Jang v. Boston Scientific Corporation

United States Court of Appeals
for the Federal Circuit
______________________
G. DAVID JANG, M.D.,
Plaintiff-Respondent,
v.
BOSTON SCIENTIFIC CORPORATION AND
SCIMED LIFE SYSTEMS, INC.,
Defendants-Petitioners.
______________________
2014-134
______________________
On Petition for Permission to Appeal pursuant to 28
U.S.C. Section 1292(b) from the United States District
Court for the Central District of California in No. 5:05-cv-
00426-VAP-MRW, Judge Virginia Anne Phillips.
______________________
ON PETITION
______________________
Before DYK, PLAGER, and LINN, Circuit Judges.
LINN, Circuit Judge.
ORDER
Boston Scientific Corporation and Scimed Life Sys-
tems, Inc. petition for permission to appeal an order of the
United States District Court for the Central District of
California that denied summary judgment. The district
court certified the order for appeal under 28 U.S.C.
2 JANG v. BOSTON SCIENTIFIC CORPORATION
§ 1292(b). On June 9, 2014, this court ordered the parties
to address whether this court has jurisdiction over this
petition in light of Gunn v. Minton, 133 S. Ct. 1059 (2013),
or whether this petition should be transferred to the
United States Court of Appeals for the Ninth Circuit. We
have considered the submissions of the parties and for the
reasons provided here decline to transfer and deny the
petition for interlocutory review.
BACKGROUND
This contract case comes before this court for a third
time. The facts and procedural history of this contract
case are set forth in Jang v. Boston Scientific Corp., 532
F.3d 1330 (Fed. Cir. 2008) (“Jang I”) and Jang v. Boston
Scientific Corp., 493 Fed. App’x 70 (Fed. Cir. 2012) (“Jang
II”); we recount only those pertinent to this petition.
Respondent Dr. G. David Jang, M.D. and petitioners
entered into an agreement whereby Jang assigned his
rights in various patents to petitioners in exchange for an
upfront payment and a promise under defined circum-
stances to pay additional compensation if petitioners sold
stents covered by Jang’s patents.
In May 2005, Jang brought suit in federal court for
breach of contract and other various state law claims,
basing jurisdiction on diversity of citizenship and alleging
that petitioners had failed to compensate Jang for the sale
of certain covered stent products. In the first two appeals,
this court addressed claim construction disputes relevant
to whether the accused stents were covered by (i.e., would
have infringed) Jang’s patents. While the case was on
remand from this court after Jang II, petitioners filed
requests for ex parte reexamination with the U.S. Patent
and Trademark Office (“PTO”), asserting that the claims
of Jang’s patents were invalid. The PTO granted peti-
tioners’ requests to initiate reexamination, and the exam-
iner rejected the claims. Because petitioners did not
JANG v. BOSTON SCIENTIFIC CORPORATION 3
respond to the office action or appeal, the claims at issue
were canceled in issued reexamination certificates.
In light of the PTO proceedings, petitioners moved for
summary judgment in the district court, arguing, inter
alia, that under Lear, Inc. v. Adkins, 395 U.S. 653 (1969),
the parties’ assignment agreement cannot require pay-
ment for practice of claims subsequently held to be inva-
lid. In March 2014, the district court denied the motion.
In doing so, the district court found that under this court’s
decision in Studiengesellschaft Kohle, M.B.H. v. Shell Oil
Co., 112 F.3d 1561 (Fed. Cir. 1997) (“Kohle”), a patentee is
not precluded under Lear from recovering royalties until
the date the licensee or assignee first challenges the
validity of the patent. Because the court concluded that
Jang could seek royalties prior to a challenge to the
validity of the patents, it denied the motion for summary
judgment.
On petitioners’ motion, the district court certified an
interlocutory appeal of the order denying summary judg-
ment pursuant to 28 U.S.C. § 1292(b) as to the following
questions:
1. Where an assignor is suing under an assign-
ment agreement for payments allegedly due for
practicing claims now determined to be invalid,
and where there is no allegation of dishonest or
dilatory conduct on the part of the assignee, does
the exception to Lear, Inc. v. Adkins, 395 U.S. 653
(1969), identified in Studiengesellschaft Kohle,
M.B.H. v. Shell Oil Co., 112 F.3d 1561 (Fed. Cir.
1997), apply?
2. If the Kohle exception does apply, what is the
appropriate standard for its application where the
assignee has never made payments on sales of the
accused product and has consistently maintained
that no such payments could be due because the
claims cannot properly be construed to cover the
4 JANG v. BOSTON SCIENTIFIC CORPORATION
accused product and would be invalid under any
construction that did cover the accused product?
