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Marketplace Change Is Not an Exceptional Circumstance Warranting Reopening a Case After Final Judgment

July 25, 2006

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Last Month at the Federal Circuit - August 2006

Judges: Lourie (author), Schall, Prost

[Appealed from: W.D. Ky., Judge Simpson III]

In Louisville Bedding Co. v. Pillowtex Corp., No. 05-1595 (Fed. Cir. July 25, 2006), the Federal Circuit affirmed the district court’s denial of Louisville Bedding Company’s (“Louisville”) motion for partial relief from the district court’s final judgment of noninfringement.

Louisville is the owner of U.S. Patent No. 5,249,322 (“the ’322 patent”), which is directed to a mattress pad with a pad skirt material capable of expanding to cover mattresses of varying thickness. In 1994, Louisville filed suit against Pillowtex Corporation (“Pillowtex”) for sale of mattress pads, including a model that used Xymid, LLC’s (“Xymid”) 4059 skirt material (“the 4059 mattress pad”). The district court construed certain claim limitations of the ’322 patent and granted SJ of noninfringement with respect to the 4059 mattress pad. In 1998, the parties reached a settlement agreement as to the accused Pillowtex mattress pad models, wherein Pillowtex paid money, licensed numerous Louisville patents, including the ’322 patent, and agreed to mark the 4059 mattress pad as licensed under the patents. On the parties’ joint motion, the district court entered a final judgment dismissing with prejudice all claims that were or could have been asserted except Louisville’s claims relating to the 4059 mattress pad. The district court entered a final judgment that the 4059 mattress pad did not infringe the ’322 patent.

In 1998, Louisville filed suit against Perfect Fit Industries, Inc. (“Perfect Fit”) for infringement of the ’322 patent. The same district court adoptedthe claim construction from the earlier Pillowtex litigation, giving it collateral estoppel effect. As in the Pillowtex case, Perfect Fit and Louisville settled the suit by licensing the ’322 patent to Perfect Fit and agreeing to resolve future disputes involving potential infringement of the ’322 patent through alternative dispute resolution (“ADR”).

Pillowtex dissolved in 2003, and Xymid, who previously sold exclusively to Pillowtex, began selling its 4059 skirt material to other manufacturers, including Perfect Fit. Perfect Fit and Louisville entered into ADR, pursuant to their settlement agreement, to determine if there was possible infringement by Perfect Fit’s use of the new material. An arbitrator, adopting a new claim construction for the ’322 patent, concluded that Perfect Fit’s use of Xymid’s 4059 skirt material in its mattress pads would literally infringe the ’322 patent. On Louisville’s motion, the district court entered judgment in favor of Louisville on the arbitrator’s award.

In May 2005, Louisville filed a Rule 60(b)(6) motion to reopen the litigation against Pillowtex, to seek the district court to partially vacate judgment that the 4059 mattress pad does not infringe certain claims of the ’322 patent, and to vacate the underlying claim construction. The district court denied the motion.

On appeal, the Federal Circuit affirmed the district court’s denial of the motion, explaining that, while a district court may grant relief from judgment under Rule 60(b)(6) in “exceptional or extraordinary circumstances,” this was not such a case. The Court held that neither the change of circumstances in the marketplace nor the possibly conflicting district court judgments would provide a sufficient basis for vacating the judgment.

Specifically, the Federal Circuit reasoned that in the Pillowtex case, Louisville was faced with SJ of noninfringement and an unfavorable claim construction with respect to the ’322 patent. It was to Louisville’s advantage to settle the case, and the Court would not now nullify what Louisville conceded was a bargained-for provision in the settlement agreement in view of unforeseen market events. Additionally, the Court recognized the need for finality of judgment in matters tried between parties, particularly when the case was ended by the deliberate choice of the parties, as in the Pillowtex litigation.

The Federal Circuit also found Louisville’s remaining arguments to be without merit and affirmed the district court’s denial of Louisville’s motion.