Fujitsu Limited v. Tellabs, Inc. , 539 F. App'x 1005 ( 2013 )

Case: 13-154 Document: 14 Page: 1 Filed: 09/11/2013
NOTE: This order is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
FUJITSU LIMITED,
Plaintiff-Petitioner,
v.
TELLABS, INC., TELLABS OPERATIONS, INC.,
AND TELLABS NORTH AMERICA, INC.,
Defendants-Respondents.
______________________
Miscellaneous Docket No. 154
______________________
On Petition for Permission to Appeal pursuant to
28 U.S.C. § 1292(b) from the United States District Court
for the Northern District of Illinois in No. 09-CV-4530,
Chief Judge James F. Holderman, Jr.
______________________
ON PETITION FOR PERMISSION TO APPEAL
______________________
Before DYK, PROST, and O’MALLEY, Circuit Judges.
Opinion of the court filed PER CURIAM.
Dissenting opinion filed by Circuit Judge O’MALLEY.
PER CURIAM.
ORDER
Case: 13-154 Document: 14 Page: 2 Filed: 09/11/2013
2 FUJITSU LIMITED v. TELLABS, INC.
Fujitsu Limited (“Fujitsu”) petitions for permission to
appeal the May 23, 2013 order of the United States Dis-
trict Court for the Northern District of Illinois granting
Tellabs, Inc., Tellabs Operations, Inc., and Tellabs North
America, Inc.’s (collectively “Tellabs”) motion for sum-
mary judgment on the issue of whether Fujitsu may seek
lost profits as a theory of damages, if infringement liabil-
ity is found. Tellabs responds.
Fujitsu is a Japanese corporation and sole owner of
United States Patent Nos. 5,521,737 (“the ’737 patent”)
and 5,526,163 (“the ’163 patent”). Sales of Fujitsu patent-
ed telecommunications systems in the United States are
made by a non-exclusive licensee, Fujitsu Network Com-
munications, Inc. (“FNC”). FNC is a wholly owned subsid-
iary of Fujitsu and a California corporation.
Fujitsu sued Tellabs for patent infringement. 1 When
submitting its expert reports, Fujitsu indicated it would
be seeking damages based on lost profits regarding two
contracts Tellabs obtained. Tellabs moved for summary
judgment on the issue of whether Fujitsu could recover
lost profits on the two patents.
The district court stated that whether a parent com-
pany patent owner may be compensated under the dam-
ages theory of lost profits for its wholly-owned
subsidiary’s lost sales turned on whether the subsidiary’s
profits “flowed inexorably” to the patent-owner parent,
citing Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359,
1366 (Fed. Cir. 2008). The court then concluded that
based on the facts of this case, Fujitsu would not be
1 The ’737 patent and the ’163 patent are the only
patents covered by the district court’s May 23, 2013 order,
although there are other patents in the litigation. FNC is
not a party to the action giving rise to the May 23, 2013
order.
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FUJITSU LIMITED v. TELLABS, INC. 3
allowed to seek lost profits as a theory of recoverable
damages at trial.
The court certified the following issues for interlocuto-
ry appeal under 28 U.S.C. § 1292(b):
1) Can a foreign patent owner that does
not sell any products in the U.S. market col-
lect lost profits damages based on sales lost
by its wholly-owned U.S. subsidiary, which is
a non-exclusive licensee under the patent?
2) Can a foreign patent owner that manu-
factures and sells component parts to its
wholly-owned U.S. subsidiary via a transfer
pricing mechanism designed to comply with
the Internal Revenue Code, 26 U.S.C. § 482,
recover as lost profits the lost payments from
its wholly-owned U.S. subsidiary for these
component parts?
Fujitsu Ltd. v. Tellabs, Inc., No. 09-C-4530, slip op. at *16
(N.D. Ill. May 23, 2013).
