CAFC finds that CD Cal failed to provide a “full and fair opportunity to ventilate the issues.”

The opinion begins


Defendant Zinus, Inc., appeals from a summary
judgment entered in favor of plaintiff Cap Export, LLC,
and third-party defendants Abraham Amouyal and
4Moda Corp. (collectively, “Cap Export”) by the United
States District Court for the Central District of California.
The district court ordered Zinus, the owner of U.S. Patent
No. 8,931,123 (“the ’123 patent”), to file a motion for
summary judgment of validity of that patent. Following
briefing, the court held two of the asserted claims of
Zinus’s patent invalid for obviousness. The court then
dismissed all of Zinus’s counterclaims with prejudice. We
vacate the district court’s summary judgment and remand
for further proceedings.




Of the issues leading to decision to vacate:


On appeal, Zinus raises a number of objections to the
district court’s summary judgment ruling. Three of
Zinus’s arguments are persuasive.

First, the district court improperly granted summary
judgment for Cap Export sua sponte, without proper
notice to Zinus. “It is well established that a district court
has ‘the power to enter summary judgment[] sua sponte,
so long as the losing party was on notice that she had to
come forward with all of her evidence.’” Mikkelsen Graphic
Eng’g, Inc. v. Zund Am., Inc., 541 F. App’x 964, 972
(Fed. Cir. 2013) (quoting Celotex Corp. v. Catrett, 477 U.S.
317, 326 (1986)); see also Albino v. Baca, 747 F.3d 1162,
1176 (9th Cir. 2014) (“Even when there has been no crossmotion
for summary judgment, a district court may enter
summary judgment sua sponte against a moving party if
the losing party has had a full and fair opportunity to
ventilate the issues involved in the matter.”). Rule 56(f)
of the Federal Rules of Civil Procedure provides that
district courts may grant summary judgment for a nonmovant
only after “giving notice and a reasonable time to
respond.” See Mikkelsen, 541 F. App’x at 972–73.




AND


When it ordered Zinus to make a motion for summary
judgment of validity, the district court provided no notice
that the court was contemplating entering summary
judgment of invalidity. Normally, if a patent holder were
to lose a motion for summary judgment of validity, the
result would be a trial, not a judgment of invalidity. In
fact, because a patent carries a presumption of validity
and a challenger must prove invalidity by clear and
convincing evidence, a patentee need not present any
factual evidence to prevail on a motion for summary
judgment of validity. Massey v. Del Labs., Inc., 118 F.3d
1568, 1573 (Fed. Cir. 1997). The district court gave no
notice that it might grant summary judgment against
Zinus.
Furthermore, Zinus lacked a “full and fair opportunity
to ventilate the issues.” Gospel Missions of Am. v. City of
Los Angeles, 328 F.3d 548, 553 (9th Cir. 2003). Because of
the unusual sequence of briefs and evidence, Zinus did not
have an opportunity to depose Cap Export’s expert, whose
declaration was first presented as part of Cap Export’s
sur-reply filed on November 11, 2016. Nevertheless, the
district court relied on the expert’s testimony and found it
“credible.” Zinus was also denied an opportunity to
present evidence of objective indicia of nonobviousness,
which could have supported its position that the claims of
the ’123 patent were not obvious. See, e.g., Cheese Sys.,
Inc. v. Tetra Pak Cheese & Powder Sys., Inc., 725 F.3d
1341, 1353 (Fed. Cir. 2013). Although Zinus stated in its
reply brief in support of its motion for summary judgment
of validity that it was not “at this time asking the Court to
consider any objective evidence of nonobviousness,” Zinus
was entitled to present evidence of nonobviousness,
including objective evidence of nonobviousness, in defending
against a motion for summary judgment of invalidity.
Under these circumstances, Zinus lacked both notice
that the district court would enter summary judgment of
invalidity sua sponte and an opportunity to present evidence
and argument as to why summary judgment should
not be entered against it. Accordingly, the district court’s
entry of summary judgment in Cap Export’s favor was
procedurally improper.




Of the second point



As neither party raised arguments regarding the validity of
claim 2, the district court erred in dismissing that claim
with prejudice. In addition, although a district court may
decline to exercise supplemental jurisdiction over state
law claims after dismissing federal claims pursuant to 28
U.S.C. § 1367(c)(3), any such dismissal must be without
prejudice. Davila v. Smith, 684 F. App’x 637, 638 (9th
Cir. 2017) (citing Gini v. Las Vegas Metro. Police Dep’t, 40
F.3d 1041, 1046 (9th Cir. 1994)). Accordingly, the district
court erred in dismissing claim 2 of the ’123 patent and
Zinus’s state law claims with prejudice.


Of the third point


Third, the district court improperly relied on the “bed
in a box” prior art reference despite a factual dispute
regarding whether the reference predated the ’123 patent.
Cap Export alluded to the “Amazing Bed in a Box” website
only in its April 2016 letter to Zinus’s counsel; it did
not assert the website as prior art in any of its briefs to
the district court in connection with Zinus’s motion for
summary judgment of validity. In its opening brief on
that motion, Zinus argued that the website does not
predate the priority date of the ’123 patent, which is
September 25, 2013, because the website appears to have
been posted in November 2014.2 It appears that Cap
Export may have abandoned the reference altogether, as
Cap Export did not address that reference in its opposition
brief before the district court. See Shakur v. Schriro,
514 F.3d 878, 892 (9th Cir. 2008) (holding that a party
abandons claims by not defending them in opposition to a
motion for summary judgment); Stichting Pensioenfonds
ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125,
1132 (C.D. Cal. 2011) (“[I]n most circumstances, failure to
respond in an opposition brief to an argument put forward
in an opening brief constitutes waiver or abandonment in
regard to the uncontested issue.”).
Nevertheless, the district court relied on that reference
in concluding that claims 1 and 3 would have been
obvious. The court explained that “someone with ordinary
skill in the art would view the Tiffany Bed (with a
headboard compartment), the Aspelund bed (with legs
attached to the footboard), and the Bed in a Box (where
all pieces of the bed fit in one compartment), and combine
these references . . . .” At best, the disputed fact regarding
the publication date of the “bed in a box” reference
precludes reliance on that reference for purposes of summary
judgment. See Tennison v. City & Cty. of San
Francisco, 570 F.3d 1078, 1087 (9th Cir. 2009); Lamle v.
Mattel, Inc., 65 F. App’x 293, 295 (Fed. Cir. 2003).