Cap Export, LLC v. Zinus, Inc.

• Citation: 996 F.3d 1332
• Decision Date: 05 May 2021
• Docket Number: 2020-2087
• Parties: CAP EXPORT, LLC, Plaintiff/Counterclaim Defendant-Appellee Abraham Amouyal, Third-Party Defendant-Appellee 4Moda Corp., Third-Party Defendant v. ZINUS, INC., Defendant/Counterclaimant/Third-Party Claimant-Appellant Does, 1 through 10, Inclusive, Defendants
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

996 F.3d 1332

CAP EXPORT, LLC, Plaintiff/Counterclaim Defendant-AppelleeAbraham Amouyal, Third-Party Defendant-Appellee4Moda Corp., Third-Party Defendant

v. ZINUS, INC., Defendant/Counterclaimant/Third-Party Claimant-AppellantDoes, 1 through 10, Inclusive, Defendants

2020-2087

United States Court of Appeals, Federal Circuit.

Decided: May 5, 2021

David Beitchman, Beitchman & Zekian, PC, Encino, CA, argued for plaintiff/counterclaim defendant-appellee and third-party defendant-appellee. Also represented by Milord A. Keshishian, Milord & Associates, PC, Los Angeles, CA.

Darien Wallace, Imperium Patent Works LLP, Pleasanton, CA, argued for defendant/third party plaintiff/counterclaimant-appellant. Also represented by T. Lester Wallace.

Before Dyk, Bryson, and Hughes, Circuit Judges.

Dyk, Circuit Judge.

Zinus, Inc. ("Zinus") appeals the decision of the United States District Court for the Central District of California setting aside a judgment and injunction pursuant to Federal Rule of Civil Procedure 60(b)(3). We affirm.

BACKGROUND

Zinus is the owner of U.S. Patent No. 8,931,123 ("the ’123 patent"), which is directed to "[a]n assemblable mattress support" that "can be shipped in a compact state with all of its components compactly packed into the headboard." ’123 patent, col. 1 ll. 49–51. The relevant claims are independent claims 1–3, which each claim "[a] mattress support comprising" "a headboard with a compartment" and other parts, such as "a longitudinal bar" and "a footboard," wherein the other parts "are contained" or "fit inside the compartment." Id. col. 6 l. 21–col. 7 l. 3. Claim 2 additionally requires "headboard legs" that "are contained inside the compartment." Id. col. 6 ll. 52–58. Claim 3 additionally requires that "the compartment is closed with a zipper." Id. col. 7 ll. 2–3.

On January 15, 2016, appellee Cap Export, LLC ("Cap Export") filed a declaratory judgment action against Zinus, alleging that claims of the ’123 patent were invalid and not infringed. Zinus counterclaimed, alleging infringement of claims of the ’123 patent and unfair business practices under California state law, and added Abraham Amouyal and 4Moda Corp. as third-party defendants. Appellee Abraham Amouyal is the chief executive officer of Cap Export. 4Moda, which currently appears to be dissolved, is alleged to have sold Cap Export's products in the United States.¹

On May 16, 2016, Zinus filed a motion for partial summary judgment of no invalidity of claims 1 and 3 of the ’123 patent, relying on a declaration provided by Zinus's then-president and "testifying technical expert," Colin Lawrie. J.A. 279.² On August 29, 2016, the district court noted that Zinus had "present[ed] some testimony ... that the patent was valid" in light of prior art raised by Cap Export, and the court allowed Cap Export sixty days to depose Lawrie and "present some contrary opinion" in the form of a surreply. Id. at 1312, 1317. Counsel for Cap Export deposed Lawrie on October 11, 2016, during which Lawrie denied knowledge of the existence of various prior art items.

On November 29, 2016, the district court sua sponte granted summary judgment that claims 1 and 3 of the ’123 patent were invalid as obvious over other prior art references that are not at issue in this appeal. Zinus appealed, and we vacated and remanded, in part because the district court had improperly granted summary judgment of invalidity sua sponte without proper notice to Zinus and had relied on a prior art reference (the "bed in a box" reference) when there was a factual dispute as to whether it predated the ’123 patent. Cap Exp., LLC v. Zinus, Inc. , 722 F. App'x 1004, 1007–09 (Fed. Cir. 2018).

On September 11, 2018, Zinus filed another motion for partial summary judgment of no invalidity of claims 1, 2, and 3 of the ’123 patent. On January 24, 2019, the district court granted partial summary judgment that claims 1–3 of the ’123 patent were not invalid, in part because Cap Export had abandoned the "bed in a box" prior art reference that the district court had relied on in its previous determination of invalidity. In determining validity, "the Court analyzed relevant evidence of ‘prior art’ references identified by the parties and established that the ’123 patent was valid as a matter of law on that basis, because none of the ‘prior art’ references considered by the Court either anticipated or made obvious the patent claims embodied in the ’123 patent." J.A. 2 (citation omitted). Based on the district court's ruling, Zinus, Cap Export, and Abraham Amouyal then stipulated to the entry of a final judgment in favor of Zinus for infringement, which included that claims 1–3 of the ’123 patent were not invalid, $1.1 million in damages to be paid by Cap Export and Amouyal, and a permanent injunction against Cap Export and Amouyal, which the district court entered on May 30, 2019.

