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Federal Circuit again deals with standing
March 02, 2007
In yet another case, the Federal Circuit has dealt with whether a party asserting a patent infringement claim had title to the patent, and thus standing to bring the claim against the defendant. Here, once the standing issue was raised at the district court, the Plaintiff opted to fix the chain of title, voluntarily dismiss its claim, and refile a new case against the defendant. The court granted the dismissal (including the defendant's counterclaims) rather than addressing the standing issue. The Federal Circuit ultimately affirmed, finding that while the court should not have dismissed at least some of the counterclaims as they were not related to the asserted patent, this error was harmless. This is further motivation for parties to ensure that the chain of title to an asserted patent is clear before bringing suit, as many of the issues in this case could have been avoided by a clear chain of title. More details of the case after the jump.The plaintiff, Walter Kidde Portable Equipment ("Kidde") sued Universal Security Instruments ("USI") for infringement of a patent related to a smoke detector. The suit was initially filed in June, 2003. On January 4, 2004, after USI raised the issue of standing in a reply brief of a pre-answer motion, Kidde recorded an assignment with the USPTO correcting an apparent defect in the chain of title of the patent. The case proceeded through discovery, and as a result of various issues that arose in that process, on July 5, 2005, three of Kidde's experts were excluded from testifying because their reports were filed after the discovery deadline. After this occurred, the lower court drew attention to the standing issue, and asked that the parties develop the record on the issue to ensure the court had subject matter jurisdiction. On October 28, 2005, Kidde filed a motion to dismiss without prejudice under Rule 41(a)(2), and also filed a new action against USI on the same day. This was in order to cure any standing problem that may have existed, as a nunc pro tunc assignment cannot retroactively cure a standing defect, a new case must be filed. USI resisted, and instead asked that the court dismiss the case with prejudice. On March 31, 2006, the court granted Kidde's motion to dismiss without addressing the standing issue. The Federal Circuit noted that it was error for the district court to dismiss USI's counterclaims along with Kidde's complaint under Rule 41(a)(2), as that rule states that counterclaims may not be dismissed under that rule over the defendant's objection. Here, the counterclaims were filed over a year before the Rule 41(a)(2) motion was filed, so the court should not have dismissed the counterclaims over which it has subject matter jurisdiction (there was an issue that 4 of the 6 counterclaims were related to the patent, and the court may not have had jurisdiction to hear those claims, however 2 claims were not patent-related, and the court certainly should not have dismissed those). Even though this was error, the court still affirmed the dismissal. This was because the dismissal did not affect the parties substantial rights, as USI was free to bring its counterclaims in the newly-filed case brought after Kidde apparently cured the standing defect. USI argued that it would be negatively affected by this, as the court's ruling excluding Kidde's experts from testifying would not carry over to the new case. The Federal Circuit was somewhat sympathetic, but ultimately suggested that whether Kidde's experts could testify at trial was up to the district court in the new case, and USI could ask that the same order be entered. USI also argued that much of its work product would be wasted if the case were dismissed. The Federal Circuit gave short shrift to this argument, as there was no evidence that USI could not use its work product from the first case in the second case, as the same parties and issues were involved. As a result, while the district court got it wrong, the error was harmless, so the Federal Circuit affirmed. The recent series of cases dealing with standing in patent cases should put parties and their attorneys on notice to ensure the chain of title is clear before bringing suit to avoid unnecessary procedural wrangling. To read the full decision in Walter Kidde Portable Equip., Inc. v. Universal Security Instruments, Inc., click here.
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