## United States Court of Appeals for the Federal Circuit
2008-1441, -1454 UNIVERSITY OF PITTSBURGH, Plaintiff-Appellant,

v. VARIAN MEDICAL SYSTEMS, INC., Defendant-Cross Appellant.

Roderick R. McKelvie , Covington & Burling LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Richard J. Johnson, Jr. ; and Deanna L. Kwong , of San Francisco, California. Of counsel on the brief were Daniel Johnson, Jr. , Morgan, Lewis & Bockius LLP, of San Francisco, California and Peter Buscemi , of Washington, DC. Matthew H. Poppe , Orrick, Herrington & Sutcliffe LLP , of Menlo Park, California, argued for defendant-cross appellant. With him on the brief were William L. Anthony , Eric L. Wesenberg , and Zheng Liu

. Appealed from: United States District Cour t for the Western District of Pennsylvania Judge Arthur J. Schwab

## United States Court of Appeals for the Federal Circuit

2008-1441, -1454

UNIVERSITY OF PITTSBURGH, Plaintiff-Appellant,

v.
VARIAN MEDICAL SYSTEMS, INC., Defendant-Cross Appellant.

Appeals from the United States Distric t Court for the Western District of Pennsylvania in case no. 07-CV- 0491, Judge Arthur J. Schwab.

______________________

DECIDED: June 9, 2009

______________________ Before GAJARSA, CLEVENG ER, and DYK Circuit Judges

. GAJARSA, Circuit Judge

. The University of Pittsburgh (“Pitt”) appeals the final judgm ent of the United States District Court for the Western Distric t of Pennsylvania dism issing with prejudice its patent infringement action for lack of standing. Judgment, Un iv. of Pittsburgh v. Varian Med. Sys., Inc. , No.07-CV-0491 (W.D. Penn. J une 16, 2008). Varian Medical Systems, Inc. (“Varian”) cro ss appeals the district court’ s denial of its motions for sanctions and attorney fees. We need not decide whether a dismi ssal was warranted in this case because we hold the district c ourt erred in dismissing the claims “withprejudice.” Thus, we vacate the dismissal and remand with instruct ions to designate the dismissal as “without pr ejudice.” BACKGROUND In 1994, scientists at Pitt and Carnegi e Mellon University (“Carnegie Mellon”) agreed to collaborate to develop an improved apparatus for administering radiation therapy to lung cancer patients. Pitt and Carnegie Mellon adopted a set of policy guidelines (“Guidelines”) to govern intellect ual property rights and technology transfer procedures regarding products of that collaboration. In accordance with the Guidelines, the universities designated Pitt’s Technology Transfer Office to commercialize the inventions relevant to this case. Pitt t hen filed two patent applications covering those inventions, which issued as U.S. Pat ent Nos. 5,727,554 (“the ’554 patent”) and 5,784,431 (“the ’431 patent”). Pitt is t he named assignee on those patents. In April 2007, Pitt sued Varian for infri ngement of the ’554 and ’431 patents. On November 21, 2008, Varian mo ved for summary judgment bas ed on its assertion that Pitt lacks standing to bring the action. Specif ically, Varian alleged that Carnegie Mellon is a co-owner of the patents in suit, and t hat because Carnegie Mello n was not joined as a plaintiff, Pitt lacks standing to s ue for patent infringement. See Int’l Nutrition Co. v. Horphag Research Ltd. , 257 F.3d 1324, 1331 (Fed. Cir. 2001) (stating that “all coowners normally must join as plaintiffs in an infringement suit”). A few days later, on November 26, the district court referred that motion to a special master. On December 5, 2007, Pitt moved to join Ca rnegie Mellon as a plaintiff pur suant to Federal Rule of Civil Procedure 19; the distri ct court denied that motion without explanation. Order Den. Pl.’s Mot. to Join Carnegie Mellon University, Univ. of Pittsburgh v. Varian Med. Sys., Inc. , No. 07-CV-0491 (W.D. Penn. Dec. 14, 2007) (“Order Denying Joinder”).