This petition for permission to file an interlocutory
appeal followed, and we directed the parties to address
the jurisdictional question prior to consideration of the
merits of the petition.
DISCUSSION
I.
Section 1292(b) vests the “Court of Appeals which
would have jurisdiction of an appeal of such action,” to
decide, in its discretion, whether or not to permit an
interlocutory appeal. 28 U.S.C. § 1292(b).
This court has exclusive jurisdiction to decide an ap-
peal from a final decision of a district court in any civil
action “arising under” any Act of Congress relating to
patents. 28 U.S.C. §§ 1338(a), 1295(a)(1). Even though
petitioners do not contend that federal patent law creates
the asserted causes of action, we agree that this case
nonetheless presents a patent issue that is “(1) necessari-
ly raised, (2) actually disputed, (3) substantial, and (4)
capable of resolution in federal court without disrupting
the federal-state balance approved by Congress.” Gunn,
133 S. Ct. at 1065.
A.
In previously ruling that this court had jurisdiction
over Jang’s appeal, we noted that “[a]lthough this case
arises from a contract claim, rather than directly as a
patent infringement claim, Jang’s right to relief on the
contract claim as asserted in the complaint depends on an
issue of federal patent law—whether the stents sold by
[petitioners] would have infringed [Jang’s patents].” Jang
I, 532 F.3d at 1334 n.5. Nothing in the Supreme Court’s
decision in Gunn alters that conclusion.
JANG v. BOSTON SCIENTIFIC CORPORATION 5
In Gunn, the plaintiff alleged that his attorneys com-
mitted malpractice by failing to timely raise an exception
to the on-sale bar in district court litigation that led to his
patent being held invalid. 133 S. Ct. at 1062–63. After
the state trial court granted summary judgment in favor
of his attorneys, the plaintiff argued on appeal that the
state court lacked jurisdiction because his claim arose
under federal patent law. Id. at 1063.
The Supreme Court disagreed, holding that the pa-
tent issue underlying the malpractice case was “not
substantial in the relevant sense” because that inquiry
looks to “the importance of the issue to the federal system
as a whole” and not the significance “to the particular
parties in the immediate suit.” Id. at 1066. Minton’s
malpractice claim was not substantial because the ques-
tions posed were only “backward-looking” and “hypothet-
ical,” and their importance was limited to the specific
facts and parties in that case. Id. at 1066–67. Thus, the
Court held that the patent issue was insufficient to estab-
lish federal “arising under” jurisdiction. Id. at 1068.
Here, by contrast, the disputed federal patent law is-
sues presented by Jang’s well-pleaded complaint are
substantial and neither entirely backward-looking nor
hypothetical. In addition to infringement, the court may
be called upon to determine the extent to which validity is
made relevant to the resolution of the breach-of-contract
claim by the language of the contract itself. The Assign-
ment Agreement defines “Contingent Payment Products”
as “any stent . . . the development, manufacture, use, or
sale of which is covered by one or more Valid Claims of
the Patents . . . or which, but for the assignment made
pursuant to this Agreement, would infringe one or more
Valid Claims of the Patents.” Assignment Agreement (Ex.
A), § 1.1, at 2 (emphases added). The contract then states
that “Valid Claim means (a) a claim of any issued patent
which is contained within the [licensed patents] and
which has not expired, lapsed, or been held invalid, un-
6 JANG v. BOSTON SCIENTIFIC CORPORATION
patentable or unenforceable by a final decision, which is
unappealed or unappealable, of a court of competent
jurisdiction, or of an administrative agency having au-
thority over patents.” Id. at 4 (emphasis added). 1
Contract claims based on underlying ongoing royalty
obligations, such as the ones at issue here, raise the real-
world potential for subsequently arising infringement
suits affecting other parties. In Forrester Environmental
Services, Inc. v. Wheelabrator Technologies, Inc., we
differentiated between malpractice suits, such as the one
in Gunn, and business disparagement disputes based on
the potential for future state-federal and circuit splits:
Those cases [finding Federal Circuit jurisdic-
tion over false statement claims] may well have
survived the Supreme Court’s decision in Gunn.
Unlike the purely “backward-looking” legal mal-
practice claim in Gunn, 133 S. Ct. at 1066–67,
permitting state courts to adjudicate disparage-
ment cases (involving alleged false statements
about U.S. patent rights) could result in incon-
sistent judgments between state and federal
courts. For example, a federal court could con-
clude that certain conduct constituted infringe-
ment of a patent while a state court addressing
the same infringement question could conclude
that the accusation of infringement was false and
the patentee could be enjoined from making fu-
ture public claims about the full scope of its pa-
tent as construed in federal court.
