U.S. Ethernet Innovations v. Texas Instruments Incorporated ( 2016 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
U.S. ETHERNET INNOVATIONS, LLC,
Plaintiff-Appellant
v.
TEXAS INSTRUMENTS INCORPORATED,
Defendant-Appellee
______________________
2015-1510
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 6:11-cv-00491-MHS-JDL,
Judge Michael H. Schneider.
______________________
Decided: April 25, 2016
______________________
JOHN C. HERMAN, Robbins Geller Rudman & Dowd
LLP, Atlanta, GA, argued for plaintiff-appellant. Also
represented by PETER M. JONES.
ROBERT T. HASLAM, Covington & Burling LLP, Red-
wood Shores, CA, argued for defendant-appellee. Also
represented by RANGANATH SUDARSHAN, Washington, DC.
______________________
Before TARANTO, LINN, and HUGHES, Circuit Judges.
2 U.S. ETHERNET INNOVATIONS v. TEXAS INSTRUMENTS INC.
LINN, Circuit Judge.
U.S. Ethernet Innovations, LLC (“USEI”) appeals the
decision of the United States District Court for the East-
ern District of Texas, holding U.S. Patent No. 5,434,872(“’872 patent”) invalid as anticipated on the basis of
collateral estoppel, U.S. Ethernet Innovations, LLC. V.
Texas Instruments, Inc., No. 6:11-cv-491 (E.D. Tex. Feb.
19, 2015) (“TI”), following a final judgment of invalidity
issued by the United States District Court for the North-
ern District of California, U.S. Ethernet Innovations, LLC.
v. Acer, Inc., No. 4:10-cv-3724 (N.D. Cal. Oct. 10, 2014)
(“Acer”), affirmed in Appeal No. 2015-1640, -1641 (Fed.
Cir. April 25, 2016) (“Acer appeal”). USEI also contends
that the district court erred by not allowing USEI to
present its willful infringement argument. Because our
contemporaneous affirmance of the Northern District’s
summary judgment of invalidity of the ’872 patent in the
companion Acer appeal has issue-preclusive effect, we are
compelled to affirm and do not reach USEI’s argument on
willfulness.
BACKGROUND 1
In 2009, USEI sued several computer makers and
Ethernet end-users in the Eastern District of Texas for
infringement of the ’872 patent, U.S. Patent No.
5,732,094, 2 and other patents no longer at issue. Those
cases were transferred to the Northern District of Califor-
nia, and are the subject of the companion Acer appeal.
1 Because we write for the parties, familiarity with
the background of this case is assumed and presented
herein only to the extent necessary to provide context for
the analysis that follows.
2 The ’094 patent is not at issue in this appeal, but
was at issue in the Acer appeal.
U.S. ETHERNET INNOVATIONS v. TEXAS INSTRUMENTS INC. 3
On September 15, 2011, USEI initiated the present
action against Texas Instruments (“TI”) in the Eastern
District of Texas for infringement of the ’872 patent and
other patents no longer at issue. On April 3, 2014, the
district court heard and denied a motion by TI for sum-
mary judgment of invalidity of the ’872 patent as antici-
pated by a SONIC reference. On April 11, 2014, a jury
determined that all of the asserted claims of the ’872
patent were not invalid over SONIC. On June 20, 2014, a
second jury determined that TI directly infringed and
induced infringement of all asserted claims of the ’872
patent, and awarded USEI $3,000,000 in damages. On
the basis of these jury determinations, the district court
entered final judgment for USEI on September 19, 2014.
In that judgment, the district court noted: “With the
exception of the parties’ post-verdict briefing (Doc. Nos.
346, 348, 421, and 426 [including TI’s Rule 50(b) motion
for judgment as a matter of law]), which will be ruled
upon separately, all relief not previously granted is here-
by DENIED.”
