In Re Technology Licensing Corporation

Citations: 423 F.3d 1286; 76 U.S.P.Q. 2d (BNA) 1450; 2005 U.S. App. LEXIS 19574; 2005 WL 2179786Docket: 2005-M765

Court: Court of Appeals for the Federal Circuit; September 12, 2005; Federal Appellate Court

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Technology Licensing Corporation (TLC) initiated a lawsuit against Videotek, Inc. in the U.S. District Court for the Northern District of California, alleging patent infringement. Videotek subsequently filed a complaint against Gennum Corporation, its supplier, seeking indemnification. Gennum responded by filing a declaratory judgment action against TLC, contesting the validity and enforceability of TLC's patents and requesting a jury trial. TLC counterclaimed against Gennum for direct and contributory infringement.

A settlement between TLC and Videotek resulted in a consent decree that did not resolve Gennum's declaratory judgment action. Before the trial, Gennum moved to exclude TLC's damages measurement formula, leading the district court to issue an order that significantly limited TLC's potential damages. Consequently, TLC withdrew its claim for past damages and opted solely for injunctive relief against future infringement, prompting Gennum to withdraw its jury trial request. However, TLC maintained that it still had the right to a jury trial, arguing that the invalidation of a patent should entitle the patentee to a jury trial regardless of the relief sought.

The magistrate judge noted that a precedent case, Tegal Corp. v. Tokyo Electron America, Inc., established that no jury trial right exists when a patentee seeks only an injunction and the defendant raises patent invalidity as an affirmative defense. The judge acknowledged that this situation differs from Tegal, as Gennum had asserted invalidity as an independent claim. The key issue before the court was whether this distinction impacted TLC's right to a jury trial.

The magistrate judge's analysis followed prior court decisions establishing that the Seventh Amendment mandates a jury trial for actions analogous to common law suits at the time of its adoption. A two-part test is applied: first, comparing the action to similar actions in eighteenth-century England; second, examining the nature of the remedy sought, whether legal or equitable. The judge determined that once TLC retracted its claim for damages, the remaining claims were purely equitable. 

The first prong of the Tull analysis was deemed more complex, noting that patent infringement could historically be addressed in either legal or equitable actions, depending on the patentee's chosen remedy. A declaratory judgment of invalidity with a counterclaim of infringement was found to resemble an infringement action with an invalidity defense. Consequently, the court assessed whether TLC sought damages or only an injunction, which would dictate the trial method. Since TLC sought only equitable relief, the court ruled it would have been tried in equity, precluding a jury trial. 

TLC's petition for a writ of mandamus to compel a jury trial was considered, and while the court acknowledged the significance of protecting the right to a jury trial, it concurred with the magistrate judge's conclusion that TLC was not entitled to one. The court denied the mandamus petition, referencing a similar case where a plaintiff sought only an injunction.

Tegal's case illustrates that, historically, a party seeking only an injunction would have to pursue their case in a court of equity, which justifies the trial court's denial of a jury trial for both infringement and validity. This case diverges from Tegal in two notable ways: the accused infringer asserts invalidity as a separate claim rather than an affirmative defense, and the parties' roles are reversed, with the accused infringer as the third-party plaintiff and the patentee as the third-party defendant and counterclaimant. The alignment of parties is deemed inconsequential for jury trial rights, as established in Lockwood, where the court clarified that the distinction affecting jury trial rights is whether invalidity is raised as a separate claim.

TLC contends that a patentee has a right to a jury trial in any declaratory judgment action regarding patent validity, regardless of whether damages are pursued in a related infringement action. However, the Lockwood case does not support such a broad interpretation. It indicates that a declaratory judgment for patent invalidity cannot be brought at common law, and a patent infringement action with a counterclaim for invalidity resembles a suit for infringement where invalidity is an affirmative defense. The right to a jury trial hinges on the patentee's choice of remedy; if seeking damages, the case would proceed at law with jury involvement, while a suit seeking only an injunction would occur in equity, typically resulting in a bench trial for invalidity. The Lockwood court emphasized that it was ultimately the patentee who determined the venue for a jury trial on factual validity issues, and in that case, the patentee had not limited himself to equitable remedies.

The patentee retains the right to a jury trial on a counterclaim when seeking damages; however, in this case, the patentee has voluntarily abandoned its damages claim and is only seeking equitable relief in the form of an injunction. This transforms the situation into an inverted infringement action, which typically would be adjudicated in equity court, where neither party is entitled to a jury trial. The magistrate judge concluded that TLC's exclusive request for an injunction resulted in the loss of its jury trial right concerning invalidity claims. TLC argued that the historical writ of scire facias, which was triable to a jury, should similarly apply to modern patent invalidity claims. However, the Lockwood case rejected this analogy, emphasizing that a writ of scire facias relates more closely to inequitable conduct than patent invalidity. Consequently, Lockwood does not support TLC’s claim for a jury trial, clarifying that (1) a patentee maintains a right to a jury trial if seeking damages in an infringement action, and (2) an accused infringer is entitled to a jury trial only if the patentee's infringement claim would typically warrant one. Thus, if the patentee seeks only equitable relief, the accused infringer has no right to a jury trial, regardless of whether invalidity is raised as a defense or counterclaim. Applying the Lockwood and Tegal analyses, if TLC had pursued a standard infringement action seeking only an injunction, neither party would have been entitled to a jury trial. Consequently, in the present inverted lawsuit, Gennum as the plaintiff and TLC as the defendant have no right to a jury trial given TLC's choice of equitable relief. This indicates that parties can generally control their jury trial rights based on their claims for relief, suggesting that TLC's situation is unlikely to arise frequently in standard infringement cases.

