The Fifth and Federal Circuits continue to disagree about where appeals of Walker Process antitrust/patent claims should go. It seems that both will now transfer these appeals to each other, and each might reluctantly accepting the transfer. This jurisdictional hot potato needs to stop.
August 16, 2022
The Fifth and Federal Circuits cannot agree on where appeals of Walker Process claims belong. These claims allege that someone violated the Sherman Act by fraudulently obtaining a patent. The Federal Circuit—which has exclusive jurisdiction over claims arising under the patent laws—thinks that these cases do not arise under the patent laws. So it transfers these appeals to the appropriate regional circuit. The Fifth Circuit—to which the Federal Circuit has sent these cases—disagrees. It thinks that these cases do arise under the patent laws and thus belong in the Federal Circuit. A case recently ping-ponged between these two courts for years before settling in the Federal Circuit. And last summer, in Chandler v. Phoenix Services, LLC, the Federal Circuit transferred another Walker Process appeal to the Fifth Circuit, risking another game of jurisdictional hot potato.
Thankfully the Fifth Circuit ended this round of transfers, concluding that the Federal Circuit’s transfer order in Chandler was “not implausible.” But the Fifth Circuit continued to disagree with the Federal Circuit on where Walker Process appeals belong.
This leaves litigants pursuing Walker Process appeals in a bind: to which circuit should they appeal? There’s now a good chance that wherever they appeal—the Fifth or Federal Circuits—the court of appeals will transfer the case. These circuits have essentially told litigants that if they want the Fifth Circuit to review a Walker Process issue, they should probably appeal to the Federal Circuit. And if they want the Federal Circuit to review the issue, they should probably appeal to the Fifth Circuit.
This is untenable. No good comes from the confusion over where to bring these appeals. And these transfers delay appellate resolution of these cases for no good reason.
The Xitronix Litigation
Understanding Chandler and the Fifth and Federal Circuit’s disagreement requires first understanding the Xitronix litigation. A few years ago, the Fifth and Federal Circuits batted a case called Xitronix Corp. v. KLA-Tencor Corp. between each other for years. 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. These claims 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 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 accordingly belonged in 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. Indeed, the Federael Circuitsaid 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.
The Chandler Litigation & Transfer
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 a Walker Process claim. The district court dismissed the claim claim. The plaintiffs then appealed to the Federal Circuit.
The Federal Circuit concluded that it was bound by its initial Xitronix decision. 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. The Federal Circuit accordingly transferred the case to the Fifth Circuit.
The Fifth Circuit Begrudgingly Accepted the Transfer
The Fifth Circuit ultimately accepted the transfer. The Fifth Circuit noted an important distinction between its decision in Xitronix (which, if binding, would have required transferring the case back to the Fifth Circuit) and Chandler: the patent in Chandler had already been declared unenforceable. With no live issue of patent enforceability, Chandler presented a less compelling case for exclusive Federal Circuit jurisdiction.
The Fifth Circuit reached this conclusion reluctantly. It thought that the Federal Circuit was wrong. Indeed, the Fifth Circuit quoted the Federal Circuit’s second Xitronix opinion as the Fifth Circuit’s own assessment of the Federal Circuit’s decision:
While we do not agree with some of the legal analysis in the Transfer Order, we nevertheless conclude its ultimate conclusion that we have jurisdiction is not “implausible.”
And the Fifth Circuit reiterated that its precedent requires that Walker Process appeals go to the Federal Circuit. But to avoid “a perpetual game of jurisdictional ping-pong,” the Fifth Circuit accepted the transfer.
A Maddening State of Jurisdictional Affairs
As I said when the Federal Circuit transferred Chandler to the Federal Circuit, someone needs to clear up this confusion over the Federal Circuit’s exclusive jurisdiction. The Fifth Circuit’s decision only amplifies that need. It now appears that whether an appeal is originally filed in the Fifth or Federal Circuit, the initial court will transfer the case to the other. Whether that transfer sticks depends on how much the receiving court disagrees with the original court.
This state of affairs produces some absurd guidance. If a litigant wants the Fifth Circuit to review a decision on a Walker Process claim, it should appeal to the Federal Circuit. But if this litigant wants the Federal Circuit to review that decision, it should appeal to the Fifth Circuit.
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, L.L.C., 2022 WL 3355248 (5th Cir. Aug. 15, 2022), available at the Fifth Circuit and Westlaw