Mojave Desert Holdings, LLC v. Crocs, Inc.

• Citation: 995 F.3d 969
• Decision Date: 21 April 2021
• Docket Number: 2020-1167
• Parties: MOJAVE DESERT HOLDINGS, LLC, Appellant v. CROCS, INC., Appellee
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

995 F.3d 969

MOJAVE DESERT HOLDINGS, LLC, Appellant

v.CROCS, INC., Appellee

2020-1167

United States Court of Appeals, Federal Circuit.

Order Issued: February 11, 2021

Order Modified: April 21, 2021

Matt Berkowitz, Shearman & Sterling LLP, Menlo Park, CA, argued for appellant. Also represented by Yue Wang; Patrick Robert Colsher, Mark A. Hannemann, Thomas R. Makin, New York, NY; Laura Kieran Kieckhefer, San Francisco, CA.

Michael Berta, Arnold & Porter Kaye Scholer LLP, San Francisco, CA, argued for appellee. Also represented by Sean Michael Callagy ; Mark Christopher Fleming, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA; Benjamin S. Fernandez, Denver, CO.

Before Newman, Dyk, and O'Malley, Circuit Judges.

Dissenting opinion filed by Circuit Judge O'Malley.

ORDER

Dyk, Circuit Judge

U.S.A. Dawgs, Inc. appeals from a United States Patent and Trademark Office (USPTO) decision finding Crocs, Inc.’s design patent (No. D517,789 ) patentable. U.S.A. Dawgs and Mojave Desert Holdings, LLC move to substitute Mojave as U.S.A. Dawgs's successor-in-interest. For the reasons stated below, we grant U.S.A. Dawgs and Mojave's motion to substitute.

BACKGROUND

Crocs, Inc. is the owner of U.S. Design Patent No. D517,789 ("the ’789 patent"), titled "Footwear," which includes a single claim for the "ornamental design for footwear" and seven figures illustrating the claim. The ’789 patent issued on March 28, 2006, and has expired. According to Crocs, the ’789 patent "discloses what has become [its] iconic foam-molded clog design." J.A. 1698.

On August 6, 2012, Crocs sued U.S.A. Dawgs, Inc. for infringement of the ’789 patent in the United States District Court for the District of Colorado based on U.S.A. Dawgs's manufacture and sale of its own form of foam-molded clog footwear. Shortly after Crocs filed, on August 24, 2012, U.S.A. Dawgs filed a third-party request for inter partes reexamination of the ’789 patent at the USPTO under 35 U.S.C. § 311.¹ The USPTO ordered the reexamination on November 19, 2012. The district court stayed the proceedings in light of the inter partes reexamination. The examiner rejected the claim as anticipated under 35 U.S.C. § 102(b). Crocs appealed to the Patent Trial and Appeal Board.

While the appeal was pending before the Board, on January 31, 2018, U.S.A. Dawgs filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Nevada, where U.S.A. Dawgs is incorporated. In May, U.S.A. Dawgs moved for the bankruptcy court to approve the sale of all of its assets "free and clear of all liens, claims, and encumbrances subject to 11 U.S.C. § 363(b) and (f)."²

On July 20, 2018, the bankruptcy court approved the sale of U.S.A. Dawgs's assets to a recently formed entity, Dawgs Holdings, LLC pursuant to the terms and conditions of an Asset Purchase Agreement. The Asset Purchase Agreement assigned Dawgs Holdings

[a]ll of [U.S.A. Dawgs's] right, title and interest in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including intellectual property and goodwill), of [U.S.A. Dawgs], wherever located and whether now existing or hereafter acquired, owned, leased, licensed or used or held for use in or relating to the operation of [U.S.A. Dawgs's] business as of the Closing Date.

J.A. 3217. In its order approving the sale, the bankruptcy court stated that

[t]he transfer of Assets to the Prevailing Bidder under the Purchase Agreement will be as of the Closing Date a legal, valid, and effective transfer of the Assets and vests or will vest the Prevailing Bidder with all right, title, and interest of Debtor's estate to the Assets free and clear of all liens, claims ..., encumbrances, obligations, liabilities, contractual commitments, or interests of any kind or nature whatsoever accruing, arising, or relating thereto prior to such Closing Date, including but not limited to, patent infringement claims ... (collectively, the Claims"); provided, however , for the avoidance of doubt, the Sale [was] not free and clear of any Claims Crocs, Inc. ... may hold for patent infringement occurring post-Closing Date by any person including the Prevailing Bidder, or any defenses Crocs may have in respect of any litigation claims that are sold pursuant to the Sale, including any rights to setoff or recoupment against such claims to the extent validly existing under applicable law (together, the "Retained Rights") and the Retained Rights are preserved in all respects.

J.A. 3175 (footnote omitted).³ The order thus made the transfer of the "litigation claims"—and only the "litigation claims"—subject to potential liability for past infringement.

