November 4, 2020

A "Bitterly Divided" Federal Circuit Declines to Stay Decision Invalidating Car Driveshaft Patent

Holland & Knight Section 101 Blog
Mark T. Goracke
Section 101 Blog

Despite one concurring judge's belief in a "fair probability" that the U.S. Supreme Court would grant certiorari and reverse an order invalidating American Axle's driveshaft patent for purportedly claiming natural law, the U.S. Court of Appeals for the Federal Circuit denied the patentee's motion to stay the issuance of the mandate and determined that American Axle had not made a showing of a likelihood of irreparable injury absent a stay. Am. Axle & Mfg. Inc. v. Neapco Holdings LLC, No. 2018-1763, 2020 WL 6228080 (Fed. Cir. Oct. 23, 2020).  

In denying the stay, the Federal Circuit adopted and applied a three-pronged test requiring an applicant seeking a stay of the issuance of a mandate to show:

(1) a reasonable probability that four Justices will consider the issue sufficiently meritorious to grant certiorari; (2) a fair prospect that a majority of the Court will vote to reverse the judgment below and (3) a likelihood that irreparable harm will result from the denial of a stay. In close cases the Circuit Justice or the Court will balance the equities and weigh the relative harms to the applicant and to the respondent.

The Federal Circuit followed Chief Justice John Roberts' decision in Teva Pharms. USA Inc. v. Sandoz Inc., where the Supreme Court applied the above standard in a patent case and denied a stay solely for lack of irreparable injury. See Teva Pharms. USA Inc. v. Sandoz Inc., 572 U.S. 1301, 1301-02 (2014) (holding that, should the patentee prevail and the patent be held valid, the patentee would "be able to recover damages from respondents for past infringement" and "extraordinary relief that [patentee sought was] unwarranted."). In American Axle, the Federal Circuit followed the Chief Justice's lead, holding that an order remanding to the district court for further proceedings on claim 1 and its related claims did not justify a stay of the mandate because continued litigation and expense – even if substantial and unrecoverable – did not constitute irreparable injury justifying a stay. Further, the Federal Circuit was not persuaded by American Axle's argument that the mandate would be recalled, should the Supreme Court grant review, and decide the asserted claims were patent-eligible under § 101, as such action is "common to every case in which the Supreme Court does not affirm, [and thus] is not irreparable harm."  The decision suggests that the prospect of further district court proceedings while a case is on review could not constitute irreparable injury justifying a stay under Federal Rule of Appellate Procedure 41.

The Federal Circuit's refusal to stay the issuance of the mandate follows its tied 6-6 ruling in July, where the Federal Circuit refused to review the District of Delaware's decision invalidating the patent-at-issue, despite U.S. Circuit Judge Kara Farnandez Stoll's caution that the majority holding would "likely invite eligibility challenges to many other patents directed to mechanical inventions or otherwise." Judge Kimberly Moore, following her strong dissent from the initial invalidity decision, authored a concurring opinion to the Federal Circuit's Oct. 23, 2020, ruling, agreeing that a stay was unwarranted due to a lack of irreparable harm. Moore cautioned against the broadening of "judicial exceptions in a way that threatens to swallow the whole of the [patent] statute" after American Axle "established a fair prospect that the Supreme Court will reverse our usurpation of the district court's fact-finding role and our decision to expand the natural law exception to cover an automotive manufacturing process in direct contravention of the plain statutory language."

Judge Moore warned that the judges on the "bitterly divided" Federal Circuit, "[a]s the nation's lone patent court, are at a loss as to how to uniformly apply § 101." Moore further cautioned that the current case was not the progeny of either Alice or Mayo, but rather the Federal Circuit's "own dramatic expansion of a judicial exception to § 101." Moore also recognized that judges of the oft-divided Federal Circuit – especially split on issues concerning § 101 – were unanimous in their "unprecedented plea for guidance" when they urged the Supreme Court to grant certiorari in Athena to provide direction concerning whether diagnostic claims are eligible for patent protection. Certiorari was denied on Jan. 13, 2020.

Whether that guidance is eventually coming from the Supreme Court – and whether it will lead to more agreement on the Federal Circuit bench – remains to be seen.

The case is: Am. Axle & Mfg., Inc. v. Neapco Holdings LLC, No. 2018-1763, 2020 WL 6228080 (Fed. Cir. Oct. 23, 2020)

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