Lead Opinion
Oрinion for the court filed by Circuit Judge CLEVENGER. Concurring opinion filed by Circuit Judge O’MALLEY.
Landmark Screens, LLC (“Landmark”) appeals from the final decision of the United States District Court for the Northern District of California dismissing its state law fraud claim against Morgan, Lewis & Bockius (“MLB”) and Thomas D. Kohler (“Kohler”). Landmark Screens, LLC v. Morgan Lewis & Bockius, LLP, No. 5:08-cv-02581,
I
This case concerns Landmark’s invention of a light-emitting diode (“LED”) electronic billboard. According to Landmark, the billboard’s large size, high-quality images, and brilliance make it particularly effective for display advertising, and the ability to provide content in digital format reduces costs and time-to-market for ad
On January 9, 2002, Kohler filed U.S. Patent Application No. 10/045,096 (“the '096 application”) on Landmark’s behalf. The '096 application included 72 claims covering different aspects of Landmark’s LED invention. In May 2003, the United States Patent and Trademark Office (“PTO”) informed Kohler that, in its view, Landmark’s application contained multiple inventions. The PTO then asked Landmark to restrict the '096 application to one of the following four inventions: (1) claims 26-31 and 56-72, “drawn to an led [sic] having a threshold operator,” (2) claims 32-39, “drawn to calibrating a display and mapping the digital image,” (3) claims 40-55, “drawn to detecting absencе of a second image and inputting a default image,” and (4) claims 1-25, “drawn to selecting a color gamut.” On May 5, 2003, Kohler elected to pursue claims 26-31 and 56-72 and withdrew the remaining claims. It appears undisputed that both Kohler and Landmark intended that the withdrawn claims would be timely pursued via one or more divisional applications, which would presumably benefit from the '096 application’s filing date. However, that is not how the story unfolded.
Shortly after this, on July 10, 2003, the PTO published the '096 application. As discussed below, this publication would later create serious problems for Kohler and Landmark due to the printed publication rule of 35 U.S.C. § 102(b).
On August 13, 2003, Kohler submitted a divisional application to the PTO, and it wаs assigned Application No. 10/640,916 (“the '916 divisional application”). However, in filing the '916 divisional application, Kohler made two mistakes that left the application incomplete: (1) he failed to include copies of required drawings and specifications, and (2) his transmittal letter failed to incorporate by reference materials filed earlier with the original '096 application. Kohler also did not use the PTO’s “postcard receipt” method, which would have enabled prompt notification when the PTO noticed deficiencies in the application.
It was not until June 22, 2004, that the PTO issued a Notice of Incomplete Non-provisional Application, stating that the '916 divisional application was missing the required specification and therefore had not yet been granted a filing date. By this time, Kohler had left Pennie and was practicing law at MLB, with Landmark as a client of the firm. Neither Kohler nor any other MLB attorney took action for several weeks, and the one-year anniversary of the '096 application’s publication passed on July 10, 2004. As a result, Landmark’s own '096 application became prior art against the '916 divisional application under 35 U.S.C. § 102(b). Unless the PTO could be convinced to give the '916 divisional application the benefit of an earlier filing date, all claims in the '916 divisional application would be lost.
In mid-July 2004, Kоhler discussed the matter with his partners at MLB and the attorneys representing Pennie, but none of these attorneys apprised Landmark of the situation. On August 23, 2004, Kohler filed the papers necessary to complete the '916 divisional application, along with a petition to grant it the original filing date of August 13, 2003. The PTO dismissed the petition for “failure to exercise due care, or lack of knowledge of, or failure to properly apply, the patent statutes or rules of practice” and granted the '916 divisional application a filing date of August 23, 2004, i.e., the date on which Kohler finally corrected the application.
On November 30, 2005, Landmark filed suit against Kohler, Pennie, and MLB in the Superior Court for Santa Clara, California, alleging legal malpractice, negligence, and breach of fiduciary duty. In March 2008, Landmark reached a settlement with Pennie and a partial settlement with Kohler, concerning his actions while he was a Pennie lawyer, and the California state court dismissed Landmark’s claims against them. On April 28, 2008, MLB and Kohler filed a demurrer and asked the court to dismiss the suit against them.
