Petitioners Brief — Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc.

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—_

Supreme Court, U.S.

(4 FILED

No. 01-408 4

IN THE

Supreme Court of the Anite

CLERK

THE HOLMES GROUP, INC.,

Petitioner,

—egainst—

VORNADO AIR CIRCULATION SYSTEMS, INC.,

Respondent.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

BRIEF FOR PETITIONER

James W. DABNEY

Counsel for Petitioner

1155 Avenue of the Americas

New York, New York 10036

(212) 790-9090

Paut Izzo

Marcia H. Sundeen Timotny P. GALLOGLY

Carol M. Wilhelm Tue Homes Grovp, INc.

Pennie & Epmonps LLP Milford Massachusetts

New York, New York ARTHUR R. MILLER

Of Counsel 1755 Massachusetts Avenue

Cambridge, Massachusetts

January 4, 2002

QUESTIONS PRESENTED

Petitioner commenced this civil action in the United

States District Court for the District of Kansas. Petitioner’s

complaint sought injunctive, monetary, and declaratory

relief under 15 U.S.C. § 1125(a) and applicable state law.

In March 2000, the District Court granted summary judgment

in favor of Petitioner on its First Cause of Action, holding

that Petitioner’s “sale of its fan and heater products does not

infringe any valid or enforceable ‘trade dress’ claimed by

[Respondent] under 15 U.S.C. §§ 1051 et seq.” Final

judgment was then entered in favor of Petitioner pursuant to

Rule 54(b) of the Federal Rules of Civil Procedure.

Respondent timely filed a Notice of Appeal from the

District Court’s judgment; however, instead of appealing to

the Court of Appeals for the Tenth Circuit, Respondent

directed its appeal to the Court of Appeals for the Federal

Circuit. Respondent contended that the Federal Circuit had

appellate jurisdiction under 28 U.S.C. § 1295(a)(1), not based

on anything pleaded in Petitioner’s complaint or decided by

the District Court, but based on Respondent’s having

included, in its answer, a counterclaim against Petitioner for

alleged patent infringement. The Respondent’s counterclaim

was extraneous to the District Court’s jurisdiction to hear

Petitioner’s suit and formed no part of the judgment from

which Respondent had appealed. In its brief filed with the

Federal Circuit, Petitioner urged that Respondent’s appeal

be dismissed for lack of appellate jurisdiction or,

alternatively, transferred to the Tenth Circuit pursuant to

28 U.S.C. § 1631.

On June 5, 2001, the Federal Circuit summarily vacated

the District Court’s judgment and remanded for further

proceedings. In direct conflict with decisions of this Court,

the Federal Circuit has taken the position that a plaintiff’s

well-pleaded complaint does not determine whether a civil

action is one “arising under” federal patent law for purposes

of 28 U.S.C. §§ 1295(a)(1) and 1338(a). Rather, according

to the Federal Circuit, the answer of a defendant must be

consulted to determine whether a case is one “arising under”

federal patent law; and if a defendant’s answer includes a

patent law counterclaim against the plaintiff, then, as

exemplified by the decision below, the Federal Circuit rule —

is that the defendant’s pleading purportedly operates to

change the basis of a district court’s jurisdiction and cuts off

regional Circuit jurisdiction over the plaintiff’s suit.

The Federal Circuit’s interpretation of 28 U.S.C.

§§ 1295(a)(1) and 1338(a) purports to displace vast sectors

of regional Circuit jurisdiction and to vest in defendants,

rather than plaintiffs, control over what appellate court will

determine, and what law may govern, broad categories of

claims arising under copyright, trademark, antitrust, contract,

defamation, and other non-patent laws. .

The questions presented are:

1. Does 28 U.S.C. § 1295(a)(1) divest regional Circuits

of jurisdiction over cases in which the well-pleaded complaint

of the prevailing plaintiff does not allege any claim arising

under federal patent law?

2. Did the Court of Appeals for the Federal Ci. 1it err

in concluding that this action is a “patent case,” that is, a

“civil action arising under” federal patent law for purposes

of 28 U.S.C. §§ 1295(a)(1) and 1338(a)?

ill

CORPORATE DISCLOSURE STATEMENT

Petitioner hereby identifies Berkshire Partners L.L.C. as

a parent corporation owing 10% or more of Petitioner’s stock.

No publicly held company owns 10% or more of the stock

of the Petitioner.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..............0.05. i

