In re Cygnus Telecommunications Technology, LLC
| Decision Date | 19 August 2008 |
| Docket Number | No. 2007-1354.,No. 2007-1361.,No. 2007-1332.,No. 2007-1328.,No. 2007-1330.,No. 2007-1329.,No. 2007-1331.,No. 2007-1333.,No. 2008-1023.,2007-1328.,2007-1329.,2007-1330.,2007-1331.,2007-1332.,2007-1333.,2007-1354.,2007-1361.,2008-1023. |
| Citation | 536 F.3d 1343 |
| Parties | In re CYGNUS TELECOMMUNICATIONS TECHNOLOGY, LLC, PATENT LITIGATION. Cygnus Telecommunications Technology, LLC, Plaintiff-Appellant, v. Telesys Communications, LLC, Defendant-Appellee, and United World Telecom, L.C., Defendant-Appellee, and World Link Companies, Defendant-Appellee, and A.M.S. Voicecom, Inc., Defendant-Appellee, and Interactive Media Technologies, Inc. (doing business as GlobalTel), Defendant-Appellee, and Voiceware Systems Corporation, Dial-Thru International, International Telecom, Ltd., Kallback, Inc., and Globalphone Corp., Defendants-Appellees, and Americom Communications and Americom, Inc., Defendants-Appellees, and Telcan Incorporation, Andrew Kaweski, Maxtel Communications, Alliance Callback Communications, and Access Network Services, Defendants. In re Cygnus Telecommunications Technology, LLC, Patent Litigation. Cygnus Telecommunications Technology, LLC, Plaintiff-Appellant, v. AT & T Corp., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Federal Circuit |
John C. Carey, Carey Rodriquez Greenberg & Paul, LLP, of Miami, Florida, and Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California, argued for all defendants-appellees.
Matthew F. McGahren, McGahren, Gaskill & York, LLC, of Norcross, Georgia, for defendant-appellee Telesys Communications, LLC. Of counsel was Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California.
John C. Carey, Carey Rodriquez Greenberg & Paul, LLP, of Miami, Florida, for defendant-appellee United World Telecom, L.C. Of counsel was Allison J. Cammack. Also of counsel was Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California.
Thomas T. Tamlyn, Jr., Yeskoo Hogan & Tamlyn, LLP, of New York, New York, for defendant-appellee World Link Companies. Of counsel was Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California.
Peter S. Canelias, of New York, New York, for defendant-appellee A.M.S. Voicecom, Inc. Of counsel was Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California.
Kieran P. Fallon, Kieran P. Fallon, P.A., of Miami, Florida, for defendant-appellee Interactive Media Technologies, Inc. (d/b/a GlobalTel). Of counsel was Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California.
John F. Mardula, Roberts, Mardula & Wertheim, LLC, of Reston, Virginia, for defendants-appellees Voiceware Systems Corporation, et al. Of counsel was Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California.
Jeffrey L. Silvestrini, Cohne Rappaport & Segal, P.C., of Salt Lake City, Utah, for defendants-appellees Americom Communications, et al. Of counsel was Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California.
Gregory B. Wood, Fulbright & Jaworski, L.L.P., of Los Angeles, California, argued for defendant-appellee AT & T Corp. With him on the brief were Joseph P. Zammit, of New York, New York, and Jonathan S. Franklin, of Washington, DC.
Before NEWMAN and BRYSON, Circuit Judges, and POGUE, Judge.*
Cygnus Telecommunications Technology, LLC, has filed two appeals from a final judgment in this multidistrict litigation proceeding. In the first, Cygnus has appealed from a judgment in favor of Telesys Communications, LLC, and seven other defendants (the "Telesys defendants"). In the second, Cygnus has appealed from a judgment in favor of defendant AT & T Corp. In both cases, Cygnus appeals from the district court's grant of summary judgment that U.S. patent numbers 5,883,964 and 6,035,027 are invalid under the on-sale bar of 35 U.S.C. § 102(b). In addition, in the case against AT & T, Cygnus appeals from the district court's summary judgment of noninfringement and the dismissal of Cygnus's trade secret misappropriation claims. We affirm the judgment in all respects in both appeals.
In the late 1980s, placing a telephone call from the United States to a foreign country was typically less expensive than placing the same call from the foreign country to the United States. In 1988, James Alleman founded Paragon Services International, Inc., and began to develop systems designed to take advantage of that cost differential. Mr. Alleman first attempted to do so through what he called the "black box" system. That system allowed a user in a foreign country to purchase a dedicated line that was attached to a "black box" in the United States. The foreign user would place a call on the dedicated line and then promptly terminate the call. The black box would then call the user back using the less expensive U.S. billing rate. The user would then dial the desired destination number, and the black box would place that call and bridge the two lines together. The effect was to allow a person overseas to initiate a call to the United States, but for the call to originate in the United States for billing purposes so as to take advantage of the lower U.S. billing rates. The problem with that system was that it was expensive to maintain, since it required a dedicated line for each foreign user.
Mr. Alleman subsequently developed a system to carry out the same process by using a computer rather than the black box. He created a prototype of the new system on a 386 computer ("the 386 system"). Instead of having a dedicated line for each user, the 386 system identified users by reference to the international telephone numbers from which they made their initial calls. Part of the user's telephone number would be passed along to the 386 system by the telephone company's local exchange carrier. The 386 system would use that information to search its database and identify the foreign user. The system would then terminate the call from the user and promptly call the user back. The user could subsequently enter the number of its desired destination call, and the 386 system would place that call from within the United States and bridge the two calls together.
Mr. Alleman asserts that in order to develop the software necessary for the 386 system, he worked with a computer engineer named Jim Gunther. Throughout the development process, Mr. Alleman also worked with several individuals overseas who first used the black box system and then used the 386 system. Mr. Alleman described two of those individuals, Theo Brenner and Fadi Ghandour, as "beta-testers" who helped him troubleshoot the 386 system. Those individuals were also regularly invoiced for the cost of their telephone calls. During that period, Mr. Alleman had discussions with another telecommunications company, Call Interactive, as to how they could implement and market his invention on a commercial scale.
Mr. Alleman filed a patent application for his computerized callback system on April 24, 1992. The application led to the issuance of U.S. Patent No. 5,883,964 ("the '964 patent") and its successor, U.S. Patent No. 6,035,027 ("the '027 patent"). Paragon's successor-in-interest, Cygnus, later brought infringement suits against the defendants-appellees alleging infringement of both patents. The various actions were ultimately transferred and consolidated into a single multidistrict proceeding before the United States District Court for the Northern District of California. On November 24, 2004, AT & T moved to dismiss Cygnus's trade secret misappropriation claim under Fed.R.Civ.P. 12, arguing that it was barred by the statute of limitations. After permitting Cygnus to amend its complaint, the district court granted AT & T's motion.
On October 27, 2006, AT & T filed a motion on behalf of all defendants for summary judgment of invalidity based on prior public use and commercial sales of the subject matter of the patents. Several of the defendants also filed motions for summary judgment of noninfringement. The district court granted the invalidity and noninfringement motions and entered a final judgment on March 30, 2007.
On appeal, the defendants first assert that Cygnus is collaterally estopped from challenging the invalidity of the '964 and '027 patents under section 102(b) because it failed to appeal the district court's entry of final judgment against one defendant in the multidistrict litigation below. The defendant to which the appellees point is Heritage Communications Corp., which was granted summary judgment but which was not included in Cygnus's appeal.
It is a firmly established principle that a judgment of a patent invalidity in one case can collaterally estop the patent owner from contesting invalidity in a subsequent case, as long as the patent owner had a "full and fair opportunity to litigate the validity of the patent" in the first case. Miss. Chem. Corp. v. Swift Agric. Chems. Corp., 717 F.2d 1374, 1379 (Fed.Cir.1983); see also Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 333, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). The defendants, however, seek to extend that principle to a setting in which it has no application.
Because the multiple actions filed against various defendants were all consolidated in a single MDL proceeding, we believe that for purposes of analysis of preclusion doctrines, the proceeding is most logically viewed as a single, multi-defendant lawsuit. From that perspective, the defendant's collateral estoppel argument, reduced to its essentials, is that if a court enters a judgment of patent invalidity against a patentee in a multi-defendant action, and the patentee appeals that judgment against fewer than all of the defendants, the appellees can invoke collateral estoppel based on the final judgment in favor of the defendant as to whom the patentee did not appeal. As a result, the patentee's decision not to appeal against one defendant will mean that the patentee loses its right to...
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