Cisco Systems, Inc. v. Capella Photonics, Inc.

Filing 125

ORDER by Judge Edward M. Chen Denying 122 Defendant/Counterclaimant's Unopposed Motion to Vacate Interlocutory Orders. (emcsec, COURT STAFF) (Filed on 8/3/2021)

Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 1 of 6

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CISCO SYSTEMS, INC.,
Plaintiff,

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United States District Court
Northern District of California

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Case No. 20-cv-01858-EMC

v.
CAPELLA PHOTONICS, INC.,
Defendant.

ORDER DENYING
DEFENDANT/COUNTERCLAIMANT’S
UNOPPOSED MOTION TO VACATE
INTERLOCUTORY ORDERS
Docket No. 122

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This case involves two patents that Defendant and Counter-Plaintiff Capella Photonics,

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Inc. (“Capella”) accuses Plaintiff and Counter-Defendant Cisco Systems, Inc. (“Cisco”) of

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infringing. The parties have reached a settlement of the dispute, and Capella has now filed an

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unopposed motion to vacate two orders: (1) an order granting Cisco’s motion for judgment on the

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pleadings, issued on August 21, 2020, concluding that Capella could not seek damages for alleged

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infringement that took place prior to the reissue of the relevant patents, Docket No. 48; and (2) a

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claim construction order, issued on April 29, 2021, largely adopting the constructions proposed by

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Capella, Docket No. 119, (collectively, the “Contested Orders”). See Docket No. 122 (“Mot.”).

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For the following reasons, the Court DENIES the motion to vacate the Contested Orders.
I.

LEGAL STANDARD

While appellate court vacatur of district court judgments in the context of settlement

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agreements should be granted only in “exceptional circumstances,” U.S. Bancorp Mortg. Co. v.

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Bonner Mall P’ship, 513 U.S. 18, 29 (1994), district courts enjoy “greater equitable discretion

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when reviewing [their] own judgments than do appellate courts operating at a distance,” Am.

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Games, Inc. v. Trade Prod., Inc., 142 F.3d 1164, 1169–70 (9th Cir. 1998). Therefore, a district

Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 2 of 6

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court in this circuit, including in the context of mootness by settlement, may vacate one of its own

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judgments absent exceptional circumstances. See id. at 1168–69. “‘Under [Federal Rule of Civil

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Procedure] 54(b), district courts have complete power over non-final orders’ . . . and ‘may vacate

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or revise them at any time, if doing so would be consonant with equity.’” Automated Packaging

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Sys., Inc. v. Free Flow Packaging Int’l, Inc., No. 18-CV-00356-EMC, 2018 WL 6251051, at *1

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(N.D. Cal. Nov. 29, 2018) (quoting In re Cathode Ray Tube (CRT) Antitrust Litig., No. 14-CV-

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2058 JST, 2017 WL 2481782, at *5 n.14 (N.D. Cal. June 8, 2017)). Thus, district courts conduct

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an “equitable balancing of the hardships and the public interests at stake” to determine whether

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vacatur is appropriate. Am. Games, 142 F.3d at 1166.
Courts in recent years have adopted the factors articulated in Cisco Systems, Inc. v.

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United States District Court
Northern District of California

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Telcordia Technologies., Inc., 590 F. Supp. 2d 828, 830 (E.D. Tex. 2008), to assess whether

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vacatur of interlocutory orders would be equitable: (1) the public interest in the orderly operation

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of the federal judicial system; (2) the parties’ desire to avoid any potential preclusive effect; (3)

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the court’s resources that will be expended if the case continues; and (4) the parties’ interest in

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conserving their resources. See, e.g., Automated Packaging Sys., 2018 WL 6251051, at *2–*3

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(applying Cisco standard); RE2CON, LLC v. Telfer Oil Co., No. 2:10-CV-00786-KJM, 2013 WL

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1325183, at *3 (E.D. Cal. Mar. 29, 2013) (same); W.L. Gore & Assocs., Inc. v. C.R. Bard, Inc.,

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No. CV 11-515-LPS, 2017 WL 4231572, at *2 (D. Del. Sept. 20, 2017) (same); Contour

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Hardening, Inc. v. Vanair Mfg., Inc., No. 114CV00026JMSMJD, 2016 WL 10490508, at *1 (S.D.

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Ind. Feb. 23, 2016) (same).
II.

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DISCUSSION

Capella argues that all four Cisco factors weigh in favor of vacatur in this case. Mot. at 4–

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7. The Court addresses each of these factors in turn below.

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A.

