United States Court of Appeals 

for the Federal Circuit 

__________________________ 

SPREAD SPECTRUM SCREENING LLC, 

Plaintiff-Appellant, 

v. 

EASTMAN KODAK COMPANY, CONTINENTAL 

WEB PRESS, INC., GRAPHIC PARTNERS, INC., 

JOHNS-BYRNE COMPANY, AND GENESIS PRESS, 

INC 

Defendants-Appellees. 

__________________________ 

2011-1019 

__________________________ 

Appeal from the United States District Court for the 

Northern District of Illinois in Case No. 10-CV-1101, 

Judge Robert W. Gettleman. 

_________________________ 

Decided: September 26, 2011 

_________________________ 

CHAD ENNIS, F&B LLP, of Austin, Texas, argued for 

the plaintiff-appellant. With him on the brief was ADAM 

V. FLOYD. Of counsel was JOSEPH D. GRAY. 

R. SCOTT FELDMANN, Crowell & Moring, LLP, of Irvine, California, argued for the defendants-appellees. 

With him on the brief were BRIAN M. KOIDE, of Washing-
SPREAD SPECTRUM v. EASTMAN KODAK 2

ton, DC, and SCOTT L. BITTMAN, of New York, New York. 

Of counsel was JEFFREY D. SANOK, of Washington, DC. 

__________________________ 

Before RADER, Chief Judge, LOURIE and O’MALLEY, 

Circuit Judges. 

O’MALLEY, Circuit Judge. 

In this patent case, Spread Spectrum Screening LLC 

(“S3”) filed suit in the Northern District of Illinois against 

Eastman Kodak Company (“Kodak”) and four of Kodak’s 

customers – Continental Web Press, Inc., Graphic Partners, Inc., Genesis Press, Inc., and Johns-Byrne Company 

(collectively, “the Kodak Customers”) – alleging infringement of U.S. Patent No. 5,689,623 (“the ’623 Patent”). On 

September 1, 2010, the district court granted Kodak’s 

motion to: (1) sever the claims against it from those 

against the other defendants; (2) stay the action against 

the Kodak Customers in Illinois; and (3) transfer the case 

against Kodak to the Western District of New York. S3 

appeals only from the portion of the order granting Kodak’s motion to stay the case against the Kodak Customers pending the outcome of its action against Kodak in 

New York. Spread Spectrum Screening, LLC v. Eastman 

Kodak Co., No. 10 C 1101, 2010 U.S. Dist. LEXIS 90549 

(N.D. Ill. Sept. 1, 2010) (“District Court Opinion”). Because this appeal is not from a final judgment within the 

meaning of 28 U.S.C. § 1295(a)(1), and does not otherwise 

qualify as an appealable order, we dismiss for lack of 

jurisdiction. 

BACKGROUND

A. Factual Background 

 1. The ’623 Patent 
3 SPREAD SPECTRUM v. EASTMAN KODAK

The ’623 Patent – entitled “Spread Spectrum Digital 

Screening” – was invented by an individual named Adam 

Pinard and is currently assigned to S3, a patent holding 

company. The patent, which issued on November 18, 

1997, discloses a type of screening mask that can be used 

in commercial printing software and includes claims 

drawn to a “spread spectrum digital screening mask,” 

methods and systems for using the mask, and binary 

reproductions of a continuous tone image that have certain claimed characteristics. 

The technology involved relates to digital “halftoning,” which S3 describes as “a process used in the 

commercial printing industry to convert a continuous tone 

image, such as a photograph, into a half-tone image 

consisting of a pattern of minute dots that, when viewed 

at a suitable distance, appears to recreate the continuous 

tone image.” Appellant’s Br. 14. Newspapers, for example, are printed in half-tone. 

The ’623 Patent contains four sets of claims: 

 Claims 1-12, which claim a digital screening mask; 

 Claims 13-16, which claim methods of using the digital screening mask; 

 Claim 17, which claims a system that uses 

the digital screening mask; and 

 Claims 18-19, which claim binary reproductions having certain characteristics. 

According to S3, the screening masks described in the 

’623 Patent result in “visually-pleasing half-tone images 

that [are] less susceptible to dot gain and dot loss and 

thus more commercially viable than the prior art.” Appellant’s Br. 17. 
SPREAD SPECTRUM v. EASTMAN KODAK 4

 2. Kodak’s Staccato Software 

Kodak manufactures, uses, and licenses the allegedly 

infringing products under the brand name Staccato. The 

Kodak Customers are licensed to use the Staccato software products. According to Kodak, it has licensed 1,621 

copies of the software in the United Sates, and the Kodak 

Customers represent only nine (9) licenses. Appellees’ Br. 