CORPORATE DISCLOSURE STATEMENT ..... ili

Pe EE c clccbcedencdeucéscaas iv

TABLE OF AUTHORITIES ................... Vv

| EGE ae eee ee l

STATEMENT OF JURISDICTION ............. |

STATUTORY PROVISIONS INVOLVED ....... |

STATEMENT OF THE CASE ................. |

SUMMARY OF ARGUMENT ................. 12

NE 1h obn0 0s cr cbs Kod incetewanssiecta 15

I FEDERAL CIRCUIT JURISDICTION

UNDER 28 U.S.C. § 1295(a)(1) IS LIMITED

TO CASES “ARISING UNDER” FEDERAL

DOES GAME. Soc déduacecacemens Gpumes 15

Il. THE FEDERAL CIRCUIT ERRED IN

DETERMINING THAT THIS CIVIL

ACTION IS A “PATENT CASE” FOR

PURPOSES OF 28 U.S.C. §§ 1338(a) AND

SES cb Cdsoacspedhicdsesualevens 23

GEE. cocccccveseesucnsbvucddnsiées 32

TABLE OF AUTHORITIES

Page

CASES

Aerojet-General Corp. v. Machine Tool Works,

Oerlikon-Buehrle Lid.,

895 F.2d 736 (Fed. Cir. 1990) ... 25-26, 27, 28-29, 30

American Well Works Co. v. Layne & Bowler Co.,

EET ducettdccacemeseteees és 13

Archer v. Arms Tech., Inc.,

72 F. Supp. 2d 784 (E.D. Mich. 1999) ......... 20

Arkla, Inc. v. United States,

37 F.3d 621 (Fed. Cir. 1994),

cert. denied, 514 U.S. 1035 (1995) ........... 7

Atari, Inc. v. JS&A Group, Inc.,

747 F.2d 1422 (Fed. Cir. 1984)

PERG che Feb cbavacveatocadecevecs 9-10, 24, 29

Bell Atlantic Mobile, Inc. v. Zoning Board of

Butler Township,

138 F. Supp. 2d 668 (W.D. Pa. 2001) ......... 20

Boone v. DuBose,

718 F. Supp. 479 (M.D. La. 1988) ............ 21

Cable Elec. Prods., Inc. v. Genmark,

770 F.2d 1015 (Fed. Cir. 1985) .............. 6

Authorities

Page

Caterpillar Inc. v. Williams,

482 U.S. 386 (1987) ....... 12, 13, 19, 20, 21, 22, 23

Christianson v. Colt Indus. Operating Corp,

Ge es EEE cascdekdpbdsbecndccees passim

Christianson v. Colt Indus. Operating Corp.,

609 F. Supp. 330 (N.D. Ill. 1985) ............ 16

Civil City of South Bend v. Consolidated Rail Corp.,

880 F. Supp. 595 (N.D. Ind. 1995) ............ 20

Commercial Sales Network v. Sadler-Cisar, Inc.,

755 F. Supp. 756 (N.D. Ohio 1991) ........... 21

Cook v. Georgetown Steel Corp.,

770 F.2d 1272 (4th Cir. 1985) ............... 13, 20

DSC Communications Corp. v. Pulse

Communications, Inc.,

170 F.3d 1354 (Fed. Cir.),

cert. denied, 528 U.S. 923 (1999) ............ 24-25

Duckson, Carlson, Bassinger, LLC v. Lake Bank, N.A.,

139 F. Supp. 2d 1117 (D. Minn. 2001) ........ 20

FDIC v. Elefant,

790 F.2d 661 (7th Cir. 1986) ............055. 20

Fauntleroy v. Lum,

ST PED coccevcasbiachcesdanedvs 7

vil

Authorities

Page

Franchise Tax Board v. Construction Laborers Trust,

463 U.S. 1 (1983) .....-- eee eee 12, 18, 25, 27

Great Northern Ry. Co. v. Alexander,

246 U.S. 276 (1918) ...... 0c eee e eee cere 19, 22-23

Healy v. Sea Gull Specialty Co.,

237 U.S. 479 (1915) ......----- 12, 19, 21-22, 24, 28

Hunter Douglas, Inc. v. Harmonic Designs, Inc.,

153 F.3d 1318 (Fed. Cir. 1998),

cert. denied, 525 F.2d 1143 (1999) .......-+-: 10

Ident Corp. of America v. Wendt,

638 F. Supp. 116 (E.D. Mo. 1987) .....--.-+-: 21

In re Adams,

809 F.2d 1187 (Sth Cir. 1987) .......-- eee ee 20

In re Independent Service Organizations

Antitrust Litigation,

203 F.3d 1322 (Fed. Cir. 2000),

cert. denied, 121 S. Ct. 1077 (2001) ........-. 10

Jim Arnold Corp. v. Hydrotech Sys., Inc.,

109 F.3d 1567 (Fed. Cir.),

cert. denied, 522 U.S. 933 (1997) ....--+++++ 14

Lear, Inc. v. Adkins,

395 U.S. 653 (1969) ... 2... cece eee eee 13

vill

Authorities

Page

Louisville & Nashville R. Co. v. Mottley,

ge RN rere 20

Marshall v. Gibson's Prods., Inc.,

584 F.2d 784 (Sth Cir. 1978) ................ 20

McDonald v. Credithrift of America, Inc.,

661 F.2d 69 (Sth Cir. 1981) ................. 21

Merrell Dow Pharm. Inc. v. Thompson,

478 U.S. 804 (1986) ................ 12, 19, 24, 28

Metro Ford Truck Sales, Inc. v. Ford Motor Co.,

145 F.3d 320 (Sth Cir. 1998) ................ 20

Metropolitan Life Ins. Co. v. Taylor,

Se Ss PEE ned cvbantvedeebacedssacter 18

Midwest Indus., Inc. v. Karavan Trailers, Inc..,

175 F.3d 1356 (Fed. Cir.),

cert. denied, 528 U.S. 1019 (1999) ...... 6, 10, 24, 30

Nobelpharma AB v. Implant Innovations, Inc.,

141 F.3d 1059 (Fed. Cir),

cert. denied, 525 U.S. 876 (1998) ............. 9,10

Pan American Petroleum Corp. v. Superior Court,

ee es GOED cu dvi bssencnbetiasd 12, 19, 20

Pratt v. Paris Gas Light & Coke Co.,

SGD WE POTD 0b cosvineiusoudaceewece 13

Authorities

Page

Price v. Alfa Mut. Ins. Co.,

877 F. Supp. 597 (M.D. Ala. 1995) ........... 20-21

Rath Packing Co. v. Becker,

530 F.2d 1295 (9th Cir. 1975),

aff'd sub nom. Jones v. Rath Packing Co.,

EE Sieh nk oscbhdsdesesecece 20

Reed v. Cohen,

876 F. Supp. 25 (E.D.N.Y. 1995) ...........45. 21

Rivet v. Regions Bank,

SE PEED b-0c doveeceseéesacevees 20

Saturday Evening Post Co. v. Rumbleseat Press, Inc.,

816 F.2d 1191 (7th Cir. 1987) ............... 13, 20

Shamrock Oil Corp. v. Sheets,

i ne davsetsvhe'sedeéecsedees 27

Shannon v. Shannon,

965 F.2d 542 (7th Cir. 1992) .............45. 20

Speedco Inc. v. Estes,

853 F.2d 909 (Fed. Cir. 1988) ............... 29

Stone v. Williams,

792 F. Supp. 749 (M.D. Ala. 1992) ........... 21

Takeda v. Northwestern Nat'l Life Ins. Co.,

765 F.2d 815 (9th Cir. 1985) ..............4.. 13, 20

Authorities

Page

Taylor v. Anderson,

ee PETE uk wad CaSeuennsedeesceeses 18

Texas v. Walker,

142 F.3d 813 (Sth Cir. 1998) ..............4.. 20, 21

The Fair v. Kohler Die & Specialty Co.,

err 12, 19, 22, 28

TrafFix Devices v. Marketing Displays, Inc.,

See ek Ee SE EE bo Kccebnedencsacc 6, 7, 11, 31

Van Dusen v. Barrack,

er Orr ee tree 24

Video Connection of America, Inc. v. Priority

Concepts, Inc.,

625 F. Supp. 1549 (S.D.N.Y. 1986) ........... 21

Vornado Air Circulation Svs., Inc. v.

Duracraft Corp.,

58 F.3d 1498 (10th Cir. 1995),

cert. denied, 516 U.S. 1067 (1996) .......... passim

Wallace v. Weidenbeck,

985 F. Supp. 288 (N.D.N.Y. 1998) ............ 20

Williams v. North Carolina,

Day WET GEE Wa cacakcccotececdceacwar 7

Authorities

Page

Yamaha Corp. v. United States,

961 F.2d 245 (D.C. Cir. 1992),

cert. denied, 506 U.S. 1078 (1993) ........... 7

Zenith Electronics Corp. v. Elotouch Sys., Inc.,

182 F.3d 1340 (Fed. Cir. 1999) .............. 10

STATUTES

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y pid To >. |) rere Terre rer Ter rrr l

FB UBC. © UZBSIAME) «nc ccccccccccccccccees passim

Ft 2b er eee rer eee ee 1, 2, 16

BE ULB. © RBGREED «occ cc cwecnsvesccccsccese 1,2

2B UB.C. § USSOLE) .. nc ccccccccccsccccccees passim

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xii

Authorities

Page

EEE cv ondhedds cd canddedkiekeriocs i, 11

ee EE cb ido bsdnarabeceecvces 3

SSE bocce vivecesnascuuuscses 16, 17, 28

Mass. Gen. L. ch. 93A, §§ 2and11............. 2

RULES

I ss a 12, 20

a ROSS PR AY SeREEr IT AE EREDE 20

Ps ee EE nd vccccocheckduncaecaaut 10

Ce RIE <a sk eeb@adie SWes i sca dsc 1, 8

CONGRESSIONAL MATERIALS

jn TE TE ins 35 6 Sne Chdhecdkl 24

eee Cae. DED. SRSES CIGBE) oo. vc ccvicncnccen 17

TREATISES

14B C. Wricut, A. Miter & E. Cooper,

FEDERAL PRACTICE AND PROCEDURE

Re NEN chs o 8 ee canis k does uae as 19, 26

18 J. Moore, Moore’s FEDERAL PRACTICE

§ 132.03[6}[aj (3d ed. 2000) ................ 7

]

OPINIONS BELOW

The opinion of the Court of Appeals is unreported and

appears in the Joint Appendix (“JA”) at JA33-34. The opinion

of the District Court is reported at 93 F. Supp. 2d 1140 and

appears at JA88-98. The final judgment of the District Court

appears at JA99-100.

STATEMENT OF JURISDICTION

The judgment of the Court of Appeals was entered on

June 5, 2001. No petition for rehearing was filed. This Court’s

jurisdiction is invoked under 28 U.S.C. § 1254(1).

The District Court had jurisdiction to hear Petitioner’s

claims under 15 U.S.C. § 1121 and 28 U.S.C. §§ 1331,

1332(a), and 1367. In the decision below, the Court of

Appeals for the Federal Circuit purported to exercise

appellate jurisdiction under 28 U.S.C. § 1295(a)(1).

STATUTORY PROVISIONS INVOLVED

This case involves the scope of Federal Circuit appellate

jurisdiction under 28 U.S.C. § 1295(a)(1), which in turn is

governed by the “well-pleaded complaint rule” of 28 U.S.C.

§ 1338(a). The text of these statutory provisions is reprinted

at JA104-05.

STATEMENT OF THE CASE

Petitioner manufactures and sells HOLMES® brand

consumer household products, including household fan and

heater fan products. Respondent is a competitor of Petitioner

in the United States fan and heater business. Both parties

manufacture and sell axial-flow fan and heater fan products

whose outlet grill structures incorporate a series of arcuate

or curved vanes for directing air flow.

In Vornado Air Circulation Sys., Inc. v. Duracraft Corp.,

58 F.3d 1498 (10th Cir. 1995), cert. denied, 516 U.S. 1067

(1996) (“Vornado I’), the Court of Appeals for the Tenth

Circuit held that the “arcuate grill vane structure”

incorporated in certain fan and heater products sold

by Respondent “cannot be protected as trade dress” under ©

15 U.S.C. § 1125(a). Id. at 1510 (Lodging [“L”] at L60).

Despite this holding, the Respondent, in late 1999, issued a

press release and otherwise publicly accused Petitioner of

“infringing” exactly the same alleged “trade dress” that had

been held invalid and unprotectable in Vornado I (JA47-48).'

Petitioner commenced this civil action on December 8,

1999, in the United States District Court for the District of

Kansas. Petitioner’s complaint (L1-86) set forth seven causes

of action against Respondent: (1) declaratory judgment

of non-liability under. 15 U.S.C. § 1125(a); (2) violation of

Mass. Gen. L. ch. 93A, §§ 2 and 11; (3) violation of 15 U.S.C.

§ 1125(a); (4) tortious interference with prospective

economic advantage; (5) defamation; (6) unfair competition;

and (7) injurious falsehood (L2-15). Petitioner’s complaint

invoked jurisdiction under “15 U.S.C. § 1121, 28 U.S.C.

