ArcelorMittal v. AK Steel Corp., (Fed. Cir. May 16, 2017) (Before Moore, Wallach, and Hughes, J.) (Opinion for the court, Hughes, J.) (Dissenting opinion, Wallach, J.)
This decision marks the third return to the Federal Circuit of a dispute (the 050 case) between the ArcelorMittal Appellants and the AK Steel Appellees. ArcelorMittal initially filed suit in district court alleging that Appellees infringed its patent, and Appellees counterclaimed for non-infringement and invalidity. At trial, a jury found that Appellees did not infringe and that the claims were invalid as anticipated and obvious. In the first appeal, the Court reversed the district court’s claim construction (in part), and reversed the anticipation holding. The Court remanded for limited proceedings to address literal infringement and commercial success arguments.
Subsequently, the USPTO reissued ArcelorMittal’s patent, and ArcelorMittal filed two additional infringement suits against Appellees, alleging infringement of the reissue patent after it issued (the 685 and 686 cases). ArcelorMittal also moved to amend its complaint in the original case to substitute allegations of infringement of the reissue patent, in place of the original, surrendered patent. Appellees thereafter moved for summary judgment on the grounds that Claims 1–23 of the reissue patent were invalid as improperly broadened. The district court granted summary judgment and denied the pending motion to amend the complaint as moot. In its order, the district court clarified that it was invalidating all 25 claims of the reissue patent and not just Claims 1–23.
In the second appeal, the Federal Circuit affirmed the invalidity of Claims 1–23 of the reissue patent but reversed the invalidity finding as to Claims 24 and 25, because those two claims were not broadened on reissue. The Court remanded for “further proceedings consistent with [that] opinion and [the Court’s] mandate” in the first appeal.
On remand in the 685 case, ArcelorMittal moved to amend its complaint to substitute allegations of infringement of a continuation of the original application. In the 050 case, ArcelorMittal moved to dismiss for lack of jurisdiction, alleging that Claims 24 and 25 of the reissue patent were not part of the case on remand. Appellees moved for summary judgment of non-infringement and invalidity of the same claims. In its reply brief in support of its motion to dismiss, ArcelorMittal attached an unexecuted draft covenant not to sue.
In a single order, the district court granted Appellees’ motion for summary judgment, denied ArcelorMittal’s motion to dismiss the 050 case, and granted ArcelorMittal’s motion to amend its complaint in the 685 case. In the third appeal, ArcelorMittal appealed (1) the denial of its motion to dismiss for lack of subject matter jurisdiction and (2) the grant of summary judgment of invalidity of Claims 24 and 25 of the reissue patent.
Regarding the alleged lack of subject matter jurisdiction, ArcelorMittal argued that it never asserted Claims 24 and 25 of the reissue patent in the 050 case. The Court, however, was not convinced. The Court pointed to ArcelorMittal’s argument in the second appeal: “even if only reissue claims 24 and 25 remain, there is evidence that those claims were infringed during the time period at issue in the 050 case.” ArcelorMittal’s also asked the Court to “remand the 050 case so that the district court can address infringement of reissue claims 24 and 25.” The Court, “‘remand[ed] for further proceedings’ because [the Court] declined ‘to reach the merits’ on claims 24 and 25, which [the Court] held were improperly invalidated.” Therefore, the district court correctly considered Claims 24 and 25 of the reissue patent to be asserted on remand.
The Court rejected ArcelorMittal’s argument that the 050 case became moot when ArcelorMittal tendered a covenant not to sue. To determine whether a claim for declaratory judgment presents a case or controversy sufficient for Article III purposes, the Supreme Court noted the MedImmune standard: “[a] declaratory judgment claim must pertain to a ‘substantial controversy, between [the] parties having adverse legal interest of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” The Court explained that it “may either employ the MedImmune standard or draw from the ‘specific but overlapping doctrines rooted in the same Article III inquiry,’ including ‘lack of mootness.’” The Court cautioned that there is no bright-line rule for satisfaction of the case or controversy requirement and that “MedImmune makes clear . . . that all the circumstances must be considered when making a justiciability determination.” (internal quotation marks omitted).