Thereafter, Cap Export discovered evidence that the October 2016 deposition testimony of Lawrie, the then-president of Zinus, had been false as to the prior art. The discovery of the falsity began when, on June 22, 2019, Zinus filed a lawsuit against Classic Brands, LLC (an unrelated party), also in the Central District of California, alleging in part infringement of the ’123 patent. In support of a motion to transfer, Classic Brands filed a declaration that attached a letter with exhibits consisting of documents regarding beds manufactured by a company called Xiamen XinShunYang Industry and Trade Company ("XXITC"), which was located in Xiamen, China. One of the beds allegedly had "all of the components of the bed (except the headboard) ... packed inside of a zippered compartment in the headboard." J.A. 4 (citation omitted).³ The exhibits to the letter also included purchase invoices between XXITC and a Malaysian company called Woody Furniture.

Cap Export, after learning of these documents, sent company representatives to Malaysia to meet with Woody Furniture's representatives. Woody Furniture's representatives provided a 2012 invoice (dated before the filing date of the ’123 patent, September 25, 2013) addressed to Jusama Group Consulting Inc.⁴ and bearing Colin Lawrie's signature for a purchase of 405 beds from Woody Furniture. According to a declaration from Agnes Tan, the marketing director for Woody Furniture, executed on September 24, 2019, the beds referenced in the invoice had "all components fitting in the headboard, including the footboard and the longitudinal bar, for shipping." J.A. 303, 305.

On September 29, 2019, within a year of the entry of the final judgment and injunction, Cap Export and Abraham Amouyal filed a motion to vacate the judgment and injunction under Rule 60(b)(3), which provides grounds for relief for reason of "fraud ..., misrepresentation, or misconduct by an opposing party." Fed. R. Civ. P. 60(b)(3).

The primary basis of the allegations of fraud and misrepresentation was Lawrie's testimony during the October 11, 2016, deposition. During that deposition, "Cap Export asked [Colin Lawrie], repeatedly, about his knowledge of disassembled beds shipped in a single box with all components stored in the headboard." J.A. 18. Below are examples of such questioning:

Q. What do you think the novelty or the invention is of the [ ’123 patent]?

A. The ability to package an unassembled bed into a headboard and have it ship in one box.

J.A. 262.

Q. Prior to September 2013 had you ever seen a bed that was shipped disassembled in one box?

A. No.

Q. Not even—I'm not talking about everything stored in the headboard, I'm just saying one box.

A. No, I don't think I have.

Id. at 263.

Q. So prior to 2013, September of 2013, the only piece of furniture that you can think of that shipped in one box, disassembled, and the components were contained in another component, was just a cabinet with shelves; is that accurate?

....

Q. That would be then no, just the cabinet essentially?

A. That I'm aware of.

Id. at 265–66.⁵

The district court in the 60(b)(3) proceeding held an initial hearing on the motion and ordered a video deposition to be conducted of Colin Lawrie. Colin Lawrie also submitted a declaration executed on November 5, 2019, in which he admitted that his October 2016 deposition testimony that he had never seen "a bed that was shipped disassembled in one box" was "literally incorrect," but he asserted that he did not "intend to answer falsely" because he "meant that [he] had not seen a bed shipped disassembled in one box with all of the components in the headboard." Id. at 289. Colin Lawrie's video deposition was thereafter taken in Toronto, Canada, on November 15, 2019, during which he "again acknowledged that his answer of ‘No’ to the question of whether he had ever seen a bed prior to September 2013 that was shipped disassembled in one box was ‘literally incorrect,’ but that he did not intend to answer falsely at the deposition." Id. at 10–11 (citation omitted). The district court found Lawrie's explanation to be "wholly implausible given how counsel for Cap Export specifically distinguishe[d] between those two concepts." Id. at 12.⁶

In determining the falsity of Lawrie's testimony, the district court also relied on other Woody Furniture documents showing sales of these beds in a box to sales agents for the Zinus family of companies (Jusama and HQV),⁷ including an invoice for Jusama from 2011 for a sale of 385 beds and a purchase order for HQV for a sale of 415 beds with a shipment date in February 2013. Zinus itself concedes that "[d]ocumentary evidence of the alleged on-sale prior art beds was, throughout the entire course of the underlying litigation up until the day of entry of the final consent judgment, all the while sitting in email form in the possession of Zinus." Appellant's Br. 34.

On May 11, 2020, the district court granted the motion to set aside the May 30, 2019, judgment under Rule 60(b)(3) and vacated the injunction. The court found that the purchased Woody Furniture beds were "functionally identical in...