Automated Merch. Sys., Inc. v. Rea
| Decision Date | 06 August 2014 |
| Docket Number | Case No. 1:13–cv–1289 (AJT/JFA). |
| Citation | 45 F.Supp.3d 526 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | AUTOMATED MERCHANDISING SYSTEMS, INC., Plaintiff, v. Teresa Stanek REA, Acting Under Secretary of Commerce for Intellectual Property and Acting Director of the United States Patent and Trademark Office, et al., Defendants. |
OPINION TEXT STARTS HERE
Patentee's motion denied and PTO's motion granted. James Daniel Berquist, Donald Lee Jackson, Davidson Berquist Jackson & Gowdey LLP, Arlington, VA, for Plaintiff.
Dana J. Boente, U.S. Attorney, David Moskowitz, Assistant U.S. Attorney, U.S. Attorney's Office, Alexandria, VA, Lore Unt and William LaMarca, Office of the Solicitor, United States Patent & Trademark Office, Alexandria, VA, for Defendants.
In this action, plaintiff Automated Merchandizing Systems, Inc. (“AMS”) seeks an order compelling the defendants 1 to terminate four inter partes reexaminations currently pending before the USPTO based on a consent judgment entered in a federal court patent infringement action that involved the same patents 2 as those under reexamination. The USPTO opposes that request on the grounds that the relied-upon federal court action did not actually adjudicate the validity of the patents at issue in the reexamination proceedings and therefore does not require the termination of its reexamination proceedings under the applicable statute. The parties have filed cross motions for summary judgment [Doc. Nos. 31 and 35]. For the reasons below, plaintiff's motion for summary judgment will be DENIED and defendants' motion for summary judgment will be GRANTED.
On March 15, 2012, AMS and Crane settled their disputes in the West Virginia Action. As part of that settlement, they entered into a stipulation that the AMS Patents were valid and agreed upon a consent judgment to be presented for entry in the West Virginia Action. On June 11, 2012, upon joint motion of AMS and Crane, the district court entered the following Consent Judgment in the West Virginia Action:
Plaintiff Automated Merchandising Systems, Inc. (“AMS”) and Defendant Crane Co. (“Crane”) hereby consent to entry of judgment as follows:
1. The Court vacates all existing summary judgment orders and opinions as well as the December 12, 2011 Markman Order;
2. The parties stipulate that United States Patent Nos. 6,384,402; 6,794,634; 7,191,915; 7,343,220; and 6,732,014 are valid; and
3. All claims in this action are dismissed with prejudice.
Each party shall bear its own attorneys' fees and costs.
This judgment is final, and all relief not expressly granted herein is hereby denied.
IT IS SO ORDERED.
35 U.S.C. § 317(b), as it applies to the issue before the Court,5 (hereinafter “ § 317(b)”) provides:
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 or inter parties reexamination proceeding, 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, notwithstanding any other provision of this chapter.
On June 20, 2012, based on the Consent Judgment issued in the West Virginia Action, AMS petitioned the USPTO to terminate pursuant to § 317(b) the inter partes reexamination proceedings as to the AMS Patents. On November 19, 2012, the USPTO refused to terminate the inter partes reexamination proceedings on the grounds that the Consent Judgment failed to satisfy the requirements of § 317(b), dismissing all four petitions. On December 17, 2012, AMS filed a second petition, with further supporting documentation, to terminate the inter partes proceedings pertaining to only one of the four AMS Patents (the '634 patent), but on May 30, 2013, the USPTO dismissed that second petition on the same grounds, viz., that the Consent Judgment failed to meet the requirements for termination provided by § 317(b).
On June 23, 2013, AMS filed a request for reconsideration of its petition to terminate inter partes reexamination proceedings based on the West Virginia Action.6
On October 16, 2013, AMS filed this action to reverse the USPTO's denial of AMS' four initial petitions to terminate, as well as its dismissal of AMS' second petition to terminate as to the '634 patent.7 Before the Court are cross motions for summary judgment.