5. 

Although the Kodak Customers are licensed to use the 

Staccato software, they are not involved in making it. 

According to S3, the Kodak Customers “use Kodak’s 

digital screening masks and systems to generate halftoned images” which are “typically etched onto a printing 

plate. The plate is then installed in a printing press, 

which applies ink onto the plate and then rolls it onto a 

media, thereby transferring the image onto the media.” 

Appellant’s Br. 18. S3 alleges that the Kodak Customers 

manufacture and sell their own binary reproductions “in 

the form of half-toned image reproductions.” Id. 

B. Procedural History 

On February 18, 2010, S3 filed suit against Kodak 

and the Kodak Customers in the Northern District of 

Illinois alleging infringement of the ’623 Patent. S3 also 

named a Kodak competitor, Heidelberg U.S.A., Inc., and 

its customer, Hafner Printing Co., Inc., as defendants – 

both of which were later dismissed from the litigation.1 

In the complaint, S3 alleges that Kodak: (1) makes, uses, 

and sells software that directly infringes claims 1-9, 11, 

and 13-18 of the ’623 Patent; and (2) actively induces its 

customers to infringe claims 1-9, 11, and 13-18 of the ’623 

 1 S3 entered into a settlement agreement with Heidelberg and Hafner. Pursuant to the parties’ request, on 

September 29, 2010, the district court entered an order of 

dismissal with respect to those defendants. 
5 SPREAD SPECTRUM v. EASTMAN KODAK

Patent. With respect to the Kodak Customers, S3 alleges 

that they infringe the ’623 Patent by: (1) using Kodak’s 

infringing products; and (2) manufacturing binary reproductions that independently infringe claim 18 of the ’623 

Patent. Specifically, S3 alleges, the Kodak Customers 

directly infringe “at least claims 1-9, 11, and 13-18 of the 

’623 Patent by making, using, selling, and/or offering for 

sale infringing products and/or methods.” Joint Appendix 

(“J.A.”) 68 at ¶ 67. 

Kodak and three of its Customers (Genesis, JohnsByrne, and Graphic Partners) counterclaimed seeking 

declaratory judgment that the ’623 Patent is invalid and 

not infringed. In addition, one of Kodak’s Customers, 

Johns-Byrne, filed a cross-claim against Kodak for indemnification. In the cross-claim, Johns-Byrne alleged 

that it uses the Staccato product “in only one type of job, 

printing a white base on plastic” and that this use 

“amounts to perhaps 1% or 2% of Johns-Byrne’s business, 

and can be accomplished with other software.” J.A. 258 at 

¶ 3.2

On April 29, 2010, Kodak filed a motion to: (1) sever 

the case against it from the other defendants; (2) transfer 

the case against it to the Western District of New York; 

and (3) stay the case against the Kodak Customers in the 

Northern District of Illinois. The Kodak Customers joined 

in Kodak’s motion. 

On September 1, 2010, the district court granted Kodak’s motion in full. Specifically, the court: (1) severed 

 2 At oral argument, counsel for Kodak indicated 

that the cross-claim has been settled and that Kodak: 

(1) “do[es] not have any outstanding disputes with the 

customers”; and (2) “is defending them all in the Western 

District of New York.” Oral Argument at 18:52, available 

at http://www.cafc.uscourts.gov/oral-argumentrecordings/2011-1019/all. 
SPREAD SPECTRUM v. EASTMAN KODAK 6

S3’s claims against Kodak from the claims against its 

competitor, Heidelberg, on grounds that the actions did 

not arise from a common transaction or occurrence; 

(2) severed S3’s claims against Kodak from its claims 

against the Kodak Customers; (3) stayed the case against 

the Kodak Customers pending resolution of S3’s case 

against Kodak; and (4) transferred the case against 

Kodak to the Western District of New York pursuant to 

28 U.S.C. § 1404(a), concluding that it is a more convenient forum and that the interest of justice favored the 

transfer.3 S3 appeals only from the portion of the district 

court’s order granting the stay. 

With respect to the motion to stay, the district court 

found that the Kodak Customers were “merely peripheral” to the action against Kodak, would “add nothing to 

plaintiff’s infringement action against Kodak,” and were 

named as defendants solely to establish venue in the 

Northern District of Illinois. Accordingly, the court 

stayed S3’s action against the Kodak Customers pending 

the resolution of the case against Kodak in New York. In 

reaching this conclusion, the court noted that, “if the 

 3 Pursuant to the district court’s transfer order, 

S3’s action against Kodak was transferred to Judge David 

Larimer in the Western District of New York. On January 10, 2011, Kodak filed a motion to stay proceedings 

pending resolution of its request for reexamination to the 

PTO. In Kodak’s reply in support of the motion, it indicated that the PTO granted its reexamination request. 