2008-1441, -1454 2On March 8, 2008, the special master submitted his report and recommendation to the district court. The special master determined that Carnegie Mellon is a co-owner of the patents in suit and a necessary party to the action. The special master recommended that the district court grant Varian’s motion for summary judgment without prejudice to Pitt filing an amended co mplaint with Carnegie Mellon added as a plaintiff. In the alternative, the specia l master recommended that the district court vacate its previous order denyi ng Pitt’s motion to join Car negie Mellon. Varian objected to the special master’s recommendation, argui ng that it was too late for Pitt to add Carnegie Mellon and urging the di strict court to dismiss the action with prejudice. The district court agreed with Varian, dismissing the action with prejudice on the grounds that Carnegie Mellon should have been jo ined when the action was commenced and that joinder at that point in the litigation would be unfair to Va rian. Univ. of Pittsburgh v. Varian Med. Sys., Inc. , No. 07-CV-0491, 2008 WL 190920 8, at *2–3 (“Pitt I ”). Pitt’s failure to join Carnegie Mellon in a timely manner was thus fata l to Pitt’s standing to sue. Id. Pitt timely appealed to this court. We hav e jurisdiction over the district court’s final judgment pursuant to 28 U.S.C. § 1295(a)(1). DISCUSSION On appeal, Pitt argues that t he district court erred in dismissing the action because Carnegie Mellon is not a co-owner of the patents and thus not a necessary party to the action. Pitt also asserts that the district court further erred when it designated its dismissal as a dismissal “ with prejudice.” We find that argument persuasive. Namely, we hold that even if Carnegie Mellon is a necessary party, and even if dismissal is a proper consequence for Pi tt’s failure to join Carnegie Mellon, the

2008-1441, -1454 3dismissal should have been without prejudice. Because that holding resolves the conflict before us, we decline to consider w hether Carnegie Mellon is a necessary party to the action or whether dismissal would be the proper consequence if Pitt failed to join a necessary party. 1
I. Standard of Review In reviewing a district court’s determi nation that a dismissal should be with prejudice, we apply the procedural law of the pertinent regional circuit. See H.R. Techs., Inc. v. Astechnologies, Inc. , 275 F.3d 1378, 1384 (Fed. Cir . 2002). The Third Circuit reviews a district court’s decision to designate a dismissal as “with prejudice” for abuse of discretion. See, e.g. , Anderson v. Ayling , 396 F.3d 265, 271 (3d Cir. 2005); Alvin v. Suzuki , 227 F.3d 107, 111 (3d Cir. 2000). We re view the district court’s relevant factual findings for clear error. See Henglein v. Informal Plan for Plant Shutdown Benefits for Salaried Employees , 974 F.2d 391, 397 (3d Cir. 1992). In the present case, the district court gave two reasons for dismissing the case with prejudice: (1) because Pitt should have joined Carnegie Mellon at the commencement of its infringement acti on and (2) because Pitt’s attempt to join Carnegie Mellon was “untimely and unfair to defendant.” Pitt I , 2008 WL 1909208, at *2–3. Dismissal with prejudice is improper under either rationale.

