Hopkins Manufacturing Corp. v. Cequent Performance Products, Inc.

Citations: 223 F. Supp. 3d 1194; 2016 U.S. Dist. LEXIS 171620; 2016 WL 7188281Docket: Case No. 14-2208-JAR

Court: District Court, D. Kansas; December 11, 2016; Federal District Court

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Plaintiff Hopkins Manufacturing Corporation initiated a patent infringement lawsuit regarding U.S. Patent No. 6,837,551. On February 10, 2015, the court stayed the case pending inter partes review by the USPTO. The current matter involves Defendant Cequent Performance Products, Inc.'s motions for summary judgment and to lift the stay, both of which have been granted by the court.

The legal standard for summary judgment allows it if the moving party shows no genuine dispute exists regarding any material fact, thus entitling them to judgment as a matter of law. The court views evidence in the light most favorable to the nonmoving party. A material fact is one essential to the claim's proper disposition, while a genuine issue exists if a reasonable jury could rule for the nonmoving party. The initial burden lies with the moving party to demonstrate the absence of genuine issues of material fact. If successful, the burden then shifts to the nonmoving party to present specific facts that indicate a genuine issue for trial, which must be supported by admissible evidence, such as affidavits or deposition transcripts. Summary judgment is not merely a procedural shortcut; it serves to ensure a just and efficient resolution of cases, and parties cannot rely on speculation or unsupported allegations to avoid it.

Hopkins initiated a lawsuit against Cequent alleging infringement of U.S. Patent No. 6,837,551. On January 23, 2015, Cequent filed a petition for Inter Partes Review (IPR) with the USPTO concerning eight claims of the patent, which was granted on August 17, 2015. Following this, on December 7, 2015, Hopkins requested an adverse judgment in the IPR proceedings, acknowledging that this would result in the cancellation of the contested claims. The USPTO granted this request on December 11, 2015, leading to the cancellation of claims 1-8 of the patent.

Subsequently, Cequent sent Hopkins a draft motion for consent judgment on February 10, 2016, seeking agreement on the language. After follow-up correspondence, Hopkins provided a redlined version of a proposed stipulation for dismissal on February 18, 2016, indicating it did not believe a consent judgment was necessary and included language acknowledging Cequent as the prevailing party. Cequent did not respond to this proposal prior to filing its Motion to Lift the Stay and Motion for Summary Judgment on February 24, 2016.

The central issue in the motion for summary judgment is whether Cequent can be considered the prevailing party for the purpose of seeking attorney's fees under 35 U.S.C. § 285. Both parties agree that the merits of the infringement case were settled with the adverse judgment at the USPTO. Cequent argues that a final judgment on the merits is needed to establish its status as the prevailing party, while Hopkins contends that a stipulation of dismissal under Fed. R. Civ. P. 41(a)(1)(A)(ii) suffices. Hopkins presents three arguments against the summary judgment: the cancellation of claims mooted the case, case law does not necessitate a judgment on the merits for attorney's fees, and a stipulated dismissal is adequate for Cequent to be deemed the prevailing party.

Mootness is examined in relation to the case's potential for summary judgment and the lifting of a stay due to the USPTO's cancellation of patent claims. Article III of the Constitution limits federal court jurisdiction to actual 'Cases' and 'Controversies,' requiring that plaintiffs demonstrate a personal stake in the outcome to establish standing. Mootness ensures that a case remains viable until a court renders a decision. A case is deemed moot only when no effective relief can be granted to the prevailing party. 

The Court emphasizes that the Plaintiff has not provided authority to support the claim that the case becomes moot upon USPTO claim cancellation. While the Plaintiff references Cartner v. Alamo Group, Inc. to argue that a live controversy existed there despite a consent judgment, the Court distinguishes this case by asserting that the question of who is the prevailing party remains a live issue despite the cancellation. 

Citing precedents like Inland Steel Co. v. LTV Steel Co. and Credit Card Fraud Control Corp. v. Maxmind, Inc., the Court notes that both cases proceeded to judgment after patent cancellations without raising mootness. Therefore, the Court concludes that this case is not moot and may continue to a judgment despite the USPTO's cancellation of claims.

Determining whether the Defendant qualifies as the prevailing party hinges on the entry of judgment, which is essential for seeking attorney's fees under Section 285 of the Patent Act. An adverse judgment from the USPTO does not resolve the case in this Court, affirming that the case is not moot. The key issue is whether a stipulation of dismissal under Rule 41(a)(1)(A)(ii) or a final judgment on the merits is necessary for Cequent to obtain prevailing party status under Section 285. The Supreme Court mandates that fee-shifting statutes, like Section 285, require judicial relief on the merits for an award of attorney's fees. This means that a defendant's voluntary changes in conduct do not suffice for prevailing party status unless there is a judicially sanctioned alteration in the parties' legal relationships. 