On August 26, 2011, the New York court granted Kodak’s 

motion to stay pending reexamination. Spread Spectrum 

Screening LLC v. Eastman Kodak Co., No. 10-CV-6523L, 

2011 U.S. Dist. LEXIS 95660 (W.D.N.Y. Aug. 26, 2011). 

The court noted, however, that S3 is “permitted to apply 

for the issuance of letters rogatory authorizing depositions 

of two witnesses who are Canadian citizens.” Id. at *4. 

The propriety of the New York stay is not before this 

court. 
7 SPREAD SPECTRUM v. EASTMAN KODAK

action against Kodak proceeds and Kodak’s Staccato 

product is found to have infringed the ’623 patent, and 

each of Kodak’s Customers are found to have used Staccato in their processes, they will also have infringed the 

’623 patent.” District Court Opinion, 2010 U.S. Dist. 

LEXIS 90549, at *9. The court found that, because the 

customers “merely use” the Kodak product, “they have 

nothing substantive to offer during plaintiff’s action 

against Kodak and likely do not even understand how the 

product software actually works and will not be helpful to 

determine whether Kodak’s Staccato product infringes the 

’623 patent.” Id. 

S3 timely appealed to this court asserting jurisdiction 

under both 28 U.S.C. §§ 1292 and 1295. 

STANDARD OF REVIEW

On matters relating to this court’s jurisdiction, we apply Federal Circuit law, “not that of the regional circuit 

from which the case arose.” Nystrom v. Trex Co., Inc., 339 

F.3d 1347, 1349-50 (Fed. Cir. 2003). Whether the court 

has jurisdiction over an appeal from a district court 

decision is a question of law the court reviews “in the first 

instance.” Pause Tech. LLC v. TiVo, Inc., 401 F.3d 1290, 

1292 (Fed. Cir. 2005) (citing Nystrom, 339 F.3d at 1349-

50)). 

DISCUSSION

S3 argues that the stay order is a final appealable order and that the district court abused its discretion in 

granting the stay because its decision was based on “an 

incorrect finding that the Printer Defendants were mere 

customers of Kodak and peripheral to the litigation.” 

Appellant’s Br. 13. S3 asserts that there are three independent bases for jurisdiction in this court. First, S3 

contends that the stay is appealable as a final order under 
SPREAD SPECTRUM v. EASTMAN KODAK 8

§ 1295. Second, it argues that jurisdiction is proper under 

the customer suit exception to the first-to-file rule discussed in Kahn v. General Motors Corp., 889 F.2d 1078 

(Fed. Cir. 1989). Finally, S3 argues that the stay is 

appealable under § 1292 because the district court effectively “issued an injunction barring S3 from proceeding 

against the Printer Defendants.” Appellant’s Br. 9. 

In response, Kodak argues that this court should dismiss the case for lack of jurisdiction because: (1) the stay 

was not a final judgment under 28 U.S.C. § 1295, and 

none of the exceptions to the finality requirement applies; 

(2) the customer suit exception articulated in Kahn does 

not apply; and (3) the stay did not involve an injunction 

and thus is not appealable under 28 U.S.C. § 1292(a)(1). 

In the alternative, Kodak argues that, if the court finds 

jurisdiction, it should affirm on grounds that the district 

court acted within its discretion in granting the stay. 

For the reasons set forth below, we find Kodak’s primary arguments well-taken. Because the stay was not a 

final appealable order, we lack jurisdiction over S3’s 

appeal. 

A. The Stay is Not a Final Judgment Under 28 

U.S.C. § 1295. 

Under the “final judgment rule,” parties may only appeal a “final decision of a district court.” 28 U.S.C. 

§ 1295(a)(1). A “final decision” is “one which ends the 

litigation on the merits and leaves nothing for the court to 

do but execute the judgment.” Catlin v. United States, 

324 U.S. 229, 233 (1945) (noting that the policy “is one 

against piecemeal litigation”). 

Here, the district court stayed S3’s case against the 

Kodak Customers pending resolution of its case against 

Kodak. Because the stay does not dispose of S3’s claims 
9 SPREAD SPECTRUM v. EASTMAN KODAK

against the Kodak Customers or the pending counterclaims, and therefore was not a final judgment, the court 

lacks jurisdiction under § 1295. S3 argues, however, that 

the district court’s order is final because: (1) it put S3 

effectively “out of federal court”; and (2) under the Supreme Court’s decision in Gillespie v. United States Steel 

Corp., 379 U.S. 148 (1964), it was “practically final.” We 

disagree. 

