Xitronix Corporation v. Kla-Tencor Corporation

United States Court of Appeals
for the Federal Circuit
______________________
XITRONIX CORPORATION,
Plaintiff-Appellant
v.
KLA-TENCOR CORPORATION, DBA KLA-TENCOR,
INC., A DELAWARE CORPORATION,
Defendant-Appellee
______________________
2016-2746
______________________
Appeal from the United States District Court for the
Western District of Texas in No. 1:14-cv-01113-SS, Judge
Sam Sparks.
______________________
MICHAEL S. TRUESDALE, Law Office of Michael S.
Truesdale, PLLC, Austin, TX, argued for plaintiff-
appellant.
AARON GABRIEL FOUNTAIN, DLA Piper US LLP,
Austin, TX, argued for defendant-appellee. Also repre-
sented by BRIAN K. ERICKSON, JOHN GUARAGNA.
______________________
Before MOORE, MAYER, and HUGHES, Circuit Judges.
MOORE, Circuit Judge.
2 XITRONIX CORP. v. KLA-TENCOR CORP.
ORDER
The only asserted claim in the underlying case is a
Walker Process monopolization claim based on alleged
fraud on the United States Patent and Trademark Office
(“PTO”). Both parties assert that the Federal Circuit has
appellate jurisdiction over this case. We disagree. We
therefore transfer the case to the United States Court of
Appeals for the Fifth Circuit, which has appellate juris-
diction over cases from the District Court for the Western
District of Texas.
BACKGROUND
This appeal arises from a single cause of action filed
in the United States District Court for the Western Dis-
trict of Texas: a Walker Process monopolization claim
under § 2 of the Sherman Act and §§ 4 and 6 of the Clay-
ton Act based on the alleged fraudulent prosecution of a
patent. 1 J.A. 29, 63. Xitronix stated the Federal Circuit
had jurisdiction over this appeal pursuant to 28 U.S.C.
§ 1295(a)(1) and Nobelpharma AB v. Implant Innovations,
Inc., 141 F.3d 1059, 1067–68 (Fed. Cir. 1998), and KLA-
Tencor (“KLA”) did not dispute this assertion.
Before oral argument, we asked the parties to show
cause why we should not transfer this case to the United
States Court of Appeals for the Fifth Circuit for lack of
jurisdiction. The parties filed supplemental briefs, assert-
ing that the Federal Circuit has appellate jurisdiction
over this case. The briefs did not address the impact of
the Supreme Court’s decision in Gunn v. Minton, 568 U.S.
1 In Walker Process Equipment, Inc. v. Food Ma-
chinery & Chemical Corp., the Supreme Court held that
enforcement of a patent procured by fraud on the PTO
may be a federal antitrust violation under the Sherman
Act, provided all other elements necessary to such a claim
are present. 382 U.S. 172, 176–77 (1965).
XITRONIX CORP. v. KLA-TENCOR CORP. 3
251 (2013). At oral argument, we ordered another round
of supplemental briefing to address jurisdiction and, in
particular, Gunn v. Minton.
DISCUSSION
This court has jurisdiction over the appeal of a final
decision of a district court “in any civil action arising
under . . . any Act of Congress relating to patents or plant
variety protection.” 28 U.S.C. § 1295(a)(1). Interpreting
nearly identical language in a previous version of our
jurisdictional statute, the Supreme Court stated our
jurisdiction extends “only to those cases in which a well-
pleaded complaint establishes either that federal patent
law creates the cause of action or that the plaintiff’s right
to relief necessarily depends on resolution of a substantial
question of federal patent law, in that patent law is a
necessary element of one of the well-pleaded claims.”
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800,
809 (1988) (emphasis added); see also Holmes Grp., Inc. v.
Vornado Air Circulation Sys., Inc., 535 U.S. 826, 834
(2002) (By using “arising under” in our jurisdictional
statute, “Congress referred to a well-established body of
law that requires courts to consider whether a patent-law
claim appears on the face of the plaintiff’s well-pleaded
complaint.”), superseded in part by statute, Leahy-Smith
America Invents Act § 19(b), Pub. L. No. 112-29, 125 Stat.
284 (2011) (amending 28 U.S.C. § 1295(a)(1) to add com-
pulsory patent counterclaims).
