Court Opinion

ID: 4237385
Source: CourtListenerOpinion
Date Created: 2018-01-18 16:00:31.706132+00
Date Added: 2024-06-11T14:43:16.243706
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

   CAP EXPORT, LLC, A CALIFORNIA LIMITED
           LIABILITY COMPANY,
               Plaintiff-Appellee

 ABRAHAM AMOUYAL, AN INDIVIDUAL, 4MODA
    CORP., A CALIFORNIA CORPORATION,
             Third Party Defendants

                           v.

   ZINUS, INC., A CALIFORNIA CORPORATION,
                Defendant-Appellant

        DOES, 1 THROUGH 10, INCLUSIVE,
                    Defendant
              ______________________

                      2017-1540
                ______________________

   Appeal from the United States District Court for the
Central District of California in No. 2:16-cv-00371-SVW-
MRW, Judge Stephen V. Wilson.
                 ______________________

              Decided: January 18, 2018
               ______________________

   DAVID BEITCHMAN, Beitchman & Zekian, PC, Encino,
CA, argued for plaintiff-appellee.
2                              CAP EXPORT, LLC   v. ZINUS, INC.

    DARIEN KENNETH WALLACE, Imperium Patent Works
LLP, Pleasanton, CA, argued for defendant-appellant.
Also represented by AMIR VICENTE ADIBI, T. LESTER
WALLACE.
                ______________________

    Before MOORE, BRYSON, and HUGHES, Circuit Judges.
BRYSON, Circuit Judge.
     Defendant Zinus, Inc., appeals from a summary
judgment entered in favor of plaintiff Cap Export, LLC,
and third-party defendants Abraham Amouyal and
4Moda Corp. (collectively, “Cap Export”) by the United
States District Court for the Central District of California.
The district court ordered Zinus, the owner of U.S. Patent
No. 8,931,123 (“the ’123 patent”), to file a motion for
summary judgment of validity of that patent. Following
briefing, the court held two of the asserted claims of
Zinus’s patent invalid for obviousness. The court then
dismissed all of Zinus’s counterclaims with prejudice. We
vacate the district court’s summary judgment and remand
for further proceedings.
                                I
    The ’123 patent is directed to a bed frame that can be
assembled from components that all fit within a com-
partment fashioned from the bed’s headboard. For con-
venience and in order to lower shipping costs, all of the
pieces of the frame, including the longitudinal support
bar, the footboard, and the frame’s legs, can be packed
into the headboard compartment and shipped in a single
box.
    In January 2016, Cap Export, LLC, filed a declaratory
judgment action against Zinus, alleging that the ’123
patent was invalid and not infringed. Zinus counter-
claimed for patent infringement and unfair business
CAP EXPORT, LLC   v. ZINUS, INC.                         3

practices under California state law, and added Amouyal
and 4Moda Corp. as third-party defendants.
     At a status conference held on May 2, 2016, the dis-
trict court ordered Zinus to file a motion for summary
judgment of validity as to the ’123 patent and stayed
discovery on all other issues. In its opening brief, Zinus
addressed the prior art references that Cap Export’s
counsel had raised in an April 2016 letter to Zinus’s
counsel, which included a “bed in a box” product described
on the website GoodsHomeDesign.com. In its opposition
brief, Cap Export raised new prior art references but did
not discuss the “bed in a box” reference. Cap Export also
argued that the ’123 patent was not properly assigned to
Zinus, and that Zinus therefore lacked standing to sue on
the patent. Zinus filed a reply on those issues, which
included new evidence and a new declaration from Zinus’s
president.
    At a status conference on August 29, 2016, the district
court granted Cap Export leave to depose Zinus’s presi-
dent and to file a sur-reply to address ownership and
Zinus’s evidence about prior art. The district court stated
that all discovery would be stayed except as it related to
standing. Cap Export filed its sur-reply on November 11,
2016. In that filing, Cap Export raised new prior art
references and included a declaration from a new expert,
Leonard Backer. Zinus moved to strike Backer’s declara-
tion and the new prior art references cited in Cap Export’s
sur-reply. The district court instead granted Zinus leave
to respond to the new prior art in a sur-sur-reply, and
gave Zinus a week to do so. Zinus filed its sur-sur-reply
on November 28, 2016.
    The following day, the district court granted summary
judgment in Cap Export’s favor. The district court first
concluded that the assignment to Zinus was proper,
despite a scrivener’s error in the assignment documents.
The court therefore held that Zinus had standing to assert
4                                  CAP EXPORT, LLC   v. ZINUS, INC.