Under 28 U.S.C. § 1292(b), a district judge may certify
for appeal an otherwise unappealable order when it is “of
the opinion that such order involves a controlling question
of law as to which there is substantial ground for differ-
ence of opinion and that an immediate appeal from the
order may materially advance the ultimate termination of
the litigation.” 28 U.S.C. § 1292(b) (emphasis added). Both
the legislative history of Section 1292(b) and the case law
emphasize that appellate courts should only grant inter-
locutory appeals under rare circumstances. 2
2 Green Edge Enters., LLC v. Rubber Mulch Etc.,
LLC, 450 F. App’x 978, 979 (Fed. Cir. 2011); Union Cnty.,
Iowa v. Piper Jaffray & Co., 525 F.3d 643, 646 (8th Cir.
2008) (“‘[I]nterlocutory appeals should . . . be granted
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4 FUJITSU LIMITED v. TELLABS, INC.
In general, a question of law is “controlling” within
the meaning of Section 1292(b) only if our resolution of
that issue could have an immediate impact on the course
of the litigation. In past cases we have held that a ques-
tion regarding the theory on which damages may be
recovered cannot be controlling where the issue of liability
remains undecided. See Quad Dimension, Inc. v. Sage
Alerting Sys., Inc., 69 F. App’x 448, 449 (Fed. Cir. 2003)
(denying a Section 1292(b) petition for permission to
appeal a damages issue because the district court had not
yet tried the issues of patent infringement and invalidity);
Johnson Elec. N. Am. Inc. v. Mabuchi Motor Am. Corp.,
Misc. No. 405, 1997 WL 173208 (Fed. Cir. Mar. 20, 1997)
(denying a Section 1292(b) petition for permission to
appeal summary judgment on a damages issue); see also
United States v. Rent-A-Homes Sys. of Ill., Inc., 602 F.2d
795, 797 (7th Cir. 1979) (quoting an earlier decision of the
court, holding that where no violation of the Fair Housing
Act of 1968 had been established at the district court
level, “any question of the propriety of compensatory
damages [was] premature for [the appellate] court’s
consideration”). As we noted in Ultra-Precision Mfg. Ltd.
v. Ford Motor Co., 338 F.3d 1353 (Fed. Cir. 2003), in the
sparingly and with discrimination.’” (citations omitted));
Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d
Cir. 1996) (“Section 1292(b)’s legislative history reveals
that . . . it is a rare exception to the final judgment rule
that generally prohibits piecemeal appeals.”); United
States Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir.
1966) (“The legislative history of subsection (b) of section
1292 . . . indicates that it was to be used only in extraor-
dinary cases[.]”); Milbert v. Bison Labs., Inc., 260 F.2d
431, 433 (3d Cir. 1958) (“It is quite apparent from the
legislative history of the Act of September 2, 1958 that
Congress intended that section 1292(b) should be sparing-
ly applied.”).
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FUJITSU LIMITED v. TELLABS, INC. 5
context of a Rule 54(b) appeal, “[w]ithout a determination
of liability, there can be no damages and therefore any
appeal on the quantum of relief available at this stage is
premature and would be advisory.” Id. at 1359.
The only instance where we granted a Section
1292(b) petition pertaining to a question on damages was
Studiengesellschaft Kohle, v. Shell Oil Co., No. 96-1079,
1995 WL 723644 (Fed. Cir. Nov. 29 1995). However, in
Studiengesellschaft, the district court had already deter-
mined liability when the damages issue reached our
court.
In Fujitsu, the issue of liability for patent infringe-
ment remains undecided. Therefore, granting this appeal
on the lost profits issue would not resolve any controlling
question of law.
Accordingly,
IT IS ORDERED THAT:
The petition for permission to appeal is denied.
FOR THE COURT
/s/ Daniel E. O’Toole
Daniel E. O’Toole
Clerk
s25
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6 FUJITSU LIMITED v. TELLABS, INC.
NOTE: This order is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
FUJITSU LIMITED,
Plaintiff-Petitioner,
v.
TELLABS, INC., TELLABS OPERATIONS, INC.,
AND TELLABS NORTH AMERICA, INC.,
Defendants-Respondents.
