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Re2con, LLC, et al v. Telfer Oil Co.

March 29, 2013

RE2CON, LLC, ET AL., PLAINTIFFS,
v.
TELFER OIL CO., ET AL., DEFENDANTS.



ORDER

This motion is before the court on the unopposed motion to vacate this court's claim construction order filed by plaintiffs RE2CON and Arr-Maz Products (collectively, "plaintiffs"). (ECF 132.) This motion was decided without a hearing. For the following reasons, plaintiffs' motion is DENIED.

I. RELEVANT FACTS AND PROCEDURAL HISTORY

In the pending patent infringement action, plaintiffs and defendants have executed a settlement agreement.*fn1 (Pls.' Mot. to Vacate at 2, ECF 133.)

As part of this settlement, the parties agreed to move to vacate this court's May 15, 2012 claim construction order (ECF 112).*fn1

(ECF 133 at 2.) As agreed, plaintiffs filed their motion to vacate on November 16, 2012 (ECF 133), and defendants filed a statement of non-opposition to the vacatur on November 19, 2012 (ECF 135). On January 11, 2013, plaintiffs withdrew their motions to dismiss filed on October 26, 2012 (ECF 128; ECF 130), pending the outcome of this motion. (ECF 145.)

On November 11, 2012, Shilling Construction Company sought leave to oppose the motion to vacate as amicus. (ECF 136.) This court granted the request on December 17, 2012. (ECF 141.) Shilling stated it is a defendant in a related case before the Eastern District of Oklahoma; that case was brought by the same plaintiffs, and concerns the same patent, as in the underlying action before this court. (Amicus Application at 2, ECF 136.) The Oklahoma court granted Shilling's motion to stay that case pending the outcome of the Markman hearing in this case. (Id.) Shilling filed its opposition to the motion to vacate on December 17, 2012 (ECF 142), and plaintiffs filed their reply on January 3, 2013 (ECF 143). On March 20, 2013, Shilling withdrew its opposition after settling the Oklahoma litigation with plaintiffs. (ECF 146.) The court therefore treats this motion as unopposed and does not consider Shilling's opposition or plaintiffs' reply.

II. LEGAL STANDARD

In U.S. Bancorp Mortgage Co. v. Bonner Mall P'ship, 513 U.S. 18, 29 (1994)

("Bonner Mall"), the Supreme Court held that appellate court vacatur of district court judgments in the context of settlement agreements should be granted only in "exceptional circumstances."

Those exceptional circumstances "do not include the mere fact that the settlement agreement provides for vacatur." Id. The Court emphasized the importance of considering the public interest when contemplating the equitable remedy of vacatur: "Judicial precedents are presumptively correct and valuable to the legal community as a whole. They are not merely the property of private litigants and should stand unless a court concludes that the public interest would be served by a vacatur." Id. at 26 (quoting Izumi Seimitsu Kogyo Kabushiki Kaisha v. U.S. Philips Corp., 510 U.S. 27, 40 (1993) (Stevens, J., dissenting)). Thus, "quite apart from any considerations of fairness to the parties," vacatur disturbs the "orderly operation of the federal judicial system" by deviating from the primary route Congress has prescribed for parties who seek relief from the legal consequences of judicial judgments: appeal as of right and certiorari. Id. at 27.

However, in American Games, Inc. v. Trade Products, Inc., the Ninth Circuit distinguished Bonner Mall by holding that district courts, due to the "fact-intensive nature of the inquiry required," enjoy "greater equitable discretion when reviewing [their] own judgments than do appellate courts operating at a distance." 142 F.3d 1164, 1170 (9th Cir. 1998). Therefore, a district court in this circuit, even in the context of mootness by settlement, may vacate one of its own judgments absent exceptional circumstances. See id. at 1168-69. The proper standard is the "equitable balancing test," which balances the hardships of the parties and the public interests at stake. Id. at 1166; Zinus, Inc. v. Simmons Bedding Co., No. C 07-3012 PVT, 2008 WL 1847183, at *1 (N.D. Cal. Apr. 23, 2008). The standard for vacatur of a claim construction order, which is not final but interlocutory, is even less rigid. See Persistence Software, Inc. v. Object People, Inc., 200 F.R.D. 626, 627 (N.D. Cal. 2001) (comparing Federal Rule of Civil Procedure 54(b), governing vacatur of non-final orders, to Rule 60(b), governing vacatur of final judgments).

III. PLAINTIFFS' ARGUMENTS

Plaintiffs request vacatur because, in settling this case, they have agreed to forfeit their right to appeal particular aspects of the court's claim construction order that "may have been viewed to unduly limit the patented invention." (ECF 133 at 1-3.) Plaintiffs suggest that "district courts have commonly vacated summary judgment rulings and claim constructions that underlie those rulings when vacatur related to a settlement." (Id. at 3 (citing, e.g., Persistence Software, 200 F.R.D. at 626; Cisco Systems, Inc. v. Telcordia Techs., Inc., 590 F. Supp. 2d 828 (E.D. Tex. 2008); TriQuint Semiconductor, Inc. v. Avago Techs. Ltd., No. CV 09--1531--PHX--JAT, 2012 WL 1768084 (D. Ariz. May 17, 2012)).) Plaintiffs note that public policy encourages the settlement of private disputes; hence the court should not impede the parties' agreement here. (Id. at 4 (citing Blockbuster, 2010 WL 5437226, at *3).)

Plaintiffs further argue that, because claim construction orders are not final, granting vacatur in this case will not disrupt the orderly operation of the federal judicial system. (Id. at 5.) Citing Cisco Systems, 590 F. Supp. 2d at 830, plaintiffs note that, according to some studies, approximately forty percent of claim construction orders appealed are reversed by the Federal Circuit. (Id.) Absent settlement, this court's claim construction would be "far from final," plaintiffs assert. (Id.) Because of the interlocutory nature of claim construction, plaintiffs maintain, it is not clear what preclusive effect claim construction orders have, as some courts apply collateral estoppel while others reason that "settlements and non-appealed claim construction rulings are not final judgments for collateral estoppel purposes." (Id. (citing Cisco ...


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