Highway Equipment Co., Inc. v. Feco, Ltd.
| Decision Date | 21 November 2006 |
| Docket Number | No. 05-1547.,No. 05-1578.,05-1547.,05-1578. |
| Citation | 469 F.3d 1027 |
| Parties | HIGHWAY EQUIPMENT COMPANY, INC., Plaintiff-Cross Appellant, v. FECO, LTD. and Stan Duncalf, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Federal Circuit |
Stephen J. Holtman, Simmons, Perrine, Albright & Ellwood, PLC, of Cedar Rapids, Iowa, argued for plaintiff-cross appellant. With him on the brief was David A. Hacker.
David A. Tank, Davis, Brown, Koehn, Shors & Roberts, P.C., of Des Moines, Iowa, argued for defendants-appellants. With him on the brief was Deborah M. Tharnish.
W. Michael Garner, Dady & Garner, P.A., of Minneapolis, Minnesota, for amici curiae.
Before SCHALL, LINN, and DYK Circuit Judges.
FECO, Ltd. ("FECO") appeals from a judgment of the U.S. District Court for the Northern District of Iowa making final an order granting Highway Equipment Company, Inc.'s ("Highway Equipment") summary judgment on FECO's claim for wrongful termination of dealership and denying FECO's motion for attorney fees and expenses pursuant to 35 U.S.C. § 285. Highway Equipment cross-appeals from the ruling that the district court had subject matter jurisdiction over FECO's motion for attorney fees. Because the district court properly entertained FECO's claim for attorney fees and did not err in denying attorney fees, and because the district court lacked jurisdiction over FECO's wrongful termination of dealership claim, we affirm-in-part, vacate-in-part, and remand.
FECO and Highway Equipment are Iowa corporations that manufacture and sell agricultural equipment including spreaders for applying particulate material, such as fertilizer to fields or salt to roads. Highway Equipment is also the owner of U.S. Patent No. 6,517,281 (the '281 patent), directed to an adjustable spreader that allows for a more precise application of the various types and densities of particulate material.
On October 1, 1996, Highway Equipment entered into an agreement with FECO, authorizing FECO to sell Highway Equipment's adjustable spreader. The agreement was governed by the Iowa Agricultural Equipment Dealer Statute, Iowa Code § 322F ("322F"), which regulates certain aspects of contractual relationships between agricultural equipment suppliers and dealers. 322F provides, among other things, that a supplier shall terminate a dealership agreement only upon good cause and with at least ninety-days prior written notice. On September 16, 2002, without good cause and without prior written notice, Highway Equipment terminated FECO as its agricultural equipment dealer.
In December of 2002, or sometime shortly thereafter, FECO began manufacturing an adjustable spreader. The '281 patent issued on February 11, 2003. On June 17, 2003, Highway Equipment sued FECO and its president, Stan Duncalf (collectively "FECO") for infringement of the '281 patent. Also named as a defendant in that case was Doyle Equipment Manufacturing Company ("Doyle"). Highway Equipment averred in its complaint that the district court possessed subject matter jurisdiction over the counts alleging infringement pursuant to 28 U.S.C. § 1338(a).
FECO filed affirmative defenses, based on inventorship and inequitable conduct, and counterclaimed for a declaratory judgment of non-infringement and invalidity and for tortious interference with a prospective business relationship. FECO also sought damages pursuant to 322F for wrongful termination of its dealership agreement with Highway Equipment. FECO asserted that the district court possessed supplemental jurisdiction over the counterclaim, alleging violation of the Iowa Code pursuant to 28 U.S.C. § 1367(a). FECO also sought attorney fees and costs.
On November 1, 2004, Highway Equipment moved for partial summary judgment on FECO's counterclaim for damages pursuant to 322F. On March 22, 2005, the district court, by an interlocutory order, granted Highway Equipment's summary judgment motion. The district court held that, as a matter of law, FECO was not entitled to damages for wrongful termination of dealership under the statute because the statute expressly lists certain acts that are "violations" of 322F and wrongful termination of dealership is not enumerated on the list. See Highway Equipment Co. v. FECO, Ltd., No. 03-CV-0076 (N.D.Iowa Mar. 22, 2005) ("322F Order"); see also Iowa Code § 322F.7. Trial on the remaining patent-related issues was scheduled to begin in April, with the final pretrial conference set for April 1, 2005.
