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Unadjudicated Counterclaim “Pauses” Appeal

March 14, 2005

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Last Month at the Federal Circuit - April 2005

Judges: Linn (author), Newman, and Lourie

In Pause Technology LLC v. TiVo, Inc., No. 04- 1263 (Fed. Cir. Mar. 14, 2005), the Federal Circuit dismissed an appeal of a district court’s finding of SJ of noninfringement because the Defendant’s invalidity counterclaim remained unadjudicated. The Federal Circuit agreed to reinstate the appeal if the district court entered final judgment on the entire case or granted a Rule 54(b) certification.

In 2001, Pause Technology LLC (“Pause”) sued TiVo, Inc. (“TiVo”), alleging that TiVo’s digital video recorder technology infringed Pause’s U.S. Reissue Patent No. 36,801. Shortly thereafter, TiVo counterclaimed for a DJ of invalidity and noninfringement. The district court granted TiVo’s SJ motion of noninfringement with respect to certain newer versions of TiVo’s products, then entered judgment for TiVo. Neither the record nor the district court’s docket indicated the disposition of TiVo’s counterclaims.

In their initial appeal briefs, neither Pause nor TiVo addressed the unresolved counterclaim. The Federal Circuit then issued an order to show cause why the appeal should not be dismissed for lack of jurisdiction and ordered the parties to further brief the jurisdictional issues. Pause argued that the district court docket sheet shows the case as dismissed and that the district court had implicitly dismissed the invalidity counterclaim as moot, so jurisdiction is proper. In contrast, TiVo acknowledged that the counterclaim is still pending and contended that the Federal Circuit lacked jurisdiction.

The Federal Circuit noted that its jurisdiction must be based on a final judgment or a basis for an interlocutory order. The Court observed that parties too frequently are not reviewing the actions of the district courts for finality before lodging appeals. The Federal Circuit did not agree with Pause’s argument that there was an implicit dismissal of the invalidity counterclaim and concluded that when fewer than all claims are dismissed, the district court must enter a certification under F.R.C.P. 54(b) that judgment is final.

Despite its frustration, the Court granted Pause’s request to seek remedial action in the district court and, thereafter, reinstate the appeal. Notably, Pause would be permitted to reinstate the appeal, without paying an additional fee, if Pause were to appeal from entry of final judgment or certification for appeal under Rule 54(b).

On April 7, 2005, the district court amended the final judgment, dismissing TiVo’s counterclaim without prejudice. The next day, Pause filed a notice of appeal of the Amended Final Judgment and moved the Federal Circuit to reinstate the appeal.