Few precedents directly address the current case, but one relevant appellate decision is Shubin v. United States Dist. Court, which concluded that a patentee's choice to seek only equitable relief means the entire case, including invalidity claims, is triable to the court rather than a jury. The Lockwood case distinguished Shubin by noting that the patentee had limited their infringement counterclaim to an injunction, stipulating no claim for damages, reinforcing the principle that if a patentee abandons damage claims, related invalidity claims are bench-triable. Several district courts have similarly supported this conclusion. The magistrate judge’s analysis of relevant Supreme Court and appellate opinions regarding the jury trial scope was upheld, leading to the denial of a petition for a writ of mandamus.

In dissent, Circuit Judge Newman argued that Gennum Corporation's request for a jury trial on both infringement and validity claims should be granted, asserting that the Seventh Amendment guarantees this right regardless of TLC's waiver of damages for infringement. Newman emphasized that the waiver does not eliminate all legal issues that necessitate a jury trial, highlighting that the right to a jury for invalidity claims remains intact. He referenced the historical context of the Seventh Amendment, asserting that it preserves the right to a jury in cases where legal rights are at stake, in contrast to cases limited to equitable rights.

The trial court is required to respect a jury demand in cases involving the adjudication of legal rights, regardless of any equitable issues present, as established in Dairy Queen Inc. v. Wood and further explained in Ross v. Bernhard. The Seventh Amendment ensures the right to a jury based on the nature of the issues to be tried, maintaining this right even when the overall action may appear equitable. Patent validity litigation is classified as a legal action distinct from patent infringement claims, a distinction emphasized in Cardinal Chem. Co. v. Morton International. The historical context shows that patent validity actions were traditionally tried by jury in Eighteenth Century England, where actions to cancel patents were addressed through the common law writ of scire facias. This legal process was affirmed by notable cases and historical legal texts, indicating that scire facias for invalidating patents was a legal, not equitable, action. In the U.S., early jurisprudence also recognized the right to jury trials for patent validity issues, as seen in Ex parte Wood, which supported the notion that factual issues warrant a jury trial while legal issues are reserved for the court.

Jury trials have historically played a significant role in patent litigation, particularly concerning issues of infringement and validity. Key cases illustrate this principle:

1. **Shaw v. Cooper (1833)** and **Gaylor v. Wilder (1850)** demonstrate that both infringement and validity issues were consistently tried before a jury.
2. **Hotchkiss v. Greenwood (1850)** confirms the appropriateness of submitting questions regarding patent improvements to the jury.
3. In **Batten v. Taggert (1854)**, the court emphasized that directing a verdict on validity was erroneous, asserting that juries should assess the novelty of inventions.
4. **Godfrey v. Eames (1863)** reiterated this by ruling it was incorrect for a judge to direct a verdict on validity without jury input.
5. **Bischoff v. Wethered (1869)** upheld that issues of patent invalidity should be determined by a jury, supporting proper jury directions on validity.
6. **Klein v. Russell (1873)** affirmed the jury's role in assessing both infringement and utility validity.
7. **Adams v. Bellaire Stamping Co. (1891)** involved juries evaluating obviousness in patent claims.
8. **Root v. Railway Co. (1881)** clarified that legal defenses in equitable infringement suits do not necessitate separate legal actions.
9. **United States v. American Bell Telephone Co. (1888)** established that invalidity claims, even by the government, must be brought in a court of law, although fraudulently obtained patents can be contested in equity.
10. By the time of **Dairy Queen**, it was clear that equitable issues do not negate the right to a jury trial in patent cases.

Overall, these cases underscore the consistent judicial practice of allowing juries to decide on matters of both infringement and validity, reflecting a long-standing commitment to jury trials in patent law, regardless of the remedy sought.

The issue involves the validity of Woodworth's patent, with pleadings structured to address all relevant facts. The court references several cases where juries determined issues of infringement and validity, underscoring that questions of utility and inventive skill are also for the jury to decide based on evidence presented. A patent is deemed invalid if the invention has been publicly used or sold with the inventor's consent more than two years prior to application. Historical precedent demonstrates that patent validity has consistently been a jury issue, reflecting the constitutional right to a jury trial as enshrined in the Seventh Amendment. The right to jury trials in civil cases is fundamental and must be preserved, with courts carefully scrutinizing any limitations on this right, particularly when both legal and equitable claims are present.

In Beacon Theatres, the Court granted mandamus to uphold the jury right in a case where Fox West Coast Theatres sought a declaration of non-violation of antitrust laws against Beacon Theatres, which counterclaimed for antitrust violations. The Court criticized the trial court's discretionary decision to deny Beacon a jury trial on its counterclaims and Fox’s request for declaratory relief. In Tull, the Court affirmed that the jury right extends to statutory actions resembling common law suits and rejected the notion that both the cause of action and remedy must be legal for the Seventh Amendment right to apply. The excerpt asserts that when a complaint involves patent invalidity, the right to a jury trial is preserved, countering the Federal Circuit's ruling in Tegal, where a patentee sought no damages and was denied a jury trial on invalidity. It emphasizes that Gennum's case, where invalidity was the central complaint, should not be denied a jury right based on Tegal. The majority's reliance on vacated decisions and district court interpretations that limit jury rights in declaratory actions is criticized, asserting that such interpretations contradict established principles of Seventh Amendment jurisprudence. The historical context of the jury right is emphasized, arguing it cannot be easily dismissed based on questionable precedents. The conclusion is that deprivation of jury rights in cases of declared invalidity violates constitutional protections and established legal precedent.