On May 21, 2008, the California state court dismissed Landmark’s claims against MLB and Kohler as a MLB lawyer for lack of subject matter jurisdiction. Citing Immunocept, LLC v. Fulbright & Jaworski, LLP,
The same day that the California state court dismissed the action, Landmark filed a complaint in the United States District Court for the Northern District of California, making the same claims as in the state court action and adding a cause of action for breach of contract arising out of the same facts. On June 11, 2008, Landmark filed an amended complaint that included all previous claims and added a claim for actual fraud. Over the next two years the district court dismissed all of Landmark’s claims except its fraud claim as barred by California’s one-yеar statute of limitations governing any action for legal malpractice. Landmark does not appeal these rulings.
As to the fraud claim, the parties continued to litigate. Under California law, the elements of fraud are: “(1) a misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.” Robinson Helicopter Co., Inc. v. Dana Corp.,
On February 7, 2011, the district court granted summary judgment to the defendants. Dismissal Order at 9. The court ruled that Landmark had notice of its fraud claim more than three years before filing its federal lawsuit, and that the claim was therefore barred by the statute of limitations. Cal.Civ.Proc.Code § 388(d) (West 2011). Landmark timely appealed both summary judgment orders. Because the Dismissal Order encompasses the Damages Order, we turn to the Dismissal Order first.
II
We must first determine if we have jurisdiction over this appeal. Pursuant to 28 U.S.C. § 1295(a)(1), we have exclusive jurisdiction over an appeal from a final district court decision if the court’s jurisdiction was based at least in part on 28 U.S.C. § 1338(a), which states that federal district courts have exclusive jurisdiction over actions “arising under any Act of Congress relating to patents.” Here, it appears that the district court based its jurisdiction on 28 U.S.C. § 1338(a).
In Christianson v. Colt Industries Operating Corp.,
In making this determination, we are limited to an analysis of Landmark’s well-pleaded complaint. See Caterpillar, Inc. v. Williams,
The exercise of jurisdiction here is consistent with this court’s decision in Davis v. Brouse McDowell, L.P.A., 596 F.3d
The same analysis pertains to Landmark’s fraud claim. In order for Landmark to prevail on its claim for damages arising from the alleged fraud, under California law Landmark would have had to prevail on its “case within a case” and prove that but for the alleged fraud it would have obtained patent rights for its invention. As in Davis, the patentability of Landmark’s invention invokes patent law sufficiently to sustain district court jurisdiction under 28 U.S.C. § 1338(a). Furthermore, at a minimum, the district court had supplemental jurisdiction over the fraud claim pursuant to 28 U.S.C. § 1367(a).
Ill
This court “reviews the district court’s grant or denial of summary judgment under the law of the regional circuit.” Bd. of Trs. of Leland Stanford Junior Univ. v. Roche Molecular Sys.,
Additionally, this court “ ‘defers to the law of the regional circuits on matters of procedural law that do not implicate issues of patent law,’ ” such as statute of limitations rulings. Roche,
IV
Landmark’s fraud claim is governed by the three-year statute of limitations period set forth in California Code of Civil Procedure § 338(d), which states that a fraud claim “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” Since Landmark filed the instant action on May 21, 2008, the district court considered whether Landmark had actual or inquiry notice of the facts giving rise to its fraud claim prior to May 21, 2005. Dismissal Order at 8. The district court found that Landmark had actual or inquiry notice of its fraud claim in late March 2005, when Kohler sent Landmark a letter stating that there had been an error with the '916 divisional application and that all of the claims wеre potentially lost. Id.
Landmark sought relief from the statute of limitations by way of two equitable doctrines: equitable estoppel and equitable tolling. Landmark’s estoppel theory focused on the conduct of Kohler and MLB after the mistakes in prosecution of the '916 divisional application came to light, when Landmark’s counsel gave assurances that its mistakes could be cured. According to Landmark, those assurances led it to rely on counsel to the detriment of timely pursuit of legal remedies against counsel. Thus, Landmark argued that the defendants should be equitably estopped from invoking the statute of limitations. The district court rejected Landmark’s estoppel theory but did not address Landmark’s equitable tolling argument, which was based on the California equitable tolling law discussed in the following paragraph.
California law “favors avoiding forfeitures and allowing good faith litigants their day in court.” Addison v. State,
In Daviton, the Ninth Circuit provided an extensive review of California’s equitable tolling law. It concluded that the principal goal of statutes of limitations is to prevent the assertion of stale claims, and equitable tolling is a general policy to preserve claims when a party “possessing several legal remedies ... reasonably and in good faith pursues one designed to lessen the extent of his injuries or damage.”