1. S3 is Not “Out of Federal Court” 

Generally, a stay is not considered a final appealable 

order. A stay order is appealable, however, if it puts the 

plaintiff “effectively out of court.” Moses H. Cone Mem’l 

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 10 (1983). In 

Moses Cone, the Supreme Court held that an order staying litigation in federal court pending resolution of a case 

in state court that would have res judicata effect on the 

federal action put the plaintiff “effectively out of court.” 

Id. (noting that the stay order “amounts to a dismissal of 

the suit”). 

This court similarly has held that a stay may be an 

appealable order “when it effectively puts the parties out 

of the district court, either permanently because it terminates the action as a practical matter, or, as some courts 

have held, for a protracted or indefinite period.” Gould v. 

Control Laser Corp., 705 F.2d 1340, 1341 (Fed. Cir. 1983) 

(citation omitted). In Gould, the district court granted a 

stay pending reexamination. Id. On appeal, we found 

that the stay was “not for such a protracted or indefinite 

period as to render its issuance an abuse of discretion” 

and that it did not terminate the action but “merely 

shifted to the PTO an issue (patent claim validity) involved in the dispute before the district court.” Id. at 

1341-42. In reaching this conclusion, we distinguished 

Moses Cone on grounds that a stay pending reexamina-
SPREAD SPECTRUM v. EASTMAN KODAK 10

tion normally does “not foreclose review on the merits by 

a federal court.” Id. at 1342 (“District court and PTO 

decisions on the merits are both reviewable by this 

court.”). We have, however, recognized a narrow exception where such a stay “effectively disposes of the district 

court action.” Slip Track Sys., Inc. v. Metal Lite, Inc., 159 

F.3d 1337, 1340 (Fed. Cir. 1998). In Slip Track, we found 

that, under the facts of that case, a stay pending the 

outcome of PTO reexamination proceedings was appealable because it was possible that the appellants would be 

unable to raise the issue of priority of invention in any 

forum. Id. (noting that, during reexamination, Slip Track 

could not swear behind a patent claiming the same invention and that “the district court will have no occasion to 

consider the issue of priority of invention following the 

resolution of the PTO proceeding”). 

Here, S3 argues that, by granting the stay, the district court “effectively dismissed the case against the 

Printer Defendants.” According to S3, the stay “is indefinite because it will remain in limbo for an indeterminable 

and substantial period of years.” Appellant’s Reply 15. In 

support of this argument, S3 points to the fact that: 

(1) the median time to trial in the Western District of 

New York is almost five years; and (2) Kodak moved to 

stay the New York case pending reexamination, possibly 

delaying its day in court even further. Indeed, as noted, 

the New York court recently granted Kodak’s motion to 

stay pending reexamination (“the New York stay”). Given 

this potentially lengthy period of time, S3 submits that 

the district court’s order puts it “effectively out of court 

with respect to the Printer Defendants.” Appellant’s Br. 

9. 

In response, Kodak argues that S3’s reliance on the 

“out of court” line of cases is misguided because those 

cases “only apply where a stay surrenders federal court 
11 SPREAD SPECTRUM v. EASTMAN KODAK

jurisdiction to a state court or administrative body.” 

Appellees’ Br. 15. We agree. See Slip Track, 159 F.3d at 

1340 (“[F]ederal courts have often found jurisdiction to 

review stays in favor of state court suits when the state 

court judgment would have a fully preclusive effect on the 

federal action or moot the federal action entirely. Stays in 

favor of administrative proceedings are similarly reviewed 

on an ‘effectively out of court’ standard.”) (internal citations omitted). Here, the stay does not have the effect of 

surrendering the federal action to state court or to an 

administrative body. Instead, S3 has the ability to pursue 

its case against Kodak in federal court in New York. And, 

importantly, the stay is not indefinite – the proceedings 

against the Kodak Customers in Illinois will resume (to 

the extent necessary) after the action against Kodak in 

New York is resolved.4 Although the propriety of the 

recently granted New York stay is not before this court on 

appeal, it is not indefinite and does not render S3 out of 

federal court. See Gould, 705 F.2d at 1341-42 (noting that 

“stays to enable reexamination do not foreclose review on 

the merits by a federal court”). Indeed, it contemplates 

that discovery will proceed when the reexamination is 

complete and allows preparations for foreign discovery to 

 4 At oral argument, counsel for Kodak indicated 

that “Kodak represented to the court that it has taken 

responsibility for any infringement arising out of the use 

of the Staccato software by its customer defendants.” 

