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

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No. 01-408 Aligy 2202

IN THE

Supreme Court of the Uitited-Stater __|

THE HOLMES GROUP, INC.,

Petitioner,

—against—

VORNADO AIR CIRCULATION SYSTEMS, INC.,

Respondent.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

REPLY BRIEF

James W. DABNEY

Counsel for Petitioner

1155 Avenue of the Americas

New York, New York 10036

(212) 790-9090

Paut Izzo

Marcia H. Sundeen TimoTuy P. GALLOGLY

Carol M. Wilhelm Tue Hoimes Group, INc.

Pennie & Epmonps LLP Milford, Massachusetts

New York, New York ARTHUR R. MILLER

Of Counsel 1755 Massachusetts Avenue

Cambridge, Massachusetts

March 12, 2002

i

CORPORATE DISCLOSURE STATEMENT

Petitioner’s Corporate Disclosure Statement was set forth

at page iii of Petitioner’s Opening Brief, and there are no

amendments to that Statement.

TABLE OF CONTENTS

Corporate Disclosure Statement ................

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ill

TABLE OF CITED AUTHORITIES

\ Page

Cases:

American First Fed., Inc. v. Lake Forest Park, Inc.,

198 F.3d 1259 (11th Cir. 1999) .............. 1]

Atari, Inc. v. JS&A Group, Inc., 747 F.2d 1422

(Fed. Cir. 1984) (en banc), overruled by

Nobelpharma AB yv. Implant Innovations, Inc.,

141 F.3d 1059 (Fed. Cir. 1998) .............. 2,3

Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d

850 (Fed. Cir. 1991), cert. denied, 504 U.S. 980

ee eee ebeecseceseecccoccses 2

Boggild v. Kenner Prods., Div. of CPG Prods. Corp.,

853 F.2d 465 (6th Cir. 1988) ................ 3, 10

Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S.

Re sec ceccccececces: 8,9, 10

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

EEC ee casos pecceccescesce 5, 6, 7, 13

Christianson v. Colt Indus. Operating Corp.,

486 U.S. 800 (1988) ........... 2, 3, 4, 5, 10, 11, 12

DSC Communications Corp. v. Pulse Communications,

Inc., 170 F.3d 1354 (Fed. Cir.), cert. denied, 528 U.S.

eres hb cso decectcceeccees 11

Franchise Tax Bd. v. Constr. Laborers Vacation Trust,

ki coe cwececcccece 6,8

iv

Cited Authorities

Page

Great Northern Ry. Co. v. Alexander, 246 U.S. 276

SUE ocvncsddecdesodaducsuuteneetesbsene 5

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

EE 06000 54n6e0d deenesnacedesbentekenat 3

Hunter Douglas, Inc. v. Harmonic Design, Inc., 153

F.3d 1318 (Fed. Cir. 1998), cert. denied, 525 U.S.

SEP GSEED 00406060 budetabckodseasiesian 4,6

Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342

Sah SED 42 ccndudcsenokasenees csedes 13, 16

Lear, Inc. v. Adkins, 395 U.S. 653 (1969) ........ 9

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

EEE whe cncdawetdubblin dnetidoadtbaadan 4,7

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. Mktg. Displays, Inc., 121 S. Ct. 1255 (2001) ... 2

Pratt v. Paris Gaslight & Coke Co., 168 U.S. 255

SE du sh ods 6ee6dee dunes cdbeaeetnsbedane 4

Public Service Comm'n v. Wycoff Co., 344 U.S. 237

Pb etinenseneesesbendssetnseenelcedias 8

Rivet v. Regions Bank, 522 U.S. 470 (1998) ....6, 12, 13

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

816 F.2d 1191 (7th Cir. 1987) ............... 5

Vv

Cited Authorities

Page

Serco Serv. Co. v. Kelley Co., 51 F.3d 1037

Gab, Gia. BGGED no cc cccccccccccvcccccsceess 16

Speedco Inc. v. Estes, 853 F.2d 909 (Fed. Cir. 1988)

veoecduvevonesnacsdbsdeaséeccuscde 9

Tempco Elec. Heater Corp. v. Omega Eng’g, Inc.,

819 F.2d 746 (7th Cir. 1987) ...........0005. 16

The Fair v. Kohler Die & Specialty Co., 228 U.S. 22

GREED occ ccdcccdcccuccsteccessseccscedes 3, 7,15

Unique Concepts, Inc. v. Manuel, 930 F.2d 573

CHG, BGDED cc cccccccccccccccccescccscge |

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

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

S16 US. 1067 (IDSS) ow cccccccgeccscees 1, 5, 6, 16

Wilton v. Seven Falls Co., 515 U.S. 277 (1995) ... 16

Xeta, Inc. v. Atex, Inc., 825 F.2d 604 (1st Cir. 1987)

scm 6eutwenehsesbabsvosnvedeekedtonres 3

vi

Cited Authorities

Page

Statutes:

