EON Corp. petitions Supreme Court for review of Federal Circuit’s expansive view of Rule 50 power

In EON Corp. IP Holdings LLC v. Silver Spring Networks, Inc., No. 15-1237, 815 F.3d 1314 (Fed. Cir. 2016), the Federal Circuit reversed a jury verdict and ordered judgment as a matter of law (“JMOL”)—without further proceedings in the district court—on an unarticulated claim construction that was raised by neither party below or on appeal.  On Friday, October 21, EON Corp. IP Holdings, LLC (“EON”) filed a petition for certiorari for review of the decision.  The petition (this author appears on the cover) presents a critical question regarding the extent to which an appellate court may grant judgement as a matter of law (JMOL) on a “purely legal” issue that was not preserved in a Rule 50(b) motion.

The Federal Circuit Decision

The Federal Circuit’s decision in EON Corp. was covered briefly in a previous IPWatchdog post by Robert Schaffer and Joseph Robinson.  In short, the Federal Circuit determined that the district court incorrectly construed two patent claim terms—“portable” and “mobile”—as having their plain and ordinary meaning.  Instead, the majority reasoned that those terms “should not be construed so broadly such that they covered ‘fixed or stationary products that are only theoretically capable of being moved.’”  However, the panel refused to articulate a construction, noting instead that the terms could not have covered the accused devices because “when the claim terms are properly construed, no reasonable jury could have found that Silver Spring’s electric utility meters infringe.”

In a sharp dissent, Judge Bryson disagreed, noting that the majority “[did] not state what it regards as the proper construction.”  Judge Bryson reasoned that the majority was “essentially adopting Silver Spring’s construction,” but the majority rejected that characterization.  Judge Bryson found the majority’s lack of an articulated construction problematic because the majority’s reasoning appeared to turn on a conclusion that “portable” and “mobile” require the meters to be operable while they are moving from one location to the next, a position that Silver Spring expressly disavowed multiple times before the district court and on appeal.

The Extent of Rule 50 Review in the Courts of Appeal

In its cert petition, EON contends that the majority’s reliance on an unarticulated construction to order JMOL presents a larger question that the Supreme Court has previously articulated but declined to answer.  Specifically, the case presents the issue: “Whether the Federal Circuit erred in ordering entry of judgment as a matter of law on a ground not presented in a Rule 50 motion in the district court, even though the ground presented a purely legal question.”

Federal Rule of Civil Procedure 50(a)(1) provides that a motion requesting JMOL before the case is submitted to a jury must demonstrate that “a reasonable jury would not have a legally sufficient evidentiary basis to find” in favor of the other party.  Accordingly, a pre-verdict Rule 50(a) motion, and a post-verdict Rule 50(b) motion that renews a Rule 50(a) motion after a jury verdict issues, are seen as vehicles to measure the sufficiency of the evidence presented at trial.  For example, in a negligence case, if a plaintiff failed to present any evidence regarding an element of the tort, like breach, a defendant would use a Rule 50 motion to argue that no reasonable jury could determine that there was a breach of duty because the jury was presented with no evidence on the element.  In turn, the district court could order a new trial or enter JMOL on behalf of the defendant.

How a court of appeals may review the district court’s JMOL ruling is a topic that divides the circuits.  In Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., 546 U.S. 394 (2006), the Supreme Court held that an appellate court was “without power to direct the District Court to enter judgment contrary to the one it had permitted to stand” without a proper Rule 50(b) motion.  As that Court reasoned, one purpose of Rule 50 is to allow the district court, in real time, to evaluate whatever errors the movant brings to its attention, and itself determine whether such errors warrant JMOL or a new trial.  It also provides the non-movant an opportunity to correct whatever errors may exist.  Accordingly, cabining a court of appeal’s review power to only those grounds raised in a Rule 50(b) motion preserves those underlying purposes.

