DYK, Circuit Judge.
Schreiber Foods, Inc. ("Schreiber") appeals from the judgment of the United States District Court for the Eastern District of Wisconsin. The district court vacated its prior judgment of infringement in favor of Schreiber and dismissed Schreiber's patent infringement suit pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 305 F.Supp.2d 939 (E.D.Wis.2004) ("Schreiber III"). We affirm the order vacating the earlier judgment, reverse the judgment of dismissal, and remand for a new trial.
Schreiber is a producer of cheese products and is the current owner of U.S. Patent Nos. 5,440,860 ("the '860 patent") and 5,701,724 ("the '724 patent"), both pertaining to a method and apparatus for forming and hermetically sealing slices of food items. The '860 patent was issued to Schreiber in 1995.
In January 1997 Schreiber, then the owner of the '860 patent, filed suit against appellee Kustner Industries ("Kustner") and other defendants,
During discovery in August 1997, Kustner sought from Schreiber "[a]ll documents concerning any negotiations for assignments, licenses, or security interests in the '860 patent." (J.A. at 651) Schreiber objected to this request on the grounds of attorney-client privilege and work product protection. It then stated that, subject to these objections, "Schreiber is not aware of any such documents." (Id.) There was no basis to claim either privilege or work product protection with respect to the assignment agreement itself.
In December 1997, a second patent, the '724 patent, was issued to Schreiber, and Schreiber amended its complaint to allege that Kustner also infringed the '724 patent. As provided in the '724 patent's terminal disclaimer, the '724 patent was required to be co-owned with the '860 patent to be enforceable. In its amended
In July 1998, Schreiber notified the Patent Office of the assignment of the '860 patent to Schreiber Technologies. (J.A. at 856.) However, it still did not inform the court or its opponents of the transfer. The case proceeded to trial in August 1998. During the trial, Thomas Badciong, a Schreiber director who had been present when Schreiber's Board had approved the assignment of the '860 patent, falsely testified that "Schreiber Foods" owned the '860 patent and had owned it since it was issued by the Patent Office. At the conclusion of the trial, the jury returned a special verdict finding both the '724 and '860 patents valid and infringed. The jury assessed damages at $26 million. Defendants moved pursuant to Federal Rule of Civil Procedure 50 for judgment notwithstanding the verdict.
In September 1998, after the trial and verdict, and while the defendants' motion for judgment as a matter of law was pending, Schreiber's counsel in this case learned of the assignment of the '860 patent. Schreiber's counsel concluded that there was no legal or ethical obligation to disclose the assignment to the court or the opposing party despite the unjustified failure to produce the assignment documents in discovery, the false statements made in response to the document production request, the false statements appearing in the amended complaint, and the false testimony by Badciong. (J.A. at 617.) Instead, on the advice of counsel, Schreiber reacquired the '860 patent. The patent, with all causes of action thereunder, was reassigned to Schreiber on April 20, 1999. (J.A. at 233.) Just as the original assignment of the '860 patent to Schreiber Technologies had not been disclosed, neither Schreiber nor its counsel disclosed the reassignment of the '860 patent to the district court or to opposing counsel.
In March 2000, the district court granted the defendants' motion for judgment as a matter of law, finding non-infringement and setting aside the jury verdict. Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 92 F.Supp.2d 857 (E.D.Wis.2000) ("Schreiber I"). On appeal to this court, we reversed the district court's judgment and ordered the reinstatement of the jury verdict in favor of Schreiber. Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 31 Fed. Appx. 727 (Fed.Cir.2002) ("Schreiber II"), cert. denied, 538 U.S. 1031, 123 S.Ct. 2129, 155 L.Ed.2d 1059 (2003). Pursuant to this court's mandate, the district court entered judgment in Schreiber's favor on September 10, 2002. Kustner was ordered to pay $15,729,846 in damages, plus costs and post-judgment interest. (J.A. at 192.)
After Kustner learned of the '860 patent's earlier assignment to Schreiber Technologies in October 2002 from an unrelated lawsuit, Kustner moved to vacate judgment pursuant to Rule 60(b) of the Federal Rules of Civil Procedure.
Schreiber appeals. Kustner conditionally cross-appeals for a new trial. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1). At oral argument, the court inquired whether the Supreme Court's decision in Caterpillar Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996), which had not been cited by either party, might be relevant to the issues presented. With the leave of the court, both parties filed supplemental briefs on the question.
Schreiber on appeal has (1) waived its claim for monetary damages against Kustner, and (2) waived its claim against Kustner for infringement of the '724 patent. (Br. of Appellant at 7-8.) Schreiber seeks only reinstatement of a judgment that the '860 patent is valid, enforceable and infringed, and an injunction barring infringement of the '860 patent against Kustner.