U.S.A. Dawgs moved to distribute the net proceeds from the sale of its assets and to dismiss its Chapter 11 bankruptcy case.⁴ On August 21, 2018, the bankruptcy court granted U.S.A. Dawgs's motion, authorizing the distribution of the net sale proceeds and dismissing U.S.A. Dawgs's Chapter 11 bankruptcy case.

Thereafter, in three closings, Dawgs Holdings assigned litigation claims, including all those against Crocs, "and the facts and circumstance giving rise to such [claims]" to Mojave, J.A. 3252, including, on August 15, 2018, explicitly the claims asserted by U.S.A. Dawgs in the District of Colorado action and the inter partes reexamination. On October 23, 2018, U.S.A. Dawgs dissolved but continued to exist for limited purposes, including "prosecuting and defending suits, actions, proceedings and claims of any kind or character by or against it" and "enabling it ... to do every other act to wind up and liquidate its business and affairs." Nev. Rev. Stat. § 78.585.

Months later, on July 18, 2019, Mojave filed a petition with the Board titled, "Request to Change the Real-Party-in-Interest from Third-Party Requestor U.S.A. Dawgs, Inc. to Mojave Desert Holding, LLC in Inter Partes Reexamination/Hearing." J.A. 3100. The Board expunged and dismissed Mojave's request on August 9, 2019, on various grounds. First, the Board found that Mojave's

submissions [were] insufficient to establish Mojave as a real party[-]in[-]interest and/or Requester in the instant inter partes reexamination proceeding, because the initial transfer of assets from U.S.A. Dawgs, Inc. to U.S.A. Dawgs Holdings, LLC ... appears to be silent about any rights with regard to the instant inter partes reexamination proceeding.

J.A. 176 (citing Agilent Techs., Inc. v. Waters Techs. Corp. , 811 F.3d 1326, 1334 (Fed. Cir. 2016) ).

Second, based on its interpretation of the transfer of assets, the Board rejected Mojave's filing because Mojave was "not a party to the instant inter partes reexamination proceeding" and did "not have standing to update the real party-in-interest in the proceeding pursuant to [ 37 C.F.R.] § 41.8(a)." J.A. 180. And third, the Board concluded that Mojave did not file its submission "within 20 days of any change [of the real party-in-interest] during the proceeding," as required by 37 C.F.R. § 41.8(a), making it untimely. J.A. 180.

The first and second grounds appear to be the same. Based on these grounds, the Board considered Mojave's petition an "improper submission" under 37 C.F.R. § 1.905⁵ and expunged it from the record and dismissed it as well. J.A. 173–74, 181–82.

On September 10, 2019, the Board issued its decision reversing the examiner's rejection of the ’789 patent ’s sole claim. U.S.A. Dawgs appealed to this court. In its Notice of Appeal, U.S.A. Dawgs stated that Mojave "intend[ed] to file a motion for substitution of parties" with the court "pursuant to Federal Rule of Appellate Procedure 43(b)." Notice of Appeal at 1 n.1, ECF No. 1. On December 13, 2019, U.S.A. Dawgs and Mojave filed the motion to substitute.

We now address U.S.A. Dawgs and Mojave's motion to substitute. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).

DISCUSSION

The motion to substitute is made pursuant to Rule 43(b) of the Federal Rules of Appellate Procedure, which provides that, "[i]f a party needs to be substituted for any reason other than death, the procedure prescribed in Rule 43(a) applies." Fed. R. App. P. 43(b).⁶

Substitution [under Rule 43(b) ] may ... be necessary when a party is incapable of continuing the suit, such as ... when a transfer of interest in the company or property involved in the suit has occurred[ ] or when the focus of the litigation has shifted, making another entity the real party in interest.

21 James W. Moore et al., Moore's Federal Practice – Civil § 343.12 (2020).

Crocs asserts that U.S.A. Dawgs and Mojave's motion to substitute should be denied for several reasons. We disagree.

I

Crocs argues that the Board correctly determined that Mojave is not the successor-in-interest to U.S.A. Dawgs with respect to the inter partes reexamination because the bankruptcy sale did not transfer U.S.A. Dawgs's interest as a requester to Dawgs Holdings and therefore the interest could not have been transferred to Mojave.

U.S.A. Dawgs assigned all of its assets to Dawgs Holdings through the bankruptcy sale. This assignment was comprehensive and was described as

[a]ll of [U.S.A. Dawgs's] right, title and interest in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible (including intellectual property and goodwill), of [U.S.A. Dawgs], wherever located and whether now existing or hereafter acquired, owned, leased, licensed or used or held for use in or relating to the operation of [U.S.A. Dawgs's] business as of the Closing Date. Without limiting the generality of the foregoing, the Assets include, without limitation, all of the items described on Schedule B attached hereto and incorporated herein ....

J.A. 3217.

Crocs argues that this case is just like Agilent Technologies, Inc. v. Waters Technologies Corp. , 811 F.3d 1326 (Fed. Cir. 2016). In that case, Agilent claimed to be the successor-in-interest to Aurora, a company that filed a...