______________________
Miscellaneous Docket No. 154
______________________
On Petition for Permission to Appeal pursuant to
28 U.S.C. § 1292(b) from the United States District Court
for the Northern District of Illinois in No. 09-CV-4530,
Chief Judge James F. Holderman, Jr.
______________________
ON PETITION FOR PERMISSION TO APPEAL
______________________
O’MALLEY, Circuit Judge, dissenting.
I believe we should accept the interlocutory appeal the
district judge has certified to us in this case. While grant-
ing this petition may not immediately end the litigation as
the majority evidently requires, it would materially
advance its ultimate termination, which is all 28 U.S.C.
§ 1292(b) requires—indeed, that is precisely the purpose
for which § 1292(b) was designed. It is “within this
court’s complete discretion” to accept or deny an interlocu-
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FUJITSU LIMITED v. TELLABS, INC. 7
tory appeal under § 1292(b) and (c). Studiengesellschaft
Kohle v. Shell Oil Co., No. 96-1079, 1995 WL 723644, at
*1 (Fed. Cir. Nov. 29, 1995). Under the circumstances
presented here, we should exercise our discretion to
accept the appeal.
Section 1292(b) allows an appeal of a preliminary or-
der when a district court judge 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 that litigation.” 28 U.S.C.
§ 1292(b). The legislative history of § 1292(b) emphasizes
that the purpose of interlocutory appeals was to create a
vehicle to avoid unnecessary expenditures of party and
court resources. See S. Rep. No. 2434, Report of the
Committee on Appeals from Interlocutory Orders of the
District Courts, Sept. 23, 1953, reprinted in 1958
U.S.C.C.A.N. 5255, 5260–61 (stating that, while ground-
less appeals and piecemeal litigation are disfavored,
interlocutory appeals may be used to avoid unnecessary
delay and expense). Applying these principles to the
petition here should compel us to grant it—not deny it as
the majority does.
The record in this case reveals that both parties and
the district court believe that resolution of the certified
questions will materially advance the ultimate termina-
tion of this litigation. See Fujitsu Ltd. v. Tellabs, Inc.,
1:09-cv-4530, ECF No. 1096 at 3:12–8:25 (N.D. Ill. May
15, 2013) (transcript from hearing wherein all parties and
district court agree that Federal Circuit resolution of the
lost profits questions would materially advance the litiga-
tion). The parties diligently have attempted to settle this
dispute, but, absent resolution of their disagreement over
whether Fujitsu is entitled to lost profits through its
wholly owned subsidiary, the parties cannot “value” the
case. See id. In other words, Fujitsu cannot determine
whether the cost of the remaining pretrial proceedings
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8 FUJITSU LIMITED v. TELLABS, INC.
and trial will outweigh any potential recovery, and Tell-
abs is unable to determine its potential risk of exposure.
Our resolution of these pending questions will allow the
parties to obtain a clear-eyed view of their potential risks.
The dispute here is not one at the margins; resolution of
the certified questions would mean the difference between
a substantial damages award and none, or relatively
none.
The district court, moreover, has currently set De-
cember 2, 2013, as the deadline for dispositive motions,
and trial is set for February 2014. See Fujitsu, ECF No.
1108 (N.D. Ill. June 7, 2013). Between now and trial, the
parties must engage in expensive and time-consuming
fact and expert discovery, and the district court will be
required to rule on dispositive motions, resolve any dis-
covery disputes that may arise, and hold pretrial hear-
ings. Subsequently, the district court must empanel a
jury, and the parties will have to present a trial and
engage in post-trial motion practice. Only then will the
parties be entitled to file an appeal to this court. Should
this court accept the petition, however, the district court
has already indicated that it will likely exercise its discre-
tion to stay the pending litigation, see Fujitsu, ECF No.
1103 at 16 (N.D. Ill. May 23, 2013) (district court discuss-
ing propriety of stay should the Federal Circuit grant this
petition), saving both the parties and the district court
considerable resources in the process.
