May 2013
When Party Challenging Validity Fails to Cross-Appeal, Cross-Appeal Rule Precludes Reopening Prior Validity Judgment on Remand Based on Modified Claim Construction
| Judges: Lourie (author), Dyk (dissenting), Reyna |
| [Appealed from S.D.N.Y., Judge Griesa] |
In Lazare Kaplan International, Inc. v. Photoscribe Technologies, Inc., No. 12-1247 (Fed. Cir. Apr. 19, 2013), the Federal Circuit reversed the district court’s grant of relief under Fed. R. Civ. P. 60(b), vacated the finding of invalidity, and remanded with instructions to reinstate its original judgment of validity and assess infringement.
In 2006, Lazare Kaplan International, Inc. (“Lazare”) sued Photoscribe Technologies, Inc. and the Gemological Institute of America (collectively “Photoscribe”), alleging infringement of two patents, including U.S. Patent No. 6,476,351 (“the ’351 patent”). Photoscribe filed counterclaims seeking declarations of invalidity. Claims 1 and 7 of the ’351 patent, which were the only claims-at-issue, recite a method of microscribing a gemstone and a corresponding system, respectively. Following a claim construction ruling that resulted in a narrow construction of a key claim term, the district court granted SJ of no literal infringement of the asserted claims, and, at a later trial, the jury returned a verdict of noninfringement under the DOE and validity of the asserted claims. The district court then issued a final judgment that the asserted claims were not invalid and not infringed, either literally or under the DOE. Lazare appealed the judgment of noninfringement. Photoscribe, however, did not cross-appeal the judgment of validity. In that appeal, the Federal Circuit broadened the district court’s construction of the key term, vacated both the grant of SJ and jury verdict on infringement issues, and remanded the infringement issues to the district court for determination based on the modified claim construction. Lazare Kaplan Int’l, Inc. v. Photoscribe Techs., Inc., 628 F.3d 1359, 1369 (Fed. Cir. 2010).
On remand, the parties disputed as to whether the district court should retry on only infringement or both infringement and validity. The district court agreed with Photoscribe that, despite Photoscribe’s failure to cross-appeal the adverse validity judgment, it should also retry on validity because the validity judgment in the first trial was based on a claim construction that the Federal Circuit reversed. Photoscribe then moved for SJ of invalidity and relief under Rule 60(b) from the prior validity judgment, and Lazare moved for SJ of infringement. The district court granted both of Photoscribe’s motions and denied Lazare’s motion as moot. Lazare appealed for a second time.
In the instant appeal, the Federal Circuit reversed the district court’s grant of relief under Rule 60(b), vacated the SJ of invalidity, and remanded with instructions to reinstate its original judgment of validity and assess infringement. The parties disputed whether, on remand, the district court properly reopened the prior final judgment on validity, not appealed by either party, based on the Federal Circuit’s modified claim construction. Lazare argued that the cross-appeal rule—requiring a party to file a cross-appeal if the party seeks to lessen the rights of its adversary or to enlarge its own rights—should have barred reopening the prior judgment on validity because Photoscribe sought to lessen the rights of Lazare under that prior judgment without filing a cross-appeal. In response, Photoscribe argued that prior Federal Circuit decisions permitted the district court to address validity on remand and that the relief under either Rule 60(b)(5) or 60(b)(6) was proper.
“The cases cited by Photoscribe, however, do not involve Rule 60(b)(6), and only recite the familiar axiom that ‘claims are construed the same way for both invalidity and infringement.’ [Appellee Br.] 21 (quoting Amgen Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1330 (Fed. Cir. 2003)). That axiom, however, does not trump the Federal Rules or the cross-appeal rule, and cannot save Photoscribe from its deliberate decision not to file a cross-appeal from an adverse judgment.” Slip op. at 11.
Applying the law of the Federal Circuit, the Court agreed with Lazare and concluded that the district court erred by allowing Photoscribe to address validity on remand despite its failure to file a cross-appeal from the adverse prior final judgment on validity. In reaching this conclusion, the Court emphasized the Supreme Court’s long-standing recognition of the cross-appeal rule as “inveterate and certain” by reiterating that “[a]pplication of the [cross-appeal] rule promotes orderly functioning of the appellate courts by providing ‘notice of issues to be litigated and encouraging repose of those that are not.’” Slip op. at 7 (quoting El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 481-82 (1999)). “[A] party will not be permitted to argue before us an issue on which it has lost and on which it has not appealed, where the result of acceptance of its argument would be reversal or modification of the judgment rather than affirmance.” Id. (alteration in original) (quoting Radio Steel & Mfg. Co. v. MTD Prods., Inc., 731 F.2d 840, 844 (Fed. Cir. 1984)). The Court also expressly rejected the district court’s view that, because the issues of validity and infringement are closely interrelated, it was not necessary for Photoscribe to appeal the validity issue in order for the district court to hear the issue on remand. “Whether or not the concepts of invalidity and infringement are ‘closely interrelated’ is irrelevant; the relevant issue is whether a ruling reversing the validity holding would expand Photoscribe’s rights or lessen [Lazare’s] rights.” Id. at 9. The Court then found that the holding of invalidity on remand would certainly expand Photoscribe’s rights or lessen Lazare’s rights beyond the infringement determination.
The Court also rejected all of Photoscribe’s arguments that the district court properly granted relief under Rule 60(b)(5) and 60(b)(6). In particular, recognizing that relief under Rule 60(b) has long been limited to “extraordinary circumstances,” the Court held that “reversal of a claim construction is hardly an ‘extraordinary circumstance.’” Id. at 11. The Court explained that the familiar axiom that claims are construed the same way for both invalidity and infringement does not “trump the Federal Rules or the cross-appeal rule, and cannot save Photoscribe from its deliberate decision not to file a cross-appeal from an adverse judgment.” Id. (citing El Paso, 526 U.S. at 480). Finally, while recognizing the district court’s reasons for entertaining the validity challenge on remand, the Court explained that, although a new claim construction potentially raises new validity issues, “rules are rules, and the cross-appeal rule is firmly established in our law,” thus making it an error by the district court to rely on Rule 60(b) as a substitute for a cross-appeal. Id. at 14.
Judge Dyk dissented from the majority, explaining that the majority declined to follow the basic patent law principle that claims must be interpreted and given the same meaning for purposes of both validity and infringement analyses. In Judge Dyk’s view, the majority’s holding reverses the district court’s effort to eliminate the inconsistency—i.e., “allowing the patentee to assert infringement on a broad claim construction while permitting it to defend against invalidity using a different and far narrower claim construction”—through Fed. R. Civ. P. 60(b)(5). Dyk Dissent at 1-2. In support of his view, Judge Dyk noted that the circumstance of the case is not governed by the traditional cross-appeal rule because Photoscribe did not seek on appeal to modify the rights established by the district court judgment but only to preserve them. Citing the Supreme Court and other appellate precedent, Judge Dyk also noted that, in such a circumstance, there is no requirement that a party, who is satisfied with the judgment below, file a conditional cross-appeal even if his adversary pursues an appeal, and cross-appeal is not required to preserve the right to orderly disposition of issues that become relevant only because of reversal.
