Addressing jurisdictional issues under the America Invents Act (AIA), the US Court of Appeals for the Federal Circuit denied a petition for a writ of mandamus challenging a district court order compelling a petitioner to produce allegedly privileged documents. In re: Rearden LLC, Case No. 16-125 (Fed. Cir., Nov. 17, 2016) (Stoll, J).
Virtue Global Holding Limited (VGHL) filed a district court complaint accusing Rearden of false or misleading representations of fact concerning ownership of visual effects technology contained in various hardware, source code and physical assets, and protected by trademarks, copyrights, trade secrets and patents (MOVA assets). Both VGHL and Rearden claimed ownership of the MOVA assets, and each sought a declaration that it owned the assets. VGHL also argued that Rearden’s patent assignments were invalid, and Rearden counterclaimed seeking damages for patent infringement. The central issue on appeal related to VGHL’s motion to compel Rearden to produce, during discovery, certain documents Rearden exchanged with its corporate lawyer. Finding that Rearden failed to show it could assert the attorney-client privilege, and had in fact waived any such privilege, the magistrate judge granted VGHL’s motion to compel. Rearden objected, but the district court found that Rearden failed to establish that the magistrate’s findings were clearly erroneous or contrary to law.
Rearden petitioned the Federal Circuit for a writ of mandamus challenging the district court’s order. VGHL argued that the Federal Circuit lacked jurisdiction to issue mandamus because the issue lay solely with the regional circuit court of appeal. The Federal Circuit disagreed, noting that 28 USC § 1295(a) grants the Federal Circuit appellate jurisdiction “in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents.” Notably, the AIA expanded the Federal Circuit’s jurisdiction to encompass compulsory counterclaims “arising under” patent law. This expanded jurisdiction is limited to compulsory counterclaims and does not include permissive counterclaims.
The Federal Circuit’s decision on jurisdiction thus boiled down to whether Rearden’s patent infringement counterclaim was compulsory or permissive. Under Rule 13 of the Federal Rules of Civil Procedure, a compulsory counterclaim is one that “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” In this case, the Court found the claims to be compulsory because they involved the same patents; shared overlapping legal and factual issues; shared substantial evidentiary overlap such that the same evidence could refute both the claims of ownership and the counterclaims of infringement; and shared a close, logical relation—the ownership and rightful use of the technology in the MOVA assets.
Turning to the merits of the mandamus petition, the Federal Circuit reviewed the district court’s denial of a request for an evidentiary hearing and denial to supplement the record under an abuse of discretion standard. Because petitioners sought relief by way of mandamus, the Federal Circuit emphasized that its review was “particularly deferential” and that it would only overturn the district court’s determination if Rearden showed that it had a clear and indisputable right to relief and no adequate alternative legal channels to obtain the same relief. Ultimately, Rearden fell short of meeting this standard, and the Court declined to enter mandamus relief.