Manildra Mill. Corp. v. Ogilvie Mills, Inc.

• Decision Date: 12 February 1996
• Docket Number: No. 95-1315,95-1315
• Citation: 76 F.3d 1178,37 USPQ2d 1707
• Parties: , 34 Fed.R.Serv.3d 321, 37 U.S.P.Q.2d 1707 MANILDRA MILLING CORPORATION, Plaintiff/Counterdefendant-Appellee, v. OGILVIE MILLS, INC. (now OMI Holdings, Inc.), Defendant/Counterclaimant/Third Party Plaintiff-Appellant, v. HENKEL CORPORATION and Henkel of America, Inc., Third Party Defendants, and John Thomas Honan, Counterclaim Defendant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1178

76 F.3d 1178

64 USLW 2519, 34 Fed.R.Serv.3d 321,

37 U.S.P.Q.2d 1707

MANILDRA MILLING CORPORATION, Plaintiff/Counterdefendant-Appellee, v. OGILVIE MILLS, INC. (now OMI Holdings, Inc.), Defendant/Counterclaimant/Third Party Plaintiff-Appellant, v. HENKEL CORPORATION and Henkel of America, Inc., Third Party Defendants, and John Thomas Honan, Counterclaim Defendant.

No. 95-1315.

United States Court of Appeals, Federal Circuit.

Feb. 12, 1996.

W. Stanley Walch, Thompson & Mitchell, St. Louis, Missouri, argued, for plaintiff/counterdefendant-appellee, Manildra Milling Corporation. Murray J. Belman and Adam H. Gordon, Thompson & Mitchell, Washington, DC, were on the brief, for plaintiff/counterdefendant-appellee.

Byron L. Gregory, McDermott, Will & Emery, Chicago, Illinois, argued, for defendant/counterclaimant/third party plaintiff-appellant, Ogilvie Mills, Inc. (now OMI Holdings Inc.). With him on the brief were Bruce H. Weitzman and Roger W. Wenthe. Of counsel were Patrick D. McAnany and Mark Lee Hogge.

Before RICH, MICHEL, and CLEVENGER, Circuit Judges.

CLEVENGER, Circuit Judge.

OMI Holdings Incorporated (OMI) seeks review of the decision of the United States District Court for the District of Kansas, Manildra Milling Corp. v. Ogilvie Mills, Inc., 878 F.Supp. 1417 (D.Kan.1995), which awarded Manildra Milling Corp. (Manildra) costs in the amount of $82,754.93. We affirm.

I

Because a detailed recitation of facts is available in the district court's opinion, Manildra, 878 F.Supp. at 1419-20, we present only a summary of those facts pertinent to this appeal. Manildra sued OMI seeking a declaratory judgment that OMI's patents were invalid and damages for OMI's violations of the Lanham Act, Kansas common law, and federal antitrust laws. OMI responded by filing a $17 million counterclaim for patent infringement.

After eighteen days of trial, the district court judge was forced to order a mistrial because of improper ex parte communication between three jurors and Manildra's expert witness, John Howell. Upon the completion of the second trial, the jury determined that OMI's patents were invalid, and awarded a total of $5 million in damages to Manildra for OMI's violations of the Lanham Act and Kansas common law. On appeal, this court affirmed the judgment of invalidity but reversed the judgment on the Lanham Act and Kansas common law. Manildra Milling Corp. v. Ogilvie Mills, Inc., 1 F.3d 1253, 30 USPQ2d 1012 (Fed.Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1188, 127 L.Ed.2d 538 (1994).

On November 3, 1993, Manildra submitted a bill of costs seeking $190,393.74. OMI moved to deny costs, contending that: (1) Manildra was not a prevailing party under Fed.R.Civ.P. 54(d)(1); (2) the court should exercise its discretion to deny costs; and (3) costs of certain items in the bill of costs should be disallowed. Manildra, 878 F.Supp. at 1424.

The district court determined that Manildra's success was sufficient to make it a prevailing party. Accordingly, the district court awarded partial costs of $82,754.93 to Manildra. Id. at 1424-25. OMI now appeals to this court for review of the district court's award. We have jurisdiction under 28 U.S.C. § 1295(a)(1) (1994).

II

The first issue on appeal is whether the district court properly decided that Manildra is a prevailing party in this case. This case comes to us from a district court in the Tenth Circuit. In that circuit, the court seems to approach the issue of prevailing party in two different ways.

Some cases suggest that the entire decision of awarding costs, including the determination of whether a party prevailed, is left to the discretion of the district court. See, e.g., Roberts v. Madigan, 921 F.2d 1047, 1058 (10th Cir.1990), cert. denied, 505 U.S. 1218, 112 S.Ct. 3025, 120 L.Ed.2d 896 (1992). Under this view, an appellate court may reverse the district court's prevailing party determination only for abuse of discretion. Id.

Other cases, however, state that although the ultimate decision to award fees rests within the district court's discretion, any statutory interpretation or other legal conclusions that provide a basis for the award are reviewable de novo. See Supre v. Ricketts, 792 F.2d 958, 961 (10th Cir.1986). ¹ Under this view, rule interpretation, such as the meaning of "prevailing party," like statutory interpretation, is a question of law that is reviewable de novo, while the ultimate decision to award costs remains within the district court's discretion. See id.