Oral Argument at 19:25. When asked what it means to 

“take responsibility” for the Kodak Customers, counsel 

explained that Kodak “would pay damages, defense costs.” 

Id. at 19:37. Counsel for Kodak further agreed that, if 

Kodak loses on validity and infringement on claims 1-17 

in the New York action, it will not seek to relitigate those 

claims in Illinois. Id. at 21:35. Finally, counsel explained 

that claim 18, which was asserted against Kodak as well 

as the Kodak Customers, may also be resolved in the New 

York action. Id. at 22:04. 
SPREAD SPECTRUM v. EASTMAN KODAK 12

begin. Accordingly, the New York court’s decision to 

impose a discretionary stay pending reexamination does 

not alter this court’s analysis with respect to S3’s ability 

to pursue its claims in federal court. 

To the extent S3 argues that the stay is indefinite due 

to the pace of litigation in the Western District of New 

York, such delay inherent in the federal court system is 

not the type of “protracted or indefinite” delay contemplated in Gould. As noted above, Gould was concerned 

with effectively foreclosing federal court jurisdiction, not 

with a change in the location of that jurisdiction or with 

orders relating to the priority of issues to be litigated in 

federal court on judicial efficiency grounds. Here, S3’s 

case against Kodak was immediately transferred to 

another district court, not to a state court or administrative body. And, unlike the situation in Slip Track, where 

the stay meant that the appellant would never have its 

day in court with respect to priority issues, here, S3 has 

not shown that any issue will go unresolved by a federal 

court due to the stay.5 See Slip Track, 159 F.3d at 1340. 

Accordingly, S3 is not cast “out of federal court.” 

 2. The Stay is Not Final Under Gillespie.

S3 next relies upon a 1964 Supreme Court decision – 

Gillespie v. United States Steel Corporation, 379 U.S. 148 

(1964) – for the proposition that the stay should be considered final. In Gillespie, the Court noted that, “a deci-

 5 Although S3 argues that the length of the stay is 

prejudicial, it neglects to explain how the delay would 

unduly prejudice its position in this case. During oral 

argument, counsel for S3 identified “evidentiary prejudice” as the primary harm from the stay, but conceded 

that the parties have an ongoing obligation to preserve 

evidence and that “monetary damages will still be available” to compensate S3 for any infringement. Oral Argument at 9:37. 
13 SPREAD SPECTRUM v. EASTMAN KODAK

sion ‘final’ within the meaning of § 1291 does not necessarily mean the last order possible to be made in a case.” 

379 U.S. at 152 (citation omitted). On the unique facts 

presented in Gillespie, which involved a wrongful death 

claim under the Jones Act, the Ohio wrongful death 

statute, and general maritime law, the Court found that 

immediate appellate review of an interlocutory order was 

permissible because the effect of the trial court’s ruling, 

which struck certain claims from the complaint, was 

“fundamental to the further conduct of the case.” Id. at 

154. The Court noted that, “in deciding the question of 

finality the most important competing considerations are 

‘the inconvenience and costs of piecemeal review on the 

one hand and the danger of denying justice by delay on 

the other.’” Id. at 152-53 (citation omitted). 

In a subsequent decision, the Supreme Court “severely limited Gillespie as a basis for accepting an appeal 

from an interlocutory decision.” Copelands’ Enters., Inc. 

v. CNV, Inc., 887 F.2d 1065, 1068 (Fed. Cir. 1989) (citing 

Coopers & Lybrand v. Livesay, 437 U.S. 463, 477 n.30 

(1978)). In Coopers & Lybrand, the Supreme Court 

indicated that its decision in Gillespie: 

upheld an exercise of appellate jurisdiction of 

what it considered a marginally final order that 

disposed of an unsettled issue of national significance because review of that issue unquestionably 

“implemented the same policy Congress sought to 

promote in § 1292(b),” and the arguable finality 

issue had not been presented to this Court until 

argument on the merits, thereby ensuring that 

none of the policies of judicial economy served by 

the finality requirement would be achieved were 

the case sent back with the important issue undecided. 
SPREAD SPECTRUM v. EASTMAN KODAK 14

Coopers & Lybrand, 437 U.S. at 477 n.30 (quoting Gillespie, 379 U.S. at 154). The Court further noted that, “[i]f 

Gillespie were extended beyond the unique facts of that 

case, § 1291 would be stripped of all significance.” Id. 

