The US Court of Appeals for the Federal Circuit affirmed a summary judgment of non-infringement based on invalidity of asserted reissue claims as impermissibly broadened, notwithstanding a covenant not to sue that the patent owner submitted in the case in an attempt to moot the dispute. ArcelorMittal v. AK Steel Corp., Case No. 16-1357 (Fed. Cir., May 16, 2017) (Hughes, J) (Wallach, J, dissenting).

The appeal stems from a January 2010 lawsuit filed by ArcelorMittal against AK Steel and others for allegedly infringing its patent relating to coated hot and cold rolled steel. A jury found that the patent was invalid as anticipated and obvious, but the Federal Circuit reversed and remanded (IP Update, Vol. 15, No. 12). While the appeal was pending, the patent was reissued. ArcelorMittal then amended its complaint to replace the original patent with the reissue patent. The district court found that claims had been improperly broadened and invalidated the patent, including two new claims added on the reissue. In a May 2015 appeal, the Federal Circuit concluded that while the original claims of the patent were invalid because of impermissible broadening during the reissue proceeding, the two new claims remained valid.

On remand, ArcelorMittal moved to dismiss the case for lack of jurisdiction because it was not asserting the two new claims in the lawsuit and the remaining asserted claims had been found invalid. At the same time, the defendants moved for summary judgment of non-infringement of the two new claims. To avoid a judgment on the defendants’ motion, ArcelorMittal executed and delivered to the district court a conditional covenant not to sue defendants and their customers under the reissue patent. The delivery included a statement to the district court that the covenant was tendered on condition that ArcelorMittal’s motion to amend the complaint be resolved. Importantly, the delivery included a statement that the patentee would be “ready to deliver the covenant unconditionally” upon resolution of the motion and also that the point of the conditional delivery was to ensure that the district court maintained jurisdiction over the case. Nonetheless, the district court held the new claims invalid and denied the motion to amend as moot. ArcelorMittal appealed.

On appeal, the Federal Circuit agreed with the district court that it still held subject matter jurisdiction over the case because the covenant not to sue was not fully delivered:

Although a patentee’s grant of a covenant not to sue a potential infringer can sometimes deprive a court of subject matter jurisdiction, the patentee “bears the formidable burden of showing” “that it ‘could not reasonably be expected’ to resume its enforcement efforts. . . . In this context, that requires ArcelorMittal to show that it actually granted a covenant not to sue to Defendants, and that the covenant enforceably extinguished any real controversy between the parties related to infringement of the [reissue] patent. . . .

At no time before the court entered summary judgment did ArcelorMittal unconditionally assure Defendants and their customers that it would never assert [reissue] claims 24 and 25 against them. ArcelorMittal certainly had ample opportunity to provide the unconditional assurances required to defeat jurisdiction. It did not. . . . The district court, well within its discretion in managing its docket, resolved the . . . summary judgment motion without having first resolved the motion to amend.

The primary disputed issue was whether the district court possessed subject matter jurisdiction when it granted summary judgment of invalidity and non-infringement. The majority found a sufficient case or controversy, while Judge Wallach, in dissent, would have found appellant’s covenant not to sue sufficient to moot the dispute.

Practice Note: This case demonstrates that a case or controversy is not moot, and jurisdiction is not avoided, by tendering an unexecuted and conditional covenant not to sue.