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SHFL Entertainment v. Digideal Corporation

decided on May 2, 2018 by the Court of Appeals for the Federal Circuit

review by J. Matt Buchanan | published May 2, 2018 | updated May 2, 2018

tags: procedure, reexamination

In SHFL Entertainment, Inc. v. Digideal Corporation, the Court of Appeals for the Federal Circuit vacated the district court's granting of summary judgment against the patentee plaintiff. While litigation was pending, the United States Patent and Trademark Office reexamined all asserted claims from both patents-in-suit. In its final decision, the USPTO cancelled all asserted claims of U.S. Patent No. 7,523,935 [text] and confirmed the patentability of all asserted claims from U.S. Patent No. 6,651,982 [text] in their amended form. Returning to the infringement suit after reexamination was completed, the district court reasoned that the reexamination decision rendered the entire suit moot and granted the defendant's motion for summary judgment. On review, the Federal Circuit noted that "[t]he district court correctly found the case moot as to the cancelled claims of the ’935 patent" but explained that summary judgment was improper because "[s]uits based on cancelled claims must be dismissed for lack of jurisdiction." Regarding the reexamination-amended claims of the '982 patent, the court vacated that portion of the district court judgment as well, explaining that, in the wake of the amendments made in reexamination, the district court must determine whether "the new and amended claims that emerged from the reexaminations of the two patents are substantially identical to the claims originally asserted in the action" before assessing mootness.

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procedure | reexamination

Dismissal for lack of jurisdiction is the proper procedural tool for patent infringement actions rendered moot by cancellation of claims in reexamination—true for Ninth Circuit litigation and likely preferred for litigation arising in other circuits

Noting its own decision in Fresenius USA v. Baxter International, the court explained that “when a claim is cancelled, the patentee loses any cause of action based on that claim, and any pending litigation in which the claims are asserted becomes moot.” The district court correctly determined, therefore, that the portion of the suit based on the '935 patent was rendered moot by the intervening reexamination, which cancelled all asserted claims.

However, when applying the law of the regional circuit (the Ninth Circuit, here) and, accordingly, reviewing the dismissal for mootness de novo, the Federal Circuit held that the district court used the wrong procedural tool in dismissing the suit. The court explained that, under Ninth Circuit law, dismissal for lack of jurisdiction is the proper tool for suits, or portions of suits, that have become moot. Indeed, the Federal Circuit even pointed to its decision in Target Training International v. Extended Disc North America, which upheld the district court's dismissal for lack of jurisdiction on grounds that Fresenius rendered the suit moot as to the patent claims cancelled in reexamination.

Citing Ninth Circuit law, the court seemed to offer a broad statement on the issue, flatly stating that "[s]uits based on cancelled claims must be dismissed for lack of jurisdiction." (citing Foster v. Carson, 347 F.3d 742, 745 (9th Cir. 2003)). Considering this, and the positive nod given Target Training International, it's clear the Federal Circuit, procedurally, favors the use of dismissals for lack of jurisdiction when handling patent claims cancelled in USPTO reexaminations. SHFL Entertainment tells us that this is required under Ninth Circuit law, and suggests that it will be preferred by the Federal Circuit when reviewing mootness issues arising in other regional circuits unless the law of that circuit requires a different procedural path to dismissal.

Considering the guidance given for the Ninth Circuit, and the fairly clear suggestion of a preference on the issue, you have to question why the Federal Circuit flagged its opinion in SHFL Entertainment as nonprecedential.

procedure | reexamination

Mootness of litigation involving patent claims newly-added or amended during reexamination cannot be determined until a determination is made as to whether the new and/or amended claims are substantially identical to the originally asserted claims

During reexamination, and while the litigation was pending, the patentee plaintiff amended some of the asserted claims and also added new claims, all of which were upheld in the reexamnination and added to the litigation. The district court included these claims in its summary judgment dismissal, relying on Fresenius.

On review, the Federal Circuit noted that reliance on Fresenius is misplaced, explaining that it involved only cancelled claims. Citing directly to certificate section of the ex parte reexamination statute (35 U.S.C. 307), and its reference to the reissue statute (35 U.S.C. 252), the court explained that:

"Read conjunctively, amended or new claims incorporated into reexamined patents do not automatically abate—let alone moot—any pending action against the accused infringer based on the patents if the amended or new claims are 'substantially identical' to the original claims."

Without a "substantially identical" analysis, the district court's judgment was premature:

"The question of whether SHFL’s case is moot as to the new and amended claims that emerged from the reexaminations of the two patents, therefore, necessarily depends on whether those claims are substantially identical to the originally asserted claims. The district court, however, failed to undertake that evaluation." (emphasis added)

Importantly, under local rules in effect at the time, the patentee plaintiff had properly added the new and amended claims to its infringement action. Clearly, during reexamination and while related litigation is stayed, monitoring of local rules regarding amendment to assert new and/or amended claims, and any associated timeframes for doing so, is critical.