Schreiber Foods, Inc. v. Beatrice Cheese, Inc.

• Decision Date: 22 March 2005
• Docket Number: No. 04-1279.,No. 04-1314.,04-1279.,04-1314.
• Citation: 402 F.3d 1198
• Parties: SCHREIBER FOODS, INC., Plaintiff-Appellant, v. BEATRICE CHEESE, INC., Defendant, and Kustner Industries, S.A., Defendant-Cross Appellant, and Great Lakes Cheese Co., Inc., Great Lakes Cheese of La Crosse Wisconsin, Inc., and Great Lakes Cheese of Wisconsin, Inc., Defendants.
• Court: U.S. Court of Appeals — Federal Circuit

402 F.3d 1198

SCHREIBER FOODS, INC., Plaintiff-Appellant, v. BEATRICE CHEESE, INC., Defendant, and Kustner Industries, S.A., Defendant-Cross Appellant, and Great Lakes Cheese Co., Inc., Great Lakes Cheese of La Crosse Wisconsin, Inc., and Great Lakes Cheese of Wisconsin, Inc., Defendants.

No. 04-1279.

No. 04-1314.

United States Court of Appeals, Federal Circuit.

March 22, 2005.

COPYRIGHT MATERIAL OMITTED

Patrick F. Solon, Niro, Scavone, Haller & Niro, of Chicago, Illinois, argued for plaintiff-appellant. On the brief was Thomas G. Scavone.

James L. Quarles III, Wilmer Cutler Pickering Hale and Dorr LLP, of Washington, DC, argued for defendant cross appellant. With him on the brief was William G. McElwain. Of counsel on the brief was William F. Lee, of Boston, Massachusetts.

Before RADER, Circuit Judge, ARCHER, Senior Circuit Judge, and DYK, Circuit Judge.

DYK, Circuit Judge.

Schreiber Foods, Inc. ("Schreiber") appeals from the judgment of the United States District Court for the Eastern District of Wisconsin. The district court vacated its prior judgment of infringement in favor of Schreiber and dismissed Schreiber's patent infringement suit pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 305 F.Supp.2d 939 (E.D.Wis.2004) ("Schreiber III"). We affirm the order vacating the earlier judgment, reverse the judgment of dismissal, and remand for a new trial.

BACKGROUND

Schreiber is a producer of cheese products and is the current owner of U.S. Patent Nos. 5,440,860 ("the '860 patent") and 5,701,724 ("the '724 patent"), both pertaining to a method and apparatus for forming and hermetically sealing slices of food items. The '860 patent was issued to Schreiber in 1995.

In January 1997 Schreiber, then the owner of the '860 patent, filed suit against appellee Kustner Industries ("Kustner") and other defendants,¹ alleging infringement of the '860 patent. On March 31, 1997, while the case was being litigated, Schreiber assigned the '860 patent, including all claims and causes of action thereunder, to its subsidiary, Schreiber Technologies, Inc. (J.A. at 857, 865.) Schreiber Technologies then gave Schreiber a non-exclusive license to the '860 patent. The assignment was apparently part of a scheme to avoid state income taxes. (Br. of Appellant at 16-17.) Schreiber did not inform the defendants or the court of the assignment, and Schreiber Technologies was not joined as a party to the lawsuit.

During discovery in August 1997, Kustner sought from Schreiber "[a]ll documents concerning any negotiations for assignments, licenses, or security interests in the '860 patent." (J.A. at 651) Schreiber objected to this request on the grounds of attorney-client privilege and work product protection. It then stated that, subject to these objections, "Schreiber is not aware of any such documents." (Id.) There was no basis to claim either privilege or work product protection with respect to the assignment agreement itself.

In December 1997, a second patent, the '724 patent, was issued to Schreiber, and Schreiber amended its complaint to allege that Kustner also infringed the '724 patent. As provided in the '724 patent's terminal disclaimer, the '724 patent was required to be co-owned with the '860 patent to be enforceable. In its amended complaint, Schreiber again asserted that "Schreiber [defined earlier in the complaint as "Schreiber Foods, Inc."] owns and has standing to sue for infringement of United States Letters Patent No. 5,440,860." (J.A. at 161.) This statement was plainly false at the time since Schreiber was not then owner of the '860 patent; it had been assigned to Schreiber Technologies.

In July 1998, Schreiber notified the Patent Office of the assignment of the '860 patent to Schreiber Technologies. (J.A. at 856.) However, it still did not inform the court or its opponents of the transfer. The case proceeded to trial in August 1998. During the trial, Thomas Badciong, a Schreiber director who had been present when Schreiber's Board had approved the assignment of the '860 patent, falsely testified that "Schreiber Foods" owned the '860 patent and had owned it since it was issued by the Patent Office. At the conclusion of the trial, the jury returned a special verdict finding both the '724 and '860 patents valid and infringed. The jury assessed damages at $26 million. Defendants moved pursuant to Federal Rule of Civil Procedure 50 for judgment notwithstanding the verdict.