Se as ED. oncedcandenwdbusscodeueas 11

SP es OF PEED v.cdcencdeadatesadcescaets 2, 8,14

Pee GE 0h cnc wecsdsbeusisundéeddies 13

es Oe ED av cnedccsccnenaseed 4,9, 11, 16

BP CR PEED Sad ckscvesdeveceasepatsnabant 3,5

BO UB. © TRIG oc ccccccccccevces 3, 4, 5, 9, 11, 16

PE OE ob dcccccccccuccasadetbusnase 11

Pee ED occ bcdtveccadssdnccadcaane 9

ee, Sk Gi GE Gn OE cee ccnusdnedescacss 8,14

eee, Gam. Be. GR GR, BOE wc ccccccccecscccses 8,14

Rule:

DUP SERED. 6606606 c0sivcdnsetwaneens 13

Other Authorities:

14B C. Wright, A. Miller & E. Cooper, Federal

Practice and Procedure § 3722 (3d ed. 1998) .. 4,5

65 Fed. Reg. 4260 (Jan. 26, 2000) .............. 13

ie CD oicckids cadisan veces: 2

|

If there is one thing this case clearly is not about, it is

anything to do with what Respondent calls “uniformity in

the body of patent law” (Brief for Respondent [hereinafter

“Resp. Br.”] at 1). Petitioner did not seek, and the District

Court did not award, any relief under federal patent law; the

Federal Circuit’s unpublished decision below does not

mention patent law; and by Order of the District Court

dated June 12, 2000 (JA101-102), Respondent’s patent

counterclaim was effectively withdrawn and will never be

presented to any court if the summary judgment awarded

Petitioner in March 2000 is affirmed. '

Respondent urges this Court to expand drastically the

exclusive appellate jurisdiction of the Federal Circuit, not

on the basis of any existing or non-speculative threat to the

“uniformity” of federal patent law, but simply to improve

this particular Respondent’s chances of mounting a successful

collateral attack.on the final judgment of “trade dress”

invalidity rendered 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’). In its briefs to the

Federal Circuit (L152, L251), Respondent openly urged the

Federal Circuit to reject the Tenth Circuit’s holding in

Vornado | and to permit Respondent to re-litigate the validity

of exactly the same alleged “trade dress” held unprotectable

in Vornado J. Respondent could make this argument only

because, in the late 1990’s, the Federal Circuit repudiated

its prior practice of applying regional circuit law “in all

but the substantive law fields assigned exclusively to this

1. The Order of this Court dated November 8, 2001, granting

certiorari did not include Question No. 2 addressed to “whether Rule

54(b) can be used to direct an appeal to a particular circuit.” Unique

Concepts, Inc. v. Manuel, 930 F.2d 573, 575 (7th Cir. 1991)

(Easterbrook, J.). The Court has thus left it open to Respondent to

seek Federal Circuit review of any future judgment that might be

issued on Respondent's currently unlitigated and wholly contingent

patent counterclaim.

2

court,” and thereby undermined a key basis on which the

Federal Circuit had earlier justified extending its exclusive

appellate jurisdiction over antitrust, copyright, “trade dress,”

and other non-patent cases based solely on a defendant’s

assertion of a patent law counterclaim against the plaintiff.’

Respondent proposes a novel “test to determine whether

a case arises under patent law for purposes of 28 U.S.C.

§ 1295(a)(1)” (Resp. Br. at 16), one that is completely at

odds with the holding and reasoning of Christianson v. Colt

Indus. Operating Corp., 486 U.S. 800 (1988). Christianson

limited Federal Circuit jurisdiction to conform to the “clear

congressional intent” 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. at 814 (quoting H.R. Rep. No.

97-312 at 41). In suggesting that an interest in “greater

uniformity in the body of patent law” (Resp. Br. at 1) justifies

2. 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, 528

U.S. 1019 (1998). See Midwest Indus., Inc. v. Karavan Trailers, Inc.,

175 F.3d 1356, 1358-59 & n.1 (Fed. Cir.), cert. denied, 528 U.S.

1019 (1999) (Federal Circuit “[t}henceforth” would apply its “own”

law, in place of regional circuit law, in determining whether product

configurations were protectable as “trade dress” under 15 U.S.C.

§ 1125(a) or state law), overruled on other grounds by TrafFix

Devices, Inc. v. Mktg. Displays, Inc., 121 S. Ct. 1255 (2001).

3. In Biodex Corp. v. Loredan Biomedical, Inc., 946 F.2d 850

(Fed. Cir. 1991), cert. denied, 504 U.S. 980 (1992), the Federal

Circuit candidly acknowledged that “a rationale upon which Atari

was based, adherence to regional circuit law to promote uniformity

in pendent substantive legal issues .. . has been undermined by our

decision in Aerojet-General Corp. v. Machine Tool Works, Oerlikon-

Buehrle Lid., 895 F.2d 736 (Fed. Cir. 1990)... .” 946 F.2d at 858

n.11.

3

the creation of some special, non-uniform jurisdictional “test”

for Federal Circuit jurisdiction which deviates from the well-

pleaded complaint rule governing District Court jurisdiction

under 28 U.S.C. §§ 1331 and 1338(a), Respondent effectively

urges exactly the same “policy” argument for expanding

Federal Circuit jurisdiction which the Christianson majority

expressly rejected in 1988. 486 U.S. at 813-14.*

For nearly 100 years, this Court has held that a plaintiff

who commences a civil action (a) “is absolute master of what

jurisdiction he will appeal to”* and also (b) “is master to

decide what law he will rely upon.”® The Court has thus

4. For similar reasons, Respondent's reliance on Xeta, Inc. v.

Atex, Inc., 825 F.2d 604 (1st Cir. 1987), is misplaced. Xeta was

decided before Christianson and before the Federal Circuit repudiated

its prior practice of applying regional circuit law “in all but the

substantive law fields assigned exclusively to this court.” Atari, 747

F.2d at 1439, overruled by Nobelpharma, 141 F.3d at 1059. Without

the benefit of Christianson, the First Circuit in Xeta transferred a

preliminary injunction appeal to the Federal Circuit notwithstanding

that the plaintiff's well-pleaded complaint in that case stated only

antitrust and state unfair competition claims. The Xeta decision did

not cite or distinguish cases in other circuits holding that a defendant’s

answer and counterclaim does not operate to create “arising under”

jurisdiction for purposes of general federal question jurisdiction.

A listing of such cases (many of which were decided after Xeta)

appears on pages 9 and 20-21 of Petitioner's main brief (“Pet. Br.”).

See also Boggild v. Kenner Prods., Div. of CPG Prods. Corp., 853

F.2d 465, 467-69 (6th Cir. 1988) (regional circuit had jurisdiction

over case involving claim for breach of patent license,

notwithstanding defendant's counterclaim seeking a declaration that

the license was unenforceable as a matter of federal patent law).

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

(Holmes, J.).

6. The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25

(1913) (Holmes, J.).

4

explicitly held that “[j ]urisdiction may not be sustained on a

theory that the plaintiff has not advanced.” And with specific

reference to 28 U.S.C. §§ 1338(a) and 1295(a)(1), the Court

has held that for a case to be one “arising under” federal

patent law, “the plaintiff must set up some right, title, or

interest under the patent laws, or at least make it appear that

some right or privilege will be defeated by one construction,

or sustained by the opposite construction of these laws.”

Christianson, 486 U.S. at 807-08 (emphasis added; quoting

Pratt v. Paris Gaslight & Coke Co., 168 U.S. 255, 259

(1897)).°

It has long been recognized that a plaintiff may have

reasons for preferring one jurisdiction over another, and for

preferring one jurisdiction’s law over that of another;

and this Court has repeatedly acted to preserve and protect

the “plaintiff’s traditional prerogative of forum selection.”

14B C. Wright, A. Miller & E. Cooper, Federal Practice and

7. Merreli Dow Pharm. Inc. v. Thompson, 478 U. . 804, 809

n.6 (1986) (emphasis added).

8. Respondent's brief (“Resp. Br.”) quotes the same passage

from Christianson as is quoted in the text above, but inexcusably

substitutes the word “patentee” for the word “plaintiff” in its

characterization of what the Court “held” (Resp. Br. at 14). Contrary

to Respondent’s mischaracterization, Christianson expressly and

repeatedly held that “the district court’s jurisdiction is determined

by reference to the well-pleaded complaint,” 486 U.S. at 814

(emphasis added), by “what necessarily appears in the plaintiff's

statement of his own claim,” id. at 809 (emphasis added), and that

the Federal Circuit has no appellate jurisdiction “over an appeal

where the well-pleaded complaint does not depend on patent law.”

Id. at 814 (emphasis added). Further, non-patentee plaintiffs are fully

capable of commencing actions which “arise under” federal patent

law. E.g., Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d

1318 (Fed. Cir. 1998), cert. denied, 525 U.S. 1143 (1999) (action

alleging wrongful procurement and publicizing of invalid patent

claims held one “arising under” federal patent law).

5

Procedure § 3722, at 453 (3d ed. 1998). Thus, for example,

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

Court held that “the plaintiff may, by eschewing claims based

on federal law, choose to have the cause heard in state court.”

Id. at 399. In Great Northern Ry. Co. v. Alexander, 246 U.S.

276 (1918), the Court similarly held that a plaintiff’s choice

of a state court forum could not be defeated by a defendant’s

“subsequent pleadings.” Jd. at 281, cited in Caterpillar, 482

U.S. at 392 n.7. And outside the Federal Circuit, the Courts

of Appeals are unanimous in holding that a plaintiff’s choice

of a state court forum cannot be defeated by a defendant’s

service of an answer containing a federal law counterclaim.

