United States: The Federal Circuit Is Not the Place For Side Bets

Last Updated: March 14 2013
Article by Daniel R. Foster

Addressing an appeal on non-infringement, inequitable conduct and sanctions after the parties had reached a settlement, the U.S. Court of Appeals for the Federal Circuit dismissed a patent holder's appeal as moot, finding the settlement's $50,000 "bet" to go to the winner of the appeal did not make it a live case and controversy. Allflex USA, Inc. v. Avid Identification Systems, Inc., Case No. 11-1621 (Fed. Cir. Jan. 17, 2013) (Bryson, J.).

Avid Identification Systems appealed the district court's judgment in favor of Allflex. Allflex and Avid are both in the business of technology used in tags attached to animals or objects to locate them if they are lost. Allflex sued Avid for a declaratory judgment that six of Avid's patents were unenforceable due to inequitable conduct and that Allflex was not liable for infringement of any of the patents.

During the proceedings, the district court found that Avid and its former counsel "should be sanctioned" for their failure to disclose the existence of reexamination proceedings that were pending with respect to the patents in suit. After construing the claims, the district court granted summary judgment of non-infringement. Regarding inequitable conduct, the district court found that Avid's failure to disclose information about prior public use and offers to sell one of its products was material. However, the district court denied summary judgment on the inequitable conduct claim because it concluded there was a genuine issue of fact regarding intent to deceive.

The parties then entered into a settlement agreement. Under the terms of the agreement, Avid agreed to pay Allflex $6,550,000. The agreement also allowed Avid to appeal three rulings: the summary judgment of non-infringement, the finding of materiality on inequitable conduct and the court's ruling that Avid and its counsel should be sanctioned. The agreement also provided that if Avid succeeded in overturning any of those three issues, Allflex would return to Avid $50,000 of the settlement payment.

The district court accepted the terms of the settlement agreement, and entered a "Stipulated Order of Final Judgment." Avid appealed, and Allflex did not oppose.

The Federal Circuit addressed whether the district court's order was a "final decision" over which it had jurisdiction. Although the grant of summary judgment of non-infringement finally disposed of the infringement claims, the Federal Circuit scrutinized the inequitable conduct and sanctions issues. The Court found that the sanctions issue was not final, as it was never a final order, but instead was just a recommendation that the party and counsel "should be sanctioned." As a result, the Federal Circuit did not have jurisdiction over the sanctions issue. The Court found the inequitable conduct issue, however, to be final as a result of the specific posture of the

case. The district court had dismissed all aspects of the case, except for the specific issues preserved for appeal. Both the district court's judgment, as well as the parties' settlement agreement made clear there would be no further proceedings in the district court, including on the inequitable conduct issue.

The Federal Circuit also addressed the question of whether the case was still a live case and controversy, or whether it was moot. In contending that the case is not moot, Avid relied entirely on the $50,000 contingent payment. In doing so, Avid relied on a prior case in which it was involved, as well as two prior Supreme Court decisions. The Federal Circuit distinguished the Supreme Court cases because in those cases the parties agreed to a liquidated damages sum depending on the outcome of the case. Likewise, in the prior case involving Avid, the parties had agreed to a specific damages award that was the same amount the jury had awarded if Avid prevailed on the inequitable conduct appeal in that case.

Here, however, the $50,000 contingent payment was neither representative of either an actual damages award or a liquidated damages award. The Federal Circuit explained that the absolute amount at stake is insufficient by itself to establish a relation to the value of the issues on appeal, especially where as in this case the amount was less than 1 percent of the partial settlement payment. After noting that Allflex had $50,000 at stake based on the outcome of the appeal, the Court concluded this amount insufficient to even justify the filing of a brief.

The Federal Circuit concluded that the appellant identified no relationship between the valuation placed on the appeal and the issues that were challenged. Rather, it viewed the $50,000 as simply a "side bet" on the outcome of the appeal and determined that the contingency payment was not sufficient to avoid the conclusion that the issues raised in the appeal were moot.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions