Wednesday, May 05, 2021

CAFC analyzes FRCP 60(b)(3) in CAP Export

The outcome was affirmance:

Zinus, Inc. (“Zinus”) appeals the decision of the United States District Court for the Central District of California setting aside a judgment and injunction pursuant to Federal Rule of Civil Procedure 60(b)(3). We affirm.

Before turning to the law of Rule 60(b)(3), it is important to understand the basis of the 60(b)(3) motion. In patent cases, “[a] person shall be entitled to a patent unless . . . the claimed invention was . . . on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U.S.C. § 102(a)(1) (emphasis added). This is referred to as the “on-sale bar” provision, which defines a type of “prior art.” Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc., 139 S. Ct. 628, 631–32 (2019). Prior art under the on-sale bar can support a determination that a patent claim is invalid as anticipated or obvious. 35 U.S.C. §§ 102(a), 103.8

As to Rule 60(b)

Rule 60(b) provides:

(b) Grounds for Relief from a Final Judgment, Order, or Proceeding. On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons: . . . (3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party[.] Fed. R. Civ. P. 60(b). A motion under Rule 60(b)(3) “must be made within a reasonable time,” and “no more than a year after the entry of the judgment or order or the date of the proceeding.” Fed. R. Civ. P. 60(c)(1). The motion here satisfied the one-year requirement. “Relief under [Rule 60(b)(3)] is a procedural issue on which we apply regional circuit law.” Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 402 F.3d 1198, 1204–05 (Fed. Cir. 2005). “Motions for relief from judgment pursuant to Rule 60(b) are addressed to the sound discretion of the district court and will not be reversed absent an abuse of discretion.” Casey v. Albertson’s Inc., 362 F.3d 1254, 1257 (9th Cir. 2004). “A district court abuses its discretion if it does not apply the correct law or if it rests its decision on a clearly erroneous finding of material fact.” Id. “To prevail [under Rule 60(b)(3)], the moving party must prove by clear and convincing evidence that the verdict was obtained through fraud, misrepresentation, or other misconduct and the conduct complained of prevented the losing party from fully and fairly presenting the defense.” De Saracho v. Custom Food Mach., Inc., 206 F.3d 874, 880 (9th Cir. 2000). The Ninth Circuit has held that “Federal Rule of Civil Procedure 60(b)(3) require[s] that fraud . . . not be discoverable by due diligence before or during the proceedings.” Casey, 362 F.3d at 1260 (alterations in original) (quoting Pac. & Arctic Ry. & Navigation Co. v. United Transp. Union, 952 F.2d 1144, 1148 (9th Cir. 1991)). The Ninth Circuit’s additional due diligence requirement appears contrary to the text of Rule 60(b)(3), which does not mention diligence.10 The parties cite no cases from other courts of appeals adopting this additional requirement, nor are we aware of any other courts of appeals that have adopted it.11


On appeal here, Zinus contests the district court’s determination that Cap Export “met its burden of establishing by clear and convincing evidence that it [was] entitled to relief under Rule 60(b)(3).” J.A. 21. Zinus focuses primarily on the due diligence requirement, seeming to blame the victim’s so-called “incompetent lawyers” for the adverse consequences it suffered as a result of the fraud. Appellant’s Br. 33. Zinus argues that “emails relating to the Woody shipments would have been discovered if Cap Export’s lawyers had exercised due diligence and propounded standard document production requests for a patent case.” Id. at 38.12 Cap Export does not dispute that its written discovery served on Zinus did not specifically seek prior art; that it did not depose the inventor of the ’123 patent; and that although a deposition of Lawrie was taken, it was not taken under Federal Rule of Civil Procedure 30(b)(6). Even though the Ninth Circuit’s requirement for Rule 60(b)(3) that the “fraud” not be discoverable through due diligence seems questionable, we follow it here. Casey, 362 F.3d at 1260. The question is what constitutes due diligence in discovering fraud. Ninth Circuit cases applying Rule 60(b)(3) do not elaborate on the due diligence requirement, but Ninth Circuit decisions in other contexts provide guidance


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