American Axle & Manufacturing, Inc. v. Neapco Holdings LLC (Fed. Cir. 2020)

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Federal Circuit Refuses to Issue Stay in Mandate Pending Certiorari Decision

One of the most interesting (albeit troubling) decisions by the Federal Circuit in the past year or so was its decisions, by a panel and then in denying review en banc, in American Axle & Manufacturing, Inc. v. Neapco Holdings LLC. In addition to expanding (beyond recognition) the capacity for courts to invalidate patents on lack of subject matter eligibility grounds, the case illustrated the fractured nature of the Court on this question (with the judges being equally divided on the rehearing en banc petition). Another aspect was a pair of strong dissents by Judge Moore, at both stages, where she expressed her view that the Court had embarked on a course that resembles "enablement on steroids" and "turns the [Section 101] gatekeeper into a barricade."

On Friday, the Court denied American Axle's motion to stay issuance of the Court's mandate while awaiting the Supreme Court's decision on its petition for certiorari. The Court's order cited the standard, under Federal Rule of Appellate Procedure 41(d)(1), that such a motion be granted only if "the petition would present a substantial question and that there is good cause for a stay." More specifically, an appellant must show:

(1) a reasonable probability that four Justices will consider the issue sufficiently meritorious to grant certiorari; (2) a fair prospect that a majority of the Court will vote to reverse the judgment below; and (3) a likelihood that irreparable harm will result from the denial of a stay. In close cases the Circuit Justice or the Court will balance the equities and weigh the relative harms to the applicant and to the respondent [citing Hollingsworth v. Perry, 558 U.S. 183, 190 (2010)].

Here, the original panel -- Judges Dyk, Moore, and Taranto -- denied the motion on the grounds that American Axle had not shown the required irreparable harm. Certain claims having been held unpatentable (more properly, not patent eligible), the Order notes that there is nothing left for the District Court to do in response to the mandate. For the remaining claims, remanded for further proceedings, the Court rejected American Axle's argument that further proceedings according to their mandate would have the parties incur "[s]ignificant burdens and expenses" as a consequence. But "[c]ontinued litigation . . . cannot be irreparable injury," citing Renegotiation Bd. v. Bannercraft Clothing Co., 415 U.S. 1, 24 (1974) ("Mere litigation expense, even substantial and unrecoupable cost, does not constitute irreparable injury"); Commonwealth Oil Refin. Co. v. Lummus Co., 82 S. Ct. 348, 349 (1961); (Harlan, J., in chambers) (denying motion for stay of the mandate where the only Nara v. Frank, 494 F.3d 1132, 1133 (3d Cir. 2007); and United States v. Microsoft Corp., No. 00-5212, 2001 WL 931170, at *1 (D.C. Cir. Aug. 17, 2001).

It would be understandable for a patent practitioner reading this to believe the Court's Order was unremarkable and the denial routine. That understanding is disturbed if not shattered by Judge Moore's concurring opinion. The Judge writes "to elaborate on how [the three-prong test adopted by . . . sister circuits and several individual Justices and relied on by the Court] apply [to this case]" (although agreeing that American Axle has not satisfied the irreparable harm prong of the test).

The Judge notes that the Supreme Court grants certiorari "to provide lower courts with much-needed guidance, ensure adherence to our precedents, and resolve a Circuit split." But what we have here, in Judge Moore's opinion, "is worse than a circuit split—it is a court bitterly divided." She says the Court is "at a loss as to how to uniformly apply § 101," as illustrated by their unanimous (albeit ultimately fruitless) plea for the Supreme Court to grant certiorari in Athena Diagnostics v. Mayo Collaborative Services. Paradoxically, she writes, while "[t]here is very little about which all twelve of us are unanimous, especially when it comes to § 101. We were unanimous in our unprecedented plea for guidance." This case, on the other hand, is not "progeny" of Mayo Collaborative Services v. Prometheus Laboratories, Inc. or Alice Corp. v. CLS Bank Int'l. Rather, "[i]t is our own dramatic expansion of a judicial exception to § 101" according to Judge Moore. While the Court has "struggled to consistently apply the judicially created exceptions to this broad statutory grant of eligibility," it has "slowly creating a panel dependent body of law and destroyed] the ability of American businesses to invest with predictability." And this case is a model of [their] divide" on the issue. The Judge then repeats in brief her concerns raised in her dissents from the panel opinion and the denial of rehearing en banc:

In a divided panel here, we struggled to marry these concepts into an administrable distinction between eligible and ineligible claims. The majority concluded as a matter of law that claims to a manufacturing process are not eligible for patent protection because they are directed to a law of nature even though no law of nature appears in the claims, the patent, or the prosecution history. Under the majority's new "Nothing More" test, claims are ineligible when they merely make use of a natural law. We have strayed too far from the text of the statute.

For these reasons the Judge believes there is "a reasonable probability certiorari will be granted."

Judge Moore's concurrence then continues to draw the distinctions she believes are relevant between this case and prior Supreme Court subject matter eligibility precedent, saying that the claims at issue in this case "are not directed to a business method, internet or financial method" nor diagnostic method claims. Instead, the decision in this case "is a patent killing judicial exception of our own creation," one that "broadens the judicial exceptions in a way that threatens to swallow the whole of the statute." Her opinion notes the Supreme Court's penchant for applying a correction when the Federal Circuit has "defied precedent or strayed from our mandate by claiming de novo dominion over factual issues," citing inter alia, Teva Pharm. USA, Inc. v. Sandoz, Inc., 574 U.S. 318, 324–27 (2015); KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398, 407 (2007). And, according to Judge Moore, the Court "repeats this mistake again" in this case. The Court applied the law de novo in the face of contrary expert testimony and a complete lack of a single mention of the putative "natural law" (Hooke's law) in claims, specification or prosecution history, she states. The significance: "[t]his is simply not our role as appellate judges" she writes. And procedurally Judge Moore believes that the Court's remand has usurped the District Court's discretion regarding whether to consider a new defense which will result in both the court and the parties being "forced to undertake significant, expensive and burdensome process addressing this new defense."

None of these burdens amount to irreparable harm and accordingly Judge Moore concurred with the decision to deny American Axle's motion to stay. But in a broad judicial hint, her concurrence concludes by saying:

It bears noting, however, that although we have not stayed our mandate, the district court retains "the power to stay proceedings" as to claim 1 and the dependent claims, which "is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants" [citing Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)].

***

American Axle & Manufacturing, Inc. v. Neapco Holdings LLC (Fed. Cir. 2020)
Panel: Circuit Judges Dyk, Moore, and Taranto
Order by Circuit Judge Dyk; concurring opinion by Circuit Judge Moore

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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