The Federal Circuit applies these standards but has not clarified if voluntary dismissal under Rule 41(a)(1)(A)(ii) grants prevailing party status. Rule 41(a)(1)(A)(ii) allows a plaintiff to dismiss an action without a court order by stipulation from all appearing parties, resulting in a dismissal without prejudice unless otherwise stated. The Federal Circuit has determined that such dismissals do not confer prevailing party status due to their non-judicial nature. Conversely, dismissals with prejudice under Rule 41(a)(2), which require judicial approval and impose potential conditions, do confer prevailing party status as they carry the necessary judicial imprimatur. The Court concurs that a dismissal under Rule 41(a)(1)(A)(ii) does not satisfy the requirements established by the Supreme Court in Buckhannon for prevailing party status.

Rule 41(a)(1)(A)(ii) allows for a dismissal without prejudice unless explicitly stated otherwise, meaning it does not alter the legal relationship between the parties. A plaintiff's voluntary dismissal under this rule does not require a court order and is not judicially sanctioned, even if labeled as with prejudice, as it does not carry judicial approval necessary for establishing a prevailing party. Consequently, a stipulated dismissal would not grant Cequent prevailing party status for attorney's fees under Section 285 of the Patent Act.

The Court also evaluates whether a judgment on the merits via summary judgment can confer prevailing party status under Section 285. The Federal Circuit has determined that a defendant can be deemed a prevailing party if the district court issues a final judgment in its favor due to actions taken by the USPTO, such as patent cancellation. In this case, after an adverse judgment against Hopkins, Cequent requests a final judgment based on the cancellation of claims through inter partes review. The Court concludes that summary judgment, which represents a judicially sanctioned alteration in the parties' legal relationships, meets the requirements set forth by the Supreme Court in Buckhannon. Thus, the Court grants summary judgment in favor of the Defendant, allowing it to obtain prevailing party status and pursue attorney's fees under Section 285 of the Patent Act.

The Court has granted the Defendant's Motion for Summary Judgment and Motion to Lift the Stay. It cites various precedents and rules, emphasizing that the summary judgment rule aims to eliminate unsupported claims or defenses. The Court has overruled Cequent's objections to certain statements of additional facts from Hopkins, finding them material due to a dispute regarding the appropriate case disposition method—either stipulated dismissal or consent judgment. The Court noted that Cequent failed to adequately challenge Hopkins' assertion regarding communication about stipulated dismissal. Cequent's counsel, David Cupar, confirmed multiple communications with Hopkins in February 2016, with Hopkins rejecting the consent judgment on February 18, 2016. However, there was no evidence of further communication from Cequent after proposing the stipulation of dismissal.

All eight claims of the '551 patent have been definitively canceled, establishing Cequent as the prevailing party in the case. There are no remaining merits for the parties or the court to address, as this has been resolved by the Patent Trial and Appeals Board. Legal precedents affirm that a party can be deemed prevailing even without an explicit court declaration. Various cases illustrate this principle, including instances where courts awarded attorney's fees to defendants after patent claims were canceled or dismissed under Rule 41(a)(2). Such dismissals, particularly when ordered by the court, materially alter the legal relationship between the parties and indicate a prevailing party status. Notably, dismissals without prejudice do not equate to a victory on merits, while those under Rule 41(a)(2) do. The Federal Circuit's definition of a prevailing party applies in patent litigation contexts, emphasizing the necessity for judicial approval in dismissals that affect party status.

In Capitol Records, Inc. v. Foster, the court determined that a plaintiff's voluntary dismissal with prejudice under Rule 41(a)(2) constituted a significant change in the legal relationship between the parties, resulting in the defendant being recognized as the prevailing party. Similarly, in Bryant v. MV Transp. Inc., the court affirmed that Rule 41(a)(2) provides necessary judicial endorsement for the dismissal, establishing the defendant's status as prevailing. Power Mosfet Techs. LLC v. Siemens AG also supported this view, where the court ruled the defendant as the prevailing party following the plaintiff's dismissal motion. Although the plaintiff cited SFA Sys. LLC v. Newegg Inc. and Levitan Mfg. Co. v. Universal Sec. Instruments, Inc. as precedents for voluntary dismissal conferring prevailing party status, the specific rule under which the dismissals were filed was not clarified, and the court refrained from making assumptions. The case of Inland Steel Co. v. LTV Steel Co. affirmed a defendant's prevailing status when the court stayed litigation for reexamination and later ruled in favor of the defendant. Conversely, in Mars, Inc. v. JCM Am. Corp, the defendant was deemed not prevailing, as the court dismissed the case without prejudice, despite the USPTO's invalidation of claims. The court also noted that a consent judgment under Rule 41(a)(2), as initially suggested by Cequent, would have sufficed to establish prevailing party status for attorney's fees, avoiding unnecessary litigation burdens.