Automated Merch. Sys., Inc. v. Lee

• Decision Date: 10 April 2015
• Docket Number: No. 2014–1728.,2014–1728.
• Citation: 782 F.3d 1376,114 U.S.P.Q.2d 1457
• Parties: AUTOMATED MERCHANDISING SYSTEMS, INC., a Delaware Corporation, Plaintiff–Appellant v. Michelle K. LEE, Director, U.S. Patent and Trademark Office, in her official capacity as the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

782 F.3d 1376

114 U.S.P.Q.2d 1457

AUTOMATED MERCHANDISING SYSTEMS, INC., a Delaware Corporation, Plaintiff–Appellant

v.Michelle K. LEE, Director, U.S. Patent and Trademark Office, in her official capacity as the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Defendant–Appellee.

No. 2014–1728.

United States Court of Appeals, Federal Circuit.

April 10, 2015.

James Daniel Berquist, Davidson Berquist Jackson & Gowdey, LLP, Arlington, VA, argued for plaintiff-appellant. Also represented by Donald Lee Jackson.

Megan Barbero, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Mark R. Freeman, Joyce R. Branda ; Nathan K. Kelley, William LaMarca, Lore A. Unt, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA; Dana J. Boente, David Moskowitz, Office of the United States Attorney for the Eastern District of Virginia, Alexandria, VA.

Before PROST, Chief Judge, TARANTO, Circuit Judge, and FOGEL, District Judge.^*

Opinion

TARANTO, Circuit Judge.

Automated Merchandising Systems, Inc. (AMS) petitioned the United States Patent and Trademark Office to terminate four pending inter partes reexaminations of four AMS patents that had been the subject of a patent-infringement suit between AMS and Crane Co., the requester of the reexaminations. After AMS and Crane entered into a consent judgment, which dismissed the infringement suit and stated that the parties stipulated to the validity of the patents, AMS argued to the PTO that the reexaminations must stop because, under 35 U.S.C. § 317(b) (2006), the consent judgment was a “final decision ... entered against a party in a civil action ... that the party has not sustained its burden of proving the invalidity of any patent claim in suit.” The PTO denied AMS's petition to terminate the reexaminations.

When AMS challenged that decision in district court under the Administrative Procedure Act (APA), 5 U.S.C. §§ 701 –706, the court held that § 317(b) did not require termination of the reexaminations. Automated Merch. Sys., Inc. v. Rea, 45 F.Supp.3d 526, 530–31 (E.D.Va.2014) (AMS ). The court concluded that the consent judgment, though final, was not a decision that Crane failed to prove invalidity of the patents, as the judgment stated, regarding invalidity, only that the parties stipulated to validity. Id. We now affirm, though not on the district court's ground of § 317(b)'s inapplicability. We conclude that AMS's challenge to the PTO's refusal to terminate pending reexaminations cannot proceed because the refusal is not a “final agency action” under the APA, 5 U.S.C. § 704.

Background

AMS sued Crane in the Northern District of West Virginia for infringement of four patents, U.S. Patent Nos. 6,384,402, 6,794,634, 7,191,915, and 7,343,220. In early 2011, years into the litigation, Crane requested an inter partes reexamination of each patent under 35 U.S.C. §§ 311 –318 (2006).¹ Finding that Crane had raised substantial new questions of patentability as to all four patents, the PTO initiated four inter partes reexaminations. Id. §§ 312(a), 313.

While the reexaminations were underway, AMS and Crane settled their suit in the Northern District of West Virginia. Pursuant to the settlement, the court issued a consent judgment stating, in relevant part, that “[t]he parties stipulate that [the four patents] are valid,” that “[a]ll claims ... are dismissed with prejudice,” and that “[t]his judgment is final.” J.A. 62. AMS then asked the PTO, several times, to terminate the reexaminations under § 317(b), which read, in relevant part, as follows:

Once a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28, that the party has not sustained its burden of proving the invalidity of any patent claim in suit ..., then neither that party nor its privies may thereafter request an inter partes reexamination of any such patent claim on the basis of issues which that party or its privies raised or could have raised in such civil action ..., and an inter partes reexamination requested by that party or its privies on the basis of such issues may not thereafter be maintained by the Office....

The PTO refused to terminate the reexaminations. For example, with regard to the '634 patent, it found no “decision” by the West Virginia court “that [Crane] ha[d] not sustained its burden of proving the invalidity of any patent claim.” J.A. 75. The PTO also stated that its refusal to terminate the proceedings was “a final agency action.” J.A. 81, 97.