This court similarly has found that the “exception to 

the finality created by Gillespie is to be very rarely used 

beyond the unique facts of that case.” Fairchild Republic 

Co. v. United States, 810 F.2d 1123, 1126 (Fed. Cir. 1987). 

Because both the Supreme Court and this court have 

declined to extend Gillespie beyond its unique facts, we 

will not do so here. 

B. The Court Does Not Have Jurisdiction 

Under the Customer Suit Exception. 

S3 next argues that interlocutory review is warranted 

because the district court’s stay order resulted from “an 

erroneous application of the policy favoring manufacturer 

suits over those against customers.” Appellant’s Br. 3 

(citing Kahn v. Gen. Motors Corp., 889 F.2d 1078 (Fed. 

Cir. 1989)). In Kahn, we recognized a customer-suit 

exception “to the general rule that favors the forum of the 

first-filed action.” Tegic Commc’ns Corp. v. Bd. of Regents 

of Univ. of Tex. Sys., 458 F.3d 1335, 1343 (Fed. Cir. 2006). 

The exception provides that, in certain patent cases, 

“litigation against or brought by the manufacturer of 

infringing goods takes precedence over a suit by the 

patent owner against customers of the manufacturer.” 

Katz v. Lear Siegler, Inc., 909 F.2d 1459, 1464 (Fed. Cir. 

1990) (citation omitted). 

The customer suit exception “is based on the manufacturer’s presumed greater interest in defending its 

actions against charges of patent infringement; and to 

guard against possibility of abuse.” Kahn, 889 F.2d at 

1081 (citation omitted); see also Katz, 909 F.2d at 1464 

(noting that “the manufacturer is the true defendant in 
15 SPREAD SPECTRUM v. EASTMAN KODAK

the customer suit” and that it “must protect its customers, 

either as a matter of contract, or good business, in order 

to avoid the damaging impact of an adverse ruling against 

its products”) (citation omitted). As this court has noted 

previously, “the guiding principles in the customer suit 

exception cases are efficiency and judicial economy.” 

Tegic, 458 F.3d at 1343. Generally speaking, courts apply 

the customer suit exception to stay earlier-filed litigation 

against a customer while a later-filed case involving the 

manufacturer proceeds in another forum. 

S3 argues that jurisdiction is proper based on language in Kahn which states that, “[d]ecrees staying an 

action based on an erroneously applied customer suit 

exception to the rules disfavoring stays have, without 

more, uniformly received interlocutory review.” Kahn, 

889 F.2d at 1080. According to S3, because the district 

court’s stay order was based on an erroneous determination that the Kodak Customers were “merely peripheral,” 

this court has jurisdiction on appeal. 

In response, Kodak argues that Kahn is not controlling because it: (1) found interlocutory review only under 

the specific facts of that case; and (2) was limited to 

application of Second Circuit law. For the reasons articulated below, we find that the customer suit exception, 

which is a narrow exception to the first-to-file doctrine, 

does not create jurisdiction over this appeal.

First, the procedural posture in Kahn differed from 

that presented here. In Kahn, this court indicated that 

the customer suit exception applies “where the first suit is 

filed against a customer who is simply a reseller of the 

accused goods, while the second suit is a declaratory 

judgment action brought by the manufacturer of the 

accused goods.” Kahn, 889 F.2d at 1081 (citing William 

Gluckin & Co., Inc. v. Int’l Playtex Corp., 407 F.2d 177, 
SPREAD SPECTRUM v. EASTMAN KODAK 16

178 (2d Cir. 1969)). In that case, a patent holder sued 

General Motors (“GM”) in the Southern District of New 

York for infringement of a patent covering AM stereo 

receivers. Id. at 1078. Motorola, the manufacturer of 

integrated circuit boards used in the receivers, subsequently filed a declaratory judgment action in Illinois, 

seeking judgment that Kahn’s patent was invalid, unenforceable, and not infringed. Id. GM moved to stay the 

New York case pending the outcome of the Illinois action. 

The district court granted the stay on grounds that the 

New York case was “merely a ‘customer suit’ . . . [and] 

that all issues would be settled in the litigation with 

Motorola in Illinois, as to all potential and actual infringers.” Id. at 1079. 

On appeal, this court found that the customer suit exception did not apply because the second-filed action 

would not completely resolve the issues between the 

parties. Id. at 1082. The court noted that, “in those cases 

in which a customer suit exception has been held to favor 

the forum of the second-filed action, the second action 

would resolve all charges against the customers in the 

stayed suit, including liability for damages.” Id. at 1081. 