$§ 1331 and 1332(a), and the principles of supplemental

jurisdiction codified in 28 U.S.C. § 1367” (L2).

. 1. Descriptions of the Respondent’s actions givin rise to

this action appear in the Declaration of Paul J. Powers, sworn to

December 17, 1999, the Declaration of Francis E. Marino, sworn

to December 17, 1999, and the Declaration of James W. Dabney sworn

to December 17, 1999, and filed with the District Court (JA13-15).

On December 17, 1999, Petitioner moved for a

preliminary injunction restraining Respondent from falsely

claiming, in commercial advertising or promotion, that

HOLMES? products sold by Petitioner purportedly infringed

“trade dress” rights claimed by Respondent under 15 U.S.C.

§ 1125(a) (JA13). On January 4, 2000, the District Court

issued an “Order Granting Preliminary Injunction” (JA84-

86) under which Respondent was “enjoined and restrained

from making or permitting to be made, in commercial

advertising or in the marketplace, directly or indirectly, any

claim ... to the effect that Holmes or any Holmes product

infringes any ostensible Vornado trade dress rights in spiral

grill designs. .. . ” (JA85-86).’

On January 7, 2000, Petitioner moved for summary

judgment on its First Cause of Action seeking a declaratory

judgment that its sale of HOLMES® products does not

infringe any valid or enforceable “trade dress” rights claimed

by Respondent under 15 U.S.C. § 1125(a). Petitioner’s

motion was granted by Order dated March 8, 2000. Holmes

2. In addition to seeking preliminary injunctive relief against

false advertising by Respondent in the marketplace, Petitioner sought

an order under 28 U.S.C. § 1651(a) (L10) restraining Respondent

from attempting to re-litigate its purported “trade dress” claim in the

context of a quasi-judicial, administrative “investigation” proceeding

under 19 U.S.C. § 1337 before the International Trade Commission

(“ITC”), with which Respondent had lodged a complaint on

November 24, 1999 (L7-8, L61-86). The District Court denied the

latter aspect of Petitioner’s motion for preliminary injunctive relief

(JA86), ruling that “Vornado shall not be required to withdraw its

complaint lodged with the ITC nor enjoined from cooperating with

any future ITC investigation” (JA86). The ITC subsequently instituted

Investigation No. 337-TA-426 (the “ITC proceeding”). See 65 Fed.

Reg. 4260 (Jan. 26, 2000). The ITC proceeding was ultimately

terminated on July 20, 2000, with no action having been taken against

Petitioner. See 65 Fed. Reg. 45999 (July 26, 2000). -

Group, Inc. v. Vornado Air Circulation Systems, Inc.,

93 F. Supp. 2d 1140 (D. Kan. 2000) (JA88-98).

The District Court concluded that the final judgment of

invalidity rendered in the Vornado I case collaterally estopped

Respondent from re-litigating the validity of the same alleged

“trade dress” that had been the subject of the earlier case:

[T}his Court previously entered a valid and final

judgment in Vornado J and the Tenth Circuit law

upon which that decision was based has not been

changed. Under principles of collateral estoppel,

the ruling in Vornado IJ bars Vornado from

re-litigating the same issue in this action.

Accordingly, Holmes is entitled as a matter of law

to judgment declaring that it has not infringed

Vornado’s asserted trade dress rights.

Id. at 1144-45 (JA98).

~ The District Court noted Respondent’s argument that the

Federal Circuit, rather than the Tenth Circuit, assertedly

would have appellate jurisdiction over this case based on

the contents of an answer that Respondent had served

in response to Petitioner’s complaint,’ but concluded:

3. In an Answer served December 30, 1999 (L87-147),

Respondent asserted a counterclaim against Petitioner (L98-100)

alleging that one of the products accused of “trade dress” infringement

assertedly infringed a patent owned by Respondent. Based on this

answer and counterclaim, the District Court noted that “it is possible

(although not entirely certain) that any appeal of this court’s judgment

will be to the Federal Circuit,” 93 F. Supp. 2d at 1143 (JA94), and

further noted that Petitioner had disputed Respondent’ suggestion

that its counterclaim ousted the Tenth Circuit of jurisdiction. Jd. at

1143 n.2 (JA95).

“This court does not need to stray into this procedural thicket

to decide the issue before it. Regardless of which Court of

Appeals would have jurisdiction, the court determines the

principles of collateral estoppel should be applied in this

case.” Jd. at 1143 n.2 (JA95).

The District Court viewed the legal effect of its prior

judgment in Vornado / as being a question of “Tenth Circuit

law.” Jd. at 1143-44 (JA95, 98). The District Court applied

the Tenth Circuit collateral estoppel standard and found that

“{t}]he elements of collateral estoppel are clearly satisfied in

this case”:

The trade dress now claimed by Vornado is

identical to that which it asserted in Vornado /,

Vornado I was decided on the merits; Vornado was

a party to the prior action; and Vornado had a full

and fair opportunity to litigate the issue in the prior

action.

Id. at 1142 n.1 (JA93). -

At oral argument before the District Court, counsel for

Respondent conceded (JA56) that the final judgment in

Vornado I remained valid and binding with respect to fan

and heater fan products being sold by Petitioner’s competitor,

Honeywell Inc. f/k/a Duracraft Corp, which had been the

prevailing party in Vornado /.* The District Court further

observed that “since Vornado /, Holmes and other companies

have manufactured various products in reliance upon the rule

4. See JAS6 (MR. GOWDEY: “I think Vornado has to live with

the results of the Tenth Circuit in terms of how it affected Duracraft

and in fact, Honeywell bought Duracraft so they get the benefit of

that. We cannot affect them, we have to live with that.”).

expressed in that case,” id. at 1144 n.3 (JA97), so that “failure

to apply collateral estoppel here would likely create a baffling

state of legal affairs insofar as manufacture of these products

is concerned.” /d.

The District Court rejected Respondent’s contention that

a 1999 decision of the Court of Appeals for the Federal Circuit

represented a “change in the law” warranting re-li’ yation of

whether the arcuate or “spiral” grill configuration embodied

in Vornado fan and heater products was eligible for protection

as “trade dress” under Section 43(a) of the Lanham Act,

15 U.S.C. § 1125(a). 93 F. Supp. 2d at 1143 (JA94-96).

The cited decision of the Federal Circuit did not represent

any “change” in substantive “trade dress” principles, even

within the Federal Circuit.° Equally important, the

5. In Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d

1356 (Fed. Cir.), cert. denied, 528 U.S. 1019 (1999), overruled by

TrafFix Devices, Inc. v. Marketing Displays, Inc., 121 S. Ct. 1255

(2001), the Federal Circuit held that it would start applying “its own”

law, in place of regional Circuit law, in determining whether or to

what extent product configurations were protectable as “trade dress”

under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). Jd. at

1361, overruling Cable Elec. Prods., Inc. v. Genmark, 770 F.2d 1015,

1029 (Fed. Cir. 1985). The Federal Circuit then proceeded to reiterate

its long-standing view — which the Tenth Circuit had rejected in

Vornado I — that any product configuration could be protectable as

“trade dress” under the Lanham Act unless found to be “functional”

in a federal common law sense of having “such utility that its

protection would hinder competition.” Jd at 1361-62 (citing

authorities).

In TrafFix, this Court resolved the conflict that had existed

between the Midwest and Vornado / decisions, 121 S. Ct. at 1259,

and did so by (a) rejecting the standard of “functionality” articulated

by the Federal Circuit in Midwest, and (b) embracing a standard of

“functionality” that was and is fully consistent with both the reasoning

and the holding of the Tenth Circuit in Vornado J. Id. at 1261-62.

enforceability of a final judgment has never depended on

the state of the substantive law of a court or jurisdiction asked

to enforce the judgment:

The fact that the substantive law may be different

in the two jurisdictions does not affect the

application of issue preclusion. Therefore,

different interpretations of a statute between

circuit courts of appeal would not affect the

application of issue preclusion to a sister court’s

previously litigated issue.

18 J. Moore, Moore’s Feperar Practice § 132.03[6][a]

(3d ed. 2000). See, e.g., Arkla, Inc. v. United States, 37 F.3d

621, 626-27 (Fed. Cir. 1994), cert. denied, 514 U.S. 1035

(1995); Yamaha Corp. v. United States, 961 F.2d 245, 258

(D.C. Cir. 1992), cert. denied, 565 U.S. 1078 (1993).°

Thus, in the District Court’s view’, the long-standing (and

since resolved, see TrafFix, 121 S. Ct. 1261-62) “conflict in

the substantive law” between the Federal Circuit and

the Tenth Circuit “does not require, nor does it warrant,

a refusal to apply the law of collateral estoppel in this action.”

