Vardon Golf Co., Inc. v. Karsten Manufacturing

• Citation: 294 F.3d 1330
• Decision Date: 21 June 2002
• Docket Number: No. 01-1557.,No. 01-1651.,01-1557.,01-1651.
• Parties: VARDON GOLF COMPANY, INC., Plaintiff-Appellant, v. KARSTEN MANUFACTURING CORPORATION, Defendants-Cross Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

294 F.3d 1330

VARDON GOLF COMPANY, INC., Plaintiff-Appellant, v. KARSTEN MANUFACTURING CORPORATION, Defendants-Cross Appellant.

No. 01-1557.

No. 01-1651.

United States Court of Appeals, Federal Circuit.

June 21, 2002.

Michael P. Mazza, Niro, Scacone, Haller & Niro, of Chicago, IL, argued for plaintiff-appellant. With him on the brief was Keith A. Vogt.

Lawrence G. Kurland, Bryan Cave LLP, of New York, NY, argued for defendant-cross appellant. With him on the brief were Thomas C. Walsh, David A. Roodman, Roxana Wizorek, and K. Lee Marshall, of Bryan Cave LLP, of St. Louis, MO; and Troy B. Froderman, Bryan Cave LLP, of Phoenix, AZ.

Before NEWMAN, DYK, and PROST, Circuit Judges.

PROST, Circuit Judge.

Vardon Golf Company, Inc. ("Vardon") appeals from the final decision of the United States District Court for the Northern District of Illinois, denying Vardon's motion to amend its complaint against Karsten Manufacturing Corporation ("Karsten") and dismissing Vardon's suit in its entirety. Vardon Golf Co. v. Karsten Mfg. Corp., No. 00 C 7221, slip op. at 1 (N.D.Ill. May 9, 2001). The court held that a grant of partial summary judgment that Karsten did not infringe claims 12 and 15 of Vardon's U.S. Patent No. 5,301,941 ("the '941 patent") in a prior case, Vardon Golf Co., Inc. v. Karsten Mfg. Corp., No. 99 C 2785, slip op. at 1 (N.D.Ill. Sept. 7, 2000) ("Vardon I"), collaterally estopped Vardon from bringing a new action against Karsten based on certain claims of Vardon's reissue patent, U.S. Patent No. Re. 36,950 ("the '950 patent"). Vardon Golf Co. v. Karsten Mfg. Corp., No. 00 C 7221, slip op. at 5 (N.D.Ill. May 9, 2001) ("Vardon II"). Karsten cross-appeals, arguing that the court abused its discretion when it declined to sanction Vardon for bad faith litigation. Vardon Golf Co., Inc. v. Karsten Mfg. Corp., No. 00 C 7221, slip op. at 5, 2001 WL 1117391 (N.D.Ill. Sept.20, 2001) ("Vardon II Sanctions"). We hold that the grant of partial summary judgment in Vardon I was not final for purposes of collateral estoppel and that the court therefore erred in according it preclusive effect in Vardon II. We reverse the court's dismissal of both Vardon's complaint and its motion to amend, and remand for further proceedings consistent with this opinion. We affirm the court's refusal to impose sanctions.

BACKGROUND

Vardon and Karsten manufacture golf clubs. Vardon I at 1. In 1999, Vardon brought suit against Karsten alleging that Karsten's TiSI woods infringed claims 12 and 15 of Vardon's '941 patent and that Karsten's ISI iron-type clubs infringed several claims of Vardon's U.S. Patent No. 5,401,021 ("the '021 patent"). Id. at 1. Claims 12 and 15 of the '941 patent both contain the limitation "substantially uniform thickness." Id. at 15-16. On September 7, 2000, the district court construed this limitation and held that as a matter of law, Karsten's clubs did not infringe claims 12 and 15 either literally or under the doctrine of equivalents. Id. at 17-19. The court consequently granted summary judgment in Karsten's favor on the '941 patent. Id. It denied, however, Karsten's motion for summary judgment on certain of the '021 claims. Id. Thus, Vardon I is still before the court awaiting trial on the '021 patent. That case is not before us on appeal.

Prior to bringing suit against Karsten, Vardon had filed a reissue application for the '941 patent. While that application was pending, but before the court's decision in Vardon I, Vardon filed a motion to substitute the reissue patent for the '941 patent in the ongoing litigation. The court denied the motion. Two months after the court granted partial summary judgment in Karsten's favor, the '950 reissue patent issued. In order to obtain the reissue, Vardon surrendered the parent patent, thereby mooting Vardon I's summary judgment on the '941 claims and extinguishing Vardon's right to appeal the court's claim construction and finding of noninfringement regarding that patent. Vardon subsequently filed a second action against Karsten on November 15, 2000. Vardon II at 2. Like Vardon I, Vardon II was brought in the Northern District of Illinois, although the two suits were heard by different district judges.

In Vardon II, Vardon alleged that Karsten infringed claim 22 of the '950 reissue patent. Id. Unlike claims 12 and 15 of the '941 patent, claim 22 of the '950 reissue did not contain the "substantially uniform thickness" limitation that the court had previously construed in Vardon I. Id. After Karsten answered, however, Vardon sought to amend its complaint to include allegations that Karsten's product infringed claims 12 through 21 of the '950 patent, all of which contain the "substantially uniform thickness" limitation. Id. at 2-3. Karsten challenged this motion, arguing that Vardon was collaterally estopped from raising claims that included a limitation that Karsten's clubs had already been found not to possess. Id. at 3.

