Cardpool, Inc. v. Plastic Jungle, Inc.

United States Court of Appeals
for the Federal Circuit
______________________
CARDPOOL, INC.,
Plaintiff-Appellant
v.
PLASTIC JUNGLE, INC., NKA CARDFLO, INC.,
Defendant-Appellee
______________________
2014-1562
______________________
Appeal from the United States District Court for the
Northern District of California in No. 3:12-cv-04182-
WHA, Judge William H. Alsup.
______________________
Decided: April 5, 2016
______________________
JASON F. HOFFMAN, Baker & Hostetler LLP, Washing-
ton, DC, argued for plaintiff-appellant. Also represented
by JOHN P. MOY, EDWARD A. PENNINGTON, SEAN PHELAN,
Smith Gambrell & Russell, LLP, Washington, DC; JAMES
S. MCDONALD, Blackhawk Network, Pleasanton, CA.
MARC BELLOLI, Feinberg Day Alberti & Thompson
LLP, Menlo Park, CA, argued for defendant-appellee.
Also represented by JEREMIAH A. ARMSTRONG, NICKOLAS
BOHL, ELIZABETH DAY; THOMAS RICHARD BURNS, JR.,
Adduci, Mastriani & Schaumberg, LLP, Washington, DC.
______________________
2 CARDPOOL, INC. v. PLASTIC JUNGLE, INC.
Before NEWMAN, REYNA, and WALLACH, Circuit Judges.
NEWMAN, Circuit Judge.
Cardpool, Inc., appeals the ruling of the United States
District Court for the Northern District of California,
denying the joint motion of Cardpool and Plastic Jungle,
Inc. to vacate the district court’s judgment 1 of patent
invalidity insofar as the judgment was with prejudice. 2
The parties’ stated reason for the requested vacatur was
that all of the Cardpool patent claims had been replaced
on reexamination, and that Plastic Jungle (now operating
as CardFlo, Inc.) was no longer conducting the accused
infringing activities. Cardpool Dist. Dk. 89 at 2 (May 13,
2014) (“it is CardFlo’s representation that it is no longer
in the business of computer-implemented, online gift card
exchange . . . . As a result, Plaintiff believes this case is
no longer viable or necessary at this time.”). We affirm
the district court’s denial of vacatur, because the denial is
within the district court’s discretion and also because the
premise of the motion is both speculative and inaccurate:
the district court’s final judgment as to an original group
of claims does not automatically render that judgment res
judicata as to new claims granted upon reexamination.
BACKGROUND
Cardpool sued Plastic Jungle for infringement of U.S.
Patent No. 7,494,048 entitled “System and Method for
Brand Name Gift Card Exchange” (the ’048 patent).
Plastic Jungle’s defenses were that the claims in suit are
1 Cardpool, Inc., v. Plastic Jungle, Inc., No. 3:12-cv-
04182-WHA, 2013 WL 245026 (N.D. Cal. Jan. 22, 2013)
(finding invalidity under section 101).
2 Cardpool, Inc., v. Plastic Jungle, Inc., No. 3:12-cv-
04182-WHA, Supplemental Joint Case Management
Statement, Dk. 89 (N.D. Cal. May 13, 2014). In the
remainder of this opinion, district court documents will be
cited as: Cardpool Dist. Dk. [##] at [page] (filing date).
CARDPOOL, INC. v. PLASTIC JUNGLE, INC. 3
invalid on the ground of obviousness, 35 U.S.C. § 103(2006), and that the claimed subject matter is patent-
ineligible under 35 U.S.C. § 101. The district court agreed
as to ineligibility under section 101, and on this ground
the court granted Plastic Jungle’s motion to dismiss the
suit with prejudice under Federal Rule 12(b)(6) for failure
to state a claim on which relief can be granted. Cardpool
appealed to the Federal Circuit on February 12, 2013.
Before that appeal was decided, in June 2013 Card-
pool filed a request for ex parte reexamination in accord-
ance with 35 U.S.C. § 304. For reexamination, Cardpool
presented both amended and additional claims, in accord-
ance with 37 C.F.R. § 1.510(e) (2013), alongside certain
claims that stood unamended. Cardpool provided the
Patent and Trademark Office (PTO) with the invalidity
contentions made by Plastic Jungle before the district
court, along with a copy of the foreign prior art Plastic
Jungle cited. Reexamination was ordered by the PTO.