The court also noted that GM had “not agreed to be bound 

by the Illinois decision or any injunction against Motorola.” Id. at 1082. Accordingly, we found that the 

district court abused its discretion in granting the stay. 

Id. at 1083. In a subsequent decision, however, we clarified that the manufacturer’s case need only have the 

potential to resolve the “major issues” concerning the 

claims against the customer – not every issue – in order to 

justify a stay of the customer suits. Katz, 909 F.2d at 

1464.

As occurred in Kahn and Katz, the customer suit exception typically arises when the first-filed case is an 

infringement action against a customer and the manufac-
17 SPREAD SPECTRUM v. EASTMAN KODAK

turer subsequently files a declaratory judgment action 

against the patent holder in a different forum. That is not 

what happened here. Instead, this case developed as 

follows: (1) S3 filed its patent infringement suit in Illinois 

against both Kodak and the Kodak Customers; (2) Kodak 

filed an answer and counterclaim for declaratory judgment of invalidity and noninfringement; and (3) Kodak 

sought and obtained severance of the case against it and 

transfer to its home forum: the Western District of New 

York. Because Kodak did not file a separate declaratory 

judgment action against S3, we are not presented with a 

traditional first-to-file scenario, and the underlying policy 

considerations associated with a “race to the courthouse,” 

such as deterring forum shopping, are not implicated. 

Notably, in deciding to stay the case against the Kodak 

Customers, the district court did not apply the customer 

suit exception, and instead relied on Seventh Circuit case 

law in finding the Kodak Customers “merely peripheral” 

to the litigation against Kodak. See District Court Opinion, 2010 U.S. Dist. LEXIS 90549, at *8 (“This court has 

held that such joinder of ‘peripheral’ defendants to prevent the transfer of an action to a more appropriate venue 

is improper.”). Given this posture, it is unclear that the 

customer suit exception to the first-to-file doctrine is even 

at issue. 

Assuming the customer suit exception could apply on 

this record, moreover, the pertinent language in Kahn is 

not as expansive as S3 claims. Although Kahn contains 

broad language suggesting that a stay order “based on an 

erroneously applied customer suit exception” always 

receives interlocutory review, it does not specifically 

identify the statute under which such jurisdiction would 

arise. And, although S3 argues that this language represents Kahn’s “jurisdictional holding,” there is no indication that the language should be read so broadly. When 
SPREAD SPECTRUM v. EASTMAN KODAK 18

read in its entirety, the decision in Kahn focuses exclusively on cases dealing with injunctive relief, which are 

appealable under § 1292(a)(1), and does not create an 

alternate route for appellate jurisdiction. 

For example, the court in Kahn cites to the Second 

Circuit’s decision in Gluckin, where the district court 

granted an injunction preventing the first-filed customer 

suit from going forward while the second-filed manufacturer’s declaratory action proceeded in another jurisdiction. Kahn, 889 F.2d at 1080 (citing Gluckin, 407 F.2d at 

177-78).6 Kahn also relies on the Second Circuit’s decision in Volvo North America Corp. v. Men’s International 

Professional Tennis Council, 839 F.2d 69, 73 (2d Cir. 

1988), which held that an order dismissing certain counts 

in a complaint “had the practical effect of denying injunctive relief as to th[ose] counts, and delaying litigation of 

[the] counts until conclusion of potentially lengthy litigation on other matters would cause irreparable harm.” 

Kahn, 889 F.2d at 1079 (citing Volvo, 839 F.2d at 73). 

Applying Volvo, the court in Kahn found that “the stay of 

prosecution of Kahn’s commercial tort claims until resolution of the Illinois action has the effect of denial of injunc-

 6 In a footnote, the court in Kahn indicated that, 

“[i]n matters of jurisdictional consequence this court takes 

guidance from interpretations of the regional circuit in 

which the cause arose.” 889 F.2d at 1080 n.3. As noted 

previously, however, we have since clarified that, “[o]n 

matters relating to this court’s jurisdiction, we apply 

Federal Circuit law, not that of the regional circuit from 

which the case arose.” Pause Tech., 401 F.3d at 1292; see 

also Woodard v. Sage Prods., Inc., 818 F.2d 841, 844 (Fed. 