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. . . .”).’

The present case, like Caterpillar and Christianson and

any number of other decisions of this Court construing the

“arising under” language of 28 U.S.C. §§ 1331 and 1338(a),

pits a plaintiff’s choice of law and forum against that of a

defendant. The Petitioner chose to file suit in the District of

Kansas (within the Tenth Circuit) and deliberately invoked

the “trade dress” law of the Tenth Circuit, including the final

judgment of invalidity rendered in Vornado J. Under the well-

pleaded complaint rule as repeatedly articulated and applied

by this Court, the Petitioner was “absolute master” to frame

its complaint as it did and to include, or exclude, such claims

or theories of relief it might have had against Respondent or

others at the time. It is certainly true, as Respondent suggests,

that in December 1999, the Petitioner likely could have

pleaded one or more claims against Respondent which “arose

9. See the authorities cited in Petitioner’s main brief (Pet. Br.

at 13 & n.9 and 20-21 & nn. 14-16).

6

under” federal patent law,'° but it is equally clear that

Petitioner was entitled to “eschew” any such claim,

Caterpillar, 482 U.S. at 399, and to do so for the very purpose

of preserving Petitioner’s access to the Tenth Circuit. /d."'

The Respondent nevertheless contends that by serving

an answer to Petitioner’s complaint which included a patent

law counterclaim, the Respondent (1) automatically ousted

the Tenth Circuit of appellate jurisdiction over Petitioner’s

suit (Resp. Br. at 10), and (2) automatically effected a

fundamental change in the substantive law governing the non-

patent claims alleged in Petitioner’s complaint (id. at 5).

As noted above, Respondent’s briefs below openly and

unabashedly argued that the Federal Circuit should decide

this case on the basis of its “own” standard of “trade dress”

protection (L168-170, 173-180, 265-273), notwithstanding

that Respondent had earlier attempted and failed to persuade

the Tenth Circuit to adopt the Federal Circuit “trade dress”

standard in Vornado I.

While purporting to catalogue the “principles” used by

this Court “to divine when an action arises under the

10. Cf. Hunter Douglas, Inc. v. Harmonic Design, Inc., 153

F.3d 1318 (Fed. Cir. 1998), cert. denied, 525 U.S. 1143 (1999) (state

law claim alleging wrongful publicizing of invalid patent claims was

one “arising under” federal patent law).

11. While (falsely) accusing Petitioner of “manipulat[ing])

jurisdictional rules” (Resp. Br. at 9, 24), Respondent makes no

argument that Petitioner’s complaint in this action was not “well-

pleaded” or “omitt{ed] to plead necessary federal questions.” Rivet

v. Regions Bank, 522 U.S. 470, 475 (1998) (quoting Franchise Tax

Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 22 (1983)

(describing “artful pleading” corollary to the well-pleaded complaint

rule)). Respondent appears to complain, rather, that Petitioner’s

complaint was too well-pleaded, for it resulted in an award of

summary judgment to Petitioner.

7

Constitution or laws of the United States” (Resp. Br. at 16),

Respondent pointedly fails to include the principle that

“the 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. The question cannot

depend upon the answer....” The Fair v. Kohler Die &

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

Respondent does not distinguish, but simply disregards

The Fair, Caterpillar, and numerous other decisions of this

Court holding that “[j Jurisdiction cannot be based on a theory

the plaintiff has not advanced.” Merrell Dow, 478 U.S. at

809 n.6.

Respondent sets up its various legal and policy arguments

with a misstatement, repeated over and over again throughout

Respondent’s brief, that this case was brought by Petitioner

as “a declaratory judgment action” (Resp. Br. at 1) “seeking

only a declaration that Holmes’s sales of its products did not

infringe Vornado’s asserted trade dress” (id. at 3-4).

Notwithstanding the frequency with which Respondent

repeats this assertion,'? it is simply not true. Not only did

Petitioner’s complaint set forth seven claims for relief and

seek damages and injunctive relief against Respondent

(L2-15), but the District Court actually issued a preliminary

12. E.g., “petitioner filed a declaratory judgment action”

(Resp. Br. at 1), “in the present setting of a declaratory judgment

action” (id.), “petitioner Holmes commenced a district court action

... Seeking only a declaration” (id. at 3), “it is difficult to reconcile

how petitioner was motivated to file a declaratory judgment action”

(id. at 4 n.3), “this declaratory judgment action” (id. at 7), “preemptive

declaratory judgment actions” (id.), “forum shopping by declaratory

judgment plaintiffs” (id. at 8); “manipulate jurisdictional rules by

bringing a declaratory judgment action” (id. at 9), “declaratory

judgment actions (like this one)” (id. at 12), “petitioner manipulated

jurisdictional rules by bringing a declaratory judgment action”

(id. at 24).

