Acushnet Breached Agreement by Requesting Reexamination, Judge Rules

Scott Daniels | January 17, 2011

In May we reported the patent dispute between golf ball-makers Callaway and Acushnet – Callaway accused Acushnet of selling golf balls that infringed four Callaway patents, and Acushnet requested inter partes reexamination of each of Callaway’s patents.  A jury found all four patents to be invalid over the prior art, and the reexamination examiner rejected the claims of all four patents.  The jury’s verdict for Acushnet is now on appeal to the CAFC, and the examiner’s rejections are before the PTO Board where oral argument is scheduled for January 19th.  What interested us in the case was the trial judge and the examiner had construed the claims differently.

The case took a dramatic turn on Thursday when Judge Sue Robinson of Delaware ruled that Acushnet had breached a contract with Callaway by filing its reexamination requests.  In 1996 the parties had entered into an agreement to end an earlier dispute regarding the patents.  The agreement included a dispute resolution clause stating that “either party may initiate legal proceedings but only in the United States District Court for the District of Delaware, and no other.”  The agreement also provided that the procedures specified for dispute resolution “shall be the sole and exclusive procedure for resolution of such disputes.”

Since Acushnet’s attempt to resolve the current dispute through reexamination contradicted the dispute resolution clause, Judge Robinson granted summary judgment that Acushnet had breached its agreement with Callaway.  In rejecting Acushnet’s argument that summary judgment was premature, the Judge stated that “[t]here is no reason to deprive the PTO of any benefit, no matter how limited, it may receive from the court’s judgment in this matter.”  She added that the fact that “the PTO may not be induced to terminate or suspend reexamination proceedings based on such judgment is of no moment to the equitable principles involved in the issue at bar.”

The following day Callaway rushed Judge Robinson’s summary judgment to the attention of the PTO in a petition to terminate the four reexamination proceedings. Callaway attached an earlier petition that it had filed, stating that the reexaminations should be vacated “as ultra vires because they were initiated unlawfully by Acushnet,” specifically by a breach of Acushnet’s contractual obligations to Callaway.  At a minimum, Callaway stated, the PTO should postpone Wednesday’s oral argument to the end of February, so that it might analyze the effect of the Judge’s summary judgment on the reexaminations.  Callaway argued that allowing Acushnet to participate in the oral argument “taint” the reexaminations.

We do not know whether the PTO will delay the oral argument.  On the broader question of whether the PTO should proceed at all with the reexaminations, it is unclear whether Callaway asked Judge Robinson to enjoin the PTO from doing so.  An injunction, however, seems unlikely given the soft tone of her comments regarding the PTO.  Clearly, she seems inclined to allow the PTO to make its own decision regarding the effect of her decision on the reexaminations.

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