Gordon Gould, Refac International, Limited, Patlex Corporation, and Creative Patents, Inc. v. Control Laser Corporation and Holobeam Laser Corporation

866 F.2d 1391, 9 U.S.P.Q. 2d (BNA) 1718, 1989 U.S. App. LEXIS 742, 1989 WL 5981

• Court: Court of Appeals for the Federal Circuit
• Decided: January 30, 1989
• Docket: 88-1121
• Status: Published

Opinions

ARCHER, Circuit Judge.

ORDER

Gordon Gould, Refac International, Limited, Patlex Corporation, and Creative Patents, Inc., (Patlex) appeal from the judgment of the United States District Court for the Middle District of Florida, Orlando Division, holding claims 1, 6, 8 and 10 of U.S. Patent No. 4,053,845 (’845) invalid.¹ Control Laser Corp. and Holobeam Laser Corp. (Control Laser) informed this court by letter that it will not appear and defend this appeal.

I

The ’845 patent, directed toward laser amplifiers, issued October 11, 1977 to Gordon Gould. This case is a consolidation² of two patent infringement suits filed in 1977 and 1978 by Patlex³ against Control Laser. Control Laser counterclaimed for patent invalidity and damages for alleged antitrust violations. The issues of validity and infringement of the ’845 patent were severed from the issue of damages and set for sequential jury trials.

After trial, the jury returned a verdict finding all of Control Laser’s products to infringe claims of the ’845 patent, if valid, but found claims 1, 6, 8 and 10 invalid. On November 5,1987, during the damages portion of the trial and before submission of the damages issues to the jury, the parties announced that a settlement had been reached. A written agreement between Patlex and Control Laser, to which other parties are signatories, was represented by counsel for all parties to be the settlement agreement. Upon the request and agreement of counsel for all parties, the court ordered the agreement filed. According to the district court:

With the settlement of the then pending issues of damages, the matter was ripe for post trial motions. Plaintiffs moved for the entry of a judgment in their favor notwithstanding the verdict on the issues of the validity of claims 1, 6, 8 and 10. The motion was denied by the court. Counsel for all parties then agreed that immediate entry of final judgment would be timely and that judgment in the form set forth herein would correctly reflect the disposition which had been made (a) of the issues which had been fully tried; (b) of the issues which had been partially tried and settled; and (c) of the issues on which trial had not yet commenced.

The district court’s “Final Judgment” provided that: “Claims 1, 6, 8, and 10 ... are invalid.”

The settlement agreement also included a transfer to Patlex of an ownership interest in and voting control over Control Laser.

II

Settlement moots an action, Lake Coal Co. v. Roberts & Schaefer Co., 474 U.S. 120, 106 S.Ct. 553, 88 L.Ed.2d 418 (1985); International Union v. Dana Corp., 697 F.2d 718, 721 (6th Cir.1983), although jurisdiction remains with the district court to enter a consent judgment. Swift & Co. v. United States, 276 U.S. 311, 327, 48 S.Ct. 311, 315, 72 L.Ed. 587 (1928). See generally 13A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure, § 3533.2 at 233-35 (1975).⁴ When the case between the parties has been settled, there is no actual matter in controversy essential to the decision of the particular case before it. See Local No. 8-6, Oil, Chemical & Atomic Workers Int’l Union v. Missouri, 361 U.S. 363, 367, 80 S.Ct. 391, 394, 4 L.Ed.2d 373 (1960) (citing United States v. Alaska S.S. Co., 253 U.S. 113, 116, 40 S.Ct. 448, 449, 64 L.Ed. 808 (1919)).

Patlex in its brief on appeal argues:

Rather than risk a substantial adverse damage verdict, Control Laser decided to settle and, as part of the settlement, accepted a license on the patent-in-suit from Patlex_ Control Laser no longer has any economic interest in continuing the litigation and has informed the court that it will not be participating in the appeal.

Patlex further explains that “Control Laser’s decision not to participate in this appeal stemmed from its decision to settle.... Once it took a license, Control Laser would have had no interest in appearing before this Court.” Thus, Patlex concedes that there is no longer any controversy between the parties. Without any controversy, this court is without jurisdiction. North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 404, 30 L.Ed.2d 413 (1971) (“federal courts are without power to decide questions that cannot affect the rights of litigants in the case before them”); Local No. 8-6, 361 U.S. at 367, 80 S.Ct. at 394 (the duty of the court is to decide actual controversies).

