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Golf Club Manufacturer Gets Another “Swing” at Accused Infringer

01-1557
June 21, 2002

Decision icon Decision

Last Month at the Federal Circuit - July 2002

Judges: Prost (author), Newman, and Dyk (concurring)

In Vardon Golf Co. v. Karsten Manufacturing Corp., No. 01-1557 (Fed. Cir. June 21, 2002), the Federal Circuit, applying the law of the Seventh Circuit, reversed a district court’s dismissal of Vardon Golf Company’s (“Vardon”) complaint against Karsten Manufacturing Corporation (“Karsten”) because a prior decision involving the same parties was not final and, thus, did not collaterally estop Vardon’s subsequent suit against Karsten.

Vardon and Karsten manufacture golf clubs. In 1999, Vardon brought suit against Karsten alleging that Karsten’s golf clubs infringed Vardon’s U.S. Patent No. 5,301,941 (“the ‘941 patent”) and U.S. Patent No. 5,401,021 (“the ‘021 patent”) (“Vardon I”). In Vardon I, the district court held that, as a matter of law, Karsten’s clubs did not infringe the claims of the ‘941 patent either literally or under the DOE. The court consequently granted a partial SJ in Karsten’s favor on the ’941 patent. The district court, however, denied Karsten’s motion for SJ regarding the ’021 patent.

Prior to bringing suit against Karsten, Vardon had filed a reissue application for the ’941 patent. Two months after the court granted partial SJ in Karsten’s favor, the reissue patent issued. In order to obtain the reissue, Vardon surrendered the parent patent, thereby mooting Vardon I’s SJ on the ’941 claims and extinguishing Vardon’s right to appeal the court’s findings regarding that patent. Vardon subsequently filed a second action against Karsten based on the reissue patent, and the second action was the subject of the appeal (“Vardon II”).

In Vardon II, Vardon alleged that Karsten infringed claims having the same limitation that the district court found to render Karsten’s golf clubs noninfringing in Vardon I. Karsten argued that Vardon was collaterally estopped from raising claims that included a limitation that Karsten’s clubs had already been found not to possess.

The district court agreed with Karsten, holding 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.

The Federal Circuit disagreed. First, the Court applied the law of the circuit in which the district court sat because the application of collateral estoppel is not a matter within the exclusive jurisdiction of the Federal Circuit, citing Bayer AG v. Biovail Corp., 279 F.3d 1340, 1345 (Fed. Cir. 2002).

The Court reasoned that the grant of partial SJ in Vardon I was not final nor appealable because Vardon’s claims regarding the ’021 patent were still before the district court. The Court also rejected Karsten’s argument that Vardon should have taken certain procedural steps to preserve its right to appeal the decision in Vardon I.

Specifically, the Federal Circuit held that the decision in Vardon I was not final because it was not immune to reversal or amendment. Because neither party moved to certify the district court’s interlocutory decision as final under Rule 54(b), the Federal Circuit held that the decision was subject to revision at any time before the entry of judgment adjudicating all the claims, namely resolution of the remaining ’021 patent allegations. Also, the Federal Circuit noted that Karsten conceded that Vardon I’s partial SJ was not an appealable final judgment under 28 U.S.C. § 1291 and found it to be undisputed that this decision was rendered moot and, therefore, unappealable when Vardon surrendered the ’941 patent.

Karsten argued that Vardon I should be deemed final and preclusive because Vardon could have avoided mooting the court’s grant of partial SJ by (1) moving the Vardon I court to certify its decision for interlocutory appeal under Rule 54(b), (2) substituting U.S. Reissue Patent No. 36,950 (“the ‘950 reissue patent”) for the ’941 patent at an appropriate time, or (3) suspending its reissuance proceedings before the PTO.

The Federal Circuit held Karsten’s argument to be without merit. As a preliminary matter, the Court noted the uncertainty of whether the Vardon I court would have granted a Rule 54(b) certification motion and whether the district court would have allowed Vardon to substitute the ’950 reissue patent into the litigation. The Court stated that the existence of such speculative methods of preserving the right to appeal does not render a nonfinal judgment preclusive for the purposes of collateral estoppel.

Judge Dyk concurred in the majority’s opinion because he agreed that the Court was bound by the decision in Bayer AG v. Biovail Corp., 279 F.3d 1340 (Fed. Cir. 2002), to apply regional circuit law to res judicata and collateral-estoppel issues. Judge Dyk, however, stated that he believed uniform Federal Circuit law should apply to determine the effect of previous patent litigation.