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

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0502%3A06

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petitioners Brief
- **Published:** January 1, 2002
- **Citation:** 535 U.S. 826

## Text

—_

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

i
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

il

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.

iv

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

vi

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

ix
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

Xx

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

xi
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
Re ED. oc cin bc ccvnvecercescasosccesses 17
PB Teiis EEE Mv t vc cs cad ccdecccesecevececs 1,2
Ss OP EEE b vce descvscosvenveess i, 2, 3, 6, 10
a di pains ‘a
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
ye Error rrr rT Teer erie Te Ra

NE Fo ic icetcdbns ictus 24

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

2

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).

3

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). -

4

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).

5

“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.”).

6

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.

7

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

9

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)

10

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).

11

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.

12

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.).

13

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). ;

14

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).

15

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

copyright cases.

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:

16

(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

(c) the Federal Circuit lacked jurisdiction over
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).

17

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. ;

18

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))).

19

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.

\

20

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)

21

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).

{

22

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

23

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

24

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).

25

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

26

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)

27

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).

28

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

in Christianson were held entitled to regional Circuit review ©

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).

29

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.

30

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.

31

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.

32

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0502%3A06. Public record. Not legal advice.