1 At oral argument, Pitt admitted that should we decide in its favor on the issue of whether the district court erred by designating that the dismissal is “with prejudice,” that holding resolves this case such that we need not reach the additional issues presented by Pitt. Recording of Oral Argument at 41:15–41:35, Univ. of Pittsburgh v. Varian Med. Sys., Inc. , No. 2008-1441, -1454 (Fed. Cir. Mar. 5, 2009), available at http://oralarguments.cafc.uscourts.gov.
2008-1441, -1454 4II. Joinder of the Patent’s Co-Owner As this court has explained, if a co-o wner of a patent wishes to sue for infringement, he must join the other co-owners in the action in order to avoid a dismissal for lack of standing. Isr. Bi o-Eng’g Project v. Amgen Inc. , 475 F.3d 1256, 1264–65 (Fed. Cir. 2007). In the present case, the dist rict court dismissed the action based on its determination that Pitt lacks stand ing because it failed to join a co-owner of the ’554 and ’431 patents, Carnegie Mellon, at the inception of its lawsuit. Thus, the district court’s action may be considered a dismissal for failure to join a necessary party under Federal Rule of Civil Procedure 19(b) or, more generally, a dismi ssal for lack of standing. We consider each possibl e rationale in turn. Federal Rule of Civil Procedure 12(b)(7) allows a district court to dismiss an action for failure to join a party under Rule 19. However, it is clear that a dismissal for failure to join a party is not an adjudication on the merits, and thus, should not have preclusive effect—i.e. such a dismi ssal should be without prejudice. See Hughes v. United States , 71 U.S. (4 Wall.) 232, 237 (1866) (“If the first suit was dismissed for defect of pleadings, or parties, . . . the j udgment rendered will prove no bar to another suit.”); Gilman v. Rives , 35 U.S. (10 Pet.) 298, 301–02 (1836) (“[A] judgment that a declaration is bad in substance [i.e. as here fo r failure to join necessary parties] . . . can never be pleaded as a bar to a good declaration for the same cause of action. The judgment is in no just sense a ju dgment upon the merits.”); see also 18A Wright, Miller & Cooper, Federal Prac tice and Procedure § 4438 (2d ed. 1987). For these reasons, if the district court concluded that Pitt failed to jo in a co-owner of the patents in suit, then it had discretion to dismiss the action, but it lacked discretion to do so with prejudice. The district court should have dismissed the ac tion without prejudice, wh ich would allow Pitt
2008-1441, -1454 5to file a second action with the standing defe ct cured through the joinder of the proper parties or an assignment of t he necessary patent rights. Even if we ignore the party jo inder issue and view the di strict court’s action as a simple dismissal for lack of standing, we still conclude that the di strict court abused its discretion. A dismissal for la ck of standing is juri sdictional and is not an adjudication on the merits. Media Techs. Lic ensing, LLC v. Upper Deck Co. , 334 F.3d 1366, 1370 (Fed. Cir. 2003) (“Because standing is jurisdictional, lack of standing precludes a ruling on the merits.”). The Third Circuit and this court, as well as other regional circuit courts, have repeatedly emphasized that a di smissal for lack of standing should generally be without prejudice, particularly when the def ect is curable. See, e.g. , Pa. Prison Soc’y v. Cortes , 508 F.3d 156, 158 (3d Cir . 2007) (“We now hold that t he District Court may not have had jurisdiction to decide the merits of the comp laint. Accordingly, we . . . remand with directions to conduct further proceedings, as necessary, to determine whether any of the plaintiffs has standing and if not, to dismiss the complaint without prejudice.”); Fieldturf, Inc. v. Sw. Recreational Indus. , 357 F.3d 1266, 1269 (Fed. Cir. 2004) (“Ordinarily, dismissal for lack of standing is without prejudice. On occasion, however, a dismissal with prejudice is ap propriate, especially where it is plainly unlikely that the plaintiff will be able to cure the standing pr oblem.” (internal cita tion and quotation marks omitted)); H.R. Techs. , 275 F.3d at 1384 (“Because lack of standing is not an issue that goes to the merits of the underlying patent iss ues, a dismissal of a complaint for lack of standing would not normally be expected to be made with prejudice.”); Ko rvettes, Inc. v. Brous , 617 F.2d 1021, 1024 (3d Cir. 1980) (“A dismissal for lack of jurisdiction is plainly not a determination of the merits of a clai m. Ordinarily, such a dismissal is ‘without

2008-1441, -1454 6prejudice.’”); see also Stalley ex rel. United States v. Orlando Reg’l Healthcare Sys., Inc. , 524 F.3d 1229, 1234–35 (11th Cir. 2008) (explaining that a dismissal for lack of standing is necessarily without prejudice because the court lacked subject matter jurisdiction and thus could not reach the merits of the claim); Fleck & Assocs. v. City of Phoenix , 471 F.3d 1100, 1106–07 (9th Cir. 2006) (same); Brereton v. Bountiful City Corp. , 434 F.3d 1213, 1216–19 (10th Cir . 2006) (same and collecting cases); Kasap v. Folger Nolan Fleming & Douglas, Inc. , 166 F.3d 1243, 1248 (D.C. Cir. 1999) (modifying a dismissal to be without prej udice because “dismissals for lack of jurisdiction are not decisions on the merits and therefore have no res judicata effect on subsequent attempts to bring suit in a court of competent jurisdiction ”). Thus, the law universally disfavors dismissing an action with prejudice based on lack of standing, and there is a strong presumption that such a dismissal is improper. Nonetheless, Varian argues t hat we should affirm the “ with prejudice” nature of the district court’s dismissal because we have twice affirmed such a dismissal with prejudice. We disagree; the cases cited by Varian do not support dismissal with prejudice in this case. In Sicom , we affirmed the district c ourt’s dismissal with prejudice because the action at issue “was Sicom’s se cond suit that was dismissed for lack of standing” and because “Sicom al ready had a chance to cure the defect and failed.” Sicom Sys., Ltd. v. Agilent Techs., Inc. , 427 F.3d 971, 980 (Fed. Cir. 2005) (also noting that “dismissal with prejudice is generally inappropriate wh ere the standing defect can be cured”). The present case is distinguishable in at least three ways: Pitt did not file a previous action that was dismissed for lack of standing; Pitt’s motion attempting to cure the defect by joining Carnegie Mellon was denied; and Pitt’s alleged standing defect can

