Collateral Order Doctrine
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More Delays: Appeal Dismissed under Collateral Order Doctrine

The US Court of Appeals for the Federal Circuit dismissed a patent holder’s interlocutory appeal for lack of jurisdiction under the collateral order doctrine. Modern Font Applications LLC v. Alaska Airlines, Inc., Case No. 21-1838 (Fed. Cir. Dec. 29, 2022) (Reyna, Cunningham, JJ.) (Newman, J., dissenting).

Modern Font Applications (MFA) is a nonpracticing entity that holds the exclusive license to a patent disclosing a method for operating systems to read and display nonstandard fonts. In 2019, MFA sued Alaska Airlines in district court for patent infringement. During the proceeding, Alaska Airlines designated portions of its source code files as confidential information for attorneys’ eyes only under the district court’s standing protective order. MFA moved to allow its in-house counsel to access the source code, and Alaska Airlines moved to keep it protected. The district court denied MFA’s motion and granted Alaska Airlines’ motion, finding that the source code amounted to a trade secret and MFA’s in-house attorney was properly excluded as a “competitive decisionmaker.” MFA sought interlocutory appeal of the order.

The Federal Circuit found that it lacked jurisdiction to review the discovery order. The Court explained that US Congress holds appellate courts to the final judgment rule, which states that decisions are only appealable if they end disputes on the merits, leaving nothing but execution of the judgment. A “practical construction” of this rule is the collateral order doctrine, which allows appellate review of a “small class” of attendant rulings. To qualify for review under this doctrine, a decision must be “conclusive”; address an important question, separate from the case’s merits; and be such that an appeal of the final judgment would not encompass a review of the decision at issue. The Federal Circuit stressed that the Supreme Court of the United States “has repeatedly emphasized the limited scope” of this doctrine.

The Federal Circuit found that MFA’s appeal failed the third prong of the collateral order doctrine. The Court noted that across appellate jurisdictions, pretrial discovery orders almost always fail this prong because review of final judgments can usually adequately address discovery issues. MFA argued that dismissing its appeal would prejudice MFA both financially and by eliminating its key litigation strategists and that the district court’s error would not be sufficient to overturn a final adverse judgment. The Court was not persuaded, noting that any financial harm was speculative, and that MFA could hire outside counsel or experts instead of relying on its in-house attorney. The Court also reiterated that to merit review under the collateral order doctrine, the issue must be “effectively unreviewable” on appeal, and the likelihood of an appellant’s success is irrelevant. The Court also found that MFA’s appeal failed the second prong because the exclusion of MFA’s attorney was too entangled with the ultimate outcome of the case to be considered an issue “separate” from the case. Because MFA failed two of three collateral order doctrine prongs, the Court did not address the first prong and dismissed the appeal for lack of jurisdiction.

In [...]

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Federal Circuit: Contractual Arbitration Agreements Don’t Bind PTAB Institution Decisions

The US Court of Appeals for the Federal Circuit issued an order declining to intervene in inter partes review (IPR) institution decisions by the Patent Trial & Appeal Board (PTAB) and further denied a writ of mandamus to stay the PTAB’s IPR institution pending contractually required arbitration of the dispute between MaxPower and ROHM Japan. In re: MAXPOWER SEMICONDUCTOR, INC., Case No. 21-146 (Fed. Cir. Sept. 8, 2021) (Reyna, J.) (O’Malley, J., concurring in part and dissenting in part).

MaxPower owned patents directed to silicon transistor technology and licensed the patents to ROHM Japan. The license agreement contained an arbitration clause that applied to any disputes arising from or related to it—including patent validity. A dispute arose between the parties as to whether the patents covered certain silicon carbide transistor ROHM products. After MaxPower notified ROHM that it was initiating arbitration under the terms of their license agreement, ROHM challenged the validity of four MaxPower patents at the PTAB, which granted ROHM’s petitions to institute IPRs for the four challenged patents.

MaxPower appealed the PTAB’s institution decision to the Federal Circuit and sought a writ of mandamus to stay or terminate the IPR proceedings without prejudice to later institution if an arbitrator decided that IPR proceedings were appropriate.

