Patent Watch: Lazare Kaplan Int'l, Inc. v. Photoscribe Techs., Inc.

by BakerHostetler

[A] district court may [not] reopen a prior final judgment as to patent validity, not appealed by either party, based on a claim construction modified by [the Federal Circuit].

On April 19, 2013, in Lazare Kaplan Int'l, Inc. v. Photoscribe Techs., Inc., the U.S. Court of Appeals for the Federal Circuit (Lourie,* Dyk, Reyna) reversed-in-part, vacated-in-part and remanded the district court's summary judgment that U.S. Patent No. 6,476,351, which related to laser microinscriptions on gemstones, was invalid. The Federal Circuit stated:

Here, the issue is whether, on remand, a district court may reopen a prior final judgment as to patent validity, not appealed by either party, based on a claim construction modified by this court. Because this issue requires consistent and uniform application by district courts when handling patent cases, we resolve it as an issue of the law of this court. . . . It is well-settled that a party must file a cross-appeal if, although successful in the overall outcome in the district court, the party seeks, on appeal, to lessen the rights of its adversary or to enlarge its own rights. . . . Application of the rule promotes orderly functioning of the appellate courts by providing "notice of issues to be litigated and encouraging repose of those that are not."

Here, the district court found that "[i]n this case, the issues of invalidity and infringement cannot be said to be distinct; they are closely interrelated." The district court concluded that, because the issues of validity and infringement "cannot be said to be distinct, it was not necessary for defendants to appeal the validity issue in order for the court to hear the issue on remand." Based on that reasoning, the district court granted relief under Rule 60(b). [T]he district court erred by allowing Photoscribe to address validity on remand despite its failure to file a cross-appeal from the adverse final judgment on validity in [the prior litigation] Lazare Kaplan II.

The cross-appeal rule is normally applied not by district courts, but by appellate courts to assess the availability of arguments before those tribunals. To the extent that the cross-appeal rule can be applied to preclude certain arguments in a district court on remand after a failure to file a cross-appeal, however, we find the district court's application to be in error. Whether or not the concepts of invalidity and infringement are "closely interrelated" is irrelevant; the relevant issue is whether a ruling reversing the validity holding would expand Photoscribe's rights or lessen Lazare Kaplan's rights. It certainly would, as a holding of invalidity would extend beyond the determination that Photoscribe's accused machines do not infringe the asserted claims of the '351 patent. Indeed, no accused products can be found liable for infringement of an invalid claim.

Both before the district court and in this appeal, Photoscribe has sought relief under Rule 60(b)(5) and 60(b)(6), although the district court did not specify which section of Rule 60(b) provided the basis for its ruling. . . . Under Rule 60(b)(6), a district court may relieve a party from a final judgment for "any other reason that justifies relief." . . . Relief under this provision has long been limited to "extraordinary circumstances."

Under the facts presented here, we conclude that Rule 60(b) cannot provide the relief granted by the district court. As the language of the rule indicates, any relief provided by a district court is discretionary. Both the cross-appeal rule and Rule 60(b), however, share a common underlying rationale of promoting repose. When the potential outcomes of applying Rule 60(b) and the cross-appeal rule conflict, failure to steadfastly apply the cross-appeal rule invites unjustified relief under Rule 60(b), thereby undermining the common repose rationale underlying both of those rules. Moreover, it would allow a movant to circumvent the cross-appeal rule in a manner contrary to its well-established history. . . .

We recognize the logic of the district court's decision to entertain the validity challenge on remand in light of the broadened claim construction by this court, based on which the district court stated that it "makes no sense" not to. After all, a new claim construction potentially raises new validity issues. Nonetheless, rules are rules, and the cross-appeal rule is firmly established in our law. The district court thus erred in relying on Rule 60(b) as a substitute for a cross-appeal. Because the district court abused its discretion by granting relief under Rule 60(b), we reverse that ruling. We also vacate the finding of invalidity, and remand with instructions to reinstate the original judgment on validity.

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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