Summary judgment is appropriate when the pleadings, depositions, interrogatories, admissions and affidavits demonstrate that there are no genuine issues of material fact in dispute and that one party is entitled to judgment as a matter of law. See Fed, R. Civ. P. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists “if the evidence is such that a reasonable fact finder could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The court's review of agency action under the APA is the administrative record of the relevant administrative proceedings. See Tafas v. Dudas, 530 F.Supp.2d 786, 793 (E.D.Va.2008) () (quoting Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973)); see also Fort Sumter Tours, Inc. v. Babbitt, 66 F.3d 1324, 1335–36 (4th Cir.1995) (); Walter O. Boswell Memorial Hosp. v. Heckler, 749 F.2d 788, 792 (D.C.Cir.1984) (). An agency's actions must be set aside if the court finds that the agency action is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law....” 5 U.S.C. § 706(2)(A). An agency abuses its discretion “where the decision [by that agency] is based on an erroneous interpretation of the law, on factual findings that are not supported by substantial evidence, or represents an unreasonable judgment in weighing relevant factors.” Exelixis, Inc. v. Kappos, 906 F.Supp.2d 474, 480 (E.D.Va.2012). The scope of review under this standard is “narrow,” and “a court is not to substitute its judgment for that of the agency.” Motor Vehicle Manufacturers Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983).
The dispositive issue is whether the Consent Judgment in the West Virginia Action constitutes “a final decision ... that [Crane] has not sustained its burden of proving the invalidity” of the AMS Patents. The USPTO does not dispute that the Consent Judgment is a final decision for the purposes of the West Virginia Action.9 Rather, it takes the position that a termination of the inter partes reexaminations of the AMS Patents is not authorized under Section 317(b) because AMS has not established, through the Consent Judgment or otherwise, that Crane “had not sustained its burden of proving the invalidity” of the AMS Patents.10 Rather, in rejecting AMS' petitions to terminate the inter partes reexaminations, the USPTO adopted the view that a settlement between the parties that is merely memorialized in a consent judgment entered by a court does not constitute the required “final decision” for the purpose of § 317(b) unless the court makes specific findings regarding invalidity.11 As the USPTO stated in its dismissal of May 30, 2013:
The consent judgment merely states that the parties stipulated the validity of the '634 patent, which is evidence that an agreement was reached between the parties. There is no language in the consent judgment that suggests that the court decided any invalidity issue, let alone that the issue that defendant/requester Crane failed to sustain its burden of proving the invalidity of any patent claim in suit,
...
... [P]re–AIA 35 U.S.C. § 317(b) requires more. It specifically requires a final decision by the court that the requester/party failed to sustain its burden of proving the invalidity of any patent claim in suit. In other words, pre-AIA 35 U.S.C. § 317(b) is not triggered by a mere settlement of the parties.
Admin. Rec. at 384–85 (emphasis original). The USPTO concluded that “[AMS] has not provided any evidence of any final decision by the court that Crane failed to sustain its burden of proving the invalidity of the '634 patent claims in suit, as [AMS] asserts.” Id. at 385.
The critical issue is whether, in a patent infringement action, a consent judgment that simply references the parties' stipulation that a patent is valid, but which dismisses all claims with prejudice, constitutes a final decision that the alleged infringer did not sustain its burden that the patents were invalid. On the one hand, there would appear to be substantial merit, logic and common sense to AMS' general proposition that a stipulation of patent validity between a patent holder and a patent challenger should end an inter partes reexamination instituted by the patent challenger with respect to the patent whose validity was acknowledged in the stipulation.12 This position, however, fails to account sufficiently for the following critical aspects of this dispute: (1)the language of § 317(b) and the Consent Judgment; (2) the preclusive scope of a final decision in collateral proceedings; (3) the overriding obligations of the USPTO when the validity of a patent is challenged; and (4) Chevron deference to...
To continue reading
Request your trial