Before reexamination was completed, on January 30,
2014 the Federal Circuit affirmed without opinion under
Federal Circuit Rule 36 the district court’s judgment of
ineligibility under section 101. Cardpool, Inc. v. Plastic
Jungle, Inc., 552 F. App’x 979 (Fed. Cir. 2014). On Feb-
ruary 6, 2014, the PTO issued a notice of intent to issue
an ex parte reexamination certificate. The Ex Parte
Reexamination Certificate was issued on February 27,
2014, holding amended claims 1, 2–7, and 9–11, and new
claims 12–52, patentable under section 103. See
37 C.F.R. § 1.552 (section 101 eligibility is not considered
on reexamination).
Cardpool then filed a petition for rehearing of the
Federal Circuit’s decision of January 30, 2014, asking this
court to vacate our affirmance of the district court deci-
sion of section 101 ineligibility because the claims that
were the subject of that decision no longer existed. Card-
pool stated:
4 CARDPOOL, INC. v. PLASTIC JUNGLE, INC.
Because the District Court’s decision dismissing
the case under Rule 12(b)(6) as not claiming stat-
utory subject matter under 35 U.S.C. § 101 was
based on the original Asserted Claims that no
longer exist and have been superseded by the
amended Asserted Claims, the District Court de-
cision is moot and must be vacated. Not doing so
would create the improper ruling that an inter-
vening final PTO decision is not controlling of a
still pending District Court case—directly in con-
flict with Federal Circuit precedent. Accordingly,
this petition should be granted to allow rehearing
consistent with Federal Circuit precedent.
Pet. for Reh’g, No. 2013-1227, ECF No. 53 at 2-3 (Feb. 28,
2014).
Plastic Jungle, in response to the request for rehear-
ing, argued to this court that “the entire case is moot”
because the reexamination “substantially changed” the
claims at issue, requiring that “the prior rulings must be
vacated and the case dismissed.” Response to Petition for
Panel Rehearing, Appeal No. 2013–1227 Dk. 58 at 2.
Cardpool replied that, while the district court’s decision of
section 101 unpatentability had been rendered “moot” by
the reexamination, the underlying cause of action was not
moot because infringement might be renewed by Plastic
Jungle or a successor to Plastic Jungle. Reply, Appeal No.
2013–1227 Dk. 60 at 3–5. Cardpool stated that the validi-
ty of the reexamined claims had not been evaluated by
any court, and asked that the district court decision of
invalidity be vacated as moot.
The Federal Circuit then granted rehearing, vacated
its summary affirmance of section 101 invalidity, and
remanded to the district court “to determine what ac-
tions, if any, are appropriate in light of the reexamined
claims.” Cardpool, Inc. v. Plastic Jungle, Inc., 564 F.
App’x 582, 583 (Fed. Cir. 2014). However, the Federal
Circuit declined to vacate the district court’s invalidity
CARDPOOL, INC. v. PLASTIC JUNGLE, INC. 5
judgment of January 22, 2013, stating that “it would not
be appropriate in this context to vacate the district court’s
judgment because Cardpool, the losing party below,
caused the change in circumstances.” Id.On return to the district court, Cardpool and Plastic
Jungle jointly moved the district court to vacate its prior
judgment so that the parties could move for a voluntary
dismissal without prejudice under Rule 41(a)(1)(A)(ii).
Cardpool Dist. Dk. 89 at 3 (May 13, 2014). The joint
motion stated:
Once the Court vacates its order, the parties have
stipulated to a voluntary dismissal without preju-
dice under Rule 41(a)(1)(A)(ii) . . . . Because all of
the Asserted Claims were amended during reex-
amination or depend from an amended claim—
and because the Court’s Rule 12(b)(6) dismissal
was entirely based on the unamended Asserted
Claims, the parties agree that the Court’s earlier
decision should be vacated without need for the
Court or the parties to expend additional re-
sources briefing the matter.
Id. The parties jointly stated that Plastic Jungle was no
longer in the business of computer-implemented online
gift card exchange, that Cardpool questioned Plastic
Jungle’s solvency, and that Cardpool did not believe the
case was viable or necessary at that time. Id. at 2. The
parties also jointly stated that:
The parties are not seeking to vacate the Court’s
Order finding the unamended claims invalid . . . .
