Phonometrics Inc. v. Hospitality Franchise

Decision Date09 February 2000
Docket NumberEZ-8
Citation203 F.3d 790,53 USPQ2d 1762
Parties(Fed. Cir. 2000) PHONOMETRICS, INC., Plaintiff-Appellant, v. HOSPITALITY FRANCHISE SYSTEMS, INC., (now known as Cendant Corporation) defendant-Appellee, and MOTEL 6, L.P., and VAGABOND INNS, INC., Defendants-Appellees, and INTERSTATE HOTELS CORPORATION, Defendant-Appellee, and ASTON HOTELS AND RESORTS, Defendant-Appellee, and FAIRMONT HOTEL MANAGEMENT COMPANY, Defendant-Appellee, and CLUBHOUSE INNS OF AMERICA, Defendant-Appellee, and ECONOMY INNS OF AMERICA, Defendant-Appellee, and AMFAC RESORTS, Defendant-Appellee, and BENCHMARK HOSPITALITY, Defendant-Appellee, and CHASE MANAGEMENT CORPORATION, Defendant-Appellee, and OUTRIGGER LODGING SERVICES, Defendant-Appellee, and COLONY HOTELS & RESORTS (now known as RHI Hotels, Inc.), and RED LION HOTELS & INNS,Defendants-Appellees, and PARK LANE HOTELS INTERNATIONAL, Defendant-Appellee, and SRS HOTELS, FOUR SEASONS HOTELS, WESTCOAST HOTELS, NIKKO HOTELS, INTERNATIONAL,MOTEL, INC., NENDELS CORPORATION, SUMMERFIELD SUITES HOTELS, GROSVENOR HOTELS GROUP, PAN PACIFIC HOTELS AND RESORTS, ANA HOTELS INTERNATIONAL, INNCAL, INC., RAPHAEL HOTEL GROUP, COASTAL HOTEL GROUP, and ANDREW HOTEL MANAGEMENT COMPANY, Defendants. 99-1086 DECIDED:
CourtU.S. Court of Appeals — Federal Circuit

Appealed from: U.S. District Court for the Southern District of Florida

Judge Kenneth L. Ryskamp

John P. Sutton, Bryan, Hinshaw & Barnet, of San Francisco, California, argued for plaintiff-appellant.

Donald S. Showalter, Holland & Knight, LLP, of Ft. Lauderdale, Florida, of counsel for Clubhouse Inns of America, argued for all defendants-appellees. On the brief were J. Bruce McCubbrey, and Gary L. Benton, Coudert Brothers, of San Francisco, California for Red Lion Hotels & Inns and RHI Hotels, Inc.; Leslie J. Lott, Lott & Friedland, P.A., of Coral Gables, Florida, for Aston Hotels & Resorts; Richard M. Blau, Holland & Knight LLP, of Tampa, Florida, for Clubhouse Inns of America; Nathan Lane, III, Graham & James, LLP, of San Francisco, California, for Interstate Hotels Corporation; Jonathan R. Bass, Coblentz, Patch, Duffy and Bass, LLP, of San Francisco, California, for Fairmont Hotel Management Company; Shauna Weeks, Arnold & Porter, of Los Angeles, California, for Economy Inns of America; C. Hopkins Guy, III, Orrick, Herrington & Sutcliffe, of Menlo Park, California, for Hospitality Franchise Systems, Inc. (now known as Cendant Corporation); Noemi C. Espinosa, Brobeck, Phleger & Harrison, of Palo Alto, California, for Chase Management Corporation; Stephen Kaus, Cooper, White & Cooper, of San Francisco, California, for Park Lane Hotels International; David E. Bergquist, Hillyer & Irvin, of San Diego, California, for Benchmark Hospitality; William E. Crockett, Greenberg & Bass, of Encino, California, for Outrigger Lodging Services. Not on the brief, representing AMFAC Resorts was Frederick Brown, Orrick, Herrington & Sutcliffe, of San Francisco, California. Of counsel for RHI Hotels Inc. were Jeffrey G. Benz and Eric N. Hoover, Coudert Brothers, of San Francisco, California; of counsel for Aston Hotels and Resorts was David K. Friedland, Lott & Friedland, P.A., of Coral Gables, Florida.

Before RADER, Circuit Judge, SKELTON, and ARCHER, Senior Circuit Judges.

PER CURIAM.

The United States District Court for the Southern District of Florida dismissed the patent infringement claims of Phonometrics, Inc. (Phonometrics) against Hospitality Franchise Systems, Inc. and the other hotel operators (collectively, Hotels) under Fed. R. Civ. P. 12(b)(6). Because Phonometrics' complaint met the liberal pleading requirements of Rule 12(b)(6), this court reverses and remands.

I.