We first consider whether the district court correctly held that the judgment was void because the court lacked jurisdiction to adjudicate the case. Schreiber III, 305 F.Supp.2d at 952, 958. We apply Federal Circuit law in determining whether a judgment is void under Rule 60(b)(4). Broyhill Furniture Indus., Inc. v. Craftmaster Furniture Corp., 12 F.3d 1080, 1082-84 (Fed.Cir.1993). This is because questions of the district court's jurisdiction — upon which this court's jurisdiction depends — are always determined under Federal Circuit law. See Silicon Image, Inc. v. Genesis Microchip Inc., 395 F.3d 1358, 1362 (Fed.Cir.2005) (this court's jurisdiction determined under Federal Circuit law); Commissariat a L'Energie Atomique v. Chi Mei Optoelectronics Corp., 395 F.3d 1315, 1323 (Fed.Cir.2005) (citing Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1564 (Fed.Cir.1994)).
At the time this action commenced, Schreiber was the owner of the '860 patent and had standing.
However, the mootness in this case was only temporary. Schreiber regained its stake in the litigation when it reacquired the '860 patent before the entry of judgment. The issue before us is therefore whether a judgment is void when there is a temporary transfer of the patent in suit to a non-party, which temporarily deprives the court of jurisdiction, even though the plaintiff owned the patent at the commencement of the suit and at the time of judgment? We hold that the judgment is not void in such circumstances.
The general rule in federal cases is that a plaintiff must have initial standing and "continue to have a `personal stake in the outcome' of the lawsuit." Spencer v. Kemna, 523 U.S. 1, 7, 118 S.Ct. 978, 140 L.Ed.2d 43 (1998) (quoting Lewis v. Cont'l Bank Corp., 494 U.S. 472, 477, 110 S.Ct. 1249, 108 L.Ed.2d 400 (1990)). But, as will be seen, this rule is not absolute. In cases where the plaintiff lacked initial standing or the case suffered from some other jurisdictional defect at the time suit is commenced, the Supreme Court's cases are less than clear as to whether and how a jurisdictional defect can be remedied in the course of litigation. For example, the Court has held that, where federal jurisdiction is invoked initially on grounds of diversity, and diversity did not exist at the time of suit, it cannot be remedied by a change in citizenship before judgment. Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 124 S.Ct. 1920, 1925-26, 158 L.Ed.2d 866 (2004). On the other hand, where federal jurisdiction is invoked under the removal statute, dismissing a non-diverse party after removal and before judgment cures the defect. Caterpillar, 519 U.S. at 73, 117 S.Ct. 467.
In the area of patent infringement, this court has held that if the original plaintiff lacked Article III initial standing, the suit must be dismissed, and the jurisdictional defect cannot be cured by the addition of a party with standing, Paradise Creations, Inc. v. U V Sales, Inc., 315 F.3d 1304, 1309 (Fed.Cir.2003), nor by the subsequent purchase of an interest in the patent in suit. Gaia Techs., Inc. v. Reconversion Techs., Inc., 93 F.3d 774, 780 (Fed.Cir.1996).
In this case, Schreiber had constitutional standing at the time the suit was commenced. Importantly, after assigning the '860 patent, Schreiber reacquired it before the entry of judgment. In circumstances where dismissal for lack of initial standing is not required, the Supreme Court held in Caterpillar that jurisdictional defects can be cured before judgment.
This court has also held that the temporary loss of standing during patent litigation can be cured before judgment. In Insituform Technologies, Inc. v. Cat Contracting, Inc., 385 F.3d 1360, 1371-72 (Fed.Cir.2004), the original plaintiff was the owner of the patent at the time of filing suit. After the trial and verdict, but before judgment, the patent (together with the right to sue for past infringement) was transferred to the plaintiff's subsidiary, which was then not a party to the suit. The subsidiary waited for two years before filing a motion to be joined as a party, which was then granted before judgment. We upheld the district court's joinder decision. Id. at 1372. Other circuits have taken a similar approach. See ELCA Enters. v. Sisco Equip. Rental & Sales, Inc., 53 F.3d 186, 190-91 (8th Cir.1995) (ordering the substitution of the transferee of the real property in suit, and holding that such substitution cured any potential jurisdictional defect arising from the transfer of the property during litigation); Corbin v. Blankenburg, 39 F.3d 650, 654 (6th Cir.1994) (en banc) (ERISA trustee who resigned lost requisite stake in litigation and could not continue as plaintiff, but suit could continue because new trustee was substituted as plaintiff five days later).
