydig, Voit & Mayer, and Gerald K. White, Morton Intern., Inc., Chicago, Ill., on petition for rehearing with suggestion for rehearing in banc for the plaintiff-appellant.

Charles F. Schill and Elizabeth R.P. Bowen, Adduci, Mastriani, Meeks & Schill, Washington, D.C., and William O. Sweeny, III and Arthur L. Coleman, Nelson, Mullins, Riley & Scarborough, Columbia, on petition for rehearing with suggestion for rehearing in banc for defendants/cross-appellants.

I. Fred Koenigsberg, President, American Intellectual Property Law Ass'n, Arlington, Va., and Joseph R. Re and William C. Rooklidge, Knobbe, Martens, Olson & Bear, of Newport Beach, Cal., and H. Ross Workman, Workman, Nydegger & Jensen, Salt Lake City, Utah and Nancy J. Linck, Cushman, Carby & Cushman, Washington, D.C., on brief for amicus curiae, American Intellectual Property Law Ass'n in support of suggestions for rehearing in banc.

For majority opinion, see 959 F.2d 948.

NIES, Chief Judge, dissenting from the orders declining suggestions for rehearing in banc:

Cardinal Chemical Company sought and obtained a declaratory judgment that U.S. Patents 4,062,881 and 4,120,845, owned by Morton International, Inc., were invalid. On appeal, a majority of the panel reasoned that because it affirmed the district court's finding on Morton's infringement claim that Cardinal did not infringe the subject patents, it "need not address the question of validity." Citing Vieau v. Japax, Inc., 823 F.2d 1510, 3 USPQ2d 1094 (Fed.Cir.1987) as authority, the majority, sua sponte, vacated the judgment of invalidity entered on Cardinal's declaratory counterclaim. Vieau holds that the issue of validity of a patent, presented in a counterclaim The Vieau analysis stems from two Supreme Court cases, Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263 (1939), and Altvater v. Freeman, 319 U.S. 359, 63 S.Ct. 1115, 87 L.Ed. 1450 (1943), which addressed certain specific problems respecting validity and infringement rulings by district and circuit courts. Until revisited by the request for in banc in this case, I agreed with the interpretation of Altvater in our precedent, although I found the Altvater decision at best confusing. Upon closer scrutiny, I conclude that part of the Altvater analysis has been misinterpreted for reasons which will become evident, and that Altvater may mandate the opposite result in this case. At the very least, I am convinced that because Altvater does not support the holding of Vieau, we should overrule Vieau and address the problem anew.

for a declaratory judgment, becomes "moot," in the sense of no longer presenting a case or controversy, upon this court's finding that: (1) the patent in issue is not infringed and (2) the dispute raised by the counterclaim does not extend beyond the patentee's infringement claim. ¹

I MISINTERPRETATION OF SUPREME COURT PRECEDENT

A review of the Supreme Court precedent must begin with Electrical Fittings v. Thomas & Betts, supra. In Electrical Fittings, the district court, on a bill and answer, held the patent in suit "valid" ² but not infringed. The patentee did not appeal. However, the victorious defendant sought to appeal the judgment to the extent it ruled the patent "valid." The circuit court dismissed the appeal on the theory that a winning party could not take an appeal. The Supreme Court reversed, holding that the winner/defendant could appeal to obtain, not a ruling on the merits, but reformation of the decree. The Court appeared concerned that the defendant might otherwise be precluded by the judgment from attacking the patent in another suit.

The next decision, Altvater v. Freeman, supra, raised the question of whether a counterclaim for invalidity should be treated the same by an appellate court as a defense of invalidity had been treated in Electrical Fittings. The Court answered with a resounding "No." Per Altvater, a judgment entered by the district court on a declaratory claim for invalidity must be reviewed on the merits by the appellate court so long as a case or controversy exists at that time to support the assertion of the declaratory claim. In Altvater the Court found such controversy existed, despite the accused infringer's exculpation from liability on the patentee's claim, because the dispute between the parties "went beyond the single claim and the particular accused devices involved in [the patentee's] suit." Id., 319 U.S. at 364, 63 S.Ct. at 1118, 87 L.Ed. at 1454.

