Chandler v. Phx. Servs. LLC

• Decision Date: 10 June 2021
• Docket Number: 2020-1848
• Citation: 1 F.4th 1013
• Parties: Ronald CHANDLER, Chandler Mfg., LLC, Newco Enterprises LLC, Supertherm Fluid Heating Services, LLC, Plaintiffs-Appellants v. PHOENIX SERVICES LLC, Mark H. Fisher, Defendants-Appellees
• Court: U.S. Court of Appeals — Federal Circuit

1 F.4th 1013

Ronald CHANDLER, Chandler Mfg., LLC, Newco Enterprises LLC, Supertherm Fluid Heating Services, LLC, Plaintiffs-Appellants

v.PHOENIX SERVICES LLC, Mark H. Fisher, Defendants-Appellees

2020-1848

United States Court of Appeals, Federal Circuit.

June 10, 2021

Theodore G. Baroody, Carstens & Cahoon, LLP, Dallas, TX, argued for plaintiffs-appellants. Also represented by David W. Carstens.

Devan V. Padmanabhan, Padmanabhan & Dawson, PLLC, Minneapolis, MN, argued for defendants-appellees. Also represented by Paul J. Robbennolt.

Before Chen, Wallach^* , and Hughes, Circuit Judges.

ORDER

Hughes, Circuit Judge.

Appellants assert antitrust claims based on the prior enforcement of U.S. Patent No. 8,171,993 in a separate case and, after we held the patent unenforceable due to inequitable conduct, the alleged continued enforcement through Appellee's listing the patent on their website. We lack jurisdiction because this case does not arise under the patent laws of the United States. Accordingly, we transfer the case to the United States Court of Appeals for the Fifth Circuit, which has appellate jurisdiction over cases from the District Court for the Northern District of Texas.

I

This appeal comes to us from a Walker Process monopolization action under § 2 of the Sherman Act.¹ To succeed on a Walker Process claim, a plaintiff must prove (1) that "the antitrust-defendant obtained the patent by knowing and willful fraud on the patent office and maintained and enforced that patent with knowledge of the fraudulent procurement," and (2) that the plaintiff can satisfy "all other elements necessary to establish a Sherman Act monopolization claim." TransWeb, LLC v. 3M Innovative Props. Co. , 812 F.3d 1295, 1306 (Fed. Cir. 2016). Here, Plaintiffs Ronald Chandler, Chandler Manufacturing, LLC, Newco Enterprises, LLC, and Supertherm Heating Services, LLC (Chandler) allege that the first prong of the Walker Process claim is met by Defendants Phoenix Services, LLC and Mark Fisher (Phoenix) asserting U.S. Patent No. 8,171,993.

Beginning in 2006, a business called Heat On-The-Fly began using a new fracking technology on certain jobs. Heat On-The-Fly's owner, Mark Hefley, later filed a patent application regarding the process, but failed to disclose 61 public uses of the process that occurred over a year before the application was filed. This application led to the ’993 patent, and Heat On-The-Fly asserted the ’993 patent against a number of parties. In 2014, Defendant Phoenix acquired Heat On-The-Fly and the ’993 patent. Chandler alleges that enforcement of the ’993 patent continued in various forms. Then, in an unrelated 2018 suit, we affirmed a holding that the knowing failure to disclose prior uses of the fracking process rendered the ’993 patent unenforceable due to inequitable conduct. See Energy Heating, LLC v. Heat On-The-Fly, LLC , 889 F.3d 1291, 1296 (Fed. Cir. 2018).

Chandler alleges that Phoenix's assertion of the ’993 patent against Chandler constitutes a Walker Process antitrust violation.

II

We have jurisdiction over the appeal of a final decision of a district court "in any civil action arising under ... any Act of Congress relating to patents." 28 U.S.C. § 1295(a)(1). However, while Walker Process antitrust claims may relate to patents in the colloquial use of the term, our jurisdiction extends "only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims." Christianson v. Colt Indus. Operating Corp ., 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) ; see also Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc ., 535 U.S. 826, 834, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002) ("Not all cases involving a patent-law claim fall within the Federal Circuit's jurisdiction ... Congress referred to a well-established body of law that requires courts to consider whether a patent-law claim appears on the face of the plaintiff's well-pleaded complaint."), superseded in part by statute , Leahy-Smith America Invents Act sec. 19(b), Pub. L. No. 112-29, 125 Stat. 284, 331–32 (2011) (amending 28 U.S.C. § 1295(a)(1) to add compulsory patent counterclaims) (hereinafter AIA); Xitronix Corp. v. KLA-Tencor Corp ., 882 F.3d 1075, 1076 (Fed. Cir. 2018) ( Xitronix I ) (applying Christianson , 486 U.S. at 809, 108 S.Ct. 2166, to our current jurisdictional statute). Here, because Chandler's cause of action arises under the Sherman Act rather than under patent law, and because the claims do not depend on resolution of a substantial question of patent law, we lack subject matter jurisdiction.