Patlex states that “[t]he settlement agreement did not address or affect the jury’s finding that claims 1, 6, 8 and 10 were invalid. However, in the agreement, Patlex reserved its right to attack those findings through a motion for judgment notwithstanding the verdict and then an appeal, if necessary.”⁵

This agreement by the parties cannot confer jurisdiction on this court. “Want of jurisdiction ... may not be cured by consent of the parties_” Industrial Addition Ass ’n v. Commissioner, 323 U.S. 310, 313, 65 S.Ct. 289, 291, 89 L.Ed. 260 (1945); accord United States v. Alaska S.S. Co., 253 U.S. at 116, 40 S.Ct. at 449; Utter v. Hiraga, 845 F.2d 993, 997, n. 1, 6 USPQ2d 1709, 1713, n. 1 (Fed.Cir.1988); Coastal Corp. v. United States, 713 F.2d 728, 730 (Fed.Cir.1983). “The Constitution of the United States, not private litigants, confers jurisdiction on this court to hear cases.” International Union, 697 F.2d at 723. Nor is the reservation of this issue in the settlement agreement sufficient to maintain the controversy between the parties. Control Laser is now licensed under the claims of the patent found valid by the district court (and the invalid claims of the patent should the district court’s invalidity determination be reversed). Thus, as explained by Patlex, Control Laser, as a result of the settlement agreement, “no longer has any economic interest in continuing the litigation.”

This case is moot for a second related reason. By virtue of the settlement agreement, Patlex has become the domi-nus litis on both sides. “[I]t is elemental that there must be parties before there is a case or controversy.” Ellis v. Dyson, 421 , 95 S.Ct. 1691, 1696, 44 L.Ed.2d 274 (1975).

The fact that seemingly adverse parties appear on two sides of an action is not controlling. If one party is actually and formally in control of the other party, adjudication must be refused. As explained by the Supreme Court:

since the decision in the Circuit Court, “the control of both the corporations, parties to this suit, had come into the hands of the same persons, but ... a minority of stockholders in the Amador Medean Gold Mining Company ... retained the interest that they had at the time the decision was rendered;” “... the two corporations were still in existence and organized, and ... the present managers and owners of the properties were anxious that the question should be decided, in order that the minority of the stockholders might receive whatever, by the finding of the court, would be due them.” ... We cannot, however, consent to determine a controversy in which the plaintiff in error has become the dominus litis on both sides.

South Spring Hill Gold Mining Co. v. Amador Medean Gold Mining Co., 145 US. 300, 301, 12 S.Ct. 921, 36 L.Ed. 712 (1892) (quoting Brief for Amador Medean); accord East Tennessee, Va. & Ga. R.R. v. Southern Tel. Co., 125 U.S. 695, 696, 8 S.Ct. 1391, 1392, 31 L.Ed. 853 (1888).

Patlex, as it must, concedes that this is the controlling principle of law, but in its brief on appeal argues:

To assure itself of Control Laser’s continued fiscal viability and secure payment of the note, and as a creditor, Pat-lex requested, as part of the settlement, the right to appoint the majority of the board of directors of Control Laser, and voting control over a large block of Control Laser stock [citation to appendix omitted]. Patlex’s policy was, however, not to interfere in any decisions regarding the Gould patent, focusing solely on Control Laser’s financial stability.

We do not question the veracity of this statement. Actual control, however, is not necessary to render this case moot; rather, the ability to control the opposing party suffices. Patlex, on appeal, does not challenge the fact that it has the ability to control Control Laser. Thus, the appeal is moot for lack of adversariness.

Patlex cites Baker v. Carr, 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962), for the proposition that a case or controversy is required to “assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult ... questions,” id. at 204, 82 S.Ct. at 703, and argues that “[t]he fact that one party to a suit has lost interest or chooses not to participate in an appeal does not make the controversy ... abstract or academic.” Patlex notes that “courts have often permitted appeals to proceed even when the appellee concedes the court’s error below or affirmatively switches positions and joins with the appellant in arguing error.” However, in the cases cited in support of this proposition, e.g., Bob Jones Univ. v. United States, 461 U.S. 574, 103 S.Ct. 2017, 76 L.Ed.2d 157 (1983); Pope v. United States, 323 U.S. 1, 65 S.Ct. 16, 89 L.Ed. 3 (1944), the parties continued to have adverse interests in the outcome of the litigation. 461 U.S. at 605, 103 S.Ct. at 2035; 323 U.S. at 11, 65 S.Ct. at 22. Control Laser’s interest, conversely, is no longer adverse to Patlex.