infringement of the ’123 patent. The district court then
held that claim 1 of the patent would have been obvious in
light of three prior art references—the Tiffany bed, the
Aspelund bed, and the “bed in a box.” The court also held
that claim 3 would have been obvious in light of those
three references combined with the Ledge Headboard
Twin reference. Because neither party presented argu-
ments regarding secondary considerations of nonobvious-
ness, the district court stated that it would not consider
them. The district court entered judgment holding claims
1 and 3 of the ’123 patent invalid and dismissing all of
Zinus’s counterclaims and third-party claims with preju-
dice.
                              II
    On appeal, Zinus raises a number of objections to the
district court’s summary judgment ruling. Three of
Zinus’s arguments are persuasive.
    First, the district court improperly granted summary
judgment for Cap Export sua sponte, without proper
notice to Zinus. “It is well established that a district court
has ‘the power to enter summary judgment[] sua sponte,
so long as the losing party was on notice that she had to
come forward with all of her evidence.’” Mikkelsen Graph-
ic Eng’g, Inc. v. Zund Am., Inc., 541 F. App’x 964, 972
(Fed. Cir. 2013) (quoting Celotex Corp. v. Catrett, 477 U.S.
317, 326 (1986)); see also Albino v. Baca, 747 F.3d 1162,
1176 (9th Cir. 2014) (“Even when there has been no cross-
motion for summary judgment, a district court may enter
summary judgment sua sponte against a moving party if
the losing party has had a full and fair opportunity to
ventilate the issues involved in the matter.”). Rule 56(f)
of the Federal Rules of Civil Procedure provides that
district courts may grant summary judgment for a non-
movant only after “giving notice and a reasonable time to
respond.” See Mikkelsen, 541 F. App’x at 972–73. When a
district court’s grant of summary judgment sua sponte is
CAP EXPORT, LLC   v. ZINUS, INC.                           5

procedurally improper, we must vacate the entry of judg-
ment and remand for further proceedings. See, e.g., Fin
Control Systems Pty, Ltd. v. OAM, Inc., 265 F.3d 1311,
1321 (Fed. Cir. 2001).
    When it ordered Zinus to make a motion for summary
judgment of validity, the district court provided no notice
that the court was contemplating entering summary
judgment of invalidity. Normally, if a patent holder were
to lose a motion for summary judgment of validity, the
result would be a trial, not a judgment of invalidity. In
fact, because a patent carries a presumption of validity
and a challenger must prove invalidity by clear and
convincing evidence, a patentee need not present any
factual evidence to prevail on a motion for summary
judgment of validity. Massey v. Del Labs., Inc., 118 F.3d
1568, 1573 (Fed. Cir. 1997). The district court gave no
notice that it might grant summary judgment against
Zinus.
    Furthermore, Zinus lacked a “full and fair opportunity
to ventilate the issues.” Gospel Missions of Am. v. City of
Los Angeles, 328 F.3d 548, 553 (9th Cir. 2003). Because of
the unusual sequence of briefs and evidence, Zinus did not
have an opportunity to depose Cap Export’s expert, whose
declaration was first presented as part of Cap Export’s
sur-reply filed on November 11, 2016. Nevertheless, the
district court relied on the expert’s testimony and found it
“credible.” Zinus was also denied an opportunity to
present evidence of objective indicia of nonobviousness,
which could have supported its position that the claims of
the ’123 patent were not obvious. See, e.g., Cheese Sys.,
Inc. v. Tetra Pak Cheese & Powder Sys., Inc., 725 F.3d
1341, 1353 (Fed. Cir. 2013). Although Zinus stated in its
reply brief in support of its motion for summary judgment
of validity that it was not “at this time asking the Court to
consider any objective evidence of nonobviousness,” Zinus
was entitled to present evidence of nonobviousness,
6                               CAP EXPORT, LLC   v. ZINUS, INC.