California law also recognizes limits on its otherwise somewhat generous inclination to permit equitable tolling to excuse failure to meet a statute of limitations: “[t]hough equity will toll the statute of limitations while a plaintiff, who possesses different legal remedies for the same harm, reasonably and in good faith pursues one, it will not toll the statute while a plaintiff who has allegedly suffered several different wrongs, pursues only one remedy as to one of those wrongs.” Aerojet Gen. Corp. v. Superior Court,
Our conclusion is mandated by the factors laid out in Daviton. As to the first Daviton factor, Landmark gave timely notice to MLB and Kohler by filing the state court lawsuit in November 2005, less than a year after Kohler first mentioned any problem with the '916 divisional application in late December 2004 and well within the statutes of limitation for malpractice (one year) and fraud (three years). The facts alleged in the state court complaint included the allegations of deception by the defendants about the nature of the defendants’ conduct and adequately provided notice to MLB and Kohler of the claims brought in the federal action. As to the second Daviton factor, the appellees have suffered no prejudice in their ability to gather evidence and prepare a defense since they were on notice of all key facts underlying Landmark’s claims from the start of the state court action. As to the third Daviton factor, Landmark acted reasonably and in good faith in filing the federal lawsuit after the state court dismissed its claims for lack of subject matter jurisdiction. At the time that Landmark filed the state court suit, there was ambiguity as to whether the suit belonged in statе or federal court, as this court had not yet decided Immunocept,
In their brief to this court, the defendants do not challenge that Landmark satisfies the three-part test stated in Daviton. Instead, they argue that Aerojet defeats Landmark’s claim to equitable tolling. We
Since we hold that the district court should have equitably tolled the statute of limitations on Landmark’s fraud claim during the time the case was pending in the state courts, we need not decide whether the district court abused its discretion in denying Landmark’s request for the application of equitable estoppel.
V
We now turn to Landmark’s appeal from the Damages Order. Some background information concerning the Damages Order, which was not germane to decision of the equitable tolling claim, should be stated.
Although Kohler and MLB did not prosecute the '916 divisional application in a timely manner, they did prosecute the '096 application, which was limited to elected claims 26-31 and 56-72. On October 28, 2003, Landmark was awarded U.S. Patent No. 6,639,574 (the “'574 patent”) on the elected claims. Landmark not surprisingly turned to new patent counsel in October 2005 for an assessment of what could be done to rectify the harm done to the non-elected claims that had been included in the ill-fated '916 divisional application. New patent counsel determined that Landmark could seek reissue of the '574 patent under 35 U.S.C. § 251, to broaden the issued claims on the ground that due to error without deceptive intent, the patentee in the elected claims of the '096 application had claimed less than his right to claim. On November 10, 2009, Landmark was granted reissue patent number RE40,953 (“the RE '953 patent”), which includes the 23 elected claims that issued as the '574 patent and nеw claims 24-66.
Our precedent provides that the reissue statute may not be used to grant patent protection for substantially identical claims that were not properly prosecuted in divisional applications. See In re Orita,
The district court ruled in the Damages Order that Landmark’s reissue application did not present substantially identical claims to claims of the failed '916 divisional
The district court compared the claim language of reissue claims 43 and 58 and their counterparts, claims 1 and 42 of the '916 divisional application. Because each of claims 1 and 42 contained limitations not present in claims 43 and 58, the district court concluded that the broader reissue claim necessarily caрtured the entirety of the corresponding divisional claims. However, in its general analysis of the scope of the corresponding claims, the district court overlooked the fact that reissue claims 43 and 58 are in some respects actually narrower than their corresponding divisional claims.
For example, while claim 1 of the '916 divisional application imposes no express selection criteria to be used in the “selecting a color gamut” step and instead merely defines the desired result, claim 43 of the RE '953 patent expressly imposes two selection criteria, ie., the selecting must be carried out “according to the specified col- оr and an operating characteristic.” Similarly, the “selecting” step in claim 42 of the '916 divisional application selects “the col- or gamut containing said specified color,” but the “selecting” step in claim 58 of the RE '953 patent selects “the color gamut for each pixel.” The district court failed to appreciate that while the pertinent reissue claims may be broader in some respects than their corresponding divisional claims, the reissue claims at the same time are in other respects narrower. Because the district court did not reconcile these opposing scopes, its conclusion that the reissue claims necessarily encompass the divisional claims is incorrect. The respective claims recite different manners of carrying out their respective “selecting” steps. The district court erred by simply concluding that the '916 divisional application’s claims contain limitations not present in the RE '953 patent’s claims and by failing to analyze these differences in language that may affect the scope of these claims.