8

injunction against Respondent on January 4, 2000 (JA84-

86) restraining Respondent from acts of false advertising and

deceptive practices under 15 U.S.C. § 1125(a) and Mass.

Gen. L. ch. 93A, §§ 2 and 11. The issue on which the District

Court granted summary judgment in favor of Petitioner was

germane to multiple claims for affirmative relief pleaded by

Petitioner.

Respondent’s mischaracterization of Petitioner’s suit as

a mere “declaratory judgment action” is also without

jurisdictional significance. It is true, as Respondent notes

(Resp. Br. at 12), that a plaintiff can invoke “arising under”

jurisdiction by pleading a threatened federal claim by another.

See Franchise Tax Bd. v. Constr. Laborers Vacation Trust,

463 U.S. 1, 19 (1983); Public Service Comm'n v. Wycoff Co.,

344 U.S. 237, 248 (1952) (by implication). But this principle

merely permits “arising under” jurisdiction to be based on a

complaint which pleads a threatened federal claim by another.

As Franchise Tax Bd. itself makes clear, the “well-pleaded

complaint rule” does not permit a federal court to base

jurisdiction on a de‘endant’s answer which raises claims or

issues not presented in a plaintiff’s well-pleaded complaint.

Id. at 10 n.9.

Respondent next cites to Cardinal Chem. Co. v. Morton

Int'l, Inc., 508 U.S. 83 (1993), as purported authority for

upholding the Federal Circuit’s exercise of jurisdiction in

this case. In Cardinal Chemical, the plaintiff had filed suit

for patent infringement, and the defendant had asserted an

affirmative defense of invalidity. The defendant had also, as

is now common practice, made its invalidity defense the

subject of a counterclaim for a declaratory judgment that the

plaintiff’s patent was invalid. The Court observed in Cardinal

Chemical that the defendant “had properly invoked the

original jurisdiction of the District Court.” 508 U.S. at 98.

But contrary to Respondent’s apparent suggestion, the

9

“original jurisdiction” referred to in the cited passage was

supplemental jurisdiction” in an action otherwise “arising

under” federal patent law by reason of the plaintiff’s claim

of infringement. Having been commenced as a conventional

action for patent infringement invoking federal question

jurisdiction, the Cardinal Chemical decision clearly is not

authority that a defendant’s answer and counterclaim can

render a civil action one “arising under” federal patent law

if the plaintiff’s well-pleaded complaint seeks no relief under

patent law.'*

The error of Respondent’s reliance on Cardinal Chemical

can be appreciated by considering an action for breach of

contract to pay royalties for use of a patented invention. It is

well-settled that such an action is not one “arising under”

federal patent law; and this is so regardless of whether the

defendant asserts, by way of defense, that the licensed patent

is invalid. E.g., Lear, Inc. v. Adkins, 395 U.S. 653 (1969)

(state court had jurisdiction to hear claim for breach of patent

license including invalidity defense); Speedco Inc. v. Estes,

853 F.2d 909 (Fed. Cir. 1988) (same). But under Respondent’s

13. Following the commencement of a “civil action,” a District

Court has “supplemental jurisdiction over all other claims that are

so related to claims in the action within such original jurisdiction

that they form part of the same case or controversy under Article III

of the United States Constitution.” 28 U.S.C. § 1367(a). By statutory

definition, supplemental jurisdiction depends on the prior existence

of a “civil action of which the district courts have original

jurisdiction.” Jd. Supplemental jurisdiction clearly encompasses a

counterclaim of the type asserted in Cardinal Chemical.

14. The question decided in Cardinal Chemical was whether

the Federal Circuit properly vacated a declaratory judgment of

invalidity after determining that the defendant had not infringed the

plaintiff’s patent. The case had nothing to do with “arising under”

jurisdiction or the scope of 28 U.S.C. §§ 1338(a) and 1295(a)(1).

10

(clearly erroneous) argument, such a suit could readily be

converted into a case “arising under” federal patent law

through the simple expedient of the defendant asserting a

counterclaim for a declaratory judgment of invalidity as was

done in Cardinal Chemical. As at least one regional circuit

has held, a counterclaim arising under patent law does not

cut off regional Circuit jurisdiction over a case wherein the

plaintiff pleads only breach of contract. Boggild v. Kenner

Prods., Div. of CPG Prods. Corp., 853 F.2d 465, 467-69

(6th Cir. 1988) (regional circuit had appellate jurisdiction

over case when plaintiff alleged breach of a patent license,

notwithstanding defendant’s counterclaim alleging that the

license was unenforceable as a matter of federal patent law).

