They Did Not Like Green Edge’s Plan

Green Edge's Plan

They Did Not Like Green Edge’s Plan

Green Edge Enterprises, LLC v. Rubber Mulch Etc., LLC, No. 2011-m998 (Fed. Cir. Dec. 13, 2011) (Chief Judge Rader, Circuit Judges Lourie and Bryson) (nonprecedential) (per curiam)

We’ve written a few times about the timing of an appeal. Normally, you have to wait until all issues in a patent case have been decided at the trial court level before you appeal, although there are some exceptions. For example, the trial court can certify an issue for immediate appeal while other issues are still pending if it’s important enough and if an early decision by the Federal Circuit would help move the case forward.

This is actually an odd case with a lot going on behind the scenes for what seems like a straightforward order from the Federal Circuit. The litigation started in 2002. Green Edge’s patent was found invalid for failure to disclose the best mode a couple of years ago, but the Federal Circuit reversed that decision last year.

Trial finally arrived this year. Rubber Resources (one of the defendants) wanted to be able to argue that Green Edge—and its licensee International Mulch Corp. (IMC)—unfairly competed by misusing Green Edge’s patent to dominate the rubber mulch market. But the trial court ruled that Rubber Resources would not be allowed to present evidence of Green Edge’s patent enforcement activities. That’s because its only misuse argument was that the patent enforcement effort was objectively baseless (basically, this means that no reasonable person would think Green Edge’s patent was valid and infringed), and the court felt that Rubber Resources couldn’t meet that standard. Rubber Resources could still argue its unfair competition claim; it just couldn’t present evidence that Green Edge (and IMC) did anything wrong in enforcing its patent.

The trial court, however, certified the evidence issue for appeal and Rubber Resources petitioned the Federal Circuit to consider it immediately.

Except Rubber Resources didn’t file the petition immediately. In fact, the interlocutory appeal was filed a few days after the trial court entered final judgment on the rest of the issues. An interlocutory order is an order that doesn’t resolve a claim or issue; it’s definitely not typical to have an interlocutory appeal after the case has been resolved.

Here’s the thing: Rubber Resources won at trial, so it couldn’t appeal the result of the trial. But there was no judgment on the unfair competition claim, so there was no final judgment to appeal. All that was left was an interlocutory appeal. How did they end up in that situation?

What Really Happened?

I dug in a little bit to figure out what happened. A few years after suing Rubber Resources, Green Edge gave an exclusive license for the patent to IMC. Rubber Resources had counterclaimed against Green Edge for unfair competition, claiming that it was misusing the patent. Once IMC was licensed, it was added IMC to the unfair competition counterclaim. So IMC was aligned with Green Edge.

A few years later, the district court found the patent invalid for lack of best mode. After that, IMC terminated its license with Green Edge. It then asked the court to be allowed to switch sides with respect to invalidity of the patent, which the court allowed. That left IMC aligned with Rubber Resources on the invalidity issue. But Rubber Resources maintained its unfair competition counterclaim against both Green Edge and IMC. (The Federal Circuit reversed the finding of invalidity for lack of best mode, but IMC was stuck on the same side with Rubber Resources.)

It seems that IMC was actually instrumental in the jury’s verdict of invalidity. The unfair competition claim never went to the jury. Apparently, the parties came to an agreement that in exchange for not presenting the unfair competition argument at trial, Rubber Resources would appeal the order excluding evidence of Green Edge’s and IMC’s patent enforcement activities. If Rubber Resources won the appeal, they’d try the unfair competition claim separately. The parties told the judge about this agreement 4 days into the trial.

After the trial, Rubber Resources and Green Edge tried to reach a settlement without IMC that would have prevented the judgment of invalidity from being entered. IMC (which was still potentially on the hook for an unfair competition claim) objected and asked the court to enter final judgment, which it did.

The magistrate judge’s order seems to be a bit half-hearted in granting the motion to certify—it seems that he felt obliged to go along with the parties agreement to certify the issue and split off the unfair competition claim. But there’s absolutely no legal reasoning presented in the order granting the motion to certify. He just parroted the language of the statute. (28 U.S.C. § 1292(b) says that the district court judge shall certify an order for interlocutory appeal if he believes that the “order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.”)

And that’s why the Federal Circuit denied the petition to appeal. The trial court gave it no reason to grant the petition and it didn’t see any reason on its own. The issue isn’t important and the court’s ruling wasn’t on a legal point that’s in dispute. There was also no reason to think that the appeal would move the litigation forward. With no rationale for granting the petition, the Federal Circuit denied it.

What’s the Lesson?

This case demonstrates how important it is to think through the end game before dropping an issue at trial. In order to have a right to appeal, there had to be a final judgment on the unfair competition claim. Without that judgment in hand, Rubber Resources had to try this long shot. If the patent enforcement evidence really was critical, Rubber Resources might actually have been better off stipulating to summary judgment of no unfair competition in light of the exclusion of its evidence, conditioned on its right to appeal.

Of course, that requires giving up a potential trial on the issue with whatever evidence Rubber Resources had left. It’s hard to let go of even a small chance of winning, but it’s one of those tough choices you have to make in litigation. If you have a 30% chance of winning the evidence issue on appeal but only a 5% chance of winning at trial if you can’t get that evidence in, you’re better off taking a summary judgment against you so that you’re guaranteed your appeal.

In a sort of a postscript, it seems that the owner of Green Edge is still bitter about IMC’s switching sides. He has filed his own appeal with the Federal Circuit, asking for a new trial. We’ll let you know if anything happens with that appeal.

The Federal Circuit’s order is available for your reading pleasure.

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