Rather, the parties request that the Court vacate
the judgment because the prior Order no longer
applies because the claims on which that Order
was based are now different.
Cardpool Dist. Dk. 92 at 1 (May 29, 2014). The joint
motion was signed by Brian E. Mitchell, counsel of record
6 CARDPOOL, INC. v. PLASTIC JUNGLE, INC.
for Cardpool, and Marc Belloli, counsel of record for
Plastic Jungle.
Cardpool filed a separate brief to the district court,
stating that while the basis for the district court’s prior
invalidity judgment was mooted by the changed claims on
reexamination, the “entire case” is not moot because it
might become necessary in the future to enforce the
reexamined patent against Plastic Jungle (or a successor),
should infringing activity reoccur. Cardpool Dist. Dk. 93
at 3–5 (May 29, 2014). Cardpool asked the district court
to “either (1) vacate its dismissal with prejudice to allow
the parties to dismiss without prejudice; or (2) vacate the
dismissal to the extent that it was with prejudice and
dismiss this case without prejudice.” Id. at 7 (emphasis
removed).
Cardpool told the district court that the case was not
“settled”—although the district court had so stated—and
argued that vacatur of “with prejudice” was appropriate
because the “final PTO judgment” on reexamination was
issued before “the appellate mandate that would have
finalized the interim district court decision,” citing the
authority of Fresenius USA, Inc. v. Baxter Int’l, Inc., 721
F.3d 1330, 1346 (Fed. Cir. 2013), in which this court held
that “the statute requires that a final PTO decision af-
firmed by this court be given effect in pending infringe-
ment cases that are not yet final,” and is not affected by a
subsequent final court ruling contrary to the PTO ruling.
Cardpool Dist. Dk. 93 at 1–2 (May 29, 2014).
Cardpool told the district court that if the “with prej-
udice” quality of the judgment of invalidity of the original
claims were not vacated, Cardpool may lose the right to
“file a new case at any time against Plastic Jungle assert-
ing the reexamined claims.” Id. at 4.
The district court declined the requested vacatur,
stating that Fresenius was distinguishable in that no
Article III court had reviewed the Cardpool reexamined
claims. Cardpool Dist. Dk. 94 at 7 (May 30, 2014). “Just
CARDPOOL, INC. v. PLASTIC JUNGLE, INC. 7
because a PTO examiner allowed the amended claims
does not mean the reexamination certificate can displace
a district court judgment following a contested motion to
dismiss . . . . The judgment (and order) are a part of the
history of the asserted patent and cannot be removed by
some joint request for vacatur.” Id. “Since the mootness
was due to a voluntary act by Cardpool (the losing party),
vacating the final judgment is not appropriate.” Id. at 8.
“This order finds that it would be against the public
interest for Cardpool (the losing party) to displace our
final judgment by simply commencing an ex parte agency
reexamination and amending its invalid claims.” Id. at 9.
Cardpool again appeals, stating that the “district
court position [is] incorrect in this case,” citing this court’s
prior decision on the matter. Cardpool Br. 12. Cardpool
asks this court to vacate the district court’s “with preju-
dice” judgment of unpatentability, stating that the parties
had agreed and jointly moved for vacatur of the final
judgment dismissing the case with prejudice and further
argues that the “with prejudice” aspect of the district
court’s ruling is “superfluous” for the claims that had been
before the district court no longer exist. Id. at 7, 9.
Cardpool states that while “the appeal of the unpatenta-
bility finding had become moot [] the civil case was cer-
tainly still alive [although] it became financially
unattractive from a business standpoint . . . .” Id. at 15.
Plastic Jungle now opposes the requested vacatur, despite
having joined in the motion for vacatur. See generally
Plastic Jungle Br.
DISCUSSION
Standard of review
A district court’s denial of a motion to vacate its judg-
ment, Fed. R. Civ. P. 60(b), is reviewed on the procedural
standards of the regional circuit, while any aspects of the
motion that are unique to patent law are reviewed in
accordance with Federal Circuit law. Univ. of W. Va. Bd.
of Trs. v. VanVoorhies, 342 F.3d 1290, 1294 (Fed. Cir.
