from the United States District Court for the Western
District of Texas
JOLLY, DENNIS, and HIGGINSON, Circuit Judges.
Stephen A. Higginson, Circuit Judge.
substantive issue in this appeal is whether a jury should
hear Xitronix Corporation's claim that KLA-Tencor
Corporation violated the Sherman Act's prohibition of
monopolies by obtaining a patent through a fraud on the U.S.
Patent and Trademark Office ("PTO"). What must
first be decided, however, is whether we can reach that issue
despite the Federal Circuit's exclusive jurisdiction over
cases arising under federal patent law. That court
transferred this case to us, but we find it implausible that
we are the proper court to decide this appeal. With respect,
therefore, we transfer it to the U.S. Court of Appeals for
the Federal Circuit.
the third round of litigation between Plaintiff-Appellant
Xitronix Corporation and Defendant-Appellee KLA-Tencor
Corporation ("KLA"), competitors in the
"semiconductor wafer optical inspection market."
Optical inspection technology is used for quality control in
the production of semiconductor wafers, which are essential
components of circuits in computers and other electronic
devices. We understand from the parties that an optical
inspection device employs two lasers, a "pump" beam
and a "probe" beam, in tandem. The pump beam heats
the surface of a semiconductor sample. The probe beam, in
turn, detects changes in the semiconductor surface. The
device converts the changes detected by the probe beam into
an electrical signal, which it then measures. The device can
thereby precisely observe the composition of the
semiconductor sample, helping manufacturers ensure that their
processes are working as intended.
began in 2008 with Xitronix seeking a declaratory judgment
against KLA. According to Xitronix, KLA was and is the
dominant player in the semiconductor optical inspection
market, with approximately eighty-percent market share. KLA
had examined the technology that Xitronix was then bringing
to market and amended a pending patent application to cover
Xitronix's technology. This application resulted in the
issuance of U.S. Patent 7, 362, 441 ("the '441
patent"). In this first lawsuit, Xitronix sought a
declaration of non-infringement and of the '441
November 2010, a jury entered a verdict in Xitronix's
favor. When the district court entered final judgment in
January 2011, it explained that the central issue at trial
was the wavelength of the probe beam used by Xitronix. The
claims of the '441 patent at issue in the case specified
a wavelength between 335 and 410 nanometers (nm) and said
that such wavelength "is selected to substantially
maximize the strength of the output signals corresponding to
the modulated optical reflectivity
response." The probe beam in Xitronix's device
was fixed at a wavelength of 373 nm, putting it and KLA's
patent squarely in conflict. The jury found that
Xitronix's technology infringed one claim of KLA's
'441 patent but that this claim was anticipated by prior
art: the "Therma-Probe" device and an earlier
patent, the '611 or "Alpern" patent. The jury
also found three other claims of KLA's '441 patent
invalid due to obviousness. The district court ruled that
ample evidence supported the jury's findings. It
identified two additional pieces of prior art, Batista and
Mansanares: "[E]ach and every element of the asserted
claims were present in the combination of prior art
Therma-Probe, Batista, Mansanares, and the '611 [Alpern]
patent." The district court also ruled one of the claims
invalid as indefinite. KLA did not appeal the judgment in the
March 2011, Xitronix commenced the second suit, bringing
business tort claims against KLA for publicly accusing
Xitronix of patent infringement. The district court, which
remanded the case to Texas state court, later explained that
the state district court ruled in favor of KLA "for
unspecified reasons." Neither party advises that this
second litigation has any bearing on the present appeal.
present case began in December 2014. Xitronix alleged a
single Walker Process claim: monopolization through
use of a patent obtained by fraud on the PTO. The patent
purportedly resulting from KLA's fraud on the PTO is U.S.
Patent No. 8, 817, 260 ("the '260 patent"). It
is a continuation of an earlier patent, the '486 patent,
which was itself a continuation of the '441 patent at
issue in the parties' first litigation. KLA filed the
application that yielded the '260 patent in November
2009, U.S. Application No. 12/616, 710,  a year before the
jury entered its verdict invalidating the '441 patent.
The litigation of '441 and the prosecution of '260
unfolded in tandem. It is KLA's representations to the
PTO concerning the '441 litigation while conducting the
'260 prosecution that are at issue here.
February 2010, KLA submitted an Informational Disclosure
Statement ("IDS") with sixty works potentially
containing relevant prior art. This IDS included the key
sources on which the jury would invalidate the '441
patent later that year as well as summary judgment briefing
from the litigation. In August 2010, the PTO examiner, Layla
Lauchman, initialed and signed the IDS, thereby acknowledging
these sources. On November 5, 2010, the jury returned its
verdict invalidating the '441 patent. On November 18,
Michael Stallman, KLA's patent prosecution attorney,
submitted the jury's verdict in the '441 litigation
to the PTO and sought to explain its meaning. He acknowledged
an Office Action of August 18 that rejected the claims in the
'260 application on the grounds of "non-statutory
obviousness-type double patenting" in view of the
'441 patent. This means that, as of 2010, the PTO saw
claims in the '260 application as obvious in light of
claims later invalidated in the '441 litigation. Stallman
responded to this rejection by agreeing to a "terminal
disclaimer" of the claims in the pending '260
district court entered final judgment in the '441
litigation on January 31, 2011. On February 2, Lauchman
issued a Notice of Allowability as to the '260 patent
application predicated on the terminal disclaimer to which
KLA had agreed. On February 10, Stallman filed another IDS,
bringing the final judgment in the '441 litigation and
the district court's accompanying order to the PTO's
attention. He submitted a Request for Continued Examination
did not act on the application again for two years, by which
time a new examiner, Willie Merrell, was handling it. His
initials, dated July 12, 2013, appear on the IDS from
February 2011 containing the final judgment and related
documents, suggesting he had seen and considered the
references. In an Office Action dated July 25, 2013, Merrell
rejected much of the '260 application. He did so without
reference to the final judgment in the '441 litigation,
to the PTO's prior non-statutory double patenting
rejection, or to the materials on which the judgment in the
'441 litigation was based. Instead, he conducted a novel
analysis based on other prior art further afield.
this rejection, the '260 patent did eventually issue.
Xitronix's claims concern the actions by KLA making that
possible. Stallman filed a response to Merrell in October
2013. The remarks in that filing are one basis for the fraud
element of Xitronix's Walker Process claim.
Merrell responded in January 2014, standing by his previous
rejection. Stallman responded in March 2014 with more
remarks--another filing central to Xitronix's Walker
Process claim. A Notice of Allowability soon issued, in
which Merrell briefly explained that KLA's arguments
"have been fully considered and are persuasive."
The '260 patent issued in August 2014, and Xitronix's
Walker Process suit followed that December.
alleged that KLA's procurement of the '260 patent
impeded its ability to finance its entrance into the market
for optical inspection technology. At summary judgment, the
litigation focused on whether Xitronix had created issues of
material fact as to two elements of fraud on the PTO: whether
KLA had made material misrepresentations or omissions to the
PTO, and whether those were a but-for cause of the '260
patent's issuance. The district court found that
Stallman's remarks in his October 2013 and March 2014
filings were confined to those pieces of prior art
specifically addressed by Merrell in previous Office Actions
and contained no broader misrepresentations. To the extent
Stallman mischaracterized the prior art, the district court
reasoned, this was permissible attorney argument, not fraud.
Stallman was free to make such argument, and the examiner was
free to reject it, because Stallman had submitted all
relevant materials from the '441 litigation already.
district court also found no but-for causation. Notably, it
was not because the court viewed the '441 and '260
patents as dissimilar, such that the former would not control
the latter. Indeed, the court saw them as similar. Rather, it
saw the PTO as making a fully conscious and informed choice.
Granting summary judgment to KLA, the district court wrote:
Although Xitronix has repeatedly argued that the examiner was
unaware of the jury verdict and final judgment invalidating
the claims at issue, the Court suspects the examiner was in
fact aware of the Court's holding but chose to ignore it.
It would not be the first time the PTO, an administrative
agency, overrode a final judgment of an Article III court,
and it will likely not be the last.
is, according to the district court, it could not be said
that the PTO relied upon, and was thus defrauded by,
KLA's alleged misrepresentations; rather, the PTO had a
mind of its own. The district court's grant of summary
judgment to KLA brought the case to a close, precipitating
appeal went originally to the Federal Circuit. Before oral
argument in the case, the panel of that court ordered
briefing on transferring the case to our court for lack of
jurisdiction. Xitronix Corp. v. KLA-Tencor Corp.,
882 F.3d 1075, 1076 (Fed. Cir. 2018). The parties, who agreed
that the case belonged in the Federal Circuit, spent the bulk
of oral argument on the subject and briefed the issue further
afterwards. Despite the parties' consensus, the
panel was not persuaded, ruling based on Gunn v.
Minton, 568 U.S. 251 (2013), that it lacked
jurisdiction. Following the transfer order, KLA petitioned
for en banc rehearing,  which the Federal Circuit rejected by a
vote of ten to two. Xitronix Corp. v. KLA-Tencor
Corp., 892 F.3d 1194 (Fed. Cir. 2018). Judge Pauline
Newman dissented from that ruling, taking the panel to task
for initiating "a vast jurisdictional change for the
regional circuits as well as the Federal Circuit."
Id. at 1196.
courts are courts of limited jurisdiction," possessing
"only that power authorized by Constitution and
statute." Kokonnen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994). "The requirement
that jurisdiction be established as a threshold matter
'spring[s] from the nature and limits of the judicial
power of the United States' and is 'inflexible and
without exception.'" Steel Co. v. Citizens for a
Better Env't, 523 U.S. 83, 94-95 (1998) (quoting
Mansfield, C. & L. M. Ry. Co. v. Swan, 111 U.S.
379, 382 (1884)). Consequently, "[w]e must always be
sure of our appellate jurisdiction and, ...