Respondent asserts that its proposed “test” for Federal

Circuit jurisdiction (Resp. Br. at 16) is not inconsistent with

the principle that “a case raising a patent-law defense does

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

Christianson, 486 U.S. at 809, because according to

Respondent, “[c]ourts have differentiated between

counterclaims and defenses.” Resp. Br. at 17 n.8. But as

Respondent’s own argument based on Cardinal Chemical

reveals, there is often no meaningful distinction between

patent law “defenses” and “counterclaims” as a practical

matter.

Respondent does not cite or distinguish any of the

numerous authorities cited by Petitioner (Pet. Br. at 20-21 &

n.15) holding that defenses and counterclaims contained in

a defendant’s answer are both equally extraneous to the

existence or non-existence of “arising under” jurisdiction

governed by the well-pleaded complaint rule. The authorities

cited by Respondent in support of its contrary argument

(Resp. Br. at 17 n.8) deal with spectacularly irrelevant

subjects such as whether an affirmative defense to a

1]

promissory note is subject to the exhaustion requirement of

12 U.S.C. § 1821(d)."°

Respondent also cites authorities holding that a District

Court can “retain” jurisdiction over a counterclaim

notwithstanding that plaintiff's complaint might be defective

(Resp. Br. at 13). But as Petitioner has previously

demonstrated (Pet. Br. at 30), these authorities are inapposite

to whether a defendant’s answer and counterclaim operates

to change the basis of a civil action commenced, as the

present action was, by the filing of a well-pleaded complaint

properly invoking the original jurisdiction of the District

Court. A counterclaim often will not be one “arising under”

federal patent law but nonetheless will fall within a District

Court’s supplemental jurisdiction under 28 U.S.C § 1367.

The well-pleaded complaint rule, not the supplemental

jurisdiction statute, governs the existence or non-existence

of “arising under” jurisdiction for purposes of 28 U.S.C.

§§ 1338(a) and 1295(a)(1). See Christianson, 486 U.S. at

808-09, 813-14.

Respondent suggests that it was permissible in this case

for the Federal Circuit to look past the face of Petitioner’s

well-pleaded complaint because Respondent assertedly “was

obliged to assert its related patent claim as a compulsory

counterclaim” (Resp. Br. at 1);'° Petitioner assertedly

15. American First Fed., Inc. v. Lake Forest Park, Inc., 198

F.3d 1259, 1263 (11th Cir. 1999).

16. Respondent notably does not cite, and offers no defense of,

the Federal Circuit's position that it has exclusive jurisdiction over

cases in which a defendant's answer asserts a permissive, as distinct

from a compulsory, counterclaim. DSC Communications Corp. v.

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

528 U.S. 923 (1999). Nothing in the decision below indicates that

the allegedly “compulsory” nature of Respondent’s counterclaim

formed any basis of the Federal Circuit's taking of jurisdiction in

this case.

12

“understood” this (id. at 7), and it assertedly “strains credulity

to suggest, as petitioner does, that the patent law claims do

not underlie this lawsuit every bit as much as the trade dress

claims do” (id. at 11-12). From these premises, Respondent

accuses Petitioner of having “manipulated jurisdictional

rules” (id. at 24) . Respondent’s ad hominem argument is

flawed at several levels."’

Why a plaintiff might be “motivated” to frame a

complaint in a particular way (Resp. Br. at 4 n.3) is of course

irrelevant to whether a complaint as filed is “well-pleade“”

for jurisdictional purposes. To make “arising under”

jurisdiction dependent on a plaintiff’s “motives” would

completely destroy the “bright line” standard of looking to

what “is presented on the face of the plaintiff’s properly

pleaded complaint.” Rivet v. Regions Bank, 522 U.S. 470,

17. Although not germane to the jurisdictional questions

pending before the Court, Respondent’s ad hominem argument is

wholly unsupported and baseless as reflected in the Declaration of

Paul J. Powers sworn to December 17, 1999 (“Powers Decl.”)

submitted in support of Petitioner’s successful application for

preliminary injunctive relief against Respondent:

Buyers for major customers have already called

and expressed concern over Vornado’s allegations.

The damage this is causing to Holmes’ business and

reputation is incalculable. I and our individual sales

people will have difficulty trying to reassure our

customers with respect to the “trade dress” claim being

made by Vornado. Unlike claims of patent infringement,

which can be assessed against specific claim language,

the existence or non-existence of the type of “trade dress”

rights Vornado appears to be claiming (for a second time)

is not registered or recorded anywhere and is said by

Vornado to depend on, among other things, the mental

states of large numbers of consumers and other factors

which are not easily or certainly determinable. (Powers

Decl. ¥ 12)

13

475 (1998) (quoting Caterpillar Inc. v. Williams, 482 U.S.

386, 392 (1987)).

There is, further, nothing novel or unusual about a

plaintiff deliberately “eschewing” available claims or legal

theories in order to establish a jurisdictional choice.