Addressing the 050 case and ArcelorMittal’s tender of a covenant not to sue during briefing: “Although a patentee’s grant of a covenant not to sue a potential infringer can sometimes deprive a court of subject matter jurisdiction, . . . the patentee bears the formidable burden of showing that it could not reasonably be expected to resume its enforcement efforts against the covenanted, accused infringer.” (internal quotation marks omitted). After taking into account “all the circumstances,” the Court found “on the particular, unusual facts of this case that ArcelorMittal did not moot its controversy” with Appellees over the reissue patent because, “[a]t no time before the court entered summary judgment did ArcelorMittal unconditionally assure [Appellees] and their customers that it would never assert [reissue] claims 24 and 25 against them.” ArcelorMittal first suggested a covenant when it stated that “it was ‘prepared to grant a covenant against suit to [Appellees] for all claims of the [reissue] patent in order to resolve any remaining issue,’” and subsequently, ArcelorMittal supplemented its reply in support of its motion to dismiss by attaching “an unexecuted covenant as an exhibit.” Eventually, ArcelorMittal did file an executed covenant not to sue with the district court, but ArcelorMittal included a cover letter that stated it was “tender[ing] the covenant ‘conditioned on resolution of its motion to amend . . . in the 685 case.’”
The Court explained that ArcelorMittal “designed its actions specifically to maintain jurisdiction in the 685 case — a case that would have been moot had ArcelorMittal tendered [Appellees] an effective covenant not to assert the [reissue] patent.” Supporting this finding was ArcelorMittal’s previously provided explanation that it “tend[ered] the covenant conditioned on resolution of its motion to amend . . . in the 685 case,” and “this condition [was] necessary to avoid mooting the 685 case and thereby divesting the Court of jurisdiction.” The conditional nature of the covenant differentiates this case from others where jurisdiction was defeated by less than a fully executed covenant not to sue.
After “taking into account not solely the covenant’s terms but also the circumstances of its delivery,” the Court affirmed the district court’s retention of subject matter jurisdiction.
Finally, ArcelorMittal argued that the district court was required to start anew its obviousness assessment of the reissue claims. The Court disagreed, stating that reissuance alone does not constitute new evidence, and regardless, the reissue preceded the Court’s mandate in the second appeal, which meant it was not an intervening development. Finally, the Court found that the district court acted within its discretion in refusing ArcelorMittal’s Rule 56(d) request for new discovery on commercial success of reissue Claims 24 and 25. ArcelorMittal failed to explain how it could demonstrate a nexus between commercial success and the claimed invention recited by Claims 24 and 25 of the reissue patent.
Dissenting, Judge Wallach disagreed with the majority’s analysis of the totality of the circumstances. In his view, the analysis should have stopped with the executed covenant. The cover letter, which contained the conditional language emphasized by the majority, should not have been considered. Judge Wallach explained, “When as here a covenant’s terms are unambiguous, we may not interpret those terms using extrinsic evidence, such as a cover letter.” He concluded that the district court did not have subject matter jurisdiction to enter an order of summary judgment in favor of Appellees.
Overall, the Federal Circuit affirmed the judgment invalidating ArcelorMittal’s reissue patent, finding that the district court: (1) possessed subject matter jurisdiction when it granted summary judgment, (2) properly followed the Court’s most recent mandate on remand, and (3) properly exercised its discretion to deny a Rule 56(d) request for new discovery on commercial success.
When appropriate given all of the circumstances, a district court may have jurisdiction to consider claims of a reissue patent on remand, although the claims were not asserted at trial, e.g. if the reissue claims are sufficiently connected to the original case and the remand for such consideration is requested. A case or controversy is not moot, and jurisdiction is not avoided, by tendering an unexecuted and conditional covenant not to sue.