8 CARDPOOL, INC. v. PLASTIC JUNGLE, INC.
2003); Lazare Kaplan International, Inc. v. Photoscribe
Technologies, Inc., 714 F.3d 1289 (Fed. Cir. 2013). In the
Ninth Circuit, the relevant regional circuit in this appeal,
a district court’s denial of a Rule 60(b) motion is reviewed
for abuse of discretion. United States v. Asarco Inc., 430
F.3d 972, 978 (9th Cir. 2005). In reviewing discretionary
rulings, the Ninth Circuit determines whether the district
court applied an incorrect legal rule or whether the dis-
trict court’s application of the law to the facts was “illogi-
cal, implausible, or without support in inferences that may
be drawn from the facts in the record.” United States v.
Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)
(internal quotation marks and numbering omitted) (quot-
ing” Anderson v. City of Bessemer City, N.C., 470 U.S. 564,
577 (1985)).
The Supreme Court counsels that “vacatur must be
decreed for those judgments whose review
is . . . ‘prevented through happenstance’—that is to say,
where a controversy presented for review has ‘become
moot due to circumstances unattributable to any of the
parties.’” U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship,
513 U.S. 18, 23 (1994) (quoting United States v. Mun-
singwear, Inc., 340 U.S. 36, 40 (1950)). Applying this
precedent, the Ninth Circuit holds that “when an appel-
lant renders his appeal moot by his own act, our estab-
lished procedure is not to vacate the district court’s
decision automatically, but to remand so the district court
can decide whether to vacate its judgment in light of ‘the
consequences and attendant hardships of dismissal or
refusal to dismiss’ and ‘the competing values of finality of
judgment and right to relitigation of unreviewed dis-
putes.’” Dilley v. Gunn, 64 F.3d 1365, 1370–71 (9th Cir.
1995) (quoting Ringsby Truck Lines, Inc. v. W. Conference
of Teamsters, 686 F.2d 720, 722 (9th Cir. 1982), and stat-
ing that “Ringsby is wholly consistent with the ‘equitable
tradition of vacatur’ reflected in U.S. Bancorp.”).
The Federal Circuit conformed to this procedure in
remanding to the district court, which Cardpool does not
CARDPOOL, INC. v. PLASTIC JUNGLE, INC. 9
contest. Instead, Cardpool appeals the district court’s
denial of vacatur “with prejudice.”
Cardpool’s arguments
Cardpool argues that the entire case is not “moot,” for
it was not settled and there had been no ruling on the
validity and infringement of the reexamined claims.
Cardpool states that the case never became moot, alt-
hough the district court’s initial unpatentability ruling
became moot because the claims that were the subject of
that ruling do not exist “in the same form.” Cardpool Br.
15.
Cardpool argues that in applying the Ninth Circuit
equitable standards to the special circumstance of the
substantial revision of patent claims upon reexamination,
it would be inequitable to preserve the final judgment
“with prejudice” because the subject of that judgment no
longer exists. Id. at 22–23. Cardpool states that the
judgment with prejudice could “improvidently strip patent
rights from Cardpool through the res judicata effect.” Id.
at 23.
In support of this concern, Cardpool points to this
court’s decision in Aspex Eyewear, Inc. v. Marchon Eye-
wear, Inc., holding that a settlement and resultant dismis-
sal with prejudice was res judicata against a later suit
when infringement reoccurred, although the claims were
different due to reexamination. 672 F.3d 1335, 1341–42
(Fed. Cir. 2012). The Aspex court determined that the
reexamined claims were simply “new versions” and not
“materially different” from an original claim, and thus did
not “create a new legal right against infringement that
Aspex lacked under the original version of the patent.” Id.
at 1342. The Aspex court ruled that Aspex was estopped
by res judicata from suing for infringement of the reex-
amined claims.
Cardpool argues that the district court’s dismissal
with prejudice, paired with the broad statements in Aspex,
10 CARDPOOL, INC. v. PLASTIC JUNGLE, INC.
could result in Cardpool being barred from enforcing its
reexamined claims against Plastic Jungle or a successor to
Plastic Jungle, should infringing activity be renewed.
