IP Law Daily Federal Circuit accepts jurisdiction over Walker Process appeal after Fifth Circuit rejects transfer
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Thursday, March 14, 2019

Federal Circuit accepts jurisdiction over Walker Process appeal after Fifth Circuit rejects transfer

By Cheryl Beise, J.D.

Notwithstanding flaws in the Fifth Circuit’s analysis, the Federal Circuit concluded that its jurisdiction was plausible, given that resolution of a monopolizationclaim based on fraud in patent procurement likely would resolve questions as to patent enforceability.

The U.S. Court of Appeals for the Federal Circuit has issued a sua sponte order accepting jurisdiction over an appeal it previously transferred to the U.S. Court of Appeals in New Orleans. The Fifth Circuit declined to accept the transfer, finding that that the appeal—regarding allegations of monopolization through use of a patent obtained by fraud on the USPTO—fell within the Federal Circuit’s exclusive jurisdiction over appeals relating to patents. The Federal Circuit disagreed with the Fifth Circuit’s analysis, but nevertheless accepted the appeal because its jurisdiction was not "implausible," given that the patent at issue in the case had not yet expired and resolution of the dispute could affect its enforceability (Xitronix Corp. v. KLA-Tencor Corp., March 14, 2019, per curiam).

Xitronix Corp. and KLA-Tencor Corp. ("KLA") are competitors in the market for semiconductor process-control metrology. The underlying complaint was filed by Xitronix in 2014 in the federal district court in Austin, Texas, alleging a Walker Process monopolization claim under Section 2 of the Sherman Act and Sections 4 and 6 of the Clayton Act, based on KLA’s alleged fraudulent prosecution of a patent—U.S. Patent No. 8,817,260 ("the ‘260 patent")—in an attempt to shut Xitronix out of the optical semiconductor inspection industry (the dopant activation metrology market). The district court granted summary judgment to KLA, concluding that KLA did not engage in fraud before the USPTO.

Xitronix’s filed its original appeal with the Federal Circuit. In June 2018, a Federal Circuit panel concluded that it lacked jurisdiction based on the U.S. Supreme Court’s ruling in Gunn v. Minton, 568 U.S. 251 (2013). In Gunn, the Supreme Court held that the Federal Circuit does not have exclusive jurisdiction in appeals involving patents when the patent issue is not the primary issue in the case. Gunn involved a state legal malpractice claim by an inventor against the attorneys who had represented him in a patent infringement suit. The Federal Circuit denied KLA’s petition for a panel rehearing and rehearing en banc (Circuit Judge Pauline Newman, dissenting) and transferred Xitronix’s appeal to the Fifth Circuit. On February 15, 2019, a Fifth Circuit panel transferred the appeal back to the Federal Circuit, reasoning that the fraud element of Xitronix’s sole claim could be adjudicated only with reference to patent law.

Congress has vested the Federal Circuit with "exclusive jurisdiction of an appeal from a final decision of a district court of the United States ... in any civil action arising under ... any Act of Congress relating to patents or plant variety protection." 28 U.S.C. § 1295(a)(1).

The Federal Circuit pointed out several flaws in the Fifth Circuit’s reasoning, yet nevertheless accepted jurisdiction. Citing Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 819 (1988), the court explained that "if a transferee court can find the transfer decision ‘plausible,’ it should accept jurisdiction." The Fifth Circuit’s transfer decision in this case was not "implausible."

The Federal Circuit first clarified that as Christianson recognized, jurisdiction exists under Section 1338(a) where "patent law is a necessary element of one of the well-pleaded claims." 486 U.S. at 809. Thus, patent law must be "essential" to each theory of a claim in order for Section 1338(a) to be implicated, the court said.

The Federal Circuit next voiced its disagreement with the Fifth Circuit’s suggestion that the Supreme Court’s decision in Gunn was inapplicable to the jurisdictional analysis in this case. The Federal Circuit noted that in Gunn the Court considered the meaning of the phrase "any civil action arising under any Act of Congress relating to patents" as it appears in Section 1338(a). Id. at 257. At issue in this case is the meaning of the phrase "any civil action arising under ... any Act of Congress relating to patents" as it appears in 28 U.S.C. § 1295(a)(1). The Federal Circuit noted that it is a fundamental canon of statutory construction that words used in different parts of the same statute are generally presumed to have the same meaning. In this case, both uses of the phrase appear in Part IV of Title 28 and serve to define the jurisdiction of particular federal courts. Moreover, in enacting the Leahy-Smith America Invents Act of 2011, Congress revised Section 1295(a)(1) to parallel Section 1338(a) while expanding Federal Circuit jurisdiction to cover compulsory counterclaims.

The Fifth Circuit also misread the Federal Circuit’s decision in Nobelpharma AB v. Innovations, Inc., 141 F.3d 1059 (Fed. Cir. 1998). The Federal Circuit explained that the question of whether it has exclusive jurisdiction over a matter and the question of whether it applies "Federal Circuit law" or regional circuit law to a question are related but distinct. "In short, in Nobelpharma we considered whether the issue on appeal ‘clearly involves’ our jurisdiction, not whether the issue would give rise to jurisdiction," the court said.

The Federal Circuit concluded that its jurisdiction over this case as not implausible if Gunn is interpreted to mean that to imply that whether the patent question at issue is substantial depends on whether the patent is "live," such that the resolution of any question of patent law is not "merely hypothetical." The ’260 patent has not expired, and the resolution of the fraud question could affect its enforceability. "Walker Process fraud and inequitable conduct are fraternal twins, such that conclusions as to Walker Process fraud would likely resolve questions as to the enforceability of the patent," the court observed. The court nevertheless emphasized that its jurisdiction did not turn on whether a patent can still be asserted. To hold otherwise would require cases involving Walker Process claims based on expired patents to go to the regional circuits while those with unexpired patents would go to the Federal Circuit, despite raising the same legal questions.

The Federal Circuit agreed to accept the transfer and resolve the case on the merits on oral argument, but without additional briefing. The court recalled its prior mandate and reinstated the appeal.

This case is No. 16-2746.

Attorneys: Michael S. Truesdale (Law Office of Michael S. Truesdale, PLLC) for Xitronix Corp. Aaron Gabriel Fountain (DLA Piper US LLP) for KLA-Tencor Corp. d/b/a KLA-Tencor, Inc.

Companies: Xitronix Corp.; KLA-Tencor Corp. d/b/a KLA-Tencor, Inc.

MainStory: TopStory Patent FedCirNews

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