93 F. Supp. 2d at 1143 (JA95-96):

Vornado had a full and fair opportunity to litigate

its trade dress claim against another manufacturer,

6. Cf. Williams v. North Carolina, 317 U.S. 287, 294 (1942)

(judgment of divorce entitled to full faith and credit, notwithstanding

that grounds for divorce were not recognized in jurisdiction where

judgment was presented as defense); Fauntleroy v. Lum, 210 U.S.

230, 236-38 (1908) (judgment for money damages entitled to full

faith and credit, notwithstanding that claim would not be enforceable

if brought in jurisdiction where judgment sought to be enforced).

and that claim was ultimately decided against

Vornado by the Tenth Circuit. Vornado petitioned

the Supreme Court to review the ruling, but the

Court declined to do so, leaving intact this court’s

resulting judgment that Vornado was barred from

claiming trade dress rights in its grill design. The

Tenth Circuit law upon which that judgment was

based has not changed since Vornado I, and the

court sees nothing to substantiate Vornado’s

hopeful speculation that if the Tenth Circuit

were to revisit the issue “it would choose a

different path than it articulated in Vornado /.”

Def. Mem. at 5.

On March 27, 2000, the District Court entered a Final

Judgment under Fep. R. Civ. P. 54(b) that provided in

pertinent part (JA99-100):

Holmes is entitled as a matter of law to judgment

declaring that it has not infringed Vornado’s

asserted trade dress rights [Doc. 72, p. 1]; Plaintiff

Holmes’ Motion for Summary Judgment on

its first cause of action is hereby GRANTED

[Doc. 72, p. 12]; and Final Judgment is hereby

expressly entered in favor of Holmes and against

Vornado on Holmes’ first cause of action seeking

a declaratory judgment holding that Holmes’ sale

of its fan and heater products does not infringe

any valid or enforceable “trade dress” claimed

by defendant Vornado under 15 U.S.C. §§ 1051

et seq. [Doc. 72, p. 1].

Notwithstanding that (1) Petitioner’s complaint did not

allege any claim arising under federal patent law, (2) the

District Court’s judgment did not adjudicate any claim that

arose under federal patent law, and (3) Respondent was

openly attempting to mount a collateral attack on a prior

judgment of the Tenth Circuit, Respondent filed a Notice of

Appeal directed to the Federal Circuit. The sole purported

basis of appellate jurisdiction in was the one noted by the

District Court: Respondent’s having included, in its answer

to Petitioner’s complaint, a counterclaim against Petitioner

for alleged patent infringement. |

According to Respondent, the service of its answer and

counterclaim had automatically transformed this civil action

into a “patent ... case,” 28 U.S.C. § 1338(a), with the

purported result that the Tenth Circuit was ousted of

jurisdiction over Petitioner’s suit by operation of 28 U.S.C.

§ 1295(a)(1) (L257-63). Respondent further argued that its

answer and counterclaim had effected a fundamental change

in the substantive law governing the merits of Petitioner’s

claims arising under both the Lanham Act and state law

(L168-70, L173-80).’ Respondent’s position thus was — and

7. Early in its history, the Federal Circuit justified taking an

expansive view of its jurisdiction under 28 U.S.C. § 1295(a)(1)

in part on the basis that it would be applying regional Circuit law

“in all but the substantive law fields assigned exclusively to this

court.” Atari, Inc. v. JS&A Group, Inc., 747 F.2d 1422, 1439 (Fed.

Cir. 1984) (en banc), overruled by Nobelpharma AB v. Implant

Innovations, Inc., 141 F.3d 1059, 1068 (Fed. Cir.), cert. denied, 525

U.S. 876 (1998). The Federal Circuit stated in 1984, relatively shortly

after the enactment of 28 U.S.C. § 1295(a)(1), that Congress’s

“passage” of that statute “reflect[ed] its expectation that this court

would not appropriate or usurp for itself a broad guiding role for the

district courts beyond its mandate to contribute to uniformity of the

substantive law of patents, plant variety, and the Little Tucker Act.”

Atari, 747 F.2d at 1438. The Federal Circuit further observed in

(Cont'd)

in this Court remains — that the Federal Circuit, rather than

the Tenth Circuit, should determine whether a prior judgment

of the Tenth Circuit operates to bar Respondent from

re-litigating the validity of a “trade dress” claim purportedly

grounded in Section 43(a) of the Lanham Act, simply because

Respondent’s answer to Petitioner’s complaint included a

patent law counterclaim.*

(Cont’d)

1984: “A district court judge should not be expected to look over his

shoulder to the law in this circuit, save as to those claims over which

our subject mattet jurisdiction is exclusive.” Jd. at 1439.

In the late 1990’s, however, the Federal Circuit abruptly reversed

field and held that it wov'd start fashioning “its own” substantive

liability rules for antitrust. “trade dress,” and other claims over which

it had only pendent or non-exclusive jurisdiction. E.g., In re

Independent Service Organizations Antitrust Litigation, 203 F.3d

1322, 1324-27 (Fed. Cir. 2000), cert. denied, 121 S. Ct. 1077 (2001);

Zenith Electronics Corp. v. Elotouch Sys., Inc., 182 F.3d 1340, 1354-

55 (Fed. Cir. 1999); Hunter Douglas, Inc. v. Harmonic Designs, Inc.,

153 F.3d 1318, 1335-38 (Fed. Cir. 1998), cert. denied, 525 U.S. 1143

(1999), overruled by Midwest, 175 F.3d at 1359; Nobelpharma,

141 F.3d at 1439. The Federal Circuit justified its changed position

on the basis that it was, in its words, “the tribunal having sole

appellate responsibility for the development of patent law,” 175 F.3d

at 1360, which “responsibility” was further said to include

“decid[ing] what patent law permits and prohibits” when asserted as

a defense to a claim arising under non-patent law. /d. at 1360-61.

8. Although not germane to the jurisdictional questions before

this Court, it may be noted that the Respondent never has pursued its

counterclaim for alleged patent infringement. That counterclaim was

effectively withdrawn, and all proceedings relating to the

counterclaim were indefinitely stayed, as part of a conditional Order

of dismissal entered June 12, 2000, pursuant to Fep. R. Civ. P. 41(a)(2)

(JA101-102). In the event that the summary judgment in favor of

Petitioner is affirmed on appeal, the Respondent’s counterclaim will

be finally dismissed with prejudice (JA102).

As it had done in the District Court (JA42-43, JA94),

Petitioner filed a brief with the Federal Circuit (L203-45)

contesting that Court’s appellate jurisdiction and urging that

Respondent’s appeal be dismissed for lack of jurisdiction or

transferred to the Tenth Circuit pursuant to 28 U.S.C. § 1631

(L216, 228-34). In the alternative, Petitioner urged that the

District Court’s grant of summary judgment be affirmed

(L234-44).

On June 5, 2001, the Court of Appeals for the Federal

Circuit issued a two-page Order that simply stated

(JA33-34):

(1) The March 27, 2000 judgment of the

United States District Court for the District of

Kansas is vacated.

(2) The case is remanded to the United States

District Court for the District of Kansas for further

proceedings in light of the decision of the Supreme

Court of the United States in 7rafFix Devices v.

Marketing Displays, Inc., 121 S. Ct. 1255 (2001).

The district court is directed to consider whether

the “change in the law” exception to collateral

estoppel applies in view of the 7rafFix decision,

and if appropriate, then to consider the case on

the merits.

(3) Each side shall bear its own costs.

SUMMARY OF ARGUMENT

A “civil action” is a legal proceeding “commenced by

filing a complaint with the court.” Fep R. Civ. P. 3. To fall

with the exclusive appellate jurisdiction of the Federal Circuit

under 28 U.S.C. § 1295(a)(1), a “civil action” must be a

_ “patent ... case,” that is, a “civil action arising under any

Act of Congress relating to patents, [or] plant variety

protection.” 28 U.S.C. § 1338(a). See Christianson v. Colt

Indus. Operating Corp, 486 U.S. 800, 807-810, 813-14

(1988).

Under Christianson, whether a “civil action” is one ~

“arising under” federal patent law, and is thus a “patent case”

subject to exclusive Federal Circuit jurisdiction under

28 U.S.C. § 1295(a)(1), depends on whether “a well-pleaded

complaint establishes either that federal patent law creates

the cause of action or that the plaintiff’s right to relief

necessarily depends on resolution of a substantial question

of federal patent law, in that patent law is a necessary element

of one of the well-pleaded claims.” Jd. at 809.

The “well-pleaded complaint rule” is a “powerful

doctrine,” Franchise Tax Board v. Construction Laborers

Trust, 463 U.S. 1, 9 (1983), which has long provided that

“the plaintiff is absolute master of what jurisdiction he will

appeal to.” Healy v. Sea Gull Specialty Co, 237 U.S. 479,

480 (1915) (Holmes, J.), quoted in Merrell Dow Pharm. Inc.

v. Thompson, 478 U.S. 804, 809 n.6 (1986). See also

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987);

Pan American Petroleum Corp. v. Superior Court, 366 U.S.

