What happens when two courts of appeal each think the other has exclusive jurisdiction over an appeal? Confusion and inter-circuit criticism. The latest chapter in such a dispute between the Federal and Fifth Circuits on the scope of the Federal Circuit’s exclusive jurisdiction in patent cases is unfolding now.
Chandler v. Phoenix Services involves a so-called Walker Process claim. Walker Process monopolization claims are antitrust—not patent—claims based on the enforcement of patents procured by fraud. In Chandler, the defendants’ patent had been found unenforceable due to inequitable conduct in an earlier case. While that case was making its way to the Federal Circuit, the Chandler defendants allegedly took several steps to enforce the patent against competitors (including the Chandler plaintiffs), such as sending cease and desist letters, advertising the patent on their website, and asserting the patent in litigation. The Chandler plaintiffs then brought a Walker Process claim, alleging that the defendants were trying to enforce a patent they knew to be unenforceable. The district court granted summary judgment to defendants, finding that the plaintiffs lacked standing and that the statute of limitations had expired. The Chandler plaintiffs appealed to the Federal Circuit. But in a precedential order issued last month, the Federal Circuit declined jurisdiction and transferred the case to the Fifth Circuit—the regional circuit for this case arising from district court in Texas.
In the transfer order, the Federal Circuit recounted blow-by-blow its previous dispute with the Fifth Circuit over which one had appellate jurisdiction over a similar claim. By way of background, 28 U.S.C. § 1295(a)(1) gives the Federal Circuit exclusive jurisdiction over appeals “arising under any Act of Congress relating to patents.” In Xitronix Corporation v. KLA-Tenco Corporation, the Federal Circuit issued a precedential order holding that it lacked appellate jurisdiction over a Walker Process case on the ground that it arose under antitrust law, not patent law. 889 F.3d 1075, 1078 (Fed, Cir. 2018) (“Xitronix I”). As the court explained, “patent claims will not be invalidated or reviewed based on the results of this case.” The Federal Circuit thus transferred the appeal to the Fifth Circuit.
The Fifth Circuit, however, disagreed and shipped the Xitronix appeal back to the Federal Circuit. In doing so, it took a more expansive view of the Federal Circuit’s jurisdiction than the Federal Circuit itself had. The Fifth Circuit concluded that the case belonged in the Federal Circuit because it “touched on” patent law in that the plaintiff’s antitrust claim turned in part on whether the patent at issue was enforceable. Xitronix Corporation v. KLA-Tenco Corporation, 916 F.3d, 429, 441 (5th Cir. 2019) (“Xitronix II”).
After receiving the bounce-back from the Fifth Circuit, the Federal Circuit in Xitronix accepted jurisdiction in a non-precedential decision. In doing so, however, it characterized the Fifth Circuit’s reasoning as “incorrect,” “untenable,” and based on a “misread[ing]” of Federal Circuit precedent. Xitronix Corp. v. KLA-Tencor Corp., 757 Fed. Appx. 1008, 1009 (Fed. Cir. 2019).
Fast-forward to June 2021 and the Chandler appeal. The Federal Circuit again found itself with an appeal in a Walker Process case arising from a district court from within the Fifth Circuit. So what did it do? It adhered to the position articulated in the first (and precedential) Xitronix order, concluded it lacked appellate jurisdiction, and transferred the appeal to the Fifth Circuit. In doing so, it recounted its dispute with the Fifth Circuit in Xitronix. The Federal Circuit explained that while it had ultimately acquiesced to jurisdiction in Xitronix it had not backed down from its view that the appeal had actually belonged in the Fifth Circuit. The Federal Circuit defended its reasoning in Xitronix I, noting that in Gunn v. Minton 568 U.S. 251 (2013), the Supreme Court held that a state court had jurisdiction over a malpractice suit because it did not “arise under” federal patent law, despite requiring a patent law issue to be resolved. Drawing on Gunn, the Chandler court re-stated its position that “the risk of another circuit making an erroneous or inconsistent patent law decision within a Walker Process claim is not enough to trigger [Federal Circuit] jurisdiction over federal patent law cases.”
What will happen next in Chandler? It seems likely that the jurisdictional ping-pong between Washington and New Orleans will not resume here and that the Fifth Circuit will take the case. As the Federal Circuit’s transfer order notes, the Fifth Circuit should have jurisdiction over Chandler even under the Fifth Circuit’s own reasoning in Xitronix II. That is so because the patent-at-issue had previously been ruled unenforceable, leaving no live patent law issues to be decided.
If the Federal Circuit’s prediction is correct, the underlying disagreement between the circuits will likely remain unresolved. And future appeals involving Walker Process and other patent-adjacent claims could continue to bounce between the two courts—unless and until one of them recedes from its view or the Supreme Court steps in.