In holding that our jurisdiction extends to cases in
which patent law is a necessary element of one of the
well-pleaded claims, the Supreme Court explained that
the well-pleaded complaint rule “focuses on claims, not
theories, . . . and just because an element that is essential
to a particular theory might be governed by federal patent
law does not mean that the entire monopolization claim
‘arises under’ patent law.” Christianson, 486 U.S. at 811.
In that case, the Court held that the Federal Circuit did
4 XITRONIX CORP. v. KLA-TENCOR CORP.
not have jurisdiction over the asserted monopolization
claim because it was based on several alleged theories,
and only in one of those theories was “the patent-law
issue [] even arguably essential.” Id.More recently, in Gunn, the Supreme Court held that
a state law claim alleging legal malpractice in the han-
dling of a patent case does not “aris[e] under” federal
patent law for purposes of exclusive federal jurisdiction
under 28 U.S.C. § 1338(a). 568 U.S. at 258. Like the
language of our jurisdictional statute, § 1338(a) states
that federal district courts “shall have original jurisdic-
tion of any civil action arising under any Act of Congress
relating to patents, plant variety protection, copyrights
and trademarks.” 28 U.S.C. § 1338(a); compare § 1338(a),
with § 1295(a) (“[T]he Federal Circuit shall have exclusive
jurisdiction . . . of an appeal from a final decision of a
district court . . . in any civil action arising under . . . any
Act of Congress relating to patents or plant variety pro-
tection.”). The state malpractice claim necessarily re-
quired application of patent law, creating a patent law
“case within a case,” and the patent issue was actually
disputed by the parties. Gunn, 568 U.S. at 259. However,
the Supreme Court held that “the federal issue in this
case is not substantial” when analyzed with respect to the
federal system as a whole. Id. at 260. The resolution of
the patent “case within a case” would have no effect on
“the real-world result of the prior federal patent litiga-
tion,” and allowing the state court to resolve the underly-
ing patent issue would not undermine the uniform body of
patent law because “federal courts are of course not bound
by state court case-within-a-case patent rulings.” Id. at
261–62. Even if a novel question of patent law arose in
such a situation, it would still “at some point be decided
by a federal court in the context of an actual patent case,
with review in the Federal Circuit,” and even if the state
court’s adjudication was “preclusive under some circum-
stances, the result would be limited to the parties and
XITRONIX CORP. v. KLA-TENCOR CORP. 5
patents that had been before the state court.” Id. at 262–
63. The Supreme Court explained, “the possibility that a
state court will incorrectly resolve a state claim is not, by
itself, enough to trigger the federal courts’ exclusive
patent jurisdiction, even if the potential error finds its
root in a misunderstanding of patent law.” Id. at 263.
The complaint in this case alleges that KLA “engaged
in exclusionary conduct by fraudulently prosecuting to
issuance the [’]260 patent” and its conduct “was and is
specifically intended to monopolize and destroy competi-
tion in the market.” J.A. 63. It alleges KLA intentionally
made false representations to the PTO on which the
examiner relied during prosecution. On the face of the
complaint, no allegation establishes “that federal patent
law creates the cause of action.” Christianson, 486 U.S. at
809. The only question is whether the monopolization
allegation “necessarily depends on resolution of a sub-
stantial question of federal patent law, in that patent law
is a necessary element of one of the well-pleaded claims.”
Id. Applying the well-pleaded complaint rule, in light of
the Supreme Court’s guidance and rationale in Gunn, we
hold that it does not.
There is nothing unique to patent law about allega-
tions of false statements. Indeed, in responding to the
court’s order to show cause, the parties both cited portions
of the complaint that focus on fraud and misrepresenta-
tion, not patent law. See, e.g., Xitronix Supp. Br. (Sept.
26, 2017) at 4–5 (“KLA-Tencor affirmatively (and repeat-
edly) misrepresented the patentability of the claims it
sought, including making false representations about
what was taught by the relevant prior art.”); KLA Supp.
Br. (Sept. 26, 2017) at 8–9 (“KLA’s prosecution and pro-
curement of the [’]260 patent was undertaken in bad faith
in order to monopolize the . . . market.”). We acknowledge
that a determination of the alleged misrepresentations to
the PTO will almost certainly require some application of
patent law. For instance, the complaint alleges that
6 XITRONIX CORP. v. KLA-TENCOR CORP.
KLA’s attorney “failed to map” a one-to-one relationship
between claim 1 of the ’260 patent and another patent
claim that had previously been held invalid. J.A. 42–43.