656, 662 (1961); The Fair v. Kohler Die & Specialty Co.,

228 U.S. 22, 25 (1913) (Holmes, J.).

The cases are legion holding that a counterclaim in a

defendant’s answer does not, and cannot, transform a “civil

action” into one “arising under” federal law for jurisdictional

purposes, even when a defendant’s counterclaim expressly

invokes federal law.’ Were the rule otherwise, “the plaintiff

would be master of nothing.” Caterpillar, 482 U.S. at 399.

The “well-pleaded complaint rule” often results in

regional Circuits or state courts deciding questions of federal

patent law. E.g., Christianson, 486 U.S. at 819 (regional

Circuit had jurisdiction to review antitrust judgment based

on alleged procurement of invalid patents); Lear, Inc. v.

Adkins, 395 U.S. 653 (1969) (state court had jurisdiction to

determine validity of patent in context of action for breach

of a license agreement); American Well Works Co. v. Layne

& Bowler Co., 241 U.S. 257 (1916) (state court had

jurisdiction to hear action for slander of title arising from

allegations of patent infringement); Pratt v. Paris Gas Light

& Coke Co., 168 U.S. 255 (1897) (state court had jurisdiction

to hear action for breach of undertaking to defend against

claim of alleged patent infringement).

The exclusive jurisdiction of the Federal Circuit under

28 U.S.C. § 1295(a)(1) thus excludes, by design, a substantial

number of cases in which questions and issues of federal

9. See, e.g., Saturday Evening Post Co. v. Rumbleseat Press,

Inc., 816 F.2d 1191, 1195 (7th Cir. 1987) (Posner, J.) (“That federal

jurisdiction depends on the complaint rather than on the answer,

counterclaim, or other subsequent pleadings is an aspect of the ‘well-

pleaded complaint’ rule. . . .”); Cook v. Georgetown Steel Corp., 770

F.2d 1272, 1275 (4th Cir. 1985) (no “arising under” jurisdiction when

only federal issue raised by counterclaim): Takeda v. Northwestern

Nat'l Life Ins. Co., 765 F.2d 815, 822 (9th Cir. 1985) (federal law

counterclaim did not support “arising under” jurisdiction as basis

for removal). ;

patent law are raised, as the Federal Circuit has itself

acknowledged on occasion.'® Preserving regional Circuit

jurisdiction over antitrust, copyright, “trade dress,”

defamation, and other cases such as the present one, in which

the plaintiff’s complaint does not depend on federal patent

law, is fully consistent with the careful balance that Congress

struck in (1) creating exclusive Federal Circuit jurisdiction

in 28 U.S.C. § 1295(a)(1), but (2) limiting that jurisdiction

to true “patent cases,” 28 U.S.C. § 1338(a), i.e., ones “arising

under” federal patent law within the meaning of this Court’s

“arising under’ jurisprudence.” Christianson, 486 U.S. at

808 n.2.

The instant case clearly is not a “patent case,” i.e.,

a “civil action arising under any Act of Congress relating to

patents” within the meaning of 28 U.S.C. §§ 1338(a) and

1295(a)(1). It therefore was clear error for the Federal Circuit

to have taken appellate jurisdiction and vacated the District

Court’s derision in this case. As was done in Christianson,

the decision of the Federal Circuit should be reversed, and

the cause remanded to the Tenth Circuit for further

proceedings. Alternatively, the Court should affirm the

summary judgment the District Court entered in favor of

‘ Petitioner.

10. Cf Jim Arnold Corp. v. Hydrotech Sys., Inc., 109 F.3d 1567,

1571-78 (Fed. Cir.), cert. denied, 522 U.S. 933 (1997) (action brought

by patent assignor was not one “arising under” federal patent law;

judgment vacated for lack of jurisdiction).

ARGUMENT

I. FEDERAL CIRCUIT JURISDICTION UNDER

28 U.S.C. § 1295(a)(1) IS LIMITED TO CASES

“ARISING UNDER” FEDERAL PATENT LAW.

28 U.S.C. § 1295(a)(1) provides that Federal Circuit shall

have exclusive jurisdiction (JA104):

(1) of an appeal from a final decision of a district

court of the United States . . . , if the jurisdiction

of that court was based, in whole or in part, on

section 1338 of this title, except that a case

involving a claim arising under any Act of

Congress relating to copyrights, exclusive rights

in mask works, or trademarks and no other claims

under section 1338(a) shall be governed by

sections 1291, 1292, and 1294 of this title. . . .

28 U.S.C. § 1338(a), in turn, provides (JA105):

The district courts shall have criginal jurisdiction

of any civil action arising under aay Act of

Congress relating to patents, plant variety

protection, copyrights and trademarks. Such

jurisdiction shall be exclusive of the courts of the

states in patent, plant variety protection and

In Christianson v. Colt Indus. Operating Corp., 486 U.S.

800 (1988), this Court held that the “arising under” language

of 28 U.S.C. § 1338(a) both defined and limited the scope of

the Federal Circuit’s appellate jurisdiction under 28 U.S.C.

§ 1295(a). In particular, Christianson heid that:

(a) the “arising under” jurisprudence developed

under 28 U.S.C. § 1331 applies equally to

28 U.S.C. § 1338(a), 486 U.S. at 807-809, 813-

14, notwithstanding that “in this case our

interpretation of § 1338(a)’s ‘arising under’

language will merely determine which of two

federal appellate courts will decide the appeal,”

id. at 808 n.2;

(b) the “well-pleaded complaint rule” governs

whether a civil action is one “arising under”

federal patent law, or not, id. at 808-09, 813-14;

and

the Christianson case, because the plaintiff’s

complaint in that case did not establish “either

that federal patent law create[d] the cause of action

or that the plaintiff’s right to relief necessarily

depends on resolution of a substantial question

of federal patent law, in that patent law is a

necessary element of one of the well-pleaded

claims,” id. at 809, 810-13.

In Christianson, this Court vacated a judgment of the

Federal Circuit and remanded with instructions to transfer

the case to the Court of Appeals for the Seventh Circuit, id.

at 819, even though the District Court in Christianson had

“invalidated nine of Colt’s patents,” id. at 806, and even

though the plaintiffs in Christianson had prevailed at trial

on claims alleging that the defendant had wrongfully procured

United States patents in alleged violation of the “best mode”

requirement of 35 U.S.C. § 112. See Christianson v. Colt

Indus. Operating Corp., 609 F. Supp. 330 (N.D. Ill. 1985).

Vacatur of the Federal Circuit’s judgment in Christianson

was required, this Court held, because “the district court’s

jurisdiction is determined by reference to the well-pleaded

complaint, not the well-tried case,” 486 U.S. at 814,

and neither of the two causes of action pleaded in the

Christianson plaintiffs’ complaint were ones “arising under”

federal patent law."’ _

In support of its holding that “the well-pleaded

complaint, not the well-tried case, [is] the referent for

the Federal Circuit’s jurisdiction,” Christianson, 486 U.S.

at 814, this Court cited “[t]he legislative history of the Federal

Circuit’s jurisdictional provisions” as stating that “cases fall

within the Federal Circuit’s patent jurisdiction ‘in the same

sense that cases are said to ‘arise under’ federal law

for purposes of federal question jurisdiction.”” Jd. (quoting

H.R. Rep. No. 97-312 at 41 (1981)). The Court accordingly

had “no more authority to read § 1295(a)(1) as granting

the Federal Circuit jurisdiction over an appeal where the

11. The complaint in Christianson set forth two causes of action,

for federal antitrust liability under 15 U.S.C. § 15 and for tortious

interference with business relationships under state law. Both causes

of action were based, in part, on allegations that the defendant had

published false statements accusing the plaintiffs of misappropriating

trade secrets relating to M16 rifle parts that were, or had been, the

subject of issued patents. 486 U.S. at 804-06. The plaintiffs alleged

that the defendant’s liability was established, in part, by the

defendant’s having allegedly procured patents in violation of the

“best mode” requirement of 35 U.S.C. § 112; for if the defendant

had complied with that statute, the plaintiff's theory went, the

defendant could not have retained any trade secrets in the claimed

subject matter disclosed in the patents. The District Court had ruled

in favor of the petitioner in Christianson, “essentially relying on the

[35 U.S.C.] § 112 theory articulated above,” id. at 806, and had

“invalidated nine of Colt’s patents.” Jd. ;

well-pleaded complaint does not depend on patent law, than

to read § 1338(a) as granting a district court jurisdiction over

such a complaint.” 486 U.S. at 813-14.