Cir. 1987) (en banc) (noting that deference to regional 

circuit law “is inappropriate on issues of our own appellate jurisdiction” and that “our decision to follow another 

circuit’s interpretation of a common jurisdictional statute 

results from the persuasiveness of its analysis, not any 

binding effect”). 
19 SPREAD SPECTRUM v. EASTMAN KODAK

tive relief as to these claims, and leaves him without a 

remedy.” Id. Specifically, the court found that interlocutory review of the stay order was warranted in large part 

because “Kahn state[d] that by the time the Illinois action 

is over his business will be dead,” and thus the stay could 

have “serious, perhaps irreparable consequence[s].” Id. at 

1079-80. The decision in Kahn is, thus, a narrow one with 

limited application. 

The record before us does not fit within the rule of 

Kahn. As noted, Kahn was primarily concerned with 

injunctive relief, which is not at issue here. S3 did not 

seek a preliminary injunction, and there is no evidence 

that it will suffer irreparable harm stemming from the 

stay since it is not competing with Kodak and has pointed 

to no loss of business that could not be accounted for with 

money damages. And, unlike in Kahn, S3 is not being 

deprived of its ability to pursue claims in federal court – 

S3 will be able to pursue its central claims in New York 

after the stay pending reexamination is lifted. Accordingly, the customer suit exception does not justify our 

exercise of jurisdiction in this action. 

C. Because the Stay Did Not Involve an Injunction, There is No Jurisdiction Under 

28 U.S.C. § 1292(a)(1). 

Finally, S3 argues that this court has jurisdiction under 28 U.S.C. § 1292(a)(1), which provides that interlocutory orders “granting, continuing, modifying, refusing or 

dissolving injunctions” are appealable. According to S3, it 

should be permitted to appeal the stay order because it “is 

effectively an injunction barring S3 from pursuing its case 

against the Printer Defendants.” Appellant’s Br. 10. In 

making this argument, S3 relies on Katz for the proposition that “a grant of an injunction against continuing suit 

in another forum is appealable as of right” under § 1292. 
SPREAD SPECTRUM v. EASTMAN KODAK 20

Id. at 9 (quoting Katz, 909 F.2d at 1461). It argues that 

“the stay order has the practical effect of barring S3 from 

filing suit against any printer that happens to use Kodak’s software or hardware in any forum – even though 

they independently infringe the patent-in-suit by manufacturing and selling their own infringing products.” Id.

at 10. As such, S3 submits, it has been effectively enjoined from suing any printers in any forum. We are not 

persuaded by S3’s arguments. 

As Kodak correctly notes, “[w]hile it is true that the 

stay temporarily suspends the case against the Kodak 

Customers during the case against Kodak, the same can 

be said about every stay that is issued by any court.” 

Appellees’ Br. 25. If every stay qualified as an injunction, 

all stays would be immediately appealable under 

§ 1292(a)(1). Moreover, the Supreme Court has made 

clear that “a litigant must show more than that the order 

has the practical effect of [granting or] refusing an injunction” for an interlocutory order to be immediately appealable. Carson v. American Brands, Inc., 450 U.S. 79, 84 

(1980). And, as Kodak points out, this case is distinguishable from the facts presented in Katz. In Katz, a 

Massachusetts federal court issued an injunction preventing the plaintiff “from prosecuting two pending actions in 

the Western District of New York.” 909 F.2d at 1461.7 In 

 7 With respect to one of the New York actions, we 

reversed the district court’s order granting injunctive 

relief on grounds that “[t]here is no good reason to unduly 

delay the resolution of major issues that will not be resolved in the Massachusetts action.” Katz, 909 F.2d at 

1464. With respect to the other suit (“the Batavia action”), we affirmed the district court’s decision enjoining 

the case pending resolution of the Massachusetts action. 

Id. The court found that, “[a]lthough there may be additional issues involving the defendants in the Batavia 

action, their prosecution will be advanced if Mr. Katz is 
21 SPREAD SPECTRUM v. EASTMAN KODAK

contrast, here, the district court stayed its own case and 

did not affirmatively prohibit litigation in any other court. 

Because the district court’s order did not involve an 

injunction, we do not have jurisdiction under § 1292(a)(1). 

CONCLUSION

For the foregoing reasons, and because we find that 

S3’s remaining arguments are without merit, we conclude 

that this court lacks jurisdiction over this appeal. Accordingly, S3’s appeal is dismissed for lack of jurisdiction. 

DISMISSED

 

successful on the major premises being litigated in Massachusetts, and may well be mooted if he is unsuccessful.” 

Id. Accordingly, the court affirmed the district court’s 

order enjoining the Batavia action pending resolution of 

the Massachusetts suit. Here too, there is no dispute over 

the fact that resolution of the New York action will 

greatly narrow, if not entirely moot, the matters to be 

resolved in the case against the Kodak Customers in 

Illinois.