2008-1441, -1454 7be cured. Our decision in Textile Productions likewise does not support Varian’s position because, in that case, it was unlike ly that the standing defect could be cured. See Textile Prods., In c. v. Mead Corp. , 134 F.3d 1481, 1484–85 (Fed. Cir. 1998); see also H.R. Techs. , 275 F.3d at 1385 (noting that the parties did not contest the “with prejudice” nature of the dism issal in Textile Productions , most likely because “it was plainly unlikely that the plaintiff would have been able to cure the standing problem” and additionally noting that this c ourt has cited Textile Productions “for the prop osition that a dismissal for lack of standing would ordi narily be without prejudice”). Thus, our decisions in Sicom and Textile Productions are entirely consistent with this court’s repeated statements that a dismissal for lack of standing should generally be without prejudice so as to permit the filing of a new action by a party with proper standing. In this case, we can discern no facts that meri t deviation from that general rule, and we hold that the district court abused its discretion. III. Dismissal with Prejudice as a Sanction As a second reason for dismissing the ac tion with prejudice, th e district court explained that Pitt’s belated atte mpts to join Carnegie Mell on were “untimely and unfair” to Varian. However, the district court ci ted no authority indicating why dismissal with prejudice is a proper consequence for an “untim ely and unfair” attempt to join a party. Varian argues the “with prejudice” nature of the dismissal was an appropriate sanction based on Pitt’s failure to follow the court’s scheduling order and Pitt’s “undue delay” during the litigation. To supp ort its argument, Varian refers specifically to the district court’s statements that “Plaintiff obviously knew of CMU’s existence and its residual rights in the patents-in-suit, and chose not to jo in CMU,” that Pitt’s decision not to join Carnegie Mellon appeared to be for “tactical” reasons, and that Pitt’s attempt to join
2008-1441, -1454 8Carnegie Mellon was “untim ely and unfair” to Varian. Pitt I , 2008 WL 1909208, at *2–3. The determination of whether dismissal with prejudice is an appropriate sanction for such actions is a procedural issue not unique to patent law, and thus, we apply the law of the regional circuit. See, e.g. , Bowling v. Hasbro, Inc. , 403 F.3d 1373, 1375 (Fed. Cir. 2005); L.E.A. Dynatec h, Inc. v. Allina , 49 F.3d 1527, 1531 (Fed. Cir. 1995). Under Third Circuit la w, dismissal with prejudice ma y be, although it rarely is, a proper sanction. See, e.g. , Venuto v. Witco Corp. , 117 F.3d 754, 759 (3d Cir. 1997) (“[I]f a district court concludes that a litigant has unduly delayed, it can—and, presumably, ordinarily will—deny a motion to amend ‘with prejudice.’”). However, the law makes clear that dismissa l with prejudice should rarely be used as a sanction. See Alvin , 227 F.3d at 122 (noting that dismissal with prejudice “is a severe and disfavored remedy”); Blasband v. Rales , 971 F.2d 1034, 1055 (3d Cir . 1992) (stating, while considering the propriety of a dismissal with prejudice, that “[o]ur case law manifests a strong preference that plaintiffs be given le ave to amend where amendment is likely to cure the defects resulting in dismissal”); Harris v. Cuyler , 664 F.2d 388, 390 (3d Cir. 1981) (stating that “a party s hould not be denied t he right to assert or defend against claims as a ‘mere punishment’” and expressing the Third Circuit’s “r eluctance to sustain dismissal with prejudice”); see also Dyotherm Corp. v. Turbo Mach. Co. , 392 F.2d 146, 148–49 (3d Cir. 1968) (“Dismissal is a harsh s anction which should be resorted to only in extreme cases. The power of the c ourt to prevent undue delays and to control its calendars must be weighed against the policy of law which favo rs disposition of litigation on its merits.”). In other words, “dismissa l [with prejudice] is a drastic sanction and should be reserved for those cases where there is a clear record of delay or