The jurisdictional framework controlling the present case

is the same as it was in Christianson, id. at 807:

As relevant here, 28 U.S.C. § 1295(a)(1) grants

the Court of Appeals for the Federal Circuit

exclusive jurisdiction over “an appeal from a

final decision of a district court of the United

States ... if the jurisdiction of that court was

based, in whole or in part, on [28 U.S.C.] section

1338... .” Section 1338(a), in turn, provides in

relevant part that “(t]he district courts shall have

original jurisdiction of any civil action arising

under any Act of Congress relating to patents. . . .”

Thus, the jurisdictional issue before us turns on

whether this is a case “arising under” a federal

patent statute, for if it is then the jurisdiction of

the District Court was based at least “in part” on

§ 1338(a).

“The ‘well-pleaded complaint rule’ is the basic principle

marking the boundaries of the federal question jurisdiction

of the federal district courts.” Metropolitan Life Ins. Co. v.

Taylor, 481 U.S. 58, 63 (1987). “Under the well-pleaded

complaint rule, as appropriately adapted to § 1338(a),

whether a claim ‘arises under’ patent law must be determined

from what necessarily appears in the plaintiff's statement of

his own claim in the bill or declaration. . . .” Christianson,

486 U.S. at 809 (quoting Franchise Tax Board v. Construction

Laborers Vacation Trust, 463 U.S. 1, 10 (1983) (quoting

Taylor v. Anderson, 234 U.S. 74, 15-76 (1914))).

The “well-pleaded complaint rule” embodies a number

of long-established principles of federal court jurisdiction,

one of which is the “plaintiff’s traditional prerogative of

forum selection.” 14B C. Wricut, A. MiLter & E. Cooper,

FEDERAL PRACTICE AND Procepure § 3722, at 453 (3d 1998).

Time and time again, this Court has held that “the plaintiff

is absolute master of what jurisdiction he will appeal to,”

Healy v. Sea Gull Specialty Co., 237 U.S. 479, 480 (1915)

(Holmes, J.), such that “(t]he party who brings a suit is master

to decide what law he will rely upon and therefore does

determine whether he will bring a suit arising under the patent

or other law of the United States by his declaration or bill.

That question cannot depend upon the answer. . . .” The Fair

v. Kohler Die & Specialty Co., 228 U.S. 22, 25 (1913)

(Holmes, J.) (emphasis added).'? When a plaintiff chooses

not to invoke an available basis of federal court jurisdiction,

the plaintiff's choice is controlling: “Jurisdiction may not

be sustained on a theory that the plaintiff has not advanced.”

Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 809

n.6 (1986).

“Thus, a case raising a federal patent-law defense does

not, for that reason alone, ‘arise under’ patent law.”

12. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987)

(“the rule makes the plaintiff the master of the claim”); Pan American

Petroleum Corp. v. Superior Court, 366 U.S. 656, 662 (1961)

(“questions of exclusive federal jurisdiction ... depend on the

particular claims a suitor brings in a state court — how he casts his

action”); Great Northern Ry. Co. v. Alexander, 246 U.S. 276, 281-82

(1918) (jurisdictional status of civil action cannot be affected by

“subsequent pleadings by the defendant”).

13. The Petitioner’s complaint in this case does not invoke

jurisdiction under 28 U.S.C. § 1338(a) (L2), although it could have

done so.

Christianson, 486 U.S. at 809. This principle has been applied

in a wide spectrum of contexts. See, e.g., Rivet v. Regions

Bank, 522 U.S. 470, 475 (1998); Caterpillar Inc. v. Williams,

482 U.S. 386, 399 (1987); Pan American Petroleum Corp.

v. Superior Court, 366 U.S. 656, 663 (1961); Louisville &

Nashville R. Co. v. Mottley, 211 U.S. 149, 152 (1908).

The cases are, likewise, legion that hold a counterclaim in a

defendant’s answer" is irrelevant to whether a civil action is

one “arising under” federal law for jurisdictional purposes.'*_

14. Fep. R. Civ. P. 3 provides that “[a] civil action is commenced

by filing a complaint with the court.” Fep. R. Civ. P. 13 provides

that a “counterclaim” shall or may be “state[d]” as part of a “pleading”

permitted by the rules, including an answer. Thus, under the structure

of the Federal Rules of Civil Procedure, a “counterclaim” by

ae forms part of a “pleading” in an already-commenced “civil

action.

15. E.g., Metro Ford Truck Sales, Inc. v. Ford Motor Co.,

145 F.3d 320, 326-27 (Sth Cir. 1998); Texas v. Walker, 142 F.3d 813,

816 n.2 (Sth Cir. 1998); Shannon v. Shannon, 965 F.2d 542, 545-46

(7th Cir. 1992); Saturday Evening Post Co. v. Rumbleseat Press, Inc.,

816 F.2d 1191, 1195 (7th Cir. 1987); In re Adams, 809 F.2d 1187,

1188 n.1 (Sth Cir. 1987); FDIC v. Elefant, 790 F.2d 661, 667 (7th

Cir. 1986); Cook v. Georgetown Steel Corp., 770 F.2d 1272, 1275

(4th Cir. 1985); Takeda v. Northwestern Mut. Life Ins. Co., 765 F.2d

815, 822 (9th Cir. 1985); Marshall v. Gibson's Prods., Inc., 584 F.2d

784, 787 (SthCir. 1978); Rath Packing Co. v. Becker, 530 F.2d 1295,

1303 (9th Cir. 1975), aff'd sub nom. Jones v. Ruth Packing Co.,

430 U.S. 519 (1977); Duckson, Carlson, Bassinger, LLC v. Lake Bank,

N.A., 139 F. Supp. 2d 1117, 1118 (D. Minn. 2001); Bell Atlantic

Mobile, Inc. v. Zoning Board of Butler Township, 138 F. Supp. 2d

668, 676 (W.D. Pa. 2001); Archer v. Arms Tech., Inc., 72 F. Supp. 2d

_ 34, 787 (E.D. Mich. 1999); Wallace v. Weidenbeck, 985 F. Supp.

288, 291 (N.D.N.Y. 1998); Civil City of South Bend v. Consolidated

Rail Corp., 880 F. Supp. 595, 598-99 (N.D. Ind. 1995); Price v. Alfa

; (Cont'd)

As a practical litigation matter, a counterclaim is part of a

defendant’s defense to a plaintiff’s suit,'® and the federal

courts have consistently held that “defenses” and

“counterclaims” are both and equally extraneous to the

existence of “arising under” jurisdiction (see note 15 supra).

“There has never been a suggestion that a defendant could,

by asserting an artful counterclaim, render a case removable

in violation of the well-pleaded complaint rule.” Texas v.

Walker, 142 F.3d 813, 816 n.2 (Sth Cir. 1998).

In Caterpillar Inc. v. Williams, 482 U.S. 386 (1987),

this Court reiterated that the “paramount policies embodied

in the well-pleaded complaint rule” include the principles

that (1) “the plaintiff is the master of the complaint” and

(2) “a federal question must appear on the face of the

-complaint.” Jd. at 398-99. These “bright line” principles are

basic to federal court plaintiffs’ long-established nghts to

decide both (1) “what jurisdiction [they] will appeal to”,

(Cont'd)

Mut. Ins. Co. 877 F. Supp. 597, 600 (M.D. Ala. 1995); Reed v. Cohen,

876 F. Supp. 25, 28 (E.D.N.Y. 1995); Stone v. Williams, 792 F. Supp.

749, 753 (M.D. Ala. 1992); Commercial Sales Network v. Sadler-

Cisar, Inc., 755 F. Supp. 756, 759 (N.D. Ohio 1991); Boone v.

DuBose, 718 F. Supp. 479, 486 (M.D. La. 1988); Jdent Corp.

of America v. Wendt, 638 F. Supp. 116, 117 (E.D. Mo. 1987);

Video Connection of America, Inc. v. Priority Concepts, Inc., 625

F. Supp. 1549, 1551 n.4 (S.D.N.Y. 1986). In addition to the reported

decisions cited above and in the text, numerous unreported decisions

(available in on-line search services) are to the same effeci, holding

that a defendant’s counterclaim cannot render a civil action one

“arising under” federal law.

16. “Part of the philosophy of every succes ful trial lawyer is “

that ‘the best defense is a good offense.’” McDonald v. Credithrift of

America, Inc., 661 F.2d 69, 70 (Sth Cir. 1981) (Clark, J. dissenting).

{

Healy, 237 U.S. at 480; and (2) “what law [they] will rely

upon”, The Fair, 228 U.S. at 28. If a defendant, by serving

an answer containing a counterclaim, could defeat a

plaintiff’s choice of law or forum, then, in the words of this

Court, “the plaintiff would be master of nothing.” Caterpillar,

482 U.S. at 399."’ It would also destroy the clarity and ease

of administration of long-standing jurisdictional principles.