A

We recently analyzed a similar situation in Xitronix I . See 882 F.3d at 1075. There, the plaintiff asserted a standalone Walker Process monopolization claim based on enforcement of a live patent, alleging fraud on the PTO in procuring that patent. Id. We held that we lacked jurisdiction. Id. While acknowledging that issues regarding "alleged misrepresentations to the PTO will almost certainly require some application of patent law," we held that a Walker Process claim does not inherently present a substantial issue of patent law under Supreme Court precedent. Id. at 1078.

To aid our interpretation of the words "arising under" in 28 U.S.C. § 1295(a)(1), we drew from the Supreme Court's decision in Gunn v. Minton , where the Court interpreted those same words in 28 U.S.C. § 1338. Id. at 1077 (citing Gunn v. Minton , 568 U.S. 251, 259, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013) ); see also Christianson , 486 U.S. at 808–09, 108 S.Ct. 2166 (demanding "linguistic consistency" in interpreting various jurisdictional statutes involving "arising under" language). In Gunn , the Supreme Court held that a patent attorney malpractice case did not "arise under" federal patent law for the purposes of § 1338, even though it necessarily involved the resolution of a patent law question. 568 U.S. at 258–59, 133 S.Ct. 1059. The Court reasoned that resolution of the patent "case within a case" would have no effect on "the real-world result of the prior federal patent litigation," id. at 261, 133 S.Ct. 1059, and that allowing a state court to resolve the underlying patent issue would not undermine the uniform body of patent law because "federal courts are of course not bound by state court case-within-a-case patent rulings." Id. at 262, 133 S.Ct. 1059. "[T]he possibility that a state court will incorrectly resolve a state claim is not, by itself, enough to trigger the federal courts’ exclusive patent jurisdiction, even if the potential error finds its root in a misunderstanding of patent law." Id. at 263, 133 S.Ct. 1059. Similarly, in Xitronix I , we found that the risk of another circuit making an erroneous or inconsistent patent law decision within a Walker Process claim is not enough to trigger our jurisdiction over federal patent law cases:

The underlying patent issue in this case, while important to the parties and necessary for resolution of the claims, does not present a substantial issue of patent law. ... Patent claims will not be invalidated or revived based on the result of this case. Because Federal Circuit law applies to substantive questions involving our exclusive jurisdiction, the fact that at least some Walker Process claims may be appealed to the regional circuits will not undermine our uniform body of patent law. ... As in Gunn , even if the result of this case is preclusive in some circumstances, the result is limited to the parties and the patent involved in this matter.

Xitronix I , 882 F.3d at 1078 (citations omitted).

Our Xitronix I decision is precedential and adherence to that precedent mandates transfer of this case to the Fifth Circuit. As in Xitronix I , there are no patent issues outside of the Walker Process antitrust claim. Further, because a prior decision declared the ’993 patent unenforceable, the appellate court hearing this case may have little or no need to delve into patent law issues. Although we do not hold that our jurisdiction turns on whether a patent can still be asserted, we find it significant that Appellants fail to clearly raise any patent law questions not already addressed in Energy Heating . See Energy Heating , 889 F.3d at 1302. The enforceability of the patent is no longer at issue and Chandler's arguments center on the nature of Phoenix's relationship to the inventor's inequitable conduct rather than on the conduct before the patent office itself. See, e.g. , Appellant's Br. 44 (arguing that Phoenix should be treated as a "single enterprise" with Heat On-The-Fly). Therefore, the case to invoke our jurisdiction is even weaker here than in Xitronix I .

B

On transfer of Xitronix I , the Fifth Circuit held our conclusion to be implausible, and returned the case to us. Xitronix Corp. v. KLA-Tencor Corp ., 916 F.3d 429, 444 (5th Cir. 2019) ( Xitronix II ); see also Christianson , 486 U.S. 800, 819, 108 S.Ct. 2166 (1988) ("[I]f the transferee court can find the transfer decision plausible, its jurisdictional inquiry is at an end."). Respectfully, we disagree with the Fifth Circuit's interpretation.

After noting that " Christianson linked § 1295 to § 1338 and § 1331," which makes Gunn relevant to our analysis of § 1295, the Fifth Circuit attempted to distinguish Gunn by emphasizing that "[w]hen Christianson was decided, § 1295 referred to § 1338 expressly, [but] [b]y the time of Gunn ... the phrase ‘any civil action arising under ... any Act of Congress relating to patents’ replaced the reference to § 1338.’ " Xitronix II , 916 F.3d at 442–43.

We do not read this minor change to § 1295 as being so sweeping as to divorce § 1295 ’s connection to § 1338 and § 1331. Section 19 of the AIA amended both § 1295(a)(1) and § 1338(a). It revised § 1295(a)(1) to parallel § 1338(a)...