On November 7, 2014, Acer moved for summary
judgment of invalidity in the Northern District of Califor-
nia case on the same SONIC reference previously found
not to anticipate the claims of the ‘872 patent in the
Eastern District of Texas case. The Northern District of
California granted the motion and found the asserted
claims of both the ’872 and ’094 patents invalid as antici-
pated. The court entered final judgment of invalidity on
December 1, 2014.
Following the judgment of invalidity in the Northern
District of California case, TI filed a motion in the East-
ern District of Texas to compel the application of collat-
eral estoppel and to enter judgment of invalidity of the
’872 patent, notwithstanding the earlier contrary judg-
ment entered on the basis of the jury’s verdict. On Feb-
ruary 19, 2015, the TI district court granted TI’s motion.
4 U.S. ETHERNET INNOVATIONS v. TEXAS INSTRUMENTS INC.
The TI district court did not rule on TI’s Rule 50(b) mo-
tion for judgment as a matter of law.
USEI challenges the Eastern District of Texas’s appli-
cation of collateral estoppel in light of the timing of the
district court ruling in the Acer case and timely appeals.
We have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
USEI argues that Fifth Circuit law not Federal Cir-
cuit law governs the question of whether collateral estop-
pel may be applied after verdict and judgment in the
Eastern District of Texas case on the basis of the incon-
sistent later judgment in the Northern District of Califor-
nia case. See Cycles, Ltd. v. Navistar Fin. Corp., 37 F.3d
1088, 1090 (5th Cir. 1994) (holding a district court judg-
ments final and, thus, “strong enough to withstand pre-
clusion by inconsistent later judgments” even when the
precluded judgment was not yet appealable). We need not
resolve this question, however, because we have contem-
poraneously affirmed the invalidity of the ‘872 patent in
the Acer appeal, and that ruling itself has issue-preclusive
effect. On issues of issue preclusion that implicate the
scope of our own previous decisions, we apply Federal
Circuit law. See Soverain Software LLC v. Victoria’s
Secret Direct Brand Mgmt., LLC, 778 F.3d 1311, 1314
(Fed. Cir. 2015) (“We apply this court’s precedent to
questions involving substantive issues of patent law,
issues of issue preclusion that implicate substantive
patent law issues, or issues of issue preclusion that impli-
cate the scope of our own previous decisions.”).
Our decision in Mendenhall v. Barber-Greene Co., 26
F.3d 1573, 1576-76 (Fed. Cir. 1994) (“Mendenhall”) in-
forms the outcome in this case. That decision flowed from
a series of cases in which patentee, Mendenhall, sued
Astec, Cedarapids, and Barber-Greene, respectively, for
infringement of the same patents in various district
courts. The Astec case was the first to proceed to trial
U.S. ETHERNET INNOVATIONS v. TEXAS INSTRUMENTS INC. 5
and resulted in a determination that the patents were not
invalid. On September 1, 1989, this court affirmed the no
invalidity ruling on interlocutory appeal and remanded
for a determination of damages. See Mendenhall v. Astec
Indus., Inc., 887 F.2d 1094 (Fed. Cir. 1989) (unpublished),
aff’g 13 USPQ2d 1913, 1988 WL 188449 (E.D. Tenn. Oct.
31, 1988).
The Cedarapids case was the next to proceed to trial,
resulting in a final judgment of invalidity on March 4,
1991. This court affirmed the invalidity determination on
September 13, 1993. See Mendenhall v. Cedarapids, Inc.,
5 F.3d 1557, 1574 (Fed. Cir. 1993), cert. denied 511 U.S.
1031 (April 18, 1994).
Following the invalidity ruling in the Cedarapids
case, Astec, in the remand proceedings, argued that
Mendenhall was collaterally estopped on the basis of
Cedarapids. The Astec district court disagreed and pro-
ceeded to award damages. Astec then appealed.
In the Barber-Greene case, the district court held that
Barber-Greene had infringed, and Barber-Greene ap-
pealed. The Cedarapids district court decision issued and
we affirmed, while Barber-Greene’s appeal was pending.
