A Xitronix Sequel? Walker Process & Patent Jurisdiction

A few years ago, in Xitronix v. KLA-Tencor, the Fifth and Federal Circuits could not agree on which of them should hear an appeal. The issue was whether a Walker Process claim arose under patent law. If it did, the Federal Circuit would have exclusive jurisdiction; if not, the appeal would go to the appropriate regional circuit. Xitronix ping-ponged between the two courts for years before the Federal Circuit (reluctantly) agreed to hear it. The plaintiff twice sought cert on where the appeal belonged. But the Supreme Court refused to resolve the issue. That left litigants in a bind. Going forward, where should they appeal Walker Process cases?

We might be on the cusp of another Federal Circuit-Fifth Circuit back-and-forth. Last week, in Chandler v. Phoenix Services LLC, the Federal Circuit transferred another Walker Process appeal to the Fifth Circuit. The court thought that it was bound by its first decision in the Xitronix litigation. The Federal Circuit also reiterated that it disagreed with the Fifth Circuit’s refusal to accept the transfer in Xitronix. And the court thought that Chandler was an even stronger case for transferring an appeal to the regional circuit.

Should the Fifth Circuit transfer the case back to the Federal Circuit, we will again see a case of jurisdictional hot potato. As I said when the petitions for cert in Xitronix were pending, we could use a clear rule on where these appeals go.

The Chandler Litigation

Simplifying a bit, the inventor in Chandler obtained a patent on fracking technology. But he “failed to disclose 61 public uses of the process that occurred over a year before the application was filed.” The defendant in Chandler later acquired this patent. And in 2018, the Federal Circuit held “that the knowing failure to disclose prior uses of the fracking process rendered the . . . patent unenforceable due to inequitable conduct.”

Before the patent was deemed unenforceable, the defendant in Chandler had enforced it against a variety of entities. Some of them—the plaintiffs in Chandler—sued the defendant in the Northern District of Texas, bringing what’s often called a Walker Process claim. These claims contend that a defendant’s use of a patent violated the Sherman Act. And they require showing (among other things) that the defendant “obtained the patent by knowing and willful fraud on the patent office and maintained and enforced that patent with knowledge of the fraudulent procurement.”

The district court dismissed the Walker Process claim. The plaintiffs then appealed to the Federal Circuit.

The Xitronix Precedent

The Federal Circuit faced a similar appeal a few years ago in Xitronix Corp. v. KLA-Tencor Corp. The plaintiff in Xitronix, like the plaintiffs in Chandler, brought a Walker Process claim, alleging that the defendant violated the Sherman Act by fraudulently obtaining a patent. The district court dismissed that claim, and the plaintiff appealed to the Federal Circuit. But the Federal Circuit held that it lacked jurisdiction. Under 28 U.S.C. § 1295(a)(1), the Federal Circuit has exclusive appellate jurisdiction over actions that arise under the patent law. And the plaintiff’s Walker Process claim, the Federal Circuit said, didn’t arise under the patent laws. It arose under the antitrust laws. The appeal should accordingly go to the regional court of appeals. So the Federal Circuit transferred Xitronix to the Fifth Circuit.

The Fifth Circuit responded by transferring the case back to the Federal Circuit. Courts of appeals must accept a “plausible” transfer decision, which ensures that the jurisdictional back and forth eventually ends. The Federal Circuit’s transfer, the Fifth Circuit concluded, was not even plausible. The Fifth Circuit thought that patent law was an essential element of the Walker Process claim and thus within the Federal Circuit’s exclusive jurisdiction. The Fifth Circuit also said that the Federal Circuit misread its own caselaw on these matters.

Back in the Federal Circuit, the court deemed the transfer order sufficiently plausible to end the game of hot potato. But the Federal Circuit did not agree with the Fifth Circuit—it maintained that the Fifth Circuit had misread Supreme Court and Federal Circuit caselaw (it said that the Fifth Circuit’s reading of one case was “untenable”). But since the Fifth Circuit’s decision was “not implausible,” the Federal Circuit accepted the transfer and decided the case.

The plaintiff in Xitronix twice petitioned for cert—once from the Fifth Circuit’s transfer decision and again from the Federal Circuit’s subsequent decision. The Supreme Court denied both petitions.

A Xitronix Sequel?

In Chandler, the Federal Circuit thought that the initial Xitronix decision was binding. The plaintiff’s claim arose under the antitrust laws, and it didn’t “depend on resolution of a substantial question of patent law.” Indeed, there was no issue in Chandler as to the enforceability of the patent—the Federal Circuit had already held that it was not enforceable. The Federal Circuit also added that it continued to disagree with the Fifth Circuit’s decision to reject the transfer Xitronix.

So the case is on its way to the Fifth Circuit. Perhaps that court will find Chandler distinguishable from Xitronix and accept the transfer. But if it doesn’t, we might again see these two courts pass the case back and forth. Last time, these jurisdictional shenanigans took years.

Someone—the Supreme Court or Congress—needs to clear up this confusion over the Federal Circuit’s exclusive jurisdiction. Nothing good comes from passing these cases back and forth between the circuits. Indeed, a clear rule on where these appeals go—regardless of whether that rule picks the Federal or regional circuit—might be better than the current state of affairs.

If you’re interested in this issue, I recommend Paul Gugliuzza’s article on arising-under patent jurisdiction: Rising Confusion About ‘Arising Under’ Jurisdiction in Patent Cases.

Chandler v. Phoenix Services LLC, 2021 WL 2371238 (Fed. Cir. June 10, 2021), available at the Federal Circuit and Westlaw.