The Federal Circuit held that the PTAB’s decision to institute IPR is non-appealable under 35 U.S.C. §314(d), which plainly “confirms the unavailability of jurisdiction” for the Court to hear direct appeals. The Court also found that MaxPower failed to meet the criteria necessary to invoke the collateral order doctrine, which allows appeals from interlocutory rulings if they decide an issue “separate from the merits of the case” that would not be reviewable after final judgment. The Court noted that MaxPower could still raise its arbitration-related challenges after the PTAB issued its final written decisions in these cases.

The Federal Circuit also rejected arguments that the appeals were authorized under 9 U.S.C. § 16(a)(1) and that MaxPower failed to show that its mandamus petition was not “merely a ‘means of avoiding the statutory prohibition on appellate review of agency institution decisions,’” citing the Court’s 2018 decision in In re Power Integrations.

Since the PTAB is not bound by private contracts enforcing arbitration agreements between parties, the Federal Circuit ruled that MaxPower had failed to show that the PTAB’s institution decisions in this case “clearly and indisputably exceeded its authority,” also stating that 35 U.S.C. § 294 does not authorize the PTAB to enforce private arbitration agreements.

In a partial dissent, Judge Kathleen O’Malley argued that the majority decision casts “a shadow over all agreements to arbitrate patent validity” and goes against strong federal policy in favor of enforcing arbitration agreements. While concurring with the majority that the PTAB’s IPR institution decisions are not appealable, Judge O’Malley stated that the case “provides exactly the sort of extraordinary circumstances under which mandamus review is appropriate” in what she called an important issue of first impression. The Supreme Court of the United States has held that [...]

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For Certain Not Secret Now: Court Declines to Seal Alleged Trade Secret in Amended Complaint

The US Court of Appeals for the Federal Circuit affirmed a decision declining to seal information in an amended complaint where the defendant failed to prove that the information was a trade secret. DePuy Synthes Products, Inc. v. Veterinary Orthopedic Implants, Inc., Case No. 20-1514 (Fed. Cir. Mar. 12, 2021) (Dyk, J.)

After DePuy sued Veterinary Orthopedic Implants (VOI) for patent infringement, the district court issued a protective order providing that “supplier . . . names and identifying information” would be treated as “Highly Confidential Material—Attorney Eyes Only.” DePuy later filed an amended complaint containing such information when it joined VOI’s manufacturer as a defendant. The amended complaint disclosed the manufacturer as such and alleged additional facts about the defendants’ relationship. VOI argued that the manufacturer’s identity and additional facts about the VOI-manufacturer relationship should be sealed as trade secrets. DePuy argued that the manufacturer’s identity was already public, but took no position regarding the additional facts. After the district court declined to seal the amended complaint, VOI appealed.

The Federal Circuit first considered whether it had jurisdiction under the collateral order doctrine and whether the district court abused its discretion in denying the motion to seal.

The Federal Circuit found that it had jurisdiction under the collateral order doctrine because:

  • The district court’s order conclusively determined the sealing issue.
  • The sealing issue was important although unrelated to the merits of the infringement claim.
  • Meaningful review after final judgment would be impossible because disclosed information can never be secret again.

On the merits, the Federal Circuit found no abuse of discretion, reasoning that there was no clear error in the district court’s finding that the manufacturer’s identity was not a trade secret where (1) the manufacturer openly advertised itself as an orthopedic manufacturer, (2) the manufacturer and VOI did not have a confidentiality agreement or a confidential relationship giving rise to an implied obligation of confidentiality, and (3) a third-party email suggested that VOI’s relationship with the manufacturer was “known within the relevant community.” The Court further found no abuse of discretion in the district court’s declining to seal the additional allegations despite DePuy’s non-opposition because the district court was required to independently weigh the parties’ interest in confidentiality against the public right of access.

Practice Note: Parties routinely seek sealing of information that may not qualify as formal trade secrets. The district court’s duty to independently evaluate sealing means that parties must be prepared to articulate the particularized harm they will suffer absent sealing or risk the public disclosure of the information, even where the parties agree to treat information confidentially.




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