AMS filed suit in the Eastern District of Virginia, invoking the court's jurisdiction under 28 U.S.C. §§ 1331, 1338, 1346, and also relying for “jurisdiction” on the APA, 5 U.S.C. §§ 701 –706, the Declaratory Judgment Act, 28 U.S.C. § 2201, and the mandamus authority of 28 U.S.C. § 1361. AMS argued that, in light of the consent judgment, § 317(b) required the PTO to terminate the reexaminations. The PTO did not dispute the district court's authority to reach the merits of that challenge.

The district court rejected AMS's position on the merits. It held that § 317(b)'s prohibition on maintaining a reexamination does not apply unless there has been “an actual adjudication on the merits.” AMS, 45 F.Supp.3d at 533. In AMS's case, the district court determined, “[t]he Consent Judgment's ... language ... cannot be reasonably understood as anything more than a willingness on the part of the court to dismiss the case based on the parties' settlement without its adjudication of the merits.” Id. at 533. The district court thus denied AMS's summary-judgment motion to terminate the reexaminations and granted summary judgment in favor of the PTO. Id. at 534–35.

AMS has appealed to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

Discussion

We review a grant of summary judgment de novo, applying the same standard as the district court. Burandt v. Dudas, 528 F.3d 1329, 1332 (Fed.Cir.2008) (applying Fourth Circuit law). If review under the APA is authorized, we must “hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2).

A

Although the PTO did not raise the issue before the district court, it argues now that its refusal to terminate the reexaminations was not a “final agency action” subject to judicial review under 5 U.S.C. § 704. Just as AMS treated the APA as a matter of “jurisdiction” in its complaint, the PTO here characterizes the APA's final-agency-action requirement as “jurisdictional.” The sense of that term the PTO invokes is one that entitles a party to have an issue decided on appeal even when, like the PTO here regarding the § 704 issue, it failed to raise the issue in the district court. Appellee's Brief at 14–22; see Kontrick v. Ryan, 540 U.S. 443, 455, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004).

We need not decide whether the APA's final-agency-action requirement is jurisdictional in that sense. We assume, arguendo but with some basis, that it is not. See Air Courier Conference of Am. v. Am. Postal Workers Union, 498 U.S. 517, 523 n. 3, 111 S.Ct. 913, 112 L.Ed.2d 1125 (1991) (“The judicial review provisions of the APA are not jurisdictional, Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977), so a defense based on exemption from the APA can be waived by the Government.”). Nevertheless, we may consider whether the APA requirement is met in this case. Under certain circumstances, we may consider issues not previously raised, and we find such circumstances present here.

Considerations relevant to overlooking a failure to preserve an issue include whether

(i) the issue involves a pure question of law and refusal to consider it would result in a miscarriage of justice; (ii) the proper resolution is beyond any doubt; (iii) the appellant had no opportunity to raise the objection at the district court level; (iv) the issue presents significant questions of general impact or of great public concern; or (v) the interest of substantial justice is at stake.

L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527, 1531 (Fed.Cir.1995) (internal quotation marks and brackets omitted); see Singleton v. Wulff, 428 U.S. 106, 121, 96 S.Ct. 2868, 49 L.Ed.2d 826 (1976) (“We announce no general rule. Certainly there are circumstances in which a federal appellate court is justified in resolving an issue not passed on below, as where the proper resolution is beyond any doubt....”).

Several criteria for discretionary disregard of forfeiture combine to justify consideration of the APA issue here. Proper resolution of the issue—which is a matter of law and which does not involve the merits of the § 317(b) challenge to the PTO's decision—is beyond doubt, as explained infra in Part B. Moreover, whether a refusal to terminate ongoing PTO proceedings is immediately reviewable presents a significant question of continuing public concern, affecting a range of PTO proceedings in the regular operation of the agency. See Cemex, S.A. v. United States, 133 F.3d 897, 902 (Fed.Cir.1998)(addressing pure issue of statutory construction not raised below—application of the Tariff Act—because the issue involved “ ‘significant questions of general impact’ ”). And the issue has been fully briefed by the parties. See Interactive Gift Exp., Inc. v. Compuserve Inc., 256 F.3d 1323, 1345 (Fed.Cir.2001) (“ ‘A circuit court will disregard the rule [of waiver] in compelling circumstances[,] ... [p]articularly ... if the issue has been fully briefed, if the issue is a matter of law or the record is complete, if there will be no prejudice to any party, and if no purpose is served by remand....’ ”) (quoting 19 James W. Moore et al., Moore's Federal Practice § 205.05, at 205–58 (3d ed.1997)).

For those reasons, we will consider whether the...