Because the underpinning of the district court’s Damages Order is flawed, it was error to hold that Landmark could suffer no harm after the issuance of the RE '953 patent regarding reissue claims 43 and 58 and their corresponding dependent claims. We therefore vacate the Damages Order.
VI
For the reasons stated above, the judgment of the district court that Landmark’s fraud claim is time-barred is reversed, and its judgment restricting Landmark’s legally-cognizable harm since issuance of the RE '953 patent is vacated. The case is remanded for further proceedings consistent with this opinion.
RE VERSED-IN-PART, VACATED-IN-PART, AND REMANDED
Costs
Each party shall bear its own costs.
Concurrence Opinion
concurring.
I concur in full in parts I, III, and IV of the majority opinion. I also concur in the result in part V, but not in the entirety of its reasoning. Finally, while I must concur in the result in part II, I write separately because I believe the case law upon which part II is premised should be reconsidered by the Court en banc.
I.
I will not repeat or further comment on the careful analysis in parts I, III, and IV of the majority opinion. I simply note my agreement with them.
II.
I agree with the conclusion in part V that the Damages Order must be vacated. I also agrеe that one of the reasons that order must be vacated is that the trial court erred in concluding that the reissue claims necessarily encompass the full scope of the claims in the '916 divisional application. There are, however, additional reasons why the Damages Order must be vacated.
First, to the extent the Damages Order capped the damages Landmark could seek at trial, the in limine ruling was wrong even if the trial court’s analysis of the scope of the reissue claims was correct. Given the less-than-linear process that ultimately led to issuance of the '953 reissue patent and governing law that prohibits applicants from using the reissue statute to recapture claims previously lost in improperly prosecuted divisional applications, the claims in the '953 reissue patent remain subject to a validity challenge if and when Landmark attempts to enforce them in an infringement action. To the extent that threat diminishes the value of the '953 reissue patent to Landmark and Landmark can proffer credible, persuasive and admissible evidence to that effect, reasonable jurors could predicate a damages award in favor of Landmark on such evidence.
The Damages Order also must be vacated for a more fundamental reason. The trial judge assumed that the motion in limine which gave rise to the Damages Order was a motion which presented a pure question of law, put to him to answer rather than to the trier of fact. That assumption was understandable since, in a patent infringement action, claim scope is an issue for the trial judge alone. See, e.g., Cybor Corp. v. FAS Techs. Inc.,
This is a fraud action, governed by state law, not patent law or patent practice. It is an action, moreover, where any ruling on the scope of the claims in the '953 or the '916 divisional application will have no bearing or substantive effect on the actual scope of those claims. The question of claim scope impacts only the questions of causation and the type of recoverable damages Landmark can claim. As such, they are questions for the trier of fact, not the trial judge.
While a trial judge always may conclude that no reasonable trier of fact could reach a different conclusion than he on questions presented in a motion in limine, that is not what the trial judge did here. Not once did he address what a reasonable juror might or might not conclude on the facts presented. Instead, apparently with the parties’ blessings, he treated the issue as he would be required to do in a patent infringement trial. That was error—understandable error—but error nonetheless.
III.
I now turn to part II of the opinion, where the jurisdictional predicate for our
Turning to the particular facts of this case, the mischief our case law in this area has caused is apparent. The malpractice action arising from the facts the majority details was filed in California state court in 2005. JAI139-49. At that point, it was commonly understood that state law malpractice claims arising out of legal representation involving federal matters—including рatent matters—-were properly lodged in state courts and, absent diversity among the parties, only state courts. See, e.g., Adamasu v. Gifford, Krass, Groh, Sprinkle, Anderson & Citkowski, P.C.,
In 2007, two years after the action was filed in state court, this court affected a sea change by announcing its assertion of jurisdiction over these types of state law claims. See Air Measurement Techs., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P.,
California has no savings statute, however, and, by statute, prohibits application of equitable tolling principles to malpractice claims, causing Landmark’s malpractice claim to be lost forever. Landmark Screens, LLC v. Morgan, Lewis & Bockius LLP,
For all the reasons articulated in my dissent from the denial of rehearing en banc in Byrne and because, as in this case, our case law in this area treads unduly into matters which are—and should remain— governed by state law, I encourage our court to address the scope of our jurisdiction in these mattеrs en banc.
Notes
. See also IMT, Inc. v. Haynes & Boone, L.L.P.,