Phonometrics is the owner of United States Patent No. 3,769,463 ('463 patent). The '463 patent covers an apparatus for automatically computing and recording the cost of a long distance telephone call. Phonometrics sued Hotels for infringing the '463 patent. This court has twice previously construed the claims of the '463 patent. See Intellicall, Inc. v. Phonometrics, Inc., 952 F.2d 1384, 21 USPQ2d 1383 (Fed. Cir. 1992); Phonometrics v. Northern Telecom, Inc., 133 F.3d 1459, 45 USPQ2d 1421 (Fed. Cir. 1998) (Phonometrics I and Phonometrics II, respectively).

During the pendency of Phonometrics I and Phonometrics II, the district court stayed the proceedings in this case. After this court issued its opinion in Phonometrics II, the district court, sua sponte, dismissed Phonometrics' claims against Hotels under Rule 12(b)(6). In its order, the district court required Phonometrics to include express allegations of infringement of each claim element in accordance with this court's interpretation of those elements in Phonometrics I and Phonometrics II. To do so, the district court granted Phonometrics twenty days' leave to amend its complaint.

In Phonometrics I, this court explained that the term "digital display," as used in claim 1 of the '463 patent,1 encompasses only human readable, not machine readable, displays. See Phonometrics I, 952 F.2d at 1387. In Phonometrics II, this court explained that the phrase "substantially instantaneous" means that the "register displays cumulated costs as they accrue, in real time, and not only once the call has ended." Phonometrics II, 133 F.3d at 1465. In its order, the district court essentially required that Phonometrics specifically allege that Hotels use apparatuses that include human readable displays and that the displays show cumulated costs as they accrue in real time.

Rather than amend its complaint, Phonometrics immediately appealed the district court's order to this court. On appeal, the parties raise two issues. First, whether this court has jurisdiction to hear this case. Second, whether the district court erred in dismissing Phonometrics' complaint for failure to state a claim.

II.

On the question of jurisdiction, Hotels argue that this court lacks jurisdiction to hear this case because Phonometrics filed its notice of appeal after the district court dismissed the complaint, but before the period for leave to amend had expired. Thus, Hotels argue, Phonometrics did not appeal from a final judgment. See 28 U.S.C. § 1295 (1994). In reviewing district court judgments in patent cases, this court applies its own law on patent law issues, but with respect to nonpatent issues it generally applies the law of the circuit in which the district court sits. See Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359, 50 USPQ2d 1672, 1675 (Fed. Cir. 1999) (en banc in relevant part). Because the finality of the dismissal in this case is a procedural issue not related to patent law, this court applies the law of the regional circuit, the Eleventh Circuit. See id.

Generally, a dismissal with leave to amend is not an appealable final judgment under 28 U.S.C. § 1295. See Jung v. K.D. Mining Co., 356 U.S. 335 (1958). However, the United States Court of Appeals for the Eleventh Circuit has held that dismissal orders with leave to amend, such as the one in this case, become final as of the end of the amendment period granted by the district court. See Schuurman v. Motor Vessel "Betty K V", 798 F.2d 442, 445 (11th Cir. 1986). Eleventh Circuit law also provides that a plaintiff may even appeal a dismissal with leave to amend before the expiration of the amendment period granted by the district court, provided that the plaintiff stands on his complaint as dismissed. See Briehler v. City of Miami, 926 F.2d. 1001, 1003 (11th Cir. 1991). In the instant case, like in Briehler, Phonometrics filed its notice of appeal before entry of final judgment. Then, within thirty days of Phonometrics' filing of its notice of appeal the district court entered final judgment, dismissing the case. Technically, Phonometrics appealed before entry of final judgment, but nevertheless fell within the Eleventh Circuit's rule in Briehler.

Phonometrics' premature notice of appeal put Hotels on notice of Phonometrics' intention to stand on its complaint, and to appeal the final judgment which the district court entered soon thereafter. The Hotels have not identified any prejudice suffered as a result of the premature filing of the notice of appeal. Therefore, based on the lack of prejudice to Hotels and the Eleventh Circuit's rule in Briehler, this court holds that Phonometrics' appeal to this court was timely and not jurisdictionally barred under 28 U.S.C. § 1295. To deny jurisdiction at this stage would spin judicial wheels for no practical purpose.

III.

The second issue in this case asks whether the district court erred in dismissing for failure to state a claim upon which relief can be granted under Rule 12(b)(6). To review a purely procedural question not pertaining to patent law, such as whether a Rule 12(b)(6) motion was properly granted, this court again applies the rule of the regional circuit, the Eleventh Circuit. See Midwest, 175 F.3d at 1359; cf. Marquip, Inc. v. Fosber Am., Inc., --F.3d--, 53 USPQ2d 1015, 1020 (Fed. Cir. 1999). The United States Court of Appeals...

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