Issue 236 | August 20, 2004
Competitive v. Fujitsu
Jacobs v. Nintendo

Competitive v. Fujitsu

In Competitive Technologies, Inc. v. Fujitsu et al., No. 03-1380 (Fed. Cir. June 30, 2004), the federal circuit dismissed for lack of jurisdiction an appeal from the denial of a motion to dismiss counterclaims to a patent infringement suit on sovereign immunity grounds.

Plaintiffs University of Illinois and its licensee Competitive Technologies, Inc. (“CTI”) sued Fujitsu et al. for infringement of their ‘349 and ‘400 patents. Fuji asserted a number of affirmative defenses and counterclaims in response, including misuse and attempted misuse of the patents, as well as unclean hands and inequitable conduct by both the University and CTI. The action was stayed pending an ITC investigation initiated by University and CTI (which was dismissed), and thereafter transferred to the Northern District of California. The district court held the University was an “arm of the state” entitled to claim sovereign immunity, but that sovereign immunity was waived because Fujitsu’s counterclaims were compulsory.

The University appealed the district court’s holding that the University waived sovereign immunity with respect to Fujitsu’s counterclaims, even though the district court judgment was not final under §1291. The University argued jurisdiction was nevertheless proper under the Cohen collateral order doctrine, set forth in Cohen v. Beneficial Industrial Loan Corp.,337 U.S. 541 (1949), an exception to the final judgment rule that permits immediate appeals from orders that:

fall in that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.

The test for determining whether jurisdiction was proper under Cohen collateral order doctrine was whether (1) the order must conclusively determine the disputed question, (2) resolve an important issue completely separate from the merits of the action, and (3) be effectively unreviewable on appeal from a final judgment. Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978). Turning to the first prong of the test, the federal circuit determined that the order did not “conclusively determine” whether the counterclaims were compulsory because the district court was unable to determine whether “Fujitsu’s affirmative defenses [were] supported by the evidence or [were] otherwise insufficient as a matter of law.” Because the issue of sovereign immunity waiver depended on whether Fujitsu’s defenses would survive a summary judgment motion, the order was not conclusive and the first prong of the Cohen test was not satisfied.

Exercising judicial restraint, the federal circuit declined jurisdiction under the Cohen doctrine and dismissed the appeal.

To view the full decision visit http://www.aplf.org/mailer/Issue236Competitive.doc

Jacobs v. Nintendo

In Jordan Spencer Jacobs v. Nintendo of America, Inc., No. 03-1297 (Fed. Cir., May 28, 2004), the Federal Circuit affirmed a grant of summary judgment of noninfringement based on a license to the patented technology.

Jacobs’ ‘958 patent relates to a video game controller that the operator holds in two hands. Prior to the suit against Nintendo, Jacobs sued Analog Devices, a hardware manufacturer and supplier to Nintendo, charging it with inducement and contributory infringement based on sales of tilt-sensitive components to its customers. The suit against Analog was settled pursuant to an agreement granting Analog “an irrevocable, perpetual, fully paid up license” including “the right to make, use, sell, import and export components, including micromachined accelerometers, for use in tilt-sensitive control boxes.” The settlement agreement also included a covenant not to sue.

Thereafter, Jacobs sued Nintendo for infringement of the ‘958 patent based on sales of its “Kirby Tilt ‘n Tumble” game for use with Game Boy systems. Nintendo sought, and was granted summary judgment of noninfringement as a customer of Analog and by virtue of Jacobs’ settlement agreement with Analog. Because the Jacobs/Analog settlement agreement permitted Analog to sell its components for use in tilt-sensitive control boxes, the district court concluded Nintendo obtained an implied license to use the purchased components in tilt-sensitive control boxes.

On appeal, Jacobs argued that the settlement agreement only gave Nintendo the right to use the Analog components in infringing devices if Nintendo could prove that there were no non-infringing uses for the purchased components. But the federal circuit disagreed, reasoning that the agreement authorizing Analog to make and sell components “for use in tilt-sensitive control boxes” only had meaning if it was understood to permit Analog to make and sell components for use in infringing devices. The court stated that the Jacobs/Analog settlement agreement “must be understood to authorize Analog to sell its accelerometers for such [infringing] uses.” Distinguishing Met-Coil Systems Corp. v. Korners Unlimited, Inc., 803 F.2d 684, 686 (Fed. Cir. 1986), the court held that the requirement of demonstrating that there is no noninfringing use did not apply in this case: the “noninfringing use” doctrine applies only where a patentee or its licensee sells an article and at issue is whether the sale carries with it a license to engage in conduct that would infringe the patent owner’s rights.

Interpreting the settlement agreement, the federal circuit concluded the clause granting Analog the right to sell its accelerometers for use in tilt-sensitive control boxes barred Jacobs from interfering with that right by prohibiting Analog’s customers from using the accelerometers for that authorized purpose by making, using, and selling control boxes incorporating Analog’s devices: “[t]hat interpretation is in accordance with the basic contract law principle that a party may not assign a right, receive consideration for it, and then take steps that would render the right commercially worthless.”

To view the full decision visit http://www.aplf.org/mailer/Issue236Jacobs.doc

To discuss these topics further, please feel free to contact the author Michael R. Dzwonczyk, (mdzwonczyk@sughrue.com), at Sughrue Mion, PLLC in Washington DC, USA.

The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

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