Here Schreiber reacquired its stake in the litigation by reacquiring the '860 patent (and causes of action thereunder) before the entry of judgment. The jurisdictional defect that had existed was cured before the entry of judgment and thus the judgment was not void. The district court's holding to the contrary under Rule 60(b)(4) was erroneous.
The district court held in the alternative that judgment should be vacated under Rules 60(b)(2) and (3) because the assignment to Schreiber Technologies was material new evidence and failure to disclose the transaction was misconduct that justified relief from judgment. Relief under Rules 60(b)(2) and (3) is a procedural issue on which we apply regional circuit
Under Rule 60(b)(3), relief from judgment is warranted when there is fraud, misrepresentation, or other misconduct. As outlined previously, Schreiber repeatedly misrepresented its ownership of the '860 patent and concealed evidence that would reveal its lack of ownership. See Schreiber III, 305 F.Supp.2d at 959-60. In its brief, Schreiber does not contest these facts, except to argue that the misconduct somehow was not intentional and therefore not sanctionable. There can be no claim that Schreiber's conduct is not sanctionable. Quite apart from whether Schreiber's misstatements in the period before September 1998 were sanctionable,
Kustner argues that, in addition to vacating the judgment, the case should be dismissed with prejudice as a sanction for Schreiber's misconduct. Kustner's motion to vacate judgment under Rule 60(b)(3) did not request dismissal, but rather a new trial. (J.A. at 194.) "Of all possible sanctions, dismissal is considered `draconian.'" Maynard v. Nygren, 332 F.3d 462, 467 (7th Cir.2003). In the Seventh Circuit, dismissal for misconduct requires the district court to first consider lesser sanctions and explain why they are insufficient. Id. at 468; Schilling v. Walworth County Park & Planning Comm'n, 805 F.2d 272, 278 (7th Cir.1986). Kustner conceded at oral argument that the district court did not order a dismissal for Schreiber's misconduct, and the district court plainly did not make the findings necessary to support dismissal. In light of the district court's decision to vacate the entire judgment, we construe its order under Rule 60(b)(3) as effectively granting a new trial.
Schreiber appears to concede that in the Seventh Circuit a new trial under Rule 60(b)(3) may be granted here as either intentional or unintentional misrepresentation qualifies for relief under Rule 60(b)(3). Lonsdorf v. Seefeldt, 47 F.3d 893, 897 (7th Cir.1995). However, Schreiber's argument on appeal is that vacating the entire judgment is not appropriate, and that a new trial is only appropriate to the extent that its misrepresentations had demonstrated effects on the judgment. Through its selective waiver of claims, Schreiber asserts that it has removed the effects of tangible prejudice to Kustner that were found by the district court. Schreiber's argument ignores the fact that both Schreiber and its counsel have engaged in serious misconduct. The Seventh Circuit has held that a new trial on all issues may be granted as a form of sanction for attorney misconduct. See Petrilli v. Drechsel, 94 F.3d 325, 330 (7th Cir.1996) ("Where an attorney improperly appears as both [advocate and witness], the sanction of reversal and a new trial may be warranted. Whether to grant a mistrial falls within the trial court's discretion." (internal citations omitted)).
This court addressed a similar argument in Fraige v. Am.-Nat'l Watermattress Corp., 996 F.2d 295 (Fed.Cir.1993). In Fraige, the defendant in a patent infringement suit engaged in fraud by fabricating prior art. The jury returned a special verdict in defendant's favor, finding four separate grounds of invalidity. The district court denied a Rule 60(b)(3) motion on the ground that "the fraud could not have affected two of the jury's findings of invalidity." Id. at 298. We held that this was an abuse of discretion because, even if two of the invalidity findings were not directly affected, it "was impossible accurately to appraise the extent to which the jury relied on testimony tainted by the false and forged documentation." Id. at 299 (internal citation and quotation omitted). A litigant who engages in misconduct should "not be permitted the benefit of calculation, which can be little better than speculation, as to the extent of the wrong inflicted upon his opponent." Id. at 299 (quoting Minneapolis, St. Paul & Sault Ste. Marie Ry. Co. v. Moquin, 283 U.S. 520, 521-22, 51 S.Ct. 501, 75 L.Ed. 1243 (1931)).
We hold that the district court properly vacated the entire judgment and that a new trial on all issues (rather than outright dismissal) was an appropriate sanction. Given our disposition, there is no need to reach the issue of the district court's holding under Rule 60(b)(2).
The district court's judgment of dismissal is reversed. The district court's order vacating the earlier judgment is affirmed. The case is remanded to the district court for a new trial.
AFFIRMED-IN-PART, REVERSED-IN-PART, AND REMANDED
Costs to Kustner.