The controlling significance of a plaintiff’s well-pleaded

complaint as the determinant of federal court jurisdiction,

both original and appellate, is also reflected in the principle

that a case “cannot be converted into a removable one by

evidence of the defendant or by an order of the court upon

any issue tried upon the merits, but that such conversion can

only be accomplished by the voluntary amendment of his

pleadings by the plaintiff. ...” Great Northern Ry. Co. v.

Alexander, 246 U.S. 276, 281 (1918), cited in Caterpillar,

482 U.S. at 392 n.7. In Great Northern, this Court held that

a state court retained jurisdiction to decide a case that was

non-removable based on the allegations of the plaintiff’s

well-pleaded complaint, even though the proofs at trial later

established that a basis for federal court jurisdiction had

existed all along:

}

[T}he plaintiff may by the allegations of his

complaint determine the status with respect to

removability of a case . . . when it is commenced,

17. Petitioner’s decision to commence this case in the District

Court for the District of Kansas was a deliberate choice, intended to

invoke both the jurisdiction and the law of the Court of Appeals for

the Tenth Circuit, including the final judgment of the Tenth Circuit

Se ny eo mated Gist the Renpentens ty Reaiiguastered

in Wichita, ich was i

—— on also the venue where it commenced

and . . . this power to determine the removability

of his case continues with the plaintiff throughout

the litigation, so that whether such a case

non-removable when commenced shall afterwards

become removable depends not upon what the

defendant may allege or prove or what the court

may, after hearing upon the merits, in vitum, order,

but solely upon the form which the plaintiff by

his voluntary action shall give to the pleadings in

the case as it progresses towards a conclusion.

246 U.S. at 282.

Il. THE FEDERAL CIRCUIT ERRED IN

DETERMINING THAT THIS CIVIL ACTION IS A

“PATENT CASE” FOR PURPOSES OF 28 U.S.C.

§§ 1338(a) AND 1295(a)(1).

It is undisputed that the Petitioner’s complaint in this

action (L1-86) does not plead any claim that “arises under”

federal patent law within the meaning of 28 U.S.C. § 1338(a),

as construed by this Court in Christianson. Yet the Federal

Circuit, over Petitioner’s objection (L216, L228-34), took

jurisdiction under 28 U.S.C. § 1295(a)(1) and summarily

vacated a final judgment rendered in Petitioner’s favor on a

claim arising under the Lanham Act. The Federal Circuit

apparently accepted, without comment (JA33-34), the

Respondent’s argument (L257-63) that its answer and

counterclaim had ousted the Tenth Circuit of jurisdiction over

Petitioner’s suit.

The decision of the Federal Circuit in this case is

antithetical to the “well-pleaded complaint rule” as

articulated in Christianson and innumerable other decisions

of this Court. If the Federal Circuit’s decision is allowed to

stand, plaintiffs who commence civil actions in federal court

will be anything but the “absolute master of what jurisdiction

[they] will appeal to.” Healy, 237 U.S. at 480, quoted in

Merrell Dow, 478 U.S. at 809 n.6 (1986). In reality, as this

case demonstrates, the Federal Circuit rule is that defendants

purportedly control — and can unilaterally change — both

the applicable law'* and the appellate court that will

determine any and every type of civil case — antitrust,

contract, copyright, trademark, trade secret, defamation, false

advertising, business tort, diversity — in which a defendant’s

answer might include a patent counterclaim of any nature,

and no matter how marginal it might be.

In DSC Communications Corp. v. Pulse

Communications, Inc., 170 F.3d 1354 (Fed. Cir.), cert.

denied, 528 U.S. 923 (1999), the Federal Circuit held that a

18. As noted above, the Federal Circuit has recently overruled

a number of its own decisions and held that it would start applying

“its own” law in determining various types of non-patent claims over

which it has only pendent or non-exclusive jurisdiction. The Federal

Circuit’s announcement in Midwest, supra, that it no longer

considered itself bound by regional Circuit law on product

configuration “trade dress” questions, was admittedly what prompted

this Respondent to attempt to mount a collateral attack on the final

judgment in Vornado I.

The Federal Circuit’s recently changed approach to choice-of-

law unquestionably — if not avowedly — gives rise to “forum shopping

opportunities between the Federal Circuit and the regional courts of

appeals on [non-patent] claims.” Atari, 747 F.2d at 1437 (quoting

S. Rep. No. 97-275 at 19-20 (1981)). Cf Van Dusen v. Barrack,.376

U.S. 612, 639 (1964) (when venue is transferred under 28 U.S.C.

§ 1404(a), transferee court must apply law that would have been

applied if there had been no transfer of venue).

defendant’s assertion of a permissive counterclaim for alleged

patent infringement was sufficient to bring a case within the

scope of the Federal Circuit’s exclusive jurisdiction under

28 U.S.C. § 1295(a)(1), regardless of whether a plaintiff’s

well-pleaded complaint alleges any claim “arising under”

federal patent law. Thus, according to the Federal Circuit,

a defendant can readily evade regional Circuit jurisdiction

by asserting any sort of patent counterclaim against a plaintiff,

including one that does not arise out of the same transactions

| or events that form the basis of the plaintiff’s suit.

The Federal Circuit’s interpretation of 28 U.S.C.

§ 1295(a)(1) purports to divest regional Circuits of

jurisdiction to determine the merits of broad categories of

civil actions commenced under federal or state laws having

nothing to do with patents, their interpretation, infringement,

or validity. Although “[i]t is possible to conceive of a rational

jurisdictional system in which the answer as well as the

complaint would be consulted before a determination is made

whether the case ‘urose under’ federal law,” such an approach

to “arising under” jurisdiction has simply never been adopted

by Congress or this Court, Franchise Tax Board v.

Construction Laborers Vacation Trust, 463 U.S. 1, 10 n.9

(1983), and was not adopted by Congress when it enacted

28 U.S.C. § 1295(a)(1). See Christianson, 486 U.S. at

813-14.

The Federal Circuit’s aberrant interpretation of the

“well-pleaded complaint rule” traces its decision in Aerojet-

General Corp. v. Machine Tool Works, Oerlikon-Buehrle Ltd.,

895 F.2d 736 (Fed. Cir. 1990) (en banc). In Aerojet,

the Federal Circuit took up the question whether 28 U.S.C.

§ 1295(a)(1) extended to a case in which “the complaint was

not based on § 1338(a) but there is a counterclaim over which

the district court would have § 1338(a) jurisdiction if the

counterclaim had been a complaint.” Jd. at 738-39.

In answering this question in the affirmative, the Federal

Circuit held that the “well-pleaded complaint rule” was

“merely the name of the rule, not a statement of a principle

of law,” id. at 743, with the purported result that a defendant’s

answer containing a counterclaim could transform the basis

of a District Court’s jurisdiction and cut off regional Circuit

jurisdiction over a plaintiff’s suit:

It wouid seem at best incongruous to hold that we

have appellate jurisdiction when a well-pleaded

patent infringement claim is the basis of a pleading

labeled “complaint” but not when the identical

well-pleaded claim is the basis of pleading labeled

“counterclaim”.

Id. at 742.

But contrary to the Federal Circuit’s view, there is

nothing whatever “incongruous” about the “plaintiff’s

traditional prerogative of forum selection —. the

well-established principle that the plaintiff is the master of

_ the complaint.” 14B C. Wricut, A. Miter & E. Cooper,

FEDERAL PRACTICE AND PROCEDURE § 3722, at 453 (3d ed.

1998) (citing authorities).'? In Christianson, this Court

19. As noted above, the “well-pleaded complaint rule” often

results in state courts hearing federal law counterclaims

notwithstanding the federal courts’ presumed superior familiarity with

federal law questions. In all such cases involving a jurisdictionally

sufficient counterclaim, it could be said, as the Federal Circuit did in

Aerojet, that a defendant’s counterclaim, “had it been filed as a

complaint, would fully comply with the well-pleaded complaint rule.”

(Cont'd)

expressly held the Federal Circuit’s jurisdiction excluded cases

“whe-e the well-pleaded complaint does not depend on patent

law.” Christianson, 486 U.S. at 814 (emphasis added).

The Féderal Circuit has simply flouted Christianson’ clear

hoiding that the “well-pleaded complaint rule” applies with

full force to 28 U.S.C. §§ 1338(a) and 1295(a)(1), and entitles

plaintiffs to regional Circuit review when, as in Christianson

and in the present case, a plaintiff’s well-pleaded complaint does

not state any claim “arising under” federal patent law.