Accepting this petition on the narrow questions certi-
fied under these unique circumstances will not overbur-
den this court, and is fully in line with the goal of
materially advancing the ultimate termination of this
litigation. The parties have raised a compelling issue that
may impact numerous cases wherein a foreign patent
owner sells a commercial embodiment of that invention
through a U.S. subsidiary. Even putting aside any far-
reaching implications, the parties—and, most important-
ly, the district court—have made clear that they believe
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FUJITSU LIMITED v. TELLABS, INC. 9
resolution of this issue will materially advance termina-
tion of the litigation. Indeed, the requirement that a
district judge first certify the order under § 1292(b) was
“deliberately adopted to secure an initial judgment on the
desirability of appeal by the trial judge as the person most
familiar with the litigation.” 16 Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure § 3929
(3d ed. 2012) (emphasis added). The district court’s
certification “serves the dual purpose of ensuring that
such review will be confined to appropriate cases and
avoiding time-consuming jurisdictional determinations in
the court of appeals.” Coopers & Lybrand v. Livesay, 437
U.S. 463, 474 (1978).
Here, the district court has been shepherding this
case to its current state since July 29, 2009—over four
years. The district court’s determination that resolution
of the lost profits issue would quicken the termination of
this litigation—coming from a careful and experienced
jurist who has never before certified a case for appeal to
this court—should be entitled to deference. In fact, this
court only has received nineteen (19) petitions for permis-
sion to appeal under § 1292(b) in the last five years from
district courts, and only five (5) of those petitions have
been granted. Given the scarcity of requests, and our
extremely low grant rate, accepting this petition will not
burden us nor encourage unthinking certification on
different facts from other district judges.
The cases on which the majority relies to justify deni-
al of the petition do not require that result; they do not
even counsel against it. As noted, the decision to grant or
deny the petition is purely discretionary; there is no hard
and fast rule requiring a refusal to exercise that discre-
tion in any circumstance. See Studiengesellschaft Kohle,
No. 96-1079, 1995 WL 723644, at *1. The only case the
majority cites that provides any analysis regarding
whether § 1292(b) is a proper vehicle regarding an inter-
locutory appeal of a damages issue is Ultra-Precision
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10 FUJITSU LIMITED v. TELLABS, INC.
Manufacturing, Inc. v. Ford Motor Co., 338 F.3d 1353(Fed. Cir. 2003). That case involved a grant of a motion in
limine to prohibit certain damages evidence related to an
unjust enrichment claim and a district court’s attempt to
certify that issue to this court under Federal Rule of Civil
Procedure 54(b). 338 F.3d at 1356. Because the case
centered on a dispute over ownership—a claim which
remained pending—we had no jurisdiction under 28
U.S.C. § 1295 because there was no final judgment. We
then concluded that, because the ruling on the motion in
limine was provisional and there was no final disposition
of the unjust enrichment claim, we lacked jurisdiction to
hear the appeal under Rule 54(b). Id. at 1358. We noted,
however, that “a ruling on a motion in limine is appeala-
ble only as an interlocutory appeal . . . Section 1292(b)
more appropriately addresses the appeal of issues within
a claim like those presently before the court.” Id. (citing
Taylor v. PPG Indus., Inc., 256 F.3d 1315 (Fed. Cir.
2001)). In other words, we stated that a motion in limine
on a damages issue is appropriately appealable under
§ 1292(b).
Unlike in Ultra-Precision, here the district court and
the parties followed the procedures for certification re-
quired by § 1292(b). And, also unlike in Ultra-Precision,
here: (1) the district court granted summary judgment on
the lost profits issue, making it a final ruling, rather than
a provisional ruling on a motion in limine; and (2) resolu-
tion of the damages issues will have a significant impact
on how the case is litigated, if at all; there is no alterna-
tive claim that would still be pursued, as there was in
Ultra-Precision.
