NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 5 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
WESTLAKE SERVICES, LLC, No. 18-55139
Plaintiff-Appellant, D.C. No. 15-cv-07490-SJO v.
CREDIT ACCEPTANCE CORPORATION, MEMORANDUM*
Defendants-Appellees.
Appeal from the United States District Court for the Central District of California S. James Otero, District Judge, Presiding
Argued and Submitted August 16, 2019 Submission Vacated September 18, 2019 Resubmitted February 3, 2020 Pasadena, California
Before: CALLAHAN and CHRISTEN, Circuit Judges, and CHEN,** District Judge.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Edward M. Chen, United States District Judge for the Northern District of California, sitting by designation. Credit Acceptance Corporation (CAC) and Westlake Services compete to
provide car dealers with services for indirectly financing used car sales. Westlake
sued CAC, asserting it violated Section 2 of the Sherman Act by attempting to
enforce an invalid patent related to expediting the financing and sales process.
BACKGROUND
In January 2000, CAC began developing the Credit Approval Processing
System (CAPS). CAPS makes the financing process for car dealers more efficient.
Starting in August 2000, CAC ran a pilot program of CAPS with five dealers. In
September 2000, CAC held a demonstration of CAPS for its dealers; it included a
panel discussion and sought to advertise CAPS for future use. On or around
January 9, 2001, the first of CAC’s dealers began paying a licensing fee to use
CAPS, and it thereon became available to all CAC’s dealers.
CAC filed a patent application in December 2001. The patent was issued on
September 27, 2005. CAC filed maintenance fees to keep it active in 2009, 2013,
and 2017.
In 2013, CAC sued Westlake, alleging Westlake infringed the patent. The
patent was ruled invalid due to patent-ineligible subject matter. See Credit
Acceptance Corp. v. Westlake Servs., 859 F.3d 1044, 1048, 1057 (Fed. Cir. 2017).
During the course of that litigation, Westlake learned that CAC’s pre-2001 uses of
CAPS (i.e., the pilot program and dealer demonstration) were not disclosed to the
2 PTO. Westlake contends these uses would have invalidated the patent under the
public-use bar.
Westlake filed this action against CAC in 2015, alleging CAC’s 2013 suit to
enforce its invalid patent violated the Sherman Act. CAC defended on the grounds
of Noerr-Pennington immunity, which protects the First Amendment right to
petition the government, a right which includes the filing of lawsuits. See E. R. R.
Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); see also
United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965). Westlake
alleged two claims to overcome that immunity: (1) a Walker Process claim; and
(2) a sham litigation claim. Both stem from CAC’s failure to disclose prior public
use. Westlake’s Walker Process claim alleges CAC fraudulently obtained its
patent by intentionally failing to disclose its prior disqualifying sales and public
uses to the PTO. See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp.,
382 U.S. 172, 176–77 (1965). The sham litigation claim alleges CAC’s
infringement lawsuit against Westlake was objectively baseless and in bad faith
because CAC knew the patent was invalid. See Prof’l Real Estate Inv’rs, Inc. v.
Columbia Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993).
The district court granted CAC’s motion for summary judgment, denied
Westlake’s cross-motion, and dismissed the suit. Westlake appeals. We review
Westlake’s appeal de novo. Frudden v. Pilling, 877 F.3d 821, 828 (9th Cir. 2017).
3 JURISDICTION
We must first determine whether 28 U.S.C. § 1295(a)(1) vests exclusive
jurisdiction over this case in the Federal Circuit.1 Exclusive appellate jurisdiction
vests in the Federal Circuit when: (1) federal patent law creates the cause of
action; or (2) the plaintiff’s right to relief necessarily depends on resolution of a
substantial question of federal patent law. Christianson v. Colt Indus. Operating
Corp., 486 U.S. 800, 808–09 (1988); cf. Gunn v. Minton, 568 U.S. 251, 258 (2013)
(district court has exclusive federal jurisdiction under § 1338 when a substantial
question of federal law is: “(1) necessarily raised, (2) actually disputed, (3)
substantial, and (4) capable of resolution in federal court without disrupting the
federal-state balance approved by Congress”). The precise contours of the Federal
Circuit’s exclusive jurisdiction and the impact, if any, of Gunn on the scope of that
jurisdiction is unsettled. Compare Xitronix Corp. v. KLA-Tencor Corp., 882 F.3d
1075, 1078 (Fed. Cir. 2018) (patent issue in a “case within a case” is not sufficient
to raise a substantial issue of patent law over which Federal Circuit has exclusive
appellate jurisdiction under Gunn) with Xitronix Corp. v. KLA-Tencor Corp., 916
F.3d 429, 442 (5th Cir. 2019) (“The four-factor test applied in Gunn . . . is not a
1 The parties agree this Court has jurisdiction under 28 U.S.C. § 1291, but the Court considers its own jurisdiction sua sponte. See Diaz-Covarrubias v. Mukasey, 551 F.3d 1114, 1117 (9th Cir. 2009).