Cardpool Br. 24. Cardpool states that the district court
did not properly exercise its discretion in declining to
vacate the “with prejudice” aspect of its prior decision. Id.Had the district court done so, Cardpool continues, it
would have eliminated debate about whether Aspex ap-
plied on the facts of this case. Id. at 24–25.
Cardpool urges that this case is distinguished from
Aspex because the PTO’s issuance of the Reexamination
Certificate was an interpretation or application of federal
law, and must be given retroactive effect because the
infringement suit was still pending on appeal. Id. at 2.
Cardpool argues that the district court erred in law,
because “the controlling interpretation of federal law. . .
must be given full retroactive effect in all cases still open
on direct review and as to all events, regardless of wheth-
er such events predate or postdate our announcement of
the rule.” Id. (quoting Harper v. Va. Dep’t of Taxation,
509 U.S. 86, 97 (1993)). The Court requires that this
principle “applies with equal force where the change is
made by an administrative agency acting pursuant to
legislative authorization.” Thorpe v. Hous. Auth., 393
U.S. 268, 282 (1969).
Cardpool also criticizes the district court for “fail[ing]
to consider the case under the reexamined claims.” Card-
pool Br. 21. Cardpool states that the district court “com-
mitted legal error in not giving full effect to the
reexamined amended claims . . . and by denying the
motion to vacate without reconsideration of the basis in
view of the amended reexamined claims.” Id. at 22.
Cardpool stresses that it requested such review, Cardpool
Br. 2, and faults the district court’s statement that “[i]t is
not necessary to [consider the reexamination claims]
because the instant motion is to vacate an earlier final
judgment.” Cardpool Dist. Dk. 94 at 10 (May 30, 2014).
CARDPOOL, INC. v. PLASTIC JUNGLE, INC. 11
Plastic Jungle’s argument
The record contains the joint motion of Cardpool and
Plastic Jungle, signed by both parties, requesting that “the
Judgment dismissing this case with prejudice should now
be vacated.” Cardpool Dist. Dk. 92 at 2 (May 29, 2014).
Nonetheless, Plastic Jungle now argues against Cardpool’s
request, although Cardpool requests no more than what
Plastic Jungle had jointly urged. Plastic Jungle does not
explain its changed position; instead, Plastic Jungle
accuses Cardpool of “procedural games,” and states that
“any ‘harm’ that may result to Cardpool by virtue of res
judicata is self-inflicted and not ripe for review by this
Court.” Plastic Jungle Br. 9–10. Cardpool replies that it
“is not at fault for mooting the cause of action in any way
and has consistently made all efforts to preserve its
rights.” Cardpool Reply 14.
Before we address the merits of Cardpool’s arguments,
we must reject several of Plastic Jungle’s arguments as
unsupported or estopped. Although the record shows
Cardpool’s request that the district court review the
reexamined claims if disinclined to grant vacatur, Plastic
Jungle states that Cardpool “steadfastly refused to
demonstrate to the district court why its new and amend-
ed claims are valid under section 101.” Plastic Jungle Br.
9–10. This statement is not readily reconciled with Card-
pool’s brief to the district court, which stated that “if the
Court is inclined to apply its prior invalidity decision to
the amended reexamined claims in justification of not
vacating its dismissal, such a determination must not be
done in a cursory manner but with a full opportunity of
the parties to provide briefing and argument.” Cardpool
Dist. Dk. 93 at 5–6 (May 29, 2014).
We discern no error in the district court’s action in de-
clining to review the reexamined claims, for the parties
jointly moved for dismissal on the ground that Plastic
Jungle was no longer conducting the accused activity and
that the case was moot. Plastic Jungle does not explain
12 CARDPOOL, INC. v. PLASTIC JUNGLE, INC.
how the district court would have (or could have) reviewed
the new claims when there was no remaining controversy
about infringement.
