Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 1 of 6
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`CISCO SYSTEMS, INC.,
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`Plaintiff,
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`v.
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`CAPELLA PHOTONICS, INC.,
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`Case No. 20-cv-01858-EMC
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`ORDER DENYING
`DEFENDANT/COUNTERCLAIMANT’S
`UNOPPOSED MOTION TO VACATE
`INTERLOCUTORY ORDERS
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`Defendant.
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`Docket No. 122
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`This case involves two patents that Defendant and Counter-Plaintiff Capella Photonics,
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`Inc. (“Capella”) accuses Plaintiff and Counter-Defendant Cisco Systems, Inc. (“Cisco”) of
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`infringing. The parties have reached a settlement of the dispute, and Capella has now filed an
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`unopposed motion to vacate two orders: (1) an order granting Cisco’s motion for judgment on the
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`pleadings, issued on August 21, 2020, concluding that Capella could not seek damages for alleged
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`infringement that took place prior to the reissue of the relevant patents, Docket No. 48; and (2) a
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`claim construction order, issued on April 29, 2021, largely adopting the constructions proposed by
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`Capella, Docket No. 119, (collectively, the “Contested Orders”). See Docket No. 122 (“Mot.”).
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`For the following reasons, the Court DENIES the motion to vacate the Contested Orders.
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`I.
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`LEGAL STANDARD
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`While appellate court vacatur of district court judgments in the context of settlement
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`agreements should be granted only in “exceptional circumstances,” U.S. Bancorp Mortg. Co. v.
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`Bonner Mall P’ship, 513 U.S. 18, 29 (1994), district courts enjoy “greater equitable discretion
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`when reviewing [their] own judgments than do appellate courts operating at a distance,” Am.
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`Games, Inc. v. Trade Prod., Inc., 142 F.3d 1164, 1169–70 (9th Cir. 1998). Therefore, a district
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`Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 2 of 6
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`court in this circuit, including in the context of mootness by settlement, may vacate one of its own
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`judgments absent exceptional circumstances. See id. at 1168–69. “‘Under [Federal Rule of Civil
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`Procedure] 54(b), district courts have complete power over non-final orders’ . . . and ‘may vacate
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`or revise them at any time, if doing so would be consonant with equity.’” Automated Packaging
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`Sys., Inc. v. Free Flow Packaging Int’l, Inc., No. 18-CV-00356-EMC, 2018 WL 6251051, at *1
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`(N.D. Cal. Nov. 29, 2018) (quoting In re Cathode Ray Tube (CRT) Antitrust Litig., No. 14-CV-
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`2058 JST, 2017 WL 2481782, at *5 n.14 (N.D. Cal. June 8, 2017)). Thus, district courts conduct
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`an “equitable balancing of the hardships and the public interests at stake” to determine whether
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`vacatur is appropriate. Am. Games, 142 F.3d at 1166.
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`Courts in recent years have adopted the factors articulated in Cisco Systems, Inc. v.
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`Telcordia Technologies., Inc., 590 F. Supp. 2d 828, 830 (E.D. Tex. 2008), to assess whether
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`vacatur of interlocutory orders would be equitable: (1) the public interest in the orderly operation
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`of the federal judicial system; (2) the parties’ desire to avoid any potential preclusive effect; (3)
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`the court’s resources that will be expended if the case continues; and (4) the parties’ interest in
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`conserving their resources. See, e.g., Automated Packaging Sys., 2018 WL 6251051, at *2–*3
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`(applying Cisco standard); RE2CON, LLC v. Telfer Oil Co., No. 2:10-CV-00786-KJM, 2013 WL
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`1325183, at *3 (E.D. Cal. Mar. 29, 2013) (same); W.L. Gore & Assocs., Inc. v. C.R. Bard, Inc.,
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`No. CV 11-515-LPS, 2017 WL 4231572, at *2 (D. Del. Sept. 20, 2017) (same); Contour
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`Hardening, Inc. v. Vanair Mfg., Inc., No. 114CV00026JMSMJD, 2016 WL 10490508, at *1 (S.D.
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`Ind. Feb. 23, 2016) (same).
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`II.
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`DISCUSSION
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`Capella argues that all four Cisco factors weigh in favor of vacatur in this case. Mot. at 4–
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`7. The Court addresses each of these factors in turn below.
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`A.
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`Orderly Operation of the Federal Judicial System (First Factor)
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`In granting vacatur of interlocutory orders pursuant to settlement, courts have noted “the
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`public policy encouraging the settlement of private dispute.” Lycos, Inc. v. Blockbuster, Inc., No.
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`C.A. 07-11469-MLW, 2010 WL 5437226, at *3 (D. Mass. Dec. 23, 2010). The Cisco court
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`identified two additional reasons why vacatur would not impede the orderly operation of the
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`Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 3 of 6
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`judicial system. First, even if an interlocutory order is vacated, “whatever instructive or
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`persuasive guidance it may provide continues to exist.” Cisco Sys., 590 F.Supp.2d at 831.
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`Second, district courts’ claim construction orders—and judgment on the pleadings orders, for that
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`matter—are reviewed de novo by the Federal Circuit, “caution[ing] parties and the public against
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`excessive reliance on any district court’s construction.” Id. at 830.
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`However, courts in this district—including this Court—have sounded concerns about the
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`“weighty policy concerns” that are raised by “allowing a patent holder to litigate issues of claim
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`construction and infringement, only to settle and obtain vacatur of any unfavorable rulings.”
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`Automated Packaging Sys., 2018 WL 6251051, at *2 (quoting Zinus, Inc. v. Simmons Bedding
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`Co., No. C 07-3012 PVT, 2008 WL 1847183, at *2 (N.D. Cal. Apr. 23, 2008)). As Judge Orrick
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`explained in denying vacatur of a claim construction order in FlatWorld Interactives LLC v. Apple
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`Inc., “a court should not chisel out parts of the public record and the body of law merely because
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`an unsatisfied party wants to destroy the remains of its loss.” No. 12-cv-01956-WHO, 2014 U.S.
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`Dist. LEXIS 75529, at *6–7 (N.D. Cal. May 15, 2014). Were the practice of obtaining a
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`substantive ruling and then settling on the condition that such ruling be vacated to become routine,
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`it would not only waste significant judicial resources, but could also relegate courts to playing the
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