715 F.3d 1329, 1334 (Fed. Cir. 2013).
Under disputes like the one at issue here in which
resolution of the contract claim itself requires resolution
1 In denying the petition, we express no view on the
merits of this issue.
JANG v. BOSTON SCIENTIFIC CORPORATION 7
of underlying issues of infringement, there exists the
possibility that the patentee would file suits alleging
infringement by others and may even be contractually
obligated to do so. 2 These suits have the potential of
conflicting rulings particularly as to validity. Here, where
suit was filed in federal court based on diversity of citi-
zenship, the potential for inconsistent judgments affecting
not only the parties to this dispute but other parties who
might be sued in separate actions for infringement is
particularly significant. Permitting regional circuits to
adjudicate questions of patent validity, for example, could
result in inconsistent judgments between a regional
circuit and the Federal Circuit, resulting in serious uncer-
tainty for parties facing similar infringement charges
before district courts within that regional circuit. Main-
taining Federal Circuit jurisdiction over such contractual
disputes to avoid such conflicting rulings is important to
“the federal system as a whole” and not merely “to the
particular parties in the immediate suit.” Gunn, 133 S.
Ct. at 1066.
B.
Jang argues that the Federal Circuit no longer has
appellate jurisdiction because the PTO’s cancellation of
the claims in issue means the question of patent validity
as it relates to the public at large can no longer be said to
be “substantial.” We disagree. Just as subject matter
jurisdiction in diversity cases such as this one is deter-
mined on the facts as they existed at the time the claim
was filed, Grupo Dataflux v. Atlas Global Group, L.P., 124
2 While in this case defendant Scimed held the pa-
tents, and the additional suits would be brought by
Scimed, that does not undermine the general principle.
Indeed, Scimed, at the time this litigation commenced,
was planning to bring and later did bring suits against
third parties alleging infringement of the patents.
8 JANG v. BOSTON SCIENTIFIC CORPORATION
S. Ct. 1920, 1924 (2004) (measuring “all challenges to
subject-matter jurisdiction premised upon diversity of
citizenship against the state of facts that existed at the
time of filing—whether the challenge be brought shortly
after filing, after the trial, or even for the first time on
appeal”), the Federal Circuit’s exclusive appellate juris-
diction is predicated on the cause of action and the basis
of the facts as they existed at the time the complaint or
any compulsory counterclaim was filed. 28 U.S.C. §§
1338(a), 1295(a)(1). Thus, in assessing whether appellate
jurisdiction in the appeal of a district court judgment in a
diversity case is properly before the Federal Circuit, the
court will look to whether the four-part Gunn test is met
on the basis of the cause of action pled and the facts as
they existed at the time the complaint or any compulsory
counterclaim is filed.
Here, the actions of the PTO in cancelling the claims
at issue did not take place until long after the complaint
had been filed. Because the patent law issues raised in
the complaint were at that time substantial for the rea-
sons noted above, and because the Gunn test was other-
wise met in all respects, jurisdiction of the petition is and
properly remains before this court.
II.
Petitioners seek this court’s review of whether the dis-
trict court correctly applied Lear and Kohle. 28 U.S.C. §
1292(b) authorizes a district court to certify for appeal an
otherwise-unappealable order under circumstances in
which it is “of the opinion that such order involves a
controlling question of law as to which there is substan-
tial ground for difference of opinion and that an immedi-
ate appeal from the order may materially advance the
ultimate termination of the litigation[.]” Ultimately, this
court must exercise its own “discretion” in deciding
whether to “permit an appeal to be taken” under this
provision. Id.; see also Digital Equip. Corp. v. Desktop
JANG v. BOSTON SCIENTIFIC CORPORATION 9
Direct, Inc., 511 U.S. 863, 883 n.9 (1994) (noting “broad”
discretion); In re Convertible Rowing Exerciser Patent
Litig., 903 F.2d 822, 822–23 (Fed. Cir. 1990).
As a general proposition, our court grants interlocuto-
ry review in these multi-faceted patent cases only rare-
ly. In this case, we decline to grant such review. There
are several reasons why this case is not appropriate for
such review. It is not clear that the legal issues identified
in the questions will in fact be controlling, and each
question depends on the resolution of factual issues not
yet addressed by the district court.
Without taking any position on the merits of the is-
sues presented, we conclude that the limited circumstanc-
es under which an interlocutory appeal might be
permitted are not met in this case.
Accordingly,
IT IS ORDERED THAT:
This petition is denied.
FOR THE COURT
September 16, 2014 /s/ Daniel E. O’Toole
Dated Daniel E. O’Toole
Clerk of Court