Aside from a suggestion that it would be “incongruous”

for regional Circuits to hear appeals in antitrust, copyright,

trademark, trade secret, or other non-patent cases in which a

defendant’s answer included a patent law counterclaim, the

Federal Circuit justified its decision to take exclusive

jurisdiction over all such cases on the ground that, in its view,

“the basic purpose” of the “well-pleaded complaint rule” was

merely to avoid “federal-state conflicts,” Aerojet, 895 F.2d

at 743-44 (quoting Franchise Tax, 463 U.S. at 10). From

this premise, the Federal Circuit reasoned:

No such conflicts are possible here, where we deal

only with the direction of an appeal in a case

already properly in the federal court system.

Similarly, the plaintiff’s right to choose a federal

trial forum has already been fully exercised.

Id. at 744 (emphasis added).

(Cont’d)

895 F.2d at 742. But outside the Federal Circuit, the federal courts

have consistently held that a defendant’s counterclaim does not

change the status of a civil action as being one “arising under,”

or not “arising under,” federal law for jurisdictional purposes.

Cf. Shamrock Oil Corp. v. Sheets, 313 U.S. 100, 104 (1941)

(counterclaim falling within federal court original jurisdiction did

not entitle plaintiff to remove case to federal court).

The above-quoted analysis was and is fundamentally at

odds with Christianson. As noted above, this Court in

Christianson specifically considered, and rejected, a

suggestion that “our ‘arising under’ jurisprudence might. . .

be inapposite” to the scope of the Federal Circuit’s

jurisdiction under 28 U.S.C. §§ 1338(a) and 1295(a)(1), for

in the latter context, “our interpretation . . . will merely

determine which of two federal appellate courts will hear

the appeal.” Christianson, 486 U.S. at 808 n.2. The plaintiffs

of a judgment finding liability and awarding injunctive and

damages relief under federal antitrust and state tort law,

notwithstanding that the District Court in Christianson had

invalidated nine (9) issued patents and had construed

paragraph (2) of 35 U.S.C. § 112 as applied to the defendant’s

challenged actions. Jd. at 807-14, 819. There was no “federal-

state conflict” in Christianson, but the “well-pleaded

complaint rule” was nevertheless held fully applicable and

a cause for vacating a judgment of the Federal

ircuit.

Equally contrary to this Court’s precedents was the

Federal Circuit’s suggestion that the “well-pleaded complaint

rule” confers on plaintiffs merely a right to choose a “federal

trial forum.” Aerojet, 895 F.2d at 744 (emphasis added).

The Federal Circuit did not cite, let alone distinguish, this

Court’s precedents holding that a plaintiff who files suit in

federal court is “master” to decide both (1) “what jurisdiction

he will appeal to””° and (2) “what law he will rely upon.”?'

4 Merrell Dow, 478 U.S. at 809 n.6 (quoting Healy, 237 U.S.

at " : ,

21. Merrell Dow, 478 U.S. at 809 n.6 (quoting The Fair, 228

U.S. at 25).

Far from being “fully exercised,” id., these long-established

rights of federal court plaintiffs are effectively destroyed by

the jurisdictional rule applied by the Federal Circuit in this

case.

In further support of its conclusion that the “well-pleaded

complaint rule” should be construed, instead, as a “well-

pleaded complaint or well-pleaded answer and counterclaim

rule,” the Federal Circuit cited “Congress” goal of enhancing

predictability and certainty of the patent laws.” Jd. at 745.

But as the Federal Circuit has itself observed on occasion:

“Congress was not concerned that an occasional patent law

decision of a regional circuit court, or of a state court, would

defeat its goal of increased uniformity in the national law of

patents.” Speedco Inc. v. Estes, 853 F.2d 909, 914 (Fed. Cir.

1988) (quoting Atari, Inc. v. JS&A Group, 747 F.2d 1422,

1432 (Fed. Cir. 1984) (en banc)).

On the contrary, by circumscribing the Federal Circuit’s

appellate jurisdiction to cases “arising under” federal patent

law, as defined by the “well-pleaded complaint rule,”

Congress expressly provided that the goal of “uniformity”

in patent law jurisprudence would have to accommodate, and

be balanced against, traditional principles defining litigants’

rights in federal court. A marginal and theoretical threat to

the “uniformity” of federal patent jurisprudence surely is not

so weighty an objective as to warrant jettisoning of the “well-

pleaded complaint rule” and thereby potentially diverting to

the Federal Circuit every conceivable type of case in which

a defendant might assert a patent law counterclaim, in

derogation of the appellate jurisdiction of the regional

Circuits and the uniformity of jurisprudence outside the

Federal Circuit.

The Aerojet decision also cited and relied on authorities

holding that, when a defendant’s answer includes a

counterclaim, jurisdiction to decide the counterclaim can be

“retained” notwithstanding that a plaintiff’s complaint

may be jurisdictionally defective or voluntarily dismissed.

895 F.2d at 742-43. But those authorities are patently

inapposite to whether a defendant’s answer or counterclaim

operates to change the jurisdictional basis of a civil action

commenced, as the present action was, by the filing of a well-

p/eaded complaint.” Under the numerous authorities cited

above (see note 15 supra), the answer to the latter question

is clearly “no.”

The decision below well illustrates how the Federal

Circuit’s interpretation — and de facto rejection — of the

“well-pleaded complaint rule” can lead not only to unfair

and unpredictable results, but to enormous waste of judicial

and party resources. The District Court found, in this case,

that as of March 2000, there was a “clear conflict” between

the law of the Federal Circuit and the law of the Tenth Circuit,

as reflected in their respective decisions in the Midwest and

Vornado I cases, 93 F. Supp. 2d at 1143 (JA95), but that this

conflict did not warrant “a refusal to apply the law of

collateral estoppel in this action,” in part because “[t]he Tenth

Circuit law upon which that [Vornado I] judgment was based

has not changed.” Jd.

22. When an answer and counterclaim has been pleaded to a

complaint that later is dismissed voluntarily or for lack of jurisdiction,

it is an entirely mechanical and ministerial exercise whether a District

Court takes up the counterclaim as pleaded or requires that the party

originally named as a defendant file a complaint alleging the

substance of the existing coun.*rclaim. Either way, the original

plaintiff’s choice of law or forum is not being disturbed, and the

defendant's cause of action is treated the same as it would have been

treated if the dismissed complaint had not been filed.

In TrafFix, this Court expressly resolved the “conflict”

that had existed between the law of the Tenth and Federal

Circuits, 121 S. Ct. at 1259, and did so by (1) rejecting the

standard of “functionality” articulated by the Federal Circuit

in Midwest, and (2) embracing a standard of “functionality”

that was fully consistent with both the holding and the

reasoning of the Tenth Circuit in Vornado I. Id. at 1261-62.

The 7rafFix decision eliminated any plausible argument

that the law of the Tenth Circuit had “changed” materially

since the judgment in Vornado J, yet Petitioner, the prevailing

plaintiff in the District Court, nevertheless had its judgment

of non-infringement summarily stripped away by a two-page

Order of the Federal Circuit that did not address, at all, any

of the jurisdictional or merits arguments made by either party

(JA33-34). Instead, the Federal Circuit summarily vacated

the summary judgment that had been awarded to Petitioner

and directed the District Court to consider whether, in view

of TrafFix, the law of the Tenth Circuit might have changed

in such a way as to permit a collateral attack on a prior

judgment of the Tenth Circuit in a case arising under federal

trademark law.

The Federal Circuit’s decision apparentiy contemplates

that, after the District Court attempts to divine how the Tenth

Circuit would regard the state of its own law in view of the

TrafFix decision, the case would return to the Federal Circuit

for additional divination efforts at determining the law of

the Tenth Circuit. The one court that will never, in the Federal

Circuit’s view, have the opportunity to determine the legal

effect of the judgment in Vornado I, is the court that issued

it: the Tenth Circuit.

It is not difficult to see how tlie interests of justice,

judicial economy and efficiency, and stability of prior final

judgments, have all been sacrificed in this case as a

consequence of the Federal Circuit’s aberrant interpretation

of 28 U.S.C. §§ 1295(a)(1) and 1338(a) and its refusal to

acknowledge, let alone faithfully apply, the “well-pleaded

complaint rule” as substantially limiting the scope of the

Federal Circuit’s appellate jurisdiction as directed by this

Court in Christianson.

CONCLUSION

For the reasons set forth above, the judgment of the Court

of Appeals for the Federal Circuit should be reversed, and

the cause remanded to the Tenth Circuit for further

proceedings. Alternatively, the Court should affirm the

District Court’s award of summary judgment to Petitioner.

Respectfully submitted,

JaMEs W. DABNEY

Counsel for Petitioner

1155 Avenue of the Americas

New York, New York 10036

(212) 790-9090

Paut Izzo

Marcia H. Sundeen Timotny P. GALLOGLY

Carol M. Wilhelm Tue Homes Group, INc.

—, eT Milford Massachusetts

New York, New York ARTHUR R. MILLER

Of Counsel 1755 Massachusetts Avenue

Cambridge, Massachusetts

January 4, 2002

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.