Caterpillar, 482 U.S. at 392 & n.7, 399. To suggest, as

Respondent does, that a plaintiff can be stripped of its chosen

law and forum because the plaintiff allegedly can foretell

the future and anticipate a counterclaim by the defendant,"*

is simply a frontal assault on the well-pleaded complaint rule

itself. See Christianson, 486 U.S. at 809 (plaintiff’s

anticipation of federal law defense cannot create “arising

under” jurisdiction).

Respondent emphasizes that at the time Petitioner

commenced this action on December 8, 1999, Respondent

was actively attempting to persuade the ITC to institute an

“investigation” of Petitioner under 19 U.S.C. § 1337 and had

lodged a “complaint” with the ITC accusing Petitioner of

both patent and “trade dress” infringement (Resp. Br. at 1,

3). Respondent eventually succeeded in persuading the

ITC to institute Investigation No. 337-TA-4:'6 (the “ITC

proceeding”; see 65 Fed. Reg. 4260 (Jaa. 46, 2000))."”

18. Contrary to Respondent's apparent belief, Fed. R. Civ. P.

13{a) does not “oblige” a defendant to assert a compulsory

counterclaim. It frequently happens that a person sued in a civil action

turns around and counter-sues in a second jurisdiction; and the District

Courts have substantial discretion to decide whether the first-filed

or the second-filed action should proceed. E.g., Kerotest Mfg. Co. v.

C-O-Two Fire Equip. Co., 342 U.S. 180, 185-86 (1952) (affirming

stay of declaratory judgment action in favor of later-commenced

action for patent infringement).

19. The ITC proceeding was terminated on July 20, 2000, with

no action taken against Petitioner. Respondent’s suggestion that the

ITC purportedly “determined” that Respondent had “viable” claims

against Petitioner (Resp. Br. at 3, 9) is patently untrue.

14

Respondent was free at all times to pursue whatever remedies

the ITC had jurisdiction to award Respondent in that

proceeding.”

But just as Respondent was free to seek relief in a forum

of its choosing (i.e., the ITC), so was Petitioner. Faced with

imminent and irreparable harm to its business on the eve of

a major housewares industry trade show (JA47-49, Order

Granting Preliminary Injunction, JA84), Petitioner filed suit

seeking money damages and preliminary and permanent

injunctive relief against Respondent on claims arising under

15 U.S.C. § 1125(a), Mass. Gen. L. ch. 93A, §§ 2, 11, and

state common law (L1-86). Petitioner’s suit in the District

Court was completely separate and independent of the

then-putative ITC proceeding which Respondent was

attempting to foment.”' The District Court’s jurisdiction to

hear Petitioner’s suit was based on the contents of Petitioner’s

well-pleaded complaint which was, Respondent concedes,

“devoid of a patent infringement claim” (Resp. Br. at 5).

Respondent was free to, and did, request that the District

Court stay Petitioner’s suit and defer to the ITC proceeding,

but the District Court, in the exercise of its discretion,

declined to do so.

20. As noted in Petitioner’s main brief (Pet. Br. at 3 n.2), the District

Court specifica’, “eclined to interfere with Respondent’s pursuit of the

ITC proceeding (JA75, 85). In its Memorandum and Order dated March

8, 2000, granting summary judgment to Petitioner in “this action,” the

District Court observed that “the ITC must determine in its own right

whether the doctrine of collateral estoppel should apply to bar any of

the claims [then] pending before it.” 93 F. Supp. 2d at 1144 (JA97-98).

Nevertheless, Respondent elected not to pursue the ITC proceeding after

the District Court awarded summary judgment to Petitioner.

21. The ITC had and has no jurisdiction to award damages or to

issue the type of preliminary injunctive relief which Petitioner sought,

and was granted, against Respondent in January 2000 (JA84-86).

15

That Petitioner might have attached no commercial

significance to any threatened patent infringement claim by

Respondent,” or might have wished to ensure Tenth Circuit

jurisdiction over its suit for unfair competition and deceptive

trade practices, or might have had some other reason for

framing its well-pleaded complaint as it did, is simply

extraneous to the jurisdictional questions pending before this

Court. Under well-settled law, Petitioner was “master to

decide what law [it would] rely upon.” The Fair v. Kohler

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

does not cite or distinguish The Fair or other decisions

of this Court to the same effect, presumably because

Respondent cannot do so. Respondent’s apparent contention

that Petitioner was under some duty to plead a “patent

infringement claim” when it commenced this action in

December 1999 (Resp. Br. at 5) flies in the face of this Court’s

precedents. —

Equally specious is Respondent’s argument that in order

to “eliminate forum shopping by declaratory judgment

- plaintiffs” (Resp. Br. at 8, 20-21), the Federal Circuit must

be granted exclusive-appellate jurisdiction over any and every

type of case commenced in federal court to which a patent

law counterclaim is asserted. To begin, it is clear that the

Federal Circuit’s current approach to jurisdiction, in which

that court applies “its own” law to “trade dress” and other

22. Although not germane to the jurisdictional questions

pending before the Court, the record shows that on January 19, 2000,

Petitioner filed a reply in the District Court which characterized

Respondent's counterclaim as frivolous and asserted in bad faith for

the purpose of manipulating appellate jurisdiction (L149).