The other cases the majority cites from this court,
Johnson Electric North America Inc. v. Mabuchi Motor
America Corp., 111 F.3d 142 (Fed. Cir. 1997), and Quad
Dimension, Inc. v. Sage Alerting System, Inc., 69 F. App’x
448, 449 (Fed. Cir. 2003), provide no discussion of wheth-
er the contemplated appeal in those cases would material-
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FUJITSU LIMITED v. TELLABS, INC. 11
ly advance the ultimate termination of the litigation. In
Johnson Electric, we dismissed the appeal because the
question of “whether a patentee may recover damages
before the statutory bar if the patentee argue[ed] that an
alleged infringer deliberately copied the patentee’s prod-
uct [was] not an issue of general importance or applicabil-
ity worthy of permissive review at th[at] time.” 111 F.3d
at 142. We also stated that we were not convinced that
there was a substantial ground for difference of opinion on
the certified issue. Id. What we never mentioned, how-
ever, was whether the issue would materially advance
termination of the litigation. Presumably it would not
have.
Likewise, in Quad Dimension, we noted that issues of
liability “remain to be tried regardless of whether the
issues raised by this petition are decided by us at this
time.” 69 F. App’x at 449 (emphasis added). We provided
no analysis whatsoever regarding whether the issue
presented may materially advance the litigation. Here,
we have all parties on record, and the district court,
unequivocally stating that the resolution of the litigation
may hinge on the questions currently certified to us.
Quad Dimension is not applicable to these facts. 3
3 The majority also cites United States v. Rent-A-
Homes Systems of Illinois, Inc., 602 F.2d 795 (7th Cir.
1979). That case is not remotely like this one. In Rent-A-
Homes, the United States brought an action to enjoin
racially discriminatory housing practices prohibited by
Title VIII of the Civil Rights Act of 1968. 602 F.2d at 796.
The United States later sought monetary damages as a
result of the defendants’ discriminatory conduct. Id. The
district court struck that portion of the United States’
amended complaint, and then certified the question of
whether the Civil Rights Act of 1968 allowed for the
recovery of monetary damages. Id. at 796-97. The ap-
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12 FUJITSU LIMITED v. TELLABS, INC.
Our refusal to certify the questions presented means
that the district court and the parties must trudge for-
ward with a time-consuming and expensive trial on
liability, when it is evident that determining the permis-
sible scope of damages would substantially alter the
parties’ negotiating posture and may well end the litiga-
tion. Of course, the district court is free to bifurcate the
liability portion from damages and try to certify this
damages appeal once liability is determined. That is
what the majority’s rationale seems to urge, even in
instances when the parties unequivocally represent that
resolution of an important damages question may imme-
diately terminate the litigation. Because, according to the
majority, so long as liability is undecided, a question
regarding damages can never resolve any “controlling”
question of law. The parties and district court, mean-
while, will be required to expend tremendous resources en
route to a liability determination that might have been
avoided altogether.
peals court denied the petition on grounds that whether
monetary damages were available under the Act was not
a question which would materially advance termination of
the litigation. Id. That is, an action brought under the
Civil Rights Act of 1968 for discriminatory housing prac-
tices would proceed regardless of the monetary damages
question because the United States was primarily inter-
ested in remedying the continuing harm, i.e., enjoining the
racially discriminatory activity. In fact, only after the
United States no longer sought equitable relief, because
the defendants either went out of business or stopped
their discriminatory acts, did the district court dismiss
the case. Id. at 797. The parties here, and the district
court, have represented that this is a lost profits case
involving two specific contracts already awarded. The
relief sought in this case is retrospective, not prospective.
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FUJITSU LIMITED v. TELLABS, INC. 13
Our decision today unnecessarily multiplies the po-
tential costs of patent litigation, despite an opportunity to
help hold them down. Section 1292(b) was added as an
exception to the final judgment rule as a means to avoid
unnecessary trial court proceedings and, in turn, to in-
crease overall efficiency in the judicial process and save
valuable resources. Under the circumstances presented
in this case, accepting the appeal would further those
goals. I respectfully dissent from the decision to do oth-
erwise.