Relying on United States v. Munsingwear, Inc., 340 U.S. 36, 71 S.Ct. 104, 95 L.Ed. 36 (1950), Patlex argues that the decision of the district court should be vacated if this appeal is moot. Munsingwear explains that “[t]he established practice of the Court in dealing with a civil case from a court in the federal system which has become moot while on its way here or pending our decision on the merits is to reverse or vacate the judgment below.” Id. at 39, 71 S.Ct. at 106; accord Duke Power Co. v. Greenwood County, 299 U.S. 259, 267, 57 S.Ct. 202, 205, 81 L.Ed. 178 (1936) (“Where it appears upon appeal that the controversy has become entirely moot, it is the duty of the appellate court to set aside the decree below and to remand the cause with directions to dismiss.”); Great Western Sugar Co. v. Nelson, 442 U.S. 92, 93 n. *, 99 S.Ct. 2149 n. *, 60 L.Ed. 735 (1979) (“United States v. Munsingwear, Inc., is perhaps the leading case on the proper disposition of cases that become moot on appeal.”) This case did not become moot on appeal; rather a consent judgment was entered pursuant to the settlement agreement of the parties. The agreed settlement and entry of consent judgment mooted any possibility of Patlex pursuing an appeal and foreclosed this court from obtaining jurisdiction. The Munsingwear requirement of vacating the judgment below when a case becomes moot on appeal therefore does not apply. See Cleveland v. Chamberlain, 66 U.S. (1 Black) 419, 17 L.Ed. 93 (1861).⁶

Accordingly, it is ORDERED that:

The appeal is dismissed for lack of jurisdiction.

1 . Claims 2, 3, 4, 5, 7, 9, 11 and 12 were held not invalid, and claims 1, 2, 3, 7, 8, 9, 10, 11 and 12 were found to be infringed, if valid.

2 . Case No. 77-438-Civ-ORL-19 (M.D.FIa.) and Case No. 78-344-CÍV-ORL-19 (M.D.FIa.) were consolidated by Order entered November 27, 1978.

3 . Gould sold a substantial portion of his patent rights to Patlex Corporation and Refac International, Ltd. See Patlex Corp. v. Mossinghoff, 585 F.Supp. 713, 717 (E.D.Pa.1983).

4 .The dissent says “[t]his case was already moot when the trial court entered its final judgment and the judgment was therefore improperly entered." The cases cited by the dissent are inap-posite; in each, there was no case or controversy, and no jurisdiction, from the outset. Here, the district court clearly had jurisdiction at the outset and jurisdiction remained to enter the consent judgment.

5 . The dissent interprets the quoted statement as an argument by Patlex “in effect, that it did not settle the issues of the validity of claims 1, 6, 8, and 10.” The settlement agreement submitted in the Joint Appendix provides, however, that the litigation "shall be settled and judgment entered in the form attached hereto as Exhibit D.” Although Exhibit D was not included in the record on appeal, the district court entered a judgment that “[cjlaims 1, 6, 8, and 10 ... are invalid.” If this was not the judgment Patlex consented to, it did not so argue before this court.

More importantly, however, as the dissent recognizes, a partial settlement will render a case moot when the issues not settled are mooted by that settlement. The settlement provided for a license to Control Laser under the valid claims. As a result, Control Laser no longer infringed the patent and the issue of the validity of the claims that were found to be invalid became moot. See Advance Transformer Co. v. Levinson, 837 F.2d 1081, 1084, 5 USPQ2d 1600, 1603 (Fed.Cir.1988); Sun-Tek Indus., Inc. v. Kennedy Sky Lites, Inc., 848 F.2d 179, 183, 6 USPQ2d 2017, 2020 (Fed.Cir. 1988); Fonar Corp. v. Johnson & Johnson, 821 F.2d 627, 634, 3 USPQ2d 1109, 1114 (Fed.Cir.1987), cert. denied, — U.S. -, 108 S.Ct. 751, 98 L.Ed.2d 764 (1988).

6 . As the dissent notes, "[t]he Blonder-Tongue issue is of speculative effect until any subsequent litigation is undertaken." The applicability of Blonder-Tongue, in a situation where an agreed settlement and judgment moots the intended and expected appeal, is best left to such later litigation. Vacating the consent judgment would preclude a collateral estoppel defense in a later case and decide the issue before it arises.