On March 31, 2005, Highway Equipment filed a stipulation and motion for dismissal with prejudice of all of its claims against Doyle. Doyle likewise stipulated to dismiss with prejudice all claims against Highway Equipment. The next day, on April 1, 2005, Highway Equipment filed the following "Declaration and Covenant Not to Sue" ("covenant"):
Highway Equipment Company, on behalf of itself and any successors-in-interest to [the '281 patent], hereby unconditionally and irrevocably covenants not to assert at any time any claim of patent infringement including direct infringement, contributory infringement and/or inducing infringement against [FECO] under the '281 patent, as it currently reads, based on [FECO's] manufacture, use, offer for sale, or sale of
(1) any product that [FECO] currently manufactures; and/or
(2) any product that [FECO] manufactured prior to the date of this declaration.
By order dated that same day, the district court entered a dismissal with prejudice as to the claims between Highway Equipment and Doyle, based on the stipulations between them. Because the covenant withdrew the controversy regarding infringement, on April 4, 2005, the district court canceled the jury trial and set April 5, 2005 as the deadline for FECO to file a motion for attorney fees under 35 U.S.C. § 285.
On April 7, 2005, FECO filed its motion for attorney fees pursuant to 35 U.S.C. § 285 and requested a hearing. FECO alleged the case was exceptional under 35 U.S.C. § 285 because Highway Equipment engaged in litigation misconduct and inequitable conduct during prosecution of the '281 patent. On April 12, 2005, Highway Equipment filed an opposition to the motion, contending that the court could not properly entertain the attorney fee issue because Highway Equipment's covenant not to sue FECO for infringement divested the court of subject matter jurisdiction over the claim for attorney's fees and that, in the alternative, FECO did not obtain a disposition on the merits that would make it a prevailing party for purposes of 35 U.S.C. § 285.
On April 18, 2005, pursuant to Fed. R.Civ.P. 41(a)(2), FECO sought an order dismissing Highway Equipment's underlying infringement claim with prejudice and retaining jurisdiction to entertain the fee request. On April 20, 2005, Highway Equipment filed a brief "resisting" the motion, arguing that, although the covenant rendered all matters moot such that the court should dismiss all claims, including the fee claim, a dismissal with prejudice was not warranted. On April 21, 2005, FECO filed a reply, arguing that a dismissal with prejudice was required under the facts of this case because, among other things, the filing of the covenant is a "unilateral declaration of intent not supported by consideration, which [Highway Equipment] can attempt to withdraw, amend, or alter at any time." FECO's April 21, 2005 brief reiterated its demand for dismissal of the patent claims with prejudice, arguing that "[a]bsent a definitive and judicially sanctioned resolution of [Highway Equipment's] affirmative claims [demanding among other things damages for past infringement], the threat of further litigation is substantial."
On April 22, 2005, the district court ruled that, although it was dismissing the entire action under Fed.R.Civ.P. 41(a)(2) in light of the filing of the covenant, it nonetheless retained subject matter jurisdiction over FECO's fee request under 35 U.S.C. § 285. See Highway Equipment Co. v. FECO, Ltd., No. 03-CV-0076 (N.D. Iowa, April 22, 2005) ("Jurisdiction Order"). The court also found that it could properly entertain the fee claim because it concluded that FECO was a prevailing party for purposes of § 285. The court then set a hearing date on FECO's fee motion. Id., slip op. at 9.
On July 27, 2005, after a four-day evidentiary hearing on the fee question, the court found that the case was not exceptional and denied FECO's request for attorney fees. See Highway Equipment Co. v. FECO, Ltd., No. 03-CV-0076 (N.D.Iowa Jul. 27, 2005) ("Fee Order"). On July 29, 2005, the district court entered final judgment, dismissing Highway Equipment's claims against FECO and FECO's counterclaims against Highway Equipment with prejudice based on the covenant and denying FECO's claim for attorney fees and costs under 35 U.S.C. § 285. See Highway Equipment Co. v. FECO, Ltd., No. 03-CV-0076 (N.D.Iowa Jul. 29, 2005) ("Final Order").
FECO appeals the district court's Fee Order and the district court's 322F Order. Highway Equipment cross-appeals the district court's Jurisdiction Order. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
Whether an actual controversy exists to support subject matter jurisdiction is a question of law subject to de novo review. Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1346 (Fed.Cir.2005) (citing BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed.Cir.1993)). The district court's factual determinations made in the process of resolving questions of law are reviewed for clear error. See Vanguard Research, Inc. v. PEAT, Inc., 304 F.3d 1249, 1254 (Fed.Cir.2002). In considering the jurisdictional issues presented herein, we follow the "fundamental precept that federal courts are courts of limited jurisdiction," empowered to act only within the bounds of Article III of the United States Constitution. Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57...
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