[co-author: Charles Lee]

In a recent order issued in the Northern District of Texas, Judge Godbey denied a Defendant’s Rule 12(b)(6) motion despite the Federal Circuit’s holding that the asserted patent was invalid as indefinite. Hyosung TNS, Inc. v. Diebold Nixdorf, Inc., No. 3:16-CV-0364-N (N.D. Tex. Dec. 5, 2019). The Federal Circuit appeal arose from a related ITC investigation. Because new evidence not presented on the ITC record may alter a term’s claim construction and, as a result, the asserted patent’s validity, Judge Godbey concluded an issue of fact exists and therefore, denied the motion.

As is typical with parallel district court and ITC investigations, this district court case was originally stayed until the ITC investigation and its appeal concluded. At the ITC, ALJ Shaw found the term “cheque standby unit” definite and that the Respondent infringed six of the asserted patent’s claims. The Respondent appealed the ITC’s decision, and based on the evidence collected in the investigation, the Federal Circuit reversed, holding that the term “cheque standby unit” was invalid as indefinite because the term is a means-plus-function term without disclosure of a corresponding structure in the asserted patent’s specification. The Federal Circuit also noted that “trial courts, after deciding factual disputes, must interpret patent claims in light of the facts that they found—‘[t]his ultimate interpretation is a legal conclusion.’” Diebold Nixdorf, Inc. v. ITC, 899 F.3d 1291, 1299 (Fed. Cir. 2018) (quoting Teva Pharms. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 841 (2015)) (emphasis added).

After the district court lifted the stay, the Respondent filed a motion to dismiss on the basis that the Federal Circuit already found the asserted patent to be invalid as indefinite. Judge Godbey denied the motion to dismiss, finding that the possible introduction of new evidence at trial may produce a different claim construction, which may result in a different determination on the asserted patent’s validity. Since Judge Godbey believed “there is a fact issue” as to the patent’s validity, the issue of validity could not be resolved on the pleadings.

Takeaways

Following Judge Godbey’s reasoning, district courts may be willing to deny 12(b)(6) motions based on invalidity determinations by the Federal Circuit following an ITC investigation in certain circumstances. Complainants should consider whether to pursue infringement allegations at the district court, even after a finding of invalidity by the Federal Circuit. Respondents who seek to dismiss such allegations may want to consider the applicability of this order to their case.