For the first time on appeal, Barber-Greene argued that
the infringement determination and injunction should be
reversed, based on the invalidity determination in Ce-
darapids. Mendenhall, 26 F.3d at 1576. The Astec and
Barber-Greene appeals were consolidated. Id. Menden-
hall argued “that these cases [Astec and Barber-Greene]
are too far along for [the accused infringers] to invoke
collateral estoppel.” Id. at 1578.
We disagreed and held that “[i]t would be contrary to
the policies expressed in Blonder-Tongue were this court
now to enter the judgments Mendenhall seeks in these
appeals.” Id. In Blonder-Tongue, the Supreme Court held
that non-mutual issue preclusion was generally available
to accused infringers where a prior judgment had held
6 U.S. ETHERNET INNOVATIONS v. TEXAS INSTRUMENTS INC.
that the asserted patent was invalid. Blonder-Tongue
Labs., Inc. v. Univ. of Ill. Foundation, 402 U.S. 313, 350-
51 (1971). The Court reiterated that “[a] patent by its
very nature is affected with a public interest,” id. at 343(quoting Precision Instrument Mfg. Co. v. Automotive
Maint. Mach. Co., 324 U.S. 806, 816 (1945)), and ex-
plained its “consistent view” “that the holder of a patent
should not be . . . allowed to exact royalties for the use of
an idea that is not in fact patentable or that is beyond the
scope of the patent monopoly granted,” such as would
occur where a defendant must defend a suit for infringe-
ment of a previously adjudged invalid patent, see id. at
350-51.
Mendenhall is squarely on point here. Like the pre-
cluding invalidity determination in Cedarapids, the
precluding Acer decision was made and affirmed by this
court. Just as Barber-Greene was not immunized from
the preclusive effect of Cedarapids while Barber-Greene
was on appeal after the district court’s final judgment, the
TI decision here is likewise not immunized from the
preclusive effect of the Acer appeal. See also Soverain,
778 F.3d at 1315 (“It is also established that issue preclu-
sion applies even though the precluding judgment []
comes into existence while the case as to which preclusion
is sought (this case) is on appeal.”). The invalidity of the
’872 patent has been adjudged—to enforce it against TI in
light of our concurrent affirmance in Acer would thus
extend the patent beyond its proper scope.
USEI does not argue that it did not have a full and
fair opportunity to litigate the validity of the ’872 patent
in Acer. Instead, USEI attempts to distinguish Menden-
hall by asserting that the precluding judgment in that
decision was a decision of this court, not a district court
decision. Now that we have upheld the invalidity of the
’872 patent, this argument is inapposite. Cf. Hart Steel
Co. v. R.R. Supply Co, 244 U.S. 294, 299 (1917) (“The
conclusion [of patent invalidity] which we have reached in
U.S. ETHERNET INNOVATIONS v. TEXAS INSTRUMENTS INC. 7
[the companion] Railroad Supply Co. v. Elyria Iron &
Steel Co. this day decided 244 U. S. 285 . . . is such that it
leaves our decision in this case [to apply collateral estop-
pel] uncomplicated by the one in that.”); R.R. Supply Co.
v. Elyria Iron & Steel Co., 244 U.S. 285 (1917).
“[A] patentee, having been afforded the opportunity to
exhaust his remedy of appeal from a holding of invalidity,
has had his ‘day in court’ and should not be allowed to
harass others on the basis of an invalid claim.” Blonder-
Tongue, 402 U.S. at 339; see also Mendenhall, 26 F.3d at
1578 (“For this court to affirm the findings of infringe-
ment and the willfulness of conduct against one appellant,
increase damages against the other, and uphold injunc-
tions against both, appears anomalous in the extreme in
connection with patents this court has just held invalid.”).
There is no basis for USEI to avoid the application of
estoppel in this case.
In short, this court’s affirmance in the Acer appeal of
the Northern District of California’s judgment that all of
the asserted claims of the ’872 patent are invalid compels
our affirmance of the Eastern District of Texas’s judgment
under the circumstances of this case.
AFFIRMED