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Orderly Operation of the Federal Judicial System (First Factor)
In granting vacatur of interlocutory orders pursuant to settlement, courts have noted “the

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public policy encouraging the settlement of private dispute.” Lycos, Inc. v. Blockbuster, Inc., No.

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C.A. 07-11469-MLW, 2010 WL 5437226, at *3 (D. Mass. Dec. 23, 2010). The Cisco court

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identified two additional reasons why vacatur would not impede the orderly operation of the
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judicial system. First, even if an interlocutory order is vacated, “whatever instructive or

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persuasive guidance it may provide continues to exist.” Cisco Sys., 590 F.Supp.2d at 831.

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Second, district courts’ claim construction orders—and judgment on the pleadings orders, for that

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matter—are reviewed de novo by the Federal Circuit, “caution[ing] parties and the public against

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excessive reliance on any district court’s construction.” Id. at 830.

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However, courts in this district—including this Court—have sounded concerns about the

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“weighty policy concerns” that are raised by “allowing a patent holder to litigate issues of claim

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construction and infringement, only to settle and obtain vacatur of any unfavorable rulings.”

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Automated Packaging Sys., 2018 WL 6251051, at *2 (quoting Zinus, Inc. v. Simmons Bedding
Co., No. C 07-3012 PVT, 2008 WL 1847183, at *2 (N.D. Cal. Apr. 23, 2008)). As Judge Orrick

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United States District Court
Northern District of California

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explained in denying vacatur of a claim construction order in FlatWorld Interactives LLC v. Apple

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Inc., “a court should not chisel out parts of the public record and the body of law merely because

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an unsatisfied party wants to destroy the remains of its loss.” No. 12-cv-01956-WHO, 2014 U.S.

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Dist. LEXIS 75529, at *6–7 (N.D. Cal. May 15, 2014). Were the practice of obtaining a

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substantive ruling and then settling on the condition that such ruling be vacated to become routine,

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it would not only waste significant judicial resources, but could also relegate courts to playing the

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role of oddsmakers rather than adjudicators. Thus, this Court carefully scrutinizes requests to

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vacate orders where the request is not based on the merits.

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Moreover, while settlement of disputes is generally encouraged as a policy matter, the

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Supreme Court in “Bonner Mall intimate[d] that denying motions to vacate claim construction

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should actually encourage parties to settle before courts expend substantial resources on Markman

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hearings.” RE2CON, 2013 WL 1325183, at *5 (citing Bonner Mall, 513 U.S. at 28). The result

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sought by Capella here “would do just the opposite by encouraging litigants to test their proposed

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claim constructions via a full-blown Markman hearing and decision before settling.” Automated

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Packaging Sys., 2018 WL 6251051, at *2 (quoting Allen-Bradlev Co., LLC v. Kollmorgen Corp.,

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199 F.R.D. 316, 319–20 (E.D. Wis. 2001)). The same analysis applies to judgment on the

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pleadings order: if the Court vacates its judgment on the pleadings order it would encourage

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litigants like Capella to unnecessarily waste this Court’s time testing their merits arguments before
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deciding whether to settle the case.
Because vacatur can be abused as a mechanism for litigants to obtain a kind of trial run of

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the merits of their patent claims without being subject to binding consequences, thus potentially

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delaying settlement and wasting judicial resources, this factor weighs against vacatur.

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B.

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Potential Preclusive Effect (Second Factor)
As Capella admits in its motion, it is unclear whether the Contested Orders have any

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preclusive effect. Mot. at 6; see also Automated Packaging Sys., 2018 WL 6251051, at *2 (“‘The

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collateral or precedential value of Markman orders is an unsettled issue’ because collateral

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estoppel depends on whether a judgment is deemed ‘final’ and ‘standards of finality vary by
circuit.’” (quoting RE2CON, 2013 WL 1325183, at *3–4)); Kollmorgen Corp. v. Yaskawa Elec.

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United States District Court
Northern District of California

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Corp., 147 F. Supp. 2d 464, 467 (W.D. Va. 2001), dismissed sub nom. Kollmorgen Corp. v.

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Yaskawa Elec. Corp, 33 F. App’x 496 (Fed. Cir. 2002) (“This Court believes that a consensual

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settlement between the parties does not constitute a ‘final judgment.’ Accordingly, the doctrine of

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collateral estoppel cannot apply.”). In the context of this uncertainty, courts have reasoned that

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where settlement means “there has been no final determination [of a patent claim] on the merits,”

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there is less reason to give interlocutory orders preclusive effect. Cisco Sys., 590 F. Supp. 2d at

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831. The Cisco court therefore concluded that “the parties’ desire to avoid any preclusive effect

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favor granting the vacatur.” Id.