including objective evidence of nonobviousness, in defend-
ing against a motion for summary judgment of invalidity.
    Under these circumstances, Zinus lacked both notice
that the district court would enter summary judgment of
invalidity sua sponte and an opportunity to present evi-
dence and argument as to why summary judgment should
not be entered against it. Accordingly, the district court’s
entry of summary judgment in Cap Export’s favor was
procedurally improper. 1
    Second, the district court improperly dismissed Zi-
nus’s assertion of claim 2 of the ’123 patent and Zinus’s
state law claims with prejudice. Although Zinus omitted
claim 2 of the ’123 patent from its motion for summary
judgment of validity, the most that can be inferred from
that omission is that Zinus concluded that there were
triable issues of fact with respect to the validity of claim 2
that would warrant factual development at trial. As
neither party raised arguments regarding the validity of
claim 2, the district court erred in dismissing that claim
with prejudice. In addition, although a district court may
decline to exercise supplemental jurisdiction over state
law claims after dismissing federal claims pursuant to 28
U.S.C. § 1367(c)(3), any such dismissal must be without

    1   Cap Export argues that Zinus conceded in the par-
ties’ Joint Rule 26(f) Report that “the issue of the validity
of [Zinus’s] patent would be dispositive of its claims,” and
therefore should have been on notice of the possibility of
judgment of invalidity against it. That argument mis-
characterizes the record: Zinus agreed that “resolution
of . . . the issue of infringement would lead to the overall
disposition of the case.” That statement in the parties’
Rule 26(f) Report does not suggest that Zinus had notice
that the district court was considering granting summary
judgment sua sponte against it.
CAP EXPORT, LLC   v. ZINUS, INC.                           7

prejudice. Davila v. Smith, 684 F. App’x 637, 638 (9th
Cir. 2017) (citing Gini v. Las Vegas Metro. Police Dep’t, 40
F.3d 1041, 1046 (9th Cir. 1994)). Accordingly, the district
court erred in dismissing claim 2 of the ’123 patent and
Zinus’s state law claims with prejudice.
    Third, the district court improperly relied on the “bed
in a box” prior art reference despite a factual dispute
regarding whether the reference predated the ’123 patent.
Cap Export alluded to the “Amazing Bed in a Box” web-
site only in its April 2016 letter to Zinus’s counsel; it did
not assert the website as prior art in any of its briefs to
the district court in connection with Zinus’s motion for
summary judgment of validity. In its opening brief on
that motion, Zinus argued that the website does not
predate the priority date of the ’123 patent, which is
September 25, 2013, because the website appears to have
been posted in November 2014. 2 It appears that Cap
Export may have abandoned the reference altogether, as
Cap Export did not address that reference in its opposi-
tion brief before the district court. See Shakur v. Schriro,
514 F.3d 878, 892 (9th Cir. 2008) (holding that a party
abandons claims by not defending them in opposition to a
motion for summary judgment); Stichting Pensioenfonds
ABP v. Countrywide Fin. Corp., 802 F. Supp. 2d 1125,
1132 (C.D. Cal. 2011) (“[I]n most circumstances, failure to
respond in an opposition brief to an argument put forward

    2   The GoodsHomeDesign.com webpage cites as its
source a webpage published on December 25, 2013, which
is a strong indication that the “Amazing Bed in a Box”
post was published after the effective filing date of the
’123 patent. See “Amazing Bed in a Box,”
http://www.goodshomedesign.com/amazing-bed-in-a-box/2/
(linking to “098 California King Size Folding Bed,”
http://3dwoodworkingplans.com/bed-in-a-box-098/     (pub-
lished Dec. 25, 2013)).
8                                 CAP EXPORT, LLC   v. ZINUS, INC.

in an opening brief constitutes waiver or abandonment in
regard to the uncontested issue.”).
     Nevertheless, the district court relied on that refer-
ence in concluding that claims 1 and 3 would have been
obvious. The court explained that “someone with ordi-
nary skill in the art would view the Tiffany Bed (with a
headboard compartment), the Aspelund bed (with legs
attached to the footboard), and the Bed in a Box (where
all pieces of the bed fit in one compartment), and combine
these references . . . .” At best, the disputed fact regard-
ing the publication date of the “bed in a box” reference
precludes reliance on that reference for purposes of sum-
mary judgment. See Tennison v. City & Cty. of San
Francisco, 570 F.3d 1078, 1087 (9th Cir. 2009); Lamle v.
Mattel, Inc., 65 F. App’x 293, 295 (Fed. Cir. 2003).
                            III
    We vacate the district court’s grant of summary
judgment of invalidity as to claims 1 and 3 of the ’123
patent and the dismissal with prejudice of Zinus’s coun-
terclaims. We remand for further proceedings consistent
with this opinion.
    Costs to Zinus.
             VACATED AND REMANDED.