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Automated Merch. Sys., Inc. v. Lee

United States Court of Appeals, Federal Circuit

April 10, 2015

AUTOMATED MERCHANDISING SYSTEMS, INC., a Delaware Corporation, Plaintiff-Appellant
v.
MICHELLE K. LEE, Director, U.S. Patent and Trademark Office, in her official capacity as the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Defendant-Appellee

Appeal from the United States District Court for the Eastern District of Virginia in No. 1:13-cv-01289-AJT-JFA, Judge Anthony J. Trenga.

JAMES DANIEL BERQUIST, Davidson Berquist Jackson & Gowdey, LLP, Arlington, VA, argued for plaintiff-appellant. Also represented by DONALD LEE JACKSON.

MEGAN BARBERO, Appellate Staff, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by MARK R. FREEMAN, JOYCE R. BRANDA; NATHAN K. KELLEY, WILLIAM LAMARCA, LORE A. UNT, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA; DANA J. BOENTE, DAVID MOSKOWITZ, Office of the United States Attorney for the Eastern District of Virginia, Alexandria, VA.

Before PROST, Chief Judge, TARANTO, Circuit Judge, and FOGEL, District Judge.[*]

OPINION

Page 1377

Taranto, Circuit Judge

Automated Merchandising Systems, Inc. (AMS) petitioned the United States Patent and Trademark Office to terminate four pending inter partes reexaminations of four AMS patents that had been the subject of a patent-infringement suit between AMS and Crane Co., the requester of the reexaminations. After AMS and Crane entered into a consent judgment, which dismissed the infringement suit and stated that the parties stipulated to the validity of the patents, AMS argued to the PTO that the reexaminations must stop because, under 35 U.S.C. § 317(b) (2006), the consent judgment was a " final decision . . . entered against a party in a civil action . . . that the party has not sustained its burden of proving the invalidity of any patent claim in suit." The PTO denied AMS's petition to terminate the reexaminations.

When AMS challenged that decision in district court under the Administrative Procedure Act (APA), 5 U.S.C. § § 701-706, the court held that § 317(b) did not require termination of the reexaminations. Automated Merch. Sys., Inc. v. Rea, 45 F.Supp.3d 526, 2014 WL 4628552, at *3-6 (E.D. Va. 2014) ( AMS ). The court concluded that the consent judgment, though final, was not a decision that Crane failed to prove invalidity of the patents, as the judgment stated, regarding invalidity, only that the parties stipulated to validity. Id. We now affirm, though not on the district court's ground of § 317(b)'s inapplicability. We conclude

Page 1378

that AMS's challenge to the PTO's refusal to terminate pending reexaminations cannot proceed because the refusal is not a " final agency action" under the APA, 5 U.S.C. § 704.

Background

AMS sued Crane in the Northern District of West Virginia for infringement of four patents, U.S. Patent Nos. 6,384,402, 6,794,634, 7,191,915, and 7,343,220. In early 2011, years into the litigation, Crane requested an inter partes reexamination of each patent under 35 U.S.C. § § 311-318 (2006).[1] Finding that Crane had raised substantial new questions of patentability as to all four patents, the PTO initiated four inter partes reexaminations. Id. § § 312(a), 313.

While the reexaminations were underway, AMS and Crane settled their suit in the Northern District of West Virginia. Pursuant to the settlement, the court issued a consent judgment stating, in relevant part, that " [t]he parties stipulate that [the four patents] are valid," that " [a]ll claims . . . are dismissed with prejudice," and that " [t]his judgment is final." J.A. 62. AMS then asked the PTO, several times, to terminate the reexaminations under § 317(b), which read, in relevant part, as follows:

Once a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28, that the party has not sustained its burden of proving the invalidity of any patent claim in suit . .., then neither that party nor its privies may thereafter request an inter partes reexamination of any such patent claim on the basis of issues which that party or its privies raised or could have raised in such civil action . .., and an inter partes reexamination requested by that party or its privies on the basis of such issues may not thereafter be maintained by the Office . . . .

The PTO refused to terminate the reexaminations. For example, with regard to the '634 patent, it found no " decision" by the West Virginia court " that [Crane] ha[d] not sustained its burden of proving the invalidity of any patent claim." J.A. 75. The PTO also stated that its refusal to terminate the ...


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