ABB Inc. v. Cooper Industries, LLC, No. 2010-1227 (Fed. Cir. Feb. 17, 2011) (Judges Rader, Lourie, and Dyk)

This case of first impression presents dueling declaratory judgment actions where the potential claims and defenses involve patent infringement, but the actions themselves involve only state law questions concerning the construction and interpretation of a settlement agreement.  ABB Inc. (“ABB”) and Cooper Industries, LLC (“Cooper”) both filed declaratory judgment actions involving the scope of a settlement and license agreement that arose from a 2005 patent infringement suit.  Cooper alleged that the license agreement did not permit ABB to have certain chemicals manufactured.  ABB filed its action in federal court, while Cooper filed its action in state court and moved to dismiss ABB’s action for lack of subject matter jurisdiction on the ground that ABB’s complaint presented no federal question.  The district court granted Cooper’s motion to dismiss, and ABB appealed the district court ruling to the Federal Circuit.

The Federal Circuit reversed.  The court held that, because Cooper would have had to seek damages and an injunction for patent infringement rather than breach of contract, its hypothetical coercive complaint against ABB arose under federal law.  Cooper argued that the fact that ABB had only a state law defense meant that the case actually arose under state law.  The court disagreed, while noting that in Textron Lycoming Reciprocating Engine Div., AVCO Corp. v. Auto Workers, the Supreme Court had recognized that the issue of whether federal courts have jurisdiction where there is only a nonfederal defense to a potential federal claim was “an open question.” Acknowledging that there is “no direct authority on point,” the Federal Circuit relied on the reasoning of Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust to hold that “federal jurisdiction in this type of case depends on the federal character of the hypothetical infringement suit and not the federal character of the invalidity defense.”

Read the original opinion here.

In re Katz Interactive Call Processing Patent Litigation, Nos. 2009-1450, -1451, -1452, -1468, -1469, 2010-1017 (Fed. Cir. Feb. 18, 2011) (Judges Newman, Lourie, and Bryson)

In this lengthy and complex opinion involving patents for call processing systems for telephonic games, betting, and contests, appellant Ronald A. Katz Licensing LP (“Katz”) received a busy signal on the validity of most of the asserted claims but an opportunity to call back later for others.  This appeal arose from a group of consolidated cases in which numerous claims in Katz’s patent portfolio were found invalid or not infringed in summary judgment.  The most interesting part of this case, however, is Katz’s due process claim and the Federal Circuit’s response.  Following settlements in lawsuits in 1997 and 2001 surrounding the same portfolio, Katz filed “25 separate actions in federal district courts” between 2005 and 2006, “assert[ing] a total of 1,975 claims from 31 patents against 165 defendants in 50 groups of related corporate entities.”  To make the case somewhat manageable, the district court limited the number of claims asserted against all defendants to 64.  The court allowed Katz to add new claims if they added issues of validity or infringement that were not duplicative, but Katz instead moved the court “to sever and stay the non-selected claims.”

Katz appealed the court’s denial of its motion to sever and stay on the grounds that Katz’s due process rights were violated because the court’s final judgments on the asserted claims could have preclusive effect on subsequent actions involving the claims that were not asserted.  The Federal Circuit rejected Katz’s due process argument.  Assessing the complexity of the case, the various burdens of the parties, and the public interest in finality of judgments, the court concluded that Katz was afforded ample opportunity to show that other claims raised issues of infringement or validity, and thus had a “meaningful opportunity to be heard” on the unselected claims.  Katz denied itself the chance to assert these claims by simply asserting “the generalized notion” that 64 claims was too few rather than asserting unique or specific issues.

Read the original opinion here.