In the Tenth Circuit, then, there is some ambiguity as to whether the meaning of "prevailing party" is a question of law. A large part of the ambiguity arises from the fact that many opinions lump together analysis of the prevailing party issue with the ultimate decision to award costs. This makes it difficult to determine the standard of review.

In the present case, this ambiguity is exacerbated by a choice of law issue. We must not only decide which of these two approaches to use, but also whether to apply Tenth Circuit law or Federal Circuit law.

In deciding which law to apply, we must necessarily evaluate competing policy interests. Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d 850, 856-58, 20 USPQ2d 1252, 1257-59 (Fed.Cir.1991), cert. denied, 504 U.S. 980, 112 S.Ct. 2957, 119 L.Ed.2d 579 (1992). On the one hand, we must remain mindful of "the general policy of minimizing confusion and conflicts in the federal judicial system." Panduit Corp. v. All States Plastic Mfg. Co., 744 F.2d 1564, 1574, 223 USPQ 465, 471 (Fed.Cir.1984). On the other hand, we cannot forget that one of Congress' primary purposes in creating the Court of Appeals for the Federal Circuit was to bring about uniformity in the area of patent law. Id. at 1574, 223 USPQ at 470-71.

In resolving these competing policy interests, we have considered several factors including: the uniformity in regional circuit law, the need to promote uniformity in the outcome of patent litigation, and the nature of the legal issue involved. See Biodex, 946 F.2d at 855-59, 20 USPQ2d at 1256-59. As explained below, we believe these factors favor our applying our own law to define the meaning of prevailing party in the context of patent litigation.

We have generally conformed our law to that of the regional circuits when there exists expressed uniformity among the circuits. Id. at 856, 20 USPQ2d at 1256-57. That is not the case here. The Fifth and Seventh Circuits appear to treat the issue of prevailing party as lying within the district court's discretion. See Studiengesellschaft Kohle v. Eastman Kodak Co., 713 F.2d 128, 131, 219 USPQ 958, 960 (5th Cir.1983); Northbrook Excess and Surplus Ins. Co. v. Commercial Union Ins. Co., 924 F.2d 633, 642 (7th Cir.1991). In contrast, the First and Ninth Circuits appear to treat the meaning of "prevailing party" as a question of law to be reviewed de novo. See Gamma Audio & Video, Inc. v. Ean-Chea, 11 F.3d 1106, 1113-14, 29 USPQ2d 1257, 1263-64 (1st Cir.1993); Lummi Indian Tribe v. Oltman, 720 F.2d 1124, 1125 (9th Cir.1983).

Therefore, there is no uniformity of the law outside our circuit that argues in favor of discerning and applying Tenth Circuit law to the prevailing party issue. Indeed, the circumstances of this case might cause us to decline to employ Tenth Circuit law, even were the other circuits uniform in following either the wholly discretionary or partially discretionary standard of review. Our declination would avoid the need for us to clarify the apparent ambiguity in Tenth Circuit law on this point.

We have also recognized that our adoption of a single position promotes national uniformity in the outcome of patent litigation. See Biodex, 946 F.2d at 858-59, 20 USPQ2d at 1259. Such uniformity is undercut when the outcome of the patent trial varies depending on the regional circuit in which the case is tried. Id. at 859, 20 USPQ2d at 1259. The prevailing party determination in the present case is a prime example. If we leave to each regional circuit the task of defining when a party in a patent case has prevailed, a party such as Manildra may be eligible for costs in one circuit but not another. If, however, we instead define as a matter of law the meaning of prevailing party in the context of patent litigation, eligibility for costs will be uniform nationwide. Such a single definition will promote uniformity in the application of the term in future trials throughout the regional circuits. See id. Therefore, this factor also favors application of our own law.

Finally, we acknowledge that the degree of our deference to regional circuit law has involved the nature of the legal issue at hand. For this reason, we have generally deferred to regional circuit law when the issue involves an interpretation of the Federal Rules of Civil Procedure, as it does here with the interpretation of "prevailing party" under Rule 54(d). Id. at 857-58, 20 USPQ2d at 1258. Our practice in this regard results from the notion that such rules are integral to the routine conduct of trials, and that practitioners and judges should be free to conduct litigation according to the rules that ordinarily apply to them. We catalogued in Biodex the instances in which we have deferred to regional circuit law when confronted with questions of interpretation of the Federal Rules of Civil Procedure. See id. at 857 n. 10, 20 USPQ2d at 1258 n. 10. In each of those cases, the particular rule of procedure relates to the ongoing trial process.

In the present case, however, the impact on the district court's management of an ongoing trial will not be great because the prevailing party issue arises only after the trial has been completed. Thus, defining this term as a matter of Federal Circuit law does not interfere with the district court's ability to manage the majority of the trial according to regional circuit law. Cf. id. at 859, 20 USPQ2d at 1259 (stating that district court would not be required to...