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On the other hand, if the Contested Orders were to have a preclusive effect or at least serve

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as an important precursor to preclusion, see FlatWorld Interactives, 2014 U.S. Dist. LEXIS 75529,

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at *6, this factor would weigh against vacatur. Moreover, there is “logic in preventing a party

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from taking inconsistent positions in successive cases on issues that affect important public

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interests such as invalidity and infringement of patents.” Id. Here, the risk of Capella taking

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inconsistent positions in other cases is especially acute because it already has several pending

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matters based on the same patent claims pending before this Court, including one against the

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Cisco: Capella Photonics, Inc. v. Cisco Systems, Inc. (“Cisco I”), No. 3:14-cv-03348-EMC (N.D.

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Cal. filed Feb. 12, 2014); Capella Photonics v. Fujitsu Network Communications, Inc. (“Fujitsu”),

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No. 3:14-cv-03349-EMC (N.D. Cal. filed Feb. 12, 2014); Capella Photonics, Inc. v. Tellabs, Inc.
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Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 5 of 6

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(“Tellabs”), No. 3:14-cv-03350 (N.D. Cal. filed Feb. 12, 2014); and Capella Photonics, Inc. v.

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Ciena Corporation (“Ciena”), No. 3:20-cv-08628-EMC (N.D. Cal. filed Mar. 17, 2020.
In view of these countervailing considerations, this factor is neutral.

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C.

Court’s and Parties’ Time and Resources (Third and Fourth Factors)
Capella contends that vacatur advances the parties’ interest in “avoid[ing] the needless

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waste of resources (private and judicial) that would be expended in resolving any future collateral

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estoppel challenge based thereon.” Mot. at 1. And if denial of vacatur here meant that the parties’

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litigation would proceed, the Court would “most likely need to expend substantial resources to

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prepare and issue a post-trial opinion resolving the merits of the parties’ disputes.” Forest Labs.,
Inc. v. Teva Pharm. USA Inc., No. CV 14-121-LPS, 2016 WL 3606177, at *3 (D. Del. May 25,

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United States District Court
Northern District of California

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2016). Thus, some courts have found that resource-conservation considerations weigh in favor of

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vacatur.

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But the Court has already been required to entertain briefing and hear oral argument not

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just on the judgment on the pleadings and claim construction motions, but also on Capella’s

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motions to reconsider and certify for interlocutory appeal the Court’s judgment on the pleadings

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order. See Docket Nos. 53, 58. “‘The public paid for this use of court resources through its tax

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dollars,’ and ‘[v]acatur would render that expenditure a waste.’” Automated Packaging Sys., 2018

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WL 6251051 (quoting Zinus, 2008 WL 1847183, at *2)); see also Forest Labs., 2016 WL

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3606177, at *2 (“When parties brief and argue claim construction disputes, which require

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resolution by the Court, it will usually be inefficient . . . to treat the Court’s resolution of such

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disputes as a nullity by granting [vacatur].”). A further concern is that granting vacatur “would

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increase the possibility that other courts might be called on to expend duplicative resources in

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construing the terms” of the patents at issue. RE2CON, 2013 WL 1325183, at *5. Here, this

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Court faces that risk in the Cisco I, Fujitsu, Tellabs, and Ciena actions. Moreover, as noted above,

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allowing vacatur under these circumstances would result in fewer settlements prior to claim

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construction.

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In any event, the parties have not demonstrated that the settlement “is expressly
conditioned upon the court’s granting this motion to vacate.” RE2CON, 2013 WL 1325183, at *4.
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Thus, it has not established that the parties and the Court would expend additional resources if this

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motion is denied. Cf. U.S. Gypsum Co. v. Pac. Award Metals, Inc., No. C 04-04941JSW, 2006

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WL 1825705, at *1 (N.D. Cal. July 3, 2006) (granting motion to vacate claim construction order

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where “the parties contend[ed] that the agreement to file the . . . motion was a significant factor in

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successfully resolving this litigation.”).

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On balance, these two factors weigh against vacatur.

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III.

CONCLUSION

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For the foregoing reasons, the motion to vacate is DENIED.

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This order disposes of Docket No. 122.

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United States District Court
Northern District of California

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IT IS SO ORDERED.

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Dated: August 3, 2021

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______________________________________
EDWARD M. CHEN
United States District Judge

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