An evaluation of that allegation may require analysis of
the claims and specifications and may require application
of patent claim construction principles. But consistency
with the federal question jurisdiction statute requires
more than mere resolution of a patent issue in a “case
within a case.” See Gunn, 568 U.S. at 257, 262–64; Chris-
tianson, 486 U.S. at 808–09. Something more is required
to raise a substantial issue of patent law sufficient to
invoke our jurisdiction under 28 U.S.C. § 1295(a)(1). See
Gunn, 568 U.S. at 264.
The underlying patent issue in this case, while im-
portant to the parties and necessary for resolution of the
claims, does not present a substantial issue of patent law.
See id. at 263–64. There is no dispute over the validity of
the claims—patent law is only relevant to determine if
KLA intentionally made misrepresentations. Patent
claims will not be invalidated or revived based on the
result of this case. Because Federal Circuit law applies to
substantive questions involving our exclusive jurisdiction,
the fact that at least some Walker Process claims may be
appealed to the regional circuits will not undermine our
uniform body of patent law. See Golan v. Pingel Enter.,
Inc., 310 F.3d 1360, 1368 (Fed. Cir. 2002) (“Federal Cir-
cuit law applies to causes of action within the exclusive
jurisdiction of the Federal Circuit.”); Mars Inc. v. Ka-
bushiki-Kaisha Nippon Conlux, 24 F.3d 1368, 1371 (Fed.
Cir. 1994) (Deference to regional circuit law “is inappro-
priate when an issue involves substantive questions
coming exclusively within our jurisdiction, the disposition
of which would have a direct bearing on the outcome.”
(internal citations and quotation marks omitted)). As in
Gunn, even if the result of this case is preclusive in some
circumstances, the result is limited to the parties and the
patent involved in this matter. 568 U.S. at 263.
XITRONIX CORP. v. KLA-TENCOR CORP. 7
The parties argue that although the cause of action
does not arise directly from Title 35, the Walker Process
claim at issue is one in which patent law is a necessary
element of the claim, citing Nobelpharma and In re
Ciprofloxacin Hydrochloride Antitrust Litigation, 544
F.3d 1323 (Fed. Cir. 2008) (“Cipro”). In Nobelpharma, we
held that we apply Federal Circuit law, not regional
circuit law, to Walker Process claims. 141 F.3d at 1068.
We reasoned:
Whether conduct in the prosecution of a patent is
sufficient to strip a patentee of its immunity from
the antitrust laws is one of those issues that clear-
ly involves our exclusive jurisdiction over patent
cases. It follows that whether a patent infringe-
ment suit is based on a fraudulently procured pa-
tent impacts our exclusive jurisdiction.
Id. at 1067. This passage does not stand for the proposi-
tion that the Federal Circuit retains exclusive jurisdiction
of Walker Process claims. We made these statements in
the context of determining whether regional circuit or
Federal Circuit law applies to Walker Process claims, not
whether we have jurisdiction over any such claims. We
further indicated that our “conclusion applies equally to
all antitrust claims premised on the bringing of a patent
infringement suit.” Id. at 1068 (emphasis added). Imme-
diately following the remarks cited by the parties, we
reasoned that because Walker Process claims are “typical-
ly raised as a counterclaim by a defendant in a patent
infringement suit,” and “[b]ecause most cases involving
these issues will therefore be appealed to this court,” we
should decide such claims as a matter of Federal Circuit
law. Id. at 1067–68 (emphases added). While we recog-
nized in Nobelpharma that most Walker Process claims
will be appealed to the Federal Circuit due to the natural
connection of such claims to our exclusive jurisdiction
over patent infringement claims, we did not hold that all
Walker Process claims must be appealed to this court.
8 XITRONIX CORP. v. KLA-TENCOR CORP.
In Cipro, we explained in a footnote that the Walker
Process claim at issue in that case was “subject to exclu-
sive federal court jurisdiction under 28 U.S.C. § 1338(a)
because the determination of fraud before the PTO neces-
sarily involves a substantial question of patent law.” 544
F.3d at 1330 n.8 (citing Christianson, 486 U.S. at 808).