The court agreed with Karsten and denied Vardon's motion. Id. at 5. The court held that Vardon had failed to take advantage of available means of preserving its right to appeal in connection with the Vardon I litigation, and that Vardon was therefore estopped from rearguing the Vardon I issues. Id. When Vardon later informed the court that the Patent and Trademark Office ("PTO") had made a mistake printing claim 22 and that, like claims 12 through 21, it too should have contained the "substantially uniform thickness" language, the court dismissed Vardon's entire complaint on the basis of collateral estoppel. Id. at 1. The court denied Karsten's motion for sanctions, however, concluding that Karsten had failed to introduce sufficient evidence to support a finding of bad faith litigation on Vardon's part. Vardon II Sanctions at 5.

Vardon subsequently filed another motion with the Vardon I court to substitute the '950 patent into its grant of partial summary judgment. This motion was denied. Vardon appealed the Vardon II decision to this court, and we have jurisdiction pursuant to 35 U.S.C. § 1295(a)(1).

DISCUSSION

"Because the application of collateral estoppel is not a matter within the exclusive jurisdiction of this court, this court applies the law of the circuit in which the district court sits." Bayer AG. v. Biovail Corp., 279 F.3d 1340, 1345, 61 USPQ2d 1675, 1679 (Fed.Cir.2002) (citing Pharmacia & Upjohn Co. v. Mylan Pharms., Inc., 170 F.3d 1373, 1381 n. 4, 50 USPQ2d 1033, 1040 n. 4 (Fed.Cir.1999)). Under Seventh Circuit law, collateral estoppel, or issue preclusion, prevents a party from litigating an issue if: (1) the issue sought to be precluded is the same as that involved in an earlier action; (2) the issue was actually litigated; (3) determination of the issue was essential to a final judgment; and (4) the party against whom estoppel is invoked was represented in the prior action. See Adair v. Sherman, 230 F.3d 890, 893 (7th Cir.2000); Chicago Truck Drivers, Helpers & Warehouse Union (Indep.) Pension Fund v. Century Motor Freight, Inc., 125 F.3d 526, 530 (7th Cir.1997); Havoco of Am., Ltd. v. Freeman, Atkins & Coleman, Ltd., 58 F.3d 303, 307 (7th Cir. 1995).

A.

On appeal, Vardon argues that the Vardon II court erred when it accorded Vardon I preclusive effect because that decision was neither final nor appealable. According to Vardon, a nonfinal, unappealable judgment does not become preclusive simply because a party theoretically could have preserved its right to appeal by pursuing certain procedural avenues. In response, Karsten concedes that Vardon I's grant of partial summary judgment was not sufficiently final to be appealed. It argues, however, that the decision should be accorded preclusive effect because Vardon voluntarily relinquished its right to appeal. In short, Karsten asserts that because Vardon did not take procedural steps to preserve its appeal from Vardon I's partial summary judgment, that judgment now precludes Vardon from litigating the matter anew. In making this argument, Karsten relies heavily on the Seventh Circuit's statement in Williams v. Commissioner of Internal Revenue, 1 F.3d 502, 504 (7th Cir. 1993) that application of collateral estoppel "might be extended to certain cases of summary judgment and even of partial summary judgment."¹

We agree with Vardon that Vardon I's grant of partial summary judgment was not final for purposes of collateral estoppel and that the Vardon II court therefore erred when it accorded the decision preclusive effect. In Miller Brewing Co. v. Jos. Schlitz Brewing Co., 605 F.2d 990 (7th Cir.1979), the Seventh Circuit set forth the requirements for finality under the doctrine of collateral estoppel. The court held that in order "[t]o be `final' for purposes of collateral estoppel the decision need only be immune, as a practical matter, to reversal or amendment." Id. at 996. According to the court, the possibility of appeal contributes directly to this determination of finality, which "turns upon such factors as the nature of the decision (i.e., that it was not avowedly tentative), the adequacy of the hearing, and the opportunity for review." Id. (emphasis added) (citing Lummus Co. v. Commonwealth Oil Refining Co., 297 F.2d 80 89 (2d Cir.1961)). In so holding, the Seventh Circuit explicitly adopted the approach followed by the Restatement (Second) of Judgments, § 41 reporter's note comment g (Tent. Draft No. 1, 1973), now § 13 reporter's note comment g (1982), which states that the fact "that the decision was subject to appeal or was in fact reviewed on appeal [is a] facto[r] supporting the conclusion that the decision is final for the purpose of preclusion." Id. See also United States v. Sherman, 912 F.2d 907, 909-10 (7th Cir.1990); Gilldorn Sav. Ass'n v. Commerce Sav. Ass'n, 804 F.2d 390, 393 (7th Cir.1986); accord Interconnect Planning Corp. v. Feil, 774 F.2d 1132, 1135, 227 USPQ 543, 545 (Fed.Cir.1985) ("Sufficient firmness, according to the Restatement, requires that the...