Vieau and other decisions of our court have understood Altvater to mean that all declaratory claims for invalidity must be evaluated for the presence of a case or controversy under a standard of whether the counterclaim extended beyond the dispute defined by the patentee's claim of infringement. Thus, we have concluded This understanding of the import of Altvater is, in my view, wrong. A significant fact which distinguishes Altvater, and which makes its case or controversy analysis no longer germane, is that the Altvater claimant for a declaration of invalidity was a licensee. By reason of licensee estoppel, the licensee could not attack the validity of the patent except under limited circumstances. See, e.g., Katzinger Co. v. Chicago Mfg. Co., 329 U.S. 394, 67 S.Ct. 416, 91 L.Ed. 374 (1947) (licensee estoppel not applied in light of price-fixing provision of license). Altvater is interlaced with principles of licensee estoppel. Twenty-five years had to pass before Lear v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), overruled the doctrine of license estoppel. Thus, the discussion of case or controversy must be read in the context of that age--a time when a licensee had to base its declaratory judgment claim on a controversy beyond the patentee's assertion of a right to royalties under the license.

                that, if a declaratory claim simply involves the same devices and patent claims involved in the patentee's complaint, upon a finding of no infringement, a counterclaim seeking a declaration of invalidity becomes "moot", in the Constitutional sense of no case or controversy.   See supra, at n. 1
                

To interpret Altvater broadly as requiring an accused infringer who is not a licensee to prove that its counterclaim for invalidity goes beyond the scope of the patentee's complaint in order to establish a case or controversy has never been warranted. Such extension of Altvater leads to the absurd result that an accused infringer can obtain a declaratory judgment for claims of the patent that were not asserted in the patentee's suit but not for those that were, whereas the patentee's suit in itself shows that the controversy rages as to the asserted patent claims. ³ In any event, with respect to even a licensee's need to show a dispute outside the scope of that asserted by the patentee, Altvater must be assigned to the graveyard with respect to its case or controversy analysis by reason of Lear v. Adkins and possibly Blonder-Tongue Labs, Inc. v. University of Ill. Found., 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). ⁴

All of the precedent of this court stems from Altvater in holding that a counterclaim for a declaration of invalidity is mooted, in the sense of no longer presenting a case or controversy, upon a finding of noninfringement on the patentee's specific charge of infringement, unless the declaratory claimant asserts matters beyond the patentee's complaint. Inasmuch as Altvater no longer has any viability respecting the need for a counterclaimant's separate and distinct case or controversy, the precedent of this court has been based on a false premise. The remaining and only controlling principle of Altvater is that an appellate court must decide a counterclaim for a declaration of invalidity where a case or controversy is present and the district court has entered judgment on the counterclaim. I believe that this court should address for itself this "case or controversy" requirement in the context of declaratory counterclaims, unrestricted by the outdated pronouncements of Altvater.

II

"MOOTNESS"

A.

Confusion of Principles

Altvater aside, any suit including a counterclaim for a declaration of patent invalidity requires the presence of a case or controversy

                at all stages of litigation.   If a claim becomes "moot" in this sense at the appellate level, it must be dismissed for lack of jurisdiction.  Vieau relied on this principle but, in my view, confused concepts of mootness.   The Vieau opinion concluded there was no case or controversy respecting validity and then said that the court exercised its "discretion" to dismiss the appeal of that issue.  823 F.2d at 1520-21, 3 USPQ2d at 1102-03.   The majority opinion in this case also indicates, by its statement that "we need not address the question of validity," Morton Int'l, Inc. v. Cardinal Chem.  Co., 959 F.2d 948, 22 USPQ2d 1231, 1235 (Fed.Cir.1992), that it made a discretionary decision to dismiss Morton's appeal of the judgment of invalidity.   Indeed, the precedent of this court now takes a "one-size-fits-all" approach to treatment of the issue of validity.   The court may always dismiss and vacate the judgment below as a matter of discretion once it concludes that the patent claims in issue are not infringed.   This result is imposed on the parties regardless of whether the judgment below held the patent valid or invalid,

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