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District Court Improperly Granted Judgment on the Pleadings Where Plaintiff Voluntarily Dismissed the Case Before Being Properly Served with an Answer

February 16, 2007

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Last Month at the Federal Circuit - March 2007

Judges: Michel, Schall, Prost (author)

[Appealed from: N.D. Tex., Judge Kinkeade]

In RFR Industries, Inc. v. Century Steps, Inc., Nos. 05-1610, 06-1285 (Fed. Cir. Feb. 16, 2007), the Federal Circuit vacated the district court’s grant of judgment on the pleadings and for attorney’s fees. The Court held that plaintiff RFR Industries, Inc. (“RFR”) had properly voluntarily dismissed the action under Fed. R. Civ. P. 41(a)(1)(i) before defendant Century Steps, Inc. (“Century”) had served its answer, and thus, the district court’s grant of judgment on the pleadings was improper and without effect.

RFR is the assignee of U.S. Patent Nos. 5,577,662 (“the ’662 patent”) and 5,535,947 (“the ’947 patent”). Those patents are directed to an embedded railway track system known as a “flangeway filler” and a method of installing the “flangeway filler.” As part of a settlement agreement in 2000 in a previous patent infringement action between RFR and Century, Century was obligated to purchase an amount of filler from RFR. Century was also granted an express license under the ’662 and ’947 patents to use and sell the purchased filler. In 2004, RFR filed suit against Century, alleging that Century had failed to pay for some filler it had purchased. RFR further alleged that the filler sold by Century had been installed in a manner that infringed the ’662 and ’947 patents.

Century filed an answer with the court and faxed a copy of the answer to RFR’s attorney. In response, RFR voluntarily dismissed the action under Fed. R. Civ. P. 41(a)(1)(i). In the alternative, RFR motioned for the court to dismiss the action without prejudice under Rule 41(a)(2). Century, in turn, moved for judgment on the pleadings under Fed. R. Civ. P. 12(c). The district court granted Century’s motion for judgment on the pleadings and denied RFR’s motions to dismiss. It held that RFR’s patent rights in the filler provided to Century were exhausted, and awarded Century attorney’s fees.

On appeal, RFR argued that it had an absolute right to dismiss its action without prejudice because Century had not properly served RFR with an answer before RFR filed a notice of dismissal. Applying Fifth Circuit law to issues not unique to patent law, the Federal Circuit explained that under Rule 41(a)(1)(i), so long as a plaintiff has not been served with an answer or a motion for SJ, the plaintiff need do no more than file a notice of dismissal to dismiss the case. No order from the court is necessary. Indeed, the Federal Circuit noted, the court has no power or discretion to deny the plaintiff the right to dismiss under Rule 41(a)(1)(i). Moreover, the Fifth Circuit has made it clear that the adverse party must actually serve the plaintiff—not just file an answer—in order to prevent the plaintiff from dismissing its action under Rule 41(a)(1)(i). The Federal Circuit held that Century’s faxing of a copy of its answer to RFR did not constitute service on RFR. Service by fax under Fed. R. Civ. P. 5(b)(2) is only permitted if consented to in writing by the person being served, and RFR had not so consented. The Federal Circuit further rejected Century’s request to excuse its noncompliance with Rule 5(b)(2) for “exceptional good cause.” The Court found that the Fifth Circuit did not recognize such an exception and Century did not point to any circumstances that would amount to exceptional good cause.

The Court thus held that RFR’s action was dismissed without prejudice upon its filing of a notice of dismissal and vacated the district court’s grant of judgment on the pleadings. The Court also vacated the award of attorney’s fees under 35 U.S.C. § 285 because RFR’s voluntary dismissal without prejudice did not bestow “prevailing party” status upon Century.