The Cipro appeal was originally transferred to the Feder-
al Circuit from the Second Circuit. Ark. Carpenters
Health & Welfare Fund v. Bayer AG, 604 F.3d 98, 103
n.10 (2d Cir. 2010). We were not performing a de novo
analysis of jurisdiction in that case; we were merely
accepting a transfer from another circuit court. Chris-
tianson, 486 U.S. at 819 (“Under law-of-the-case princi-
ples, if the transferee court can find the transfer decision
plausible, its jurisdictional inquiry is at an end.”). Juris-
diction was not disputed in Cipro, and the quotation in
footnote 8 is the extent of the analysis regarding jurisdic-
tion.
Both Nobelpharma and Cipro were decided before the
Supreme Court decided Gunn. To the extent our prior
precedent could be interpreted contrary to Gunn, the
Supreme Court rendered that interpretation invalid.
While the parties argue Gunn is inapplicable because it
concerns district court jurisdiction over state claims, the
indistinguishable statutory language of §§ 1295 and 1338
requires our careful consideration of Gunn in interpreting
our jurisdictional statute. “[W]e have no more authority
to read § 1295(a)(1) as granting the Federal Circuit juris-
diction over an appeal where the well-pleaded complaint
does not depend on patent law, than to read § 1338(a) as
granting a district court jurisdiction over such a com-
plaint.” Christianson, 486 U.S. at 814 (citing Pratt v.
Paris Gas Light & Coke Co., 168 U.S. 255, 259 (1897)); see
also id. at 808–09 (noting “linguistic consistency” with the
statute for a district court’s federal question jurisdiction
demands a similar application for the Federal Circuit’s
“arising under” jurisdiction).
XITRONIX CORP. v. KLA-TENCOR CORP. 9
Decisions from our sister circuits confirm the correct-
ness of our decision today. The Third Circuit recently
called into question whether we have exclusive jurisdic-
tion over all Walker Process claims in light of Gunn. In re
Lipitor Antitrust Litig., 855 F.3d 126, 146 (3d Cir. 2017).
While recognizing that Walker Process claims have been
“considered by courts to present a substantial question of
patent law,” the “substantiality of these theories may be
open to debate following Gunn v. Minton.” Id. at 145–46
(citing Nobelpharma and Cipro). In a case involving a
legal malpractice action arising out of an unsuccessful
application for a patent, the D.C. Circuit, citing Gunn,
held that it had appellate jurisdiction because the case
“involve[d] no forward-looking questions about any pa-
tent’s validity, but instead solely concern[ed] whether
unsuccessful patent applicants can recover against their
attorneys.” Seed Co. Ltd. v. Westerman, 832 F.3d 325, 331
(D.C. Cir. 2016). The Eleventh Circuit held that a con-
tract claim with an underlying patent infringement issue
did not implicate exclusive Federal Circuit jurisdiction
due to the fact-bound nature of the question, the small
likelihood that the issue would impact future cases, and
the weak interest of the government in federal adjudica-
tion. MDS (Can.) Inc. v. Rad Source Techs., Inc., 720 F.3d
833, 843 (11th Cir. 2013). And the Fifth Circuit held that
it had appellate jurisdiction in a case involving a state
law claim based on fraud on the PTO because the under-
lying fraud allegation “d[id] not cause the underlying
hypothetical patent issues to be of substantial importance
to the federal system as a whole” as required by Gunn.
USPPS, Ltd. v. Avery Dennison Corp., 541 F. App’x 386,
390 (5th Cir. 2013).
Section 1295 defines the boundaries of our judicial in-
fluence. “The limits upon federal jurisdiction, whether
imposed by the Constitution or by Congress, must be
neither disregarded nor evaded.” Owen Equip. & Erection
Co. v. Kroger, 437 U.S. 365, 374 (1978). We decline the
10 XITRONIX CORP. v. KLA-TENCOR CORP.
parties’ invitation to so broadly read our grant of jurisdic-
tion under 28 U.S.C. § 1295.
Accordingly,
IT IS ORDERED THAT:
The case is transferred to the United States Court of
Appeals for the Fifth Circuit.
FOR THE COURT
February 9, 2018 /s/ Peter R. Marksteiner
Date Peter R. Marksteiner
Clerk of Court