Engel Indus., Inc. v. Lockformer Co., Nos. 98-1294, 1999 U.S. App. LEXIS 1419 (Fed. Cir. Feb. 3, 1999).

LICENSE AGREEMENT - REFUND OF ROYALTY PAYMENT - SCOPE OF JUDGMENT - REMAND - FRAUD - MISREPRESENTATION

ISSUE & DISPOSITION

Issue

Whether the federal district court lacked jurisdiction to consider the non-infringing licensee's request for a refund of royalty payments from the patent owner when the licensee did not raise the issue in the previous appeal to the Federal Circuit.

Disposition

Yes. The district court lacked jurisdiction to consider the licensee's refund request even if the appeals court found non-infringement of the patent by the licensee since the Appellant chose not to raise the issue in the earlier appeal to the Federal Circuit thereby waiving the issue entirely.

SUMMARY

Appellant, Engel Industries, Inc. ("Engel"), entered into a licensing agreement with Appellee, the Lockformer Company ("Lockformer"). The agreement granted Engel a license to use Lockformer's patent, U.S. Patent No. 4,466,641 (the '641 patent), on a duct connecting system used in the heating, ventilating, and air conditioning ("HVAC") industry. Engel produced a competing duct connecting system which it insisted, both in the licensing agreement and in other statements, did not infringe the '641 patent. Nevertheless, Engel signed the agreement containing a clause releasing Engel and its customers from all liability under the '641 patent.

Engel sought a declaratory judgment that its system did not infringe the '641 patent. After numerous appeals, the Federal Circuit held that Engel's system did not infringe Lockformer's patent. Engel then filed a "Motion for Entry of Final Judgment in Accordance with the Federal Circuit Opinion and Mandate" claiming that it was entitled to a refund of royalty payments made after filing for the declaratory judgment. Lockformer filed a motion for relief from the declaratory judgment asserting fraud and misconduct by Engel at trial. The district court denied both motions. It claimed lack of jurisdiction over Engel's motion and held that Lockformer had not met its burden of proof under Fed. R. Civ. Pro. 60(b)(3).

The Federal Circuit held that the court is entitled to assume that, in its appeal, the appellant has included all important issues. Therefore, any issue not raised is deemed to be waived. Unless remanded by the appellate court, all issues within the scope of the judgment are incorporated within the mandate and are not subject to further adjudication. The Federal Circuit, however, did not reach the question of whether the rule of Lear v. Adkins, 395 U.S. 653, 162 U.S.P.Q. (BNA) 1 (1969), that a licensee is entitled to recoup royalties from a patent owner after a determination of non-infringement by the licensee, can be extended to the instant case.

Regarding Lockformer's motion, the Federal Circuit ruled that, because Rule 60(b)(3) is not an issue unique to patent law, the court should apply the law of the regional circuit where the appeal would take place. The applicable standard is abuse of discretion. The Federal Circuit held that the district court did not abuse its discretion in finding that Lockformer failed to carry its burden of proof.