2008-1441, -1454 9contumacious conduct by the plaintiff.” Donnelly v. Johns-Manville Sales Corp. , 677 F.2d 339, 342 (3d Cir. 1982) . Relying on Donnelly , the Third Circuit has explicitly instructed: [F]our factors which, while not exclusive, are relevant to a determination whether a dismissal with prejudice is appropriate: (1) the degree of the plaintiff’s personal responsibility for the delay; (2 ) prejudice to the defendant occasioned by the delay; (3) any history that the plaintiff proceeded in a dilatory manner; and (4) the effectiveness of sanctions other than dismissal. Madesky v. Campbell , 705 F.2d 703, 704 (3d Cir. 1983). The Third Circuit has interpreted the fourth factor “to require that the district court indicate on the record that it has considered sanctions less severe than dismissal.” Id. In the present case, the district court’s opinion simply fails to discuss any of the relevant factors. Although the opinion states that it finds dismissal to be more appropriate than adding Carnegie Mellon to the action, Pitt I , 2008 WL 1909208, at *3, that alone does not explain wh y the dismissal should be with prejudice. Of more relevance, the district court’ s opinion states that Pitt knew of Carnegie Mellon’s residual rights in the patents and indicates that Pitt chos e not to join Carnegie Mellon for tactical reasons. See id. Varian relies heavily on those statements to support its assertion that the district court properly di smissed the action with prej udice as a sanction. We disagree with Varian because those statements are not sufficient to support a dismissal with prejudice. Although the district cour t’s statements do relate to three of the Donnelly factors—namely Pitt’s responsibility for the del ay, prejudice to Vari an, and Pitt’s history of delay—the district court provided no explanat ion or citations to the record to support its statements. The district court likewis e provided no explanatio n when it initially
2008-1441, -1454 10denied Pitt’s motion to join Carnegie Mellon. See Order Denying Joinder. On occasion, we may affirm the district court’s judgment in the absence of a recitation of its reasons for entering the judgment because “[w]e sit to review judgments, not opinions.” See Stratoflex, Inc. v. Aeroquip Corp. , 713 F.2d 1530, 1540 (Fed. Cir . 1983). However, we cannot affirm here; the judgment is not suppor ted by the record. First, the record does not support the district court’s statements that Pitt knew it must join Carnegie Mellon but declined to do so. Whether Carnegie Mellon is a necessary party to Pitt’s infringement action is a complex question; it presents nov el facts that we have not previously considered in the standing context, and Pitt could have reasonably determined that Carnegie Mellon need not be joined. Second, we have considered all of the evidence cited by Varian, but it falls short of demonstrati ng that any of the Donnelly factors were met here. Any doubts regarding t he use of dismissal as a sanction “should be resolved in favor of reaching a decision on t he merits.” Scarborough v. Eubanks , 747 F.2d 871, 878 (3d Cir. 1984). Because di smissal with prejudice is a harsh sanction that is disfavored under Third Circuit law and is not justified on this record, the dismissal should have been without prejudice. We have considered the parties’ remaining arguments, including Varian’s arguments in support of its cross appeal, and we find them unpersuasive. CONCLUSION Because the district court’s dismissal of Pitt’s infringement action with prejudice was an abuse of discretion under all rationales proffered by Varian, we vacate the dismissal and remand with inst ructions to designate the dism issal as without prejudice to Pitt’s ability to establish standing th rough the joinder of Ca rnegie Mellon or the assignment of whatever rights Carnegie Me llon may have in the patents in suit.
2008-1441, -1454 112008-1441, -1454 12 VACATED AND REMANDED COSTS No costs.