In September 1998, after the trial and verdict, and while the defendants' motion for judgment as a matter of law was pending, Schreiber's counsel in this case learned of the assignment of the '860 patent. Schreiber's counsel concluded that there was no legal or ethical obligation to disclose the assignment to the court or the opposing party despite the unjustified failure to produce the assignment documents in discovery, the false statements made in response to the document production request, the false statements appearing in the amended complaint, and the false testimony by Badciong. (J.A. at 617.) Instead, on the advice of counsel, Schreiber reacquired the '860 patent. The patent, with all causes of action thereunder, was reassigned to Schreiber on April 20, 1999. (J.A. at 233.) Just as the original assignment of the '860 patent to Schreiber Technologies had not been disclosed, neither Schreiber nor its counsel disclosed the reassignment of the '860 patent to the district court or to opposing counsel.

In March 2000, the district court granted the defendants' motion for judgment as a matter of law, finding non-infringement and setting aside the jury verdict. Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 92 F.Supp.2d 857 (E.D.Wis.2000) ("Schreiber I"). On appeal to this court, we reversed the district court's judgment and ordered the reinstatement of the jury verdict in favor of Schreiber. Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 31 Fed. Appx. 727 (Fed.Cir.2002) ("Schreiber II"), cert. denied, 538 U.S. 1031, 123 S.Ct. 2129, 155 L.Ed.2d 1059 (2003). Pursuant to this court's mandate, the district court entered judgment in Schreiber's favor on September 10, 2002. Kustner was ordered to pay $15,729,846 in damages, plus costs and post-judgment interest. (J.A. at 192.)

After Kustner learned of the '860 patent's earlier assignment to Schreiber Technologies in October 2002 from an unrelated lawsuit, Kustner moved to vacate judgment pursuant to Rule 60(b) of the Federal Rules of Civil Procedure.² The district court, in a carefully considered opinion, granted this motion under Rule 60(b)(4), holding that Schreiber's lack of ownership during the litigation deprived Schreiber of standing and rendered the suit moot, and the court's judgment was thus void. Schreiber III, 305 F.Supp.2d at 958. Additionally, the court found that Schreiber's litigation conduct constituted fraud, misrepresentation or misconduct that would warrant relief from judgment under Rule 60(b)(3), id. at 958-61, and that the evidence of Schreiber's lack of ownership of the '860 patent was newly discovered evidence that would warrant relief from judgment under Rule 60(b)(2), id. at 961. The district court vacated the judgment and dismissed the case for lack of jurisdiction. After the district court's dismissal, Kustner moved for attorney fees and costs, which issues are still pending.

Schreiber appeals. Kustner conditionally cross-appeals for a new trial. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1). At oral argument, the court inquired whether the Supreme Court's decision in Caterpillar Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996), which had not been cited by either party, might be relevant to the issues presented. With the leave of the court, both parties filed supplemental briefs on the question.

DISCUSSION

Schreiber on appeal has (1) waived its claim for monetary damages against Kustner, and (2) waived its claim against Kustner for infringement of the '724 patent. (Br. of Appellant at 7-8.) Schreiber seeks only reinstatement of a judgment that the '860 patent is valid, enforceable and infringed, and an injunction barring infringement of the '860 patent against Kustner.

I

We first consider whether the district court correctly held that the judgment was void because the court lacked jurisdiction to adjudicate the case. Schreiber III, 305 F.Supp.2d at 952, 958. We apply Federal Circuit law in determining whether a judgment is void under Rule 60(b)(4). Broyhill Furniture Indus., Inc. v. Craftmaster Furniture Corp., 12 F.3d 1080, 1082-84 (Fed.Cir.1993). This is because questions of the district court's jurisdiction — upon which this court's jurisdiction depends — are always determined under Federal Circuit law. See Silicon Image, Inc. v. Genesis Microchip Inc., 395 F.3d 1358, 1362 (Fed.Cir.2005) (this court's jurisdiction determined under Federal Circuit law); Commissariat a L'Energie Atomique v. Chi Mei Optoelectronics Corp., 395 F.3d 1315, 1323 (Fed.Cir.2005) (citing Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed.Cir.1994)).

At the time this action commenced, Schreiber was the owner of the '860 patent and had standing.³ However, once the assignment to Schreiber Technologies was completed, there was no question that Schreiber lost its "personal stake in the outcome." Though an assignment of a patent does not ordinarily include the right to sue for past infringement, Moore v. Marsh, 74 U.S. (7 Wall.) 515, 522, 19 L.Ed. 37 (1868), the assignment to Schreiber Technologies explicitly included an assignment of all causes of action. (J.A. at 865.) It is well-settled that non-exclusive licensees do not have constitutional standing to sue. Intellectual Prop. Dev., Inc. v. TCI Cablevision of Cal., Inc., 248 F.3d 1333, 1345 (Fed.Cir.2001). Thus, when Schreiber transferred the '860 patent and became a mere non-exclusive licensee, Schreiber lost standing to sue for...