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Settlement Agreement Moots Appeal and Prevents Vacatur of Invalidity Judgment Roland G. McAndrews, Jr.

April 19, 2001

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Last Month at the Federal Circuit - May 2001

Judges: Dyk (author), Lourie, and Rader

In Aqua Marine Supply v. Aim Machining, Inc., No. 00-1409 (Fed. Cir. Apr. 19, 2001), the Federal Circuit found that a settlement agreement between the parties entered into after the district court’s final judgment, but before the appeal, had terminated the case or controversy, rendering the case moot and preventing vacatur of the district court’s invalidity judgment.

Aqua Marine Supply (“Aqua Marine”) filed suit against Aim Machining, Inc. and others (collectively “Aim Machining”) for infringement of Aqua Marine’s U.S. Patent No. 5,794,919 (“the ‘919 patent”) covering a compact, motorized hoist for small boat lifts. The district court held the ‘919 patent invalid on SJ based on a violation of the onsale bar of 35 U.S.C. § 102(b). In response to a request from Aqua Marine, the district court entered final judgment and stayed the case pending appeal to the Federal Circuit.

Before filing a notice of appeal with the Federal Circuit, Aqua Marine and Aim Machining had entered into a settlement agreement (“the Agreement”) settling all claims pending between the parties. The Agreement provided that papers  would be filed with the district court reflecting that the lawsuit had been settled and dismissed with prejudice as to all claims. In accordance with the Agreement, Aqua Marine and Aim Machining filed a joint motion, pursuant to Fed. R. Civ. P. 60(b)(6), to vacate the district court’s judgment of invalidity of the ‘919 patent. The district court denied the motion for vacatur, stating that the settlement situation was not an exceptional or extraordinary circumstance warranting the equitable relief of Rule 60(b)(6). After the district court’s refusal to vacate its invalidity decision, Aqua Marine appealed on the merits of the invalidity decision. Aim Machining agreed not to oppose the appeal.

The Federal Circuit noted that before it could review the decision of the district court, it must first determine whether an Article III case or controversy still existed, or if the case had been mooted by the Agreement entered between the parties. While the Agreement was unclear regarding the ramifications of the district court’s refusal to grant vacatur, Aim Machining represented that, in light of the Agreement, they no longer had any interest in the outcome of the validity issue on appeal. The Federal Circuit went on to state that while under certain circumstances an opposing party’s lack of interest will not bar adjudication on the merits, when, as here, the alleged infringer has settled the infringement issue and no longer professes any interest in defending its DJ of invalidity, the case becomes moot as a result of the voluntary act of the patentee. Otherwise, patentees could simply settle the infringement question and continue to litigate validity unopposed by the defending party. Accordingly, the Federal Circuit concluded that the case was moot.

The Federal Circuit then addressed the request for vacatur under Rule 60(b)(6), “[w]here mootness results from settlement, . . . the losing party has voluntarily forfeited his legal remedy by the ordinary processes of appeal or certiorari, thereby surrendering his claim to the equitable remedy of vacatur.” U.S. Bancorp Mortgage Co. v. Bonner Mall P’ship, 513 U.S. 18, 25 (1994). The Federal Circuit denied vacatur because to do otherwise would have effectively been giving Aqua Marine exactly the relief Bancorp holds inappropriate.