United States: Judge Donato Refuses To Let The Tail Wag The Dog

Order Directing Entry of Partial Judgment Under FRCP 54(b), Largan Precision Co., Ltd., v. Genius Electronic Optical Co., Ltd., Case No. 13-cv-02502-JD (Judge James Donato)

In a recent order directing entry of partial judgment under Rule 54(b), Judge Donato refused to let the tail wag the proverbial dog, so to speak.  He elected not to permit the existence of a few hundred domestic sales of an accused product to otherwise hold up a Rule 54(b) final judgment that concluded millions of extraterritorial sales did not infringe.

Plaintiff Largan Precision Co., Ltd. ("Largan") owns patents related to optical lenses for cameras in mobile devices.  Defendant Genius Electronic Optical, Co., Ltd. ("Genius") was accused of selling lenses that infringed upon those patents, both within and without the United States.  On cross-motions for summary judgment, Judge Donato held that "all but a sliver" of the accused sales were outside the United States, and thus were outside of the purview of U.S. patent laws.  Specifically, he found that out of millions of accused products, fewer than 750 samples ever entered the United States.  Consequently, Judge Donato granted partial summary judgment for Genius on the extraterritorial conduct and granted partial summary judgment for Largan on the 750 product samples that admittedly infringed.  There was also a small subset of products for which a fact dispute barred summary judgment as to those products.

This summary judgment order resolved most of Largan's infringement claims, leaving only Largan's claims for willfulness and injunctive relief, as well as Genius' related defenses for the 750 samples brought into the U.S. and the small subset of products.  Judge Donato found these 750 products were "less than even the proverbial the tail on the dog" compared to the millions of extraterritorial sales.  Thus, he directed the parties to address the appropriateness of entering partial final judgment pursuant to Rule 54(b) for the extraterritorial conduct.  Such a judgment would make the decision on the extraterritorial sales immediately appealable, while the remaining claims and defenses related to the 750 samples would continue in Judge Donato's court.

Entry of judgment under Rule 54(b) is proper where there is: (1) a final judgment and (2) the court finds no just reason for delay of entry.  A final judgment is defined as a decision which is an ultimate disposition of a cognizable and individual claim for relief in a multiple claims action.

Turning first to the "finality of judgment" prong, Largan argued it had asserted a single "claim" against all sales of the accused products, whether extraterritorial or not, for purposes of Rule 54(b).  Judge Donato disagreed, however, finding that the infringement allegations with respect to each product and act constituted a distinct and separable claim, and that the grant of summary judgment of noninfringment with respect to the claims involving extraterritorial sales was "as final as final can be."

Judge Donato cited three sources of law to support his decision that these sales were separable claims:

  • First, he noted the Federal Circuit had accepted jurisdiction in a similar situation where a Rule 54(b) judgment was entered on claims involving extraterritorial sales, while claims involving U.S. sales remained pending in district court.
  • Second, he noted the Federal Circuit had also accepted jurisdiction when a district court severed infringement allegations against the same defendant involving sales of different products under Rule 21, which allows a court to "sever any claim against a party."  He noted that the allegations involving one product could only be severed if they constituted "claims" separate from the allegations involving the other product.  If the infringement allegations against all of the sales constituted one individual, indivisible claim, then they could not be severed.
  • Last, he looked to Federal Circuit law on claim preclusion and found the Federal Circuit had held that an adjudication of infringement with respect to acts that predate a judgment does not preclude an infringement claim against post-judgment acts because post-judgment acts are separate claims.  From this decision, Judge Donato found that each act of alleged infringement is a discrete tort giving rise to a separate claim.  Thus, Largan's claims involving extraterritorial sales were discrete, separable claims which were capable of forming the basis for a Rule 54(b) judgment.

Turning to the "just reason for delay" prong of Rule 54(b), Judge Donato found no reason for delaying entry of partial final judgment.  First, he found that the extraterritoriality issue was distinct from the remaining issues for the U.S. sales and therefore there was no risk the Federal Circuit would be burdened with piecemeal appeals on overlapping issues.  Second, he found the equities favored a final judgment because allowing the entire litigation to go forward despite a "miniscule" number of lenses that might possibly be found to infringe would "allow the tail to wag the dog" in light of the costs and complexity of a patent trial.  Last, Largan requested Judge Donato delay entry of judgment because it was drafting a motion for leave to file a motion for reconsideration based on evidence produced after the close of the summary judgment briefing.  Judge Donato found this reason unpersuasive because (1) the four weeks since the summary judgment decision had issued was ample time for Largan to have already moved, (2) Largan failed to assert it did not know of the evidence before the summary judgment order, and (3) it did not mention the evidence during the summary judgment hearing.

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