4 tool for the task of sorting cases between the circuits.”), cert. denied, 140 S. Ct.
110 (2019).
Regardless of whether Gunn expands the jurisdiction of regional circuit
courts over matters involving patents, we have jurisdiction over this appeal.
Westlake’s right to relief does not depend on resolution of a “substantial question
of federal patent law” under Christianson. The at-issue patent has already been
declared invalid, and the claim of invalidity based on the public-use bar involves
no doctrinal dispute but instead turns on a fact-intensive analysis particular to this
case. Thus, the memorandum disposition herein will have no practical effect on
the patent at issue nor will it impact the development of federal patent law. See
Christianson, 486 U.S. at 811–13. We thus address the merits of the appeal.
DISCUSSION
Under Noerr-Pennington, Westlake cannot sue CAC under the Sherman Act
based on CAC’s 2013 patent suit unless it proves CAC obtained its patent by
fraudulent omission or that CAC’s 2013 infringement lawsuit was objectively
baseless and in bad faith. See Kaiser Found. Health Plan, Inc. v. Abbott Labs.,
Free access — add to your briefcase to read the full text and ask questions with AI
NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 5 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
WESTLAKE SERVICES, LLC, No. 18-55139
Plaintiff-Appellant, D.C. No. 15-cv-07490-SJO v.
CREDIT ACCEPTANCE CORPORATION, MEMORANDUM*
Defendants-Appellees.
Appeal from the United States District Court for the Central District of California S. James Otero, District Judge, Presiding
Argued and Submitted August 16, 2019 Submission Vacated September 18, 2019 Resubmitted February 3, 2020 Pasadena, California
Before: CALLAHAN and CHRISTEN, Circuit Judges, and CHEN,** District Judge.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Edward M. Chen, United States District Judge for the Northern District of California, sitting by designation. Credit Acceptance Corporation (CAC) and Westlake Services compete to
provide car dealers with services for indirectly financing used car sales. Westlake
sued CAC, asserting it violated Section 2 of the Sherman Act by attempting to
enforce an invalid patent related to expediting the financing and sales process.
BACKGROUND
In January 2000, CAC began developing the Credit Approval Processing
System (CAPS). CAPS makes the financing process for car dealers more efficient.
Starting in August 2000, CAC ran a pilot program of CAPS with five dealers. In
September 2000, CAC held a demonstration of CAPS for its dealers; it included a
panel discussion and sought to advertise CAPS for future use. On or around
January 9, 2001, the first of CAC’s dealers began paying a licensing fee to use
CAPS, and it thereon became available to all CAC’s dealers.
CAC filed a patent application in December 2001. The patent was issued on
September 27, 2005. CAC filed maintenance fees to keep it active in 2009, 2013,
and 2017.
In 2013, CAC sued Westlake, alleging Westlake infringed the patent. The
patent was ruled invalid due to patent-ineligible subject matter. See Credit
Acceptance Corp. v. Westlake Servs., 859 F.3d 1044, 1048, 1057 (Fed. Cir. 2017).
During the course of that litigation, Westlake learned that CAC’s pre-2001 uses of
CAPS (i.e., the pilot program and dealer demonstration) were not disclosed to the
2 PTO. Westlake contends these uses would have invalidated the patent under the
public-use bar.
Westlake filed this action against CAC in 2015, alleging CAC’s 2013 suit to
enforce its invalid patent violated the Sherman Act. CAC defended on the grounds
of Noerr-Pennington immunity, which protects the First Amendment right to
petition the government, a right which includes the filing of lawsuits. See E. R. R.
Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); see also
United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965). Westlake
alleged two claims to overcome that immunity: (1) a Walker Process claim; and
(2) a sham litigation claim. Both stem from CAC’s failure to disclose prior public
use. Westlake’s Walker Process claim alleges CAC fraudulently obtained its
patent by intentionally failing to disclose its prior disqualifying sales and public
uses to the PTO. See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp.,
382 U.S. 172, 176–77 (1965). The sham litigation claim alleges CAC’s
infringement lawsuit against Westlake was objectively baseless and in bad faith
because CAC knew the patent was invalid. See Prof’l Real Estate Inv’rs, Inc. v.
Columbia Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993).
The district court granted CAC’s motion for summary judgment, denied
Westlake’s cross-motion, and dismissed the suit. Westlake appeals. We review
Westlake’s appeal de novo. Frudden v. Pilling, 877 F.3d 821, 828 (9th Cir. 2017).