Respondent’s subsequent failure to pursue its purported counterclaim

in any forum, including the ITC, is consistent with Petitioner's

allegation. See also Powers Decl ¢ 12; Declaration of Francis E.

Marino, sworn to December 17, 1999, ¢ 23 (“allegations of patent

infringement can be evaluated much more readily, and with much

greater confidence, than can allegations of alleged infringement of

unregistered ‘trade dress’ rights in product configurations”).

16

non-patent claims, is a powerful inducement to forum

shopping and the stirring up of marginal patent litigation in

aid of such shopping.

It was not the well-pleaded complaint rule which

prompted this Respondent to attempt to mount a collateral

attack on the final judgment in Vornado J. It also was not the

well-pleaded complaint rule which prompted this Respondent

to run away from its “home court” of Wichita, Kansas and to

allege in a complaint to the ITC that a 1999 decision of the

Federal Circuit supposedly “trumps the Tenth Circuit in

Vornado [I|” (L8, L79). These actions by Respondent were

induced by the existing jurisdictional approach of the Federal

Circuit, which Respondent understandably (if short-

sightedly) seeks to perpetuate to suit its litigation preferences

in this particular case.

Respondent’s argument also overlooks that District

Courts have “unique and su’)stantial discretion in deciding

whether to declare the rights of litigants.” Wilton v. Seven

Falls Co., 515 U.S. 277, 286 (1995). This discretion is often

used to forestall “forum shopping” in intellectual property

cases. E.g., Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co.,

342 U.S. 180, 185-86 (1952) (affirming stay of declaratory

judgment action in favor of subsequently commenced

coercive action); Serca Serv. Co. v. Kelley Co., 51 F.3d 1037,

1039 (Fed. Cir. 1995) (same); Tempco Elec. Heater Corp. v.

Omega Eng’g, Inc., 819 F.2d 746, 749-50 (7th Cir. 1987)

(same).

The broad discretion which District Courts have

“in deciding whether to declare the rights of litigants,”

Wilton, 515 U.S. at 286, exposes the emptiness of

Respondent’s speculative hypothesis that faithful application

of the well-pleaded complaint rule to 28 U.S.C. §§ 1338(a)

and 1295(a)(1) would somehow create a specter of

“forum shopping by declaratory judgment plaintiffs”

17

(Resp. Br. at 8). Diverting to the Federal Circuit every

antitrust, copyright, “trade dress,” or other non-patent case

to which a patent counterclaim is asserted, plainly is not a

sensible or appropriate means of “eliminat[ing] forum

shopping by declaratory judgment plaintiffs” (Resp. Br.

at 8), even assuming there were some connection between

the well-pleaded complaint rule and Respondent’s unfounded

speculations in that regard.

A further defect in Respondent’s argument is it is unstated

assumption that defendants who are sued in federal court

will always prefer Federal Circuit to regional circuit

jurisdiction in cases brought under antitrust or other non-

patent laws, if the defense includes a patent counterclaim.

A defendant accused, for example, of imposing unreasonable

or per se unlawful restraints on a licensee’s use of a patented

invention, in alleged violation of federal antitrust law, might

well prefer that a regional circuit decide the merits of its

defense, even though the defense might include assertion

of a counterclaim for patent infringement. But under

Respondent’s argument, such a defendant cannot have access

to regional circuit jurisdiction except by omitting any patent

counterclaim from its defense of the plaintiff’s suit. And of

course, adoption of Respondent’s position would confer upon

defendants a unilateral power to cut off regional circuit

jurisdiction over a plaintiff’s non-patent suit (and evade its

substantive law), as was attempted below.

At bottom, it is apparent that Respondent’s arguments

for jettisoning the well-pleaded complaint rule are driven,

not by any justification grounded in history, congressional

intent, this Court’s precedents, or any actual threat to

the “uniformity” of federal patent law, but merely to

accommodate this particular Respondent’s desire, in this

particular case, to improve its chances of being permitted to

re-litigate a “trade dress” issue it previously litigated and

lost, based on a 1999 decision of the Federal Circuit which

this Court subsequently overruled.

18

CONCLUSION

The judgment of 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.

Marcia H. Sundeen

Carol M. Wilhelm

Pennie & Epmonps LLP

New York, New York

Of Counsel

March 12, 2002

Respectfully submitted,

James W. DABNEY

Counsel for Petitioner

1155 Avenue of the Americas

New York, New York 10036

(212) 790-9090

Paut Izzo

Trwotuy P. GALLOGLY

Tue Hoimes Group, INc.

Milford, Massachusetts

ARTHUR R. MILLER

1755 Massachusetts Avenue

Cambridge, Massachusetts