Plastic Jungle’s other arguments are similarly unsup-
ported. Plastic Jungle states that the district court denied
the joint motion to vacate “because Cardpool failed to
demonstrate that the new and amended claims substan-
tially differed from the claims already rejected by the
Court under Section 101.” Plastic Jungle Br. 12. No such
reason appears in the district court’s opinion. What is
more, Plastic Jungle criticizes as “duplicitous” Cardpool’s
argument of the “alleged mootness of the district court’s
invalidity order.” Id. at 13. That argument contradicts
Plastic Jungle’s representation that because of mootness
“Cardpool’s lawsuit, based on now cancelled claims, must
be dismissed . . . . Thus, the prior rulings must be vacat-
ed and the case dismissed.” Id. at 2. Plastic Jungle offers
no explanation of its contradictory position in which it now
states that the case is not “moot” and thus vacatur is
improper.
Plastic Jungle’s prior statements to this court were
that “the entire case was mooted,” that “this cause of
action is extinguished—neither party appears to dispute
that,” and that “all causes of action stemming from [the
reexamined patent] are necessarily mooted.” Response to
Combined Petition for Rehearing and Hearing En Banc,
Appeal No. 2013-1227 Dk. 58 at 2, 4, 6 (filed March 21,
2014). Plastic Jungle is judicially estopped from taking
this change of position, on which this court relied in re-
manding to the district court. See, e.g., Data Gen. Corp. v.
Johnson, 78 F.3d 1556, 1565 (Fed. Cir. 1996) (“The doc-
trine of judicial estoppel is that where a party successfully
urges a particular position in a legal proceeding, it is
estopped from taking a contrary position in a subsequent
proceeding where its interests have changed.” (citations
omitted)).
CARDPOOL, INC. v. PLASTIC JUNGLE, INC. 13
Analysis
The parties mutually agreed to discontinue this litiga-
tion because the accused activities had been voluntarily
terminated by Plastic Jungle. The only issue on appeal
arises from Cardpool’s concern that it not be estopped
from acting in the future against any infringement upon
the new reexamined claims.
The district court based its denial of the motion to va-
cate or change the finality of its decision on straightfor-
ward principles of judicial process. Federal courts are
precluded from deciding “questions that cannot affect the
rights of litigants in the case before them.” North Caroli-
na v. Rice, 404 U.S. 244, 246 (1971). Whenever an action
loses its “character as a present live controversy” during
the course of litigation, federal courts are required to
dismiss the action as moot. Allard v. DeLorean, 884 F.2d
464, 466 (9th Cir. 1989). Here the district court’s decision
was final and had been affirmed on appeal before the
PTO’s reexamination decision. The district court violated
no legal right in preserving its original decision, which is
limited to the claims and grounds that existed.
Dismissal “with prejudice” operates as res judicata as
to the same cause of action. 747 Am. Jur. 2d Judgments
§ 547. How this rule of finality would apply to changed
circumstances depends on the factual circumstances of
the specific situation. See Lawlor v. Nat’l Screen Serv.
Corp., 349 U.S. 322, 327–328 (1955) (“That both suits
involved ‘essentially the same course of wrongful conduct’
is not decisive” of the applicability of the doctrine of res
judicata and courts must examine factual circumstances,
such as, for example, whether “new causes of action” or
“substantial changes in scope” of wrongful conduct exist,
in determining its applicability.). Res judicata does not
automatically arise against unknown future situations. In
Aspex, the court applied these principles to the facts of
that case, recognizing that “it is necessary that the claim
either was asserted, or could have been asserted, in the
14 CARDPOOL, INC. v. PLASTIC JUNGLE, INC.
prior action. If the claim did not exist at the time of the
earlier action, it could not have been asserted in that
action and is not barred by res judicata.” 672 F.3d at
1342; see also Lawlor, 349 U.S. at 328 (a prior judgment
“cannot be given the effect of extinguishing claims which
did not even then exist and which could not possibly have
been sued upon in the previous case”).
On the facts and procedures of this case, the issue of
validity of the reexamined claims remains to be addressed
in any future proceeding. In the initial proceeding the
original claims were adjudicated only on the ground of
subject matter eligibility under section 101. As in Aspex,
the effect of a prior judgment rendered on specific issues
as applied to the original claims, depends on the facts and
issues of the reexamination, and invokes equity as well as
law. 672 F.3d at 1341–1346. The district court correctly
deemed it inappropriate to advise on the new claims, in a
case that the parties agreed was moot. The district court
did not abuse its discretion in denying the motion to
vacate its judgment or the finality thereof. That judg-
ment is affirmed.
Each party shall bear its costs.
AFFIRMED