However, as the D.C. Circuit pointed out in Feld v. Feld, 688 F.3d 779 (D.C. Cir. 2012), some courts of appeal, including the Federal Circuit, reserve the right to enter JMOL on grounds that are not preserved in a Rule 50(b) motion if those grounds present a “purely legal” question.  Based on Rule 50’s sufficient-evidence rationale, those courts reason that preservation does not apply to legal questions.  The Supreme Court recognized this divide in Ortiz v. Jordan, 562 U.S. 180 (2011), but passed on the question there because the issue in that case turned on fact issues, not a “purely legal” question.

The Cert Petition

The Federal Circuit finds itself among those courts who have determined that they may grant JMOL on “purely legal” grounds that were unpresented in a Rule 50 motion, and, unsurprisingly, has divined and wielded that power pursuant to its de novo review of claim construction pursuant to Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996).  In Exxon Chem. Patents, Inc. v. Lubrizol Corp., 64 F.3d 1553 (Fed. Cir. 1995), the Federal Circuit determined that, if the district court had incorrectly construed a patent claim term, it could independently construe the term and then compare the trial evidence to that newly construed term.  Even if the Circuit’s sua sponte construction was not presented in a Rule 50 motion—or even presented at all below—the Federal Circuit has determined that it may still enter JMOL if the evidence is insufficient under that new construction.

That power was exercised by the Federal Circuit in EON Corp., and the cert petition seeks review of that power.  In its Rule 50 motions before the district court, Silver Spring moved for JMOL on the portable–mobile issue on two grounds: (1) the evidence was insufficient to demonstrate that Silver Spring’s meters were portable and mobile under the plain and ordinary meaning of those terms (which was the court’s construction), and (2) the evidence was insufficient to demonstrate that Silver Spring’s meters were portable and mobile under Silver Spring’s proposed construction of those terms (which the district court had rejected well before the trial in its Markman Order).  As Judge Bryson noted in his dissent, it does not appear that the majority ruled on either of those grounds because it rejected plain and ordinary meaning and also rejected that it was adopting Silver Spring’s construction.  The majority’s lack of articulation of what it considers the “proper” construction—only that there is insufficient evidence under any “proper” construction—further compounds the issue.

In its petition, EON contends that the majority’s analysis is at odds with Unitherm and Rule 50 itself, and that the facts serve as a good vehicle to finally resolve the circuit split regarding a grant of JMOL on “purely legal” grounds.  The issue is especially acute in the Federal Circuit, where affirmance or reversal of the district court’s JMOL ruling frequently follows the panel’s opinion regarding claim construction.  See, e.g., SimpleAir, Inc. v. Sony Ericsson Mobile Commc’ns AB, 820 F.3d 419, 431 (Fed. Cir. 2016) (vacating and remanding with instructions to render on terms the panel reconstrued); Function Media, L.L.C. v. Google, Inc., 708 F.3d 1310, 1316 (Fed. Cir. 2013) (affirming the district court’s JMOL ruling after affirming the district court’s constructions of several terms).

EON’s petition raises several problems created by the Federal Circuit’s position.  Rule 50 is generally meant to constrain appellate review; where a court of appeals may review a “purely legal” issue de novo pursuant to Rule 50, those constraints become unmoored.  That is compounded where the claim construction position was never advocated, and in fact expressly disavowed, by the parties below and on appeal.

It also presents Seventh Amendment concerns.  Once a claim construction issues, it becomes the law of the case, and the parties may not deviate from it.  See Andersen Corp. v. Fiber Composites, LLC, 474 F.3d 1361, 1371 n.2 (Fed. Cir. 2007).  At every stage thereafter, developing a record or presenting evidence on a rejected construction is barred.  See, e.g., CytoLogix Corp. v. Ventana Med. Sys., Inc., 424 F.3d 1168, 1172 & n.4 (Fed. Cir. 2005) (expert discovery).  Thus, when a Federal Circuit panel enters a construction and then compares the trial record to that newly minted construction, the panel is looking at a record that the parties were prevented from developing on the very construction that the panel is now measuring for sufficiency.

For a copy of the petition, or to discuss the issue further, feel free to contact me.