3 JURISDICTION
We must first determine whether 28 U.S.C. § 1295(a)(1) vests exclusive
jurisdiction over this case in the Federal Circuit.1 Exclusive appellate jurisdiction
vests in the Federal Circuit when: (1) federal patent law creates the cause of
action; or (2) the plaintiff’s right to relief necessarily depends on resolution of a
substantial question of federal patent law. Christianson v. Colt Indus. Operating
Corp., 486 U.S. 800, 808–09 (1988); cf. Gunn v. Minton, 568 U.S. 251, 258 (2013)
(district court has exclusive federal jurisdiction under § 1338 when a substantial
question of federal law is: “(1) necessarily raised, (2) actually disputed, (3)
substantial, and (4) capable of resolution in federal court without disrupting the
federal-state balance approved by Congress”). The precise contours of the Federal
Circuit’s exclusive jurisdiction and the impact, if any, of Gunn on the scope of that
jurisdiction is unsettled. Compare Xitronix Corp. v. KLA-Tencor Corp., 882 F.3d
1075, 1078 (Fed. Cir. 2018) (patent issue in a “case within a case” is not sufficient
to raise a substantial issue of patent law over which Federal Circuit has exclusive
appellate jurisdiction under Gunn) with Xitronix Corp. v. KLA-Tencor Corp., 916
F.3d 429, 442 (5th Cir. 2019) (“The four-factor test applied in Gunn . . . is not a
1 The parties agree this Court has jurisdiction under 28 U.S.C. § 1291, but the Court considers its own jurisdiction sua sponte. See Diaz-Covarrubias v. Mukasey, 551 F.3d 1114, 1117 (9th Cir. 2009).
4 tool for the task of sorting cases between the circuits.”), cert. denied, 140 S. Ct.
110 (2019).
Regardless of whether Gunn expands the jurisdiction of regional circuit
courts over matters involving patents, we have jurisdiction over this appeal.
Westlake’s right to relief does not depend on resolution of a “substantial question
of federal patent law” under Christianson. The at-issue patent has already been
declared invalid, and the claim of invalidity based on the public-use bar involves
no doctrinal dispute but instead turns on a fact-intensive analysis particular to this
case. Thus, the memorandum disposition herein will have no practical effect on
the patent at issue nor will it impact the development of federal patent law. See
Christianson, 486 U.S. at 811–13. We thus address the merits of the appeal.
DISCUSSION
Under Noerr-Pennington, Westlake cannot sue CAC under the Sherman Act
based on CAC’s 2013 patent suit unless it proves CAC obtained its patent by
fraudulent omission or that CAC’s 2013 infringement lawsuit was objectively
baseless and in bad faith. See Kaiser Found. Health Plan, Inc. v. Abbott Labs.,
Inc., 552 F.3d 1033, 1044–45 (9th Cir. 2009).
To successfully assert such a Walker Process claim, Westlake must produce:
(1) independent and clear evidence of deceptive intent; and (2) a clear showing that
the patent would not have issued but for the omission. See Nobelpharma AB v.
5 Implant Innovations, Inc., 141 F.3d 1059, 1071 (Fed. Cir. 1998). Westlake
contends CAC engaged in public use of CAPS when it rolled out an earlier version
in the pilot program and conducted the dealer demonstration. Westlake must prove
by clear and convincing evidence that either the pilot program or dealer
demonstration was a public use, and this evidence must overcome any rebuttal
evidence of experimental use. Lisle Corp. v. A.J. Mfg. Co., 398 F.3d 1306, 1316
(Fed. Cir. 2005).
Westlake failed to carry its burden. As to the pilot program, Westlake does
not dispute that no dealers paid a license fee for CAPS during this short program;
nor is it disputed that CAC made changes to CAPS based on feedback it solicited
from the five (out of eleven) participating dealers. Westlake fails to satisfy the
factors used to evaluate the experimental-use exception to the public-use bar. See
EZ Dock v. Schafer Sys., Inc., 276 F.3d 1347, 1357 (Fed. Cir. 2002). With respect
to the dealer demonstrations, Westlake failed to present any evidence that CAC
disclosed all claim limitations during these meetings. Netscape Commc’ns Corp.
v. Konrad, 295 F.3d 1315, 1321 (Fed. Cir. 2002) (“Section 102(b) may bar
patentability by anticipation if the device used in public includes every limitation
of the later claimed invention . . . .”).
Westlake’s citation to CAC’s 2001 newsletter, which informed shareholders
that it began a “gradual roll-out” of CAPS in December 2000, does not create a
6 triable issue of fact. There is no evidence of any activity in December 2000 that
would constitute prior public use. Indeed, in its 2002 Form 10-K filing with the
SEC, CAC said “CAPS was installed on a pilot basis in August 2000 and was
offered to all dealer-partners located in the United States beginning in January
2001.” This statement is consistent with the undisputed facts.
As to the sham exception to Noerr-Pennington immunity, Westlake must
prove by clear and convincing evidence, see Kaiser, 552 F.3d at 1044, that: (1) the
lawsuit was objectively baseless; and (2) CAC had the subjective motivation to
conceal an attempt to interfere directly with a competitor’s business relationships.
Prof’l Real Estate, 508 U.S. at 60–61. For the reasons stated above, Westlake fails
to prove the patent suit was objectively baseless for the same reasons Westlake
cannot establish a Walker Process claim.
The district court’s grant of summary judgment is AFFIRMED.