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Cardpool, Inc. v. Plastic Jungle, Inc.

United States Court of Appeals, Federal Circuit

April 5, 2016

CARDPOOL, INC., Plaintiff-Appellant
v.
PLASTIC JUNGLE, INC., NKA CARDFLO, INC., Defendant-Appellee

Page 1317

          Appeal from the United States District Court for the Northern District of California in No. 3:12-cv-04182-WHA, Judge William H. Alsup.

         JASON F. HOFFMAN, Baker & Hostetler LLP, Washington, DC, argued for plaintiff-appellant. Also represented by JOHN P. MOY, EDWARD A. PENNINGTON, SEAN PHELAN, Smith Gambrell & Russell, LLP, Washington, DC; JAMES S. MCDONALD, Blackhawk Network, Pleasanton, CA.

         MARC BELLOLI, Feinberg Day Alberti & Thompson LLP, Menlo Park, CA, argued for defendant-appellee. Also represented by JEREMIAH A. ARMSTRONG, NICKOLAS BOHL, ELIZABETH DAY; THOMAS RICHARD BURNS, JR., Adduci, Mastriani & Schaumberg, LLP, Washington, DC.

         Before NEWMAN, REYNA, and WALLACH, Circuit Judges.

          OPINION

Page 1318

          Newman, Circuit Judge.

         Cardpool, Inc., appeals the ruling of the United States District Court for the Northern District of California, denying the joint motion of Cardpool and Plastic Jungle, Inc. to vacate the district court's judgment[1] of patent invalidity insofar as the judgment was with prejudice.[2] The parties' stated reason for the requested vacatur was that all of the Cardpool patent claims had been replaced on reexamination, and that Plastic Jungle (now operating as CardFlo, Inc.) was no longer conducting the accused infringing activities. Cardpool Dist. Dk. 89 at 2 (May 13, 2014) (" it is CardFlo's representation that it is no longer in the business of computer-implemented, online gift card exchange . . . . As a result, Plaintiff believes this case is no longer viable or necessary at this time." ). We affirm the district court's denial of vacatur, because the denial is within the district court's discretion and also because the premise of the motion is both speculative and inaccurate: the district court's final judgment as to an original group of claims does not automatically render that judgment res judicata as to new claims granted upon reexamination.

         Background

         Cardpool sued Plastic Jungle for infringement of U.S. Patent No. 7,494,048 entitled " System and Method for Brand Name Gift Card Exchange" (the '048 patent). Plastic Jungle's defenses were that the claims in suit are invalid on the ground of obviousness, 35 U.S.C. § 103 (2006), and that the claimed subject matter is patent-ineligible under 35 U.S.C. § 101. The district court agreed as to ineligibility under section 101, and on this ground the court granted Plastic Jungle's motion to dismiss the suit with prejudice under Federal Rule 12(b)(6) for failure to state a claim on which relief can be granted. Cardpool appealed to the Federal Circuit on February 12, 2013.

         Before that appeal was decided, in June 2013 Cardpool filed a request for ex parte reexamination in accordance with 35 U.S.C. § 304. For reexamination, Cardpool presented both amended and additional claims, in accordance with 37 C.F.R. § 1.510(e) (2013), alongside certain claims that stood unamended. Cardpool provided the Patent and Trademark Office (PTO) with the invalidity contentions made by Plastic Jungle before the district court, along with a copy of the foreign prior art Plastic Jungle cited. Reexamination was ordered by the PTO.

         Before reexamination was completed, on January 30, 2014 the Federal Circuit affirmed without opinion under Federal Circuit Rule 36 the district court's judgment of ineligibility under section 101. Cardpool, Inc. v. Plastic Jungle, Inc., 552 Fed.Appx. 979 (Fed. Cir. 2014). On February 6, 2014, the PTO issued a notice of intent to issue an ex parte reexamination certificate. The Ex Parte Reexamination Certificate was issued on February 27, 2014, holding amended claims 1, 2-7, and 9-11, and new

Page 1319

claims 12-52, patentable under section 103. See 37 C.F.R. § 1.552 (section 101 eligibility is not considered on reexamination).

         Cardpool then filed a petition for rehearing of the Federal Circuit's decision of January 30, 2014, asking this court to vacate our affirmance of the district court decision of section 101 ineligibility because the claims that were the subject of that decision no longer existed. Cardpool stated:

Because the District Court's decision dismissing the case under Rule 12(b)(6) as not claiming statutory subject matter under 35 U.S.C. § 101 was based on the original Asserted Claims that no longer exist and have been superseded by the amended Asserted Claims, the District Court decision is moot and must be vacated. Not doing so would create the improper ruling that an intervening final PTO decision is not controlling of a still pending District Court case--directly in conflict with Federal Circuit precedent. Accordingly, this petition should be granted to allow rehearing consistent with Federal Circuit precedent.

Pet. for Reh'g, No. 2013-1227, ECF No. 53 at 2-3 (Feb. 28, 2014).

         Plastic Jungle, in response to the request for rehearing, argued to this court that " the entire case is moot" because the reexamination " substantially changed" the claims at issue, requiring that " the prior rulings must be vacated and the case dismissed." Response to Petition for Panel Rehearing, Appeal No. 2013-1227 Dk. 58 at 2. Cardpool replied that, while the district court's decision of section 101 unpatentability had been rendered " moot" by the reexamination, the underlying cause of action was not moot because infringement might be renewed by Plastic Jungle or a successor to Plastic Jungle. Reply, Appeal No. 2013-1227 Dk. 60 at 3-5. Cardpool stated that the validity of the reexamined claims had not been evaluated by any court, and asked that the district court decision of invalidity be vacated as moot.

         The Federal Circuit then granted rehearing, vacated its summary affirmance of section 101 invalidity, and remanded to the district court " to determine what actions, if any, are appropriate in light of the reexamined claims." Cardpool, Inc. v. Plastic Jungle, Inc., 564 F.Appx. 582, 583 (Fed. Cir. 2014). However, the Federal Circuit declined to vacate the district court's invalidity judgment of January 22, 2013, stating that " it would not be appropriate in this context to vacate the district court's judgment because Cardpool, the losing party below, caused the change in circumstances." Id.

         On return to the district court, Cardpool and Plastic Jungle jointly moved the district court to vacate its prior judgment so that the parties could move for a voluntary dismissal without prejudice under Rule 41(a)(1)(A)(ii). ...


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