Federal Circuit Jurisdiction over Permissive Counterclaims elevating Patent Points

by Dennis Crouch

The legislation of appellate jurisdiction routes nearly each patent attraction to the Courtroom of Appeals for the Federal Circuit.  This result’s by design to make sure extra nationwide uniformity in utility of the U.S. patent legal guidelines.  The court docket’s current resolution in Teradata Corp. v. SAP SE, 22-1286 (Fed. Cir. Aug. 1, 2023) gives an exception to the final rule.  In its resolution, the Federal Circuit held it lacked jurisdiction over Teradata’s attraction as a result of the patent infringement allegations solely been raised in a permissive counterclaim.  Though the counterclaims might need been obligatory if in contrast in opposition to Teradata’s authentic criticism, throughout the litigation Teradata narrowed its claims in a method that brought on separation from the counterclaims.

After a short partnership pursued below an NDA, SAP started providing a product much like that of Teradata.  Teradata then sued for commerce secret misappropriation and antitrust violations.  SAP responded with denials and likewise added patent infringement counterclaims.

Counterclaims: The Federal Guidelines of Civil Process allow a defendant to file counterclaims in opposition to the plaintiff. The foundations divide the counterclaims roughly into two classes: obligatory and permissive.  Though nobody truly forces defendant to any counterclaims, failure to claim the obligatory counterclaims is seen as a forfeiture of these claims.  Permissive counterclaims will not be misplaced and as an alternative may be raised in a separate, subsequent lawsuit (as long as a statute of limitations has not run, and many others.). The foundations spell out the next check for obligatory counterclaims:

(A) arises out of the transaction or prevalence that’s the subject material of the opposing occasion’s declare; and (B) doesn’t require including one other occasion over whom the court docket can’t purchase jurisdiction.

FRCP 13(a).   Obligatory Counterclaims are vital for Federal Circuit jurisdiction as a result of the court docket’s jurisdictional statute routes instances to the Federal Circuit if both (1) the plaintiff asserts a clam that arises below the US patent legal guidelines; or (2) a celebration asserts a obligatory counterclaim that arises below the US patent legal guidelines.  Observe right here the hole — The Federal Circuit doesn’t get jurisdiction if solely patent declare is filed as a permissive counterclaim (or a crossclaim or third-party declare).  A last quirk of the appellate jurisdiction is that the jurisdiction statute applies even when non-patent points are the one ones being appealed.

In Teradata, the district court docket initially declined to sever SAP’s patent, discovering they arose from the identical transaction or prevalence as Teradata’s claims.  Ultimately although the district court docket entered abstract judgment on the antitrust and sure “technical” commerce secret claims in SAP’s favor.  The court docket then entered partial last judgment below Rule 54(b) on these claims whereas staying remaining “enterprise” commerce secrets and techniques declare and the patent counterclaims.  R.54(b) partial last judgment is designed to sever facets of the case and permit these to be instantly appealed.

Teradata appealed the antitrust and commerce secret losses to the Federal Circuit. The court docket has rejected the attraction, holding that it lacks jurisdiction over Teradata’s attraction as a result of SAP’s patent infringement counterclaims weren’t obligatory.  Quite, holding the attraction must be heard by the suitable regional circuit court docket of appeals. For this case that’s the ninth Circuit as a result of the decrease court docket is situated in Northern California.

The Federal Circuit applies three checks in analyzing the identical transaction check quoted above from R.13: (1) whether or not the authorized and factual points are largely the identical; (2) whether or not considerably the identical proof helps or refutes the claims; and (3) whether or not there’s a logical relationship between the claims.  On this evaluation, the court docket appears to be like to the complaints and counterclaims as filed. As well as, the Federal Circuit treats claims dismissed with out prejudice as having by no means been filed.  Chamberlain Group, Inc. v. Skylink Applied sciences, Inc., 381 F.3d 1178, 1189 (Fed. Cir. 2004)

In its preliminary criticism Teradata had asserted a variety of commerce secret claims that will arguably overlap with the asserted patents.  Nevertheless, the corporate narrowed the scope of its claims through amended criticism and later stipulated dismissal with out prejudice.  On attraction, the Federal Circuit concluded that these actions narrowed the operative declare to solely what was lastly asserted by Teradata.  Within the case, this was significantly the “batched merge” performance.  However, the patents asserted by SAP deal with a special expertise and completely different merchandise than batched merge.  This weighed closely within the Federal Circuit’s evaluation, distinguishing this case from prior obligatory counterclaim precedents.  The court docket famous that the authorized and factual points, in addition to the proof required, will not be largely the identical or considerably comparable between Teradata’s narrowed commerce secret claims and SAP’s patent counterclaims.  In consequence, there’s not a ample logical relationship between the narrowed commerce secret claims and the patent counterclaims to make the latter obligatory.

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On the district court docket, Teradata was in search of to have the patent claims severed for a separate trial and, at the moment, SAP offered proof it claimed “demonstrates the substantial overlap between Teradata’s alleged commerce secrets and techniques and SAP’s asserted patents.”  This assertion on the file apparently occurred after the narrowing of the commerce secrets and techniques claims.  On attraction the edges had been reversed.  Particularly, SAP stepped again from the argument as a result of it most well-liked to have the ninth Circuit determine the case fairly than the Federal Circuit.  When questioned about its prior statements, SAP responded that estoppel can’t be used to shift a court docket’s jurisdictional necessities.

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A wierd side of the case has to do with the commerce secret claims that had been dropped throughout litigation.  There doesn’t seem like an specific assertion within the file that they had been dropped “with out prejudice.” And, even when they had been dropped with out prejudice, res judicata doubtless nonetheless applies to dam these commerce secrecy claims from being raised in a subsequent lawsuit.  Res judicata would apply as a result of they’re clearly a part of the identical transaction-or-occurrence of the opposite commerce secrecy claims that had been litigated.  Throughout oral arguments, Decide Taranto requested an astute query of SAP’s legal professionals in search of an admission that Teradata would have a proper to relitigate these claims.  SAP’s legal professionals refused to make that admission.  The opinion itself presents nothing right here and seems to easily assume that the dismissals had been with out prejudice.

Not an ideal triangle: Despite the fact that the dropped commerce secret claims doubtless relate to the identical transaction or prevalence because the remaining “batched merge” commerce secret claims; AND the dropped commerce secret claims doubtless relate to the identical transaction or prevalence as SAP’s patent counterclaims; It does NOT essentially observe that the remaining “batched merge” commerce secret claims come up from the identical transaction or prevalence because the patent counterclaims. The connection between the claims will not be transitive – every comparability have to be made straight based mostly on the weather and info required to show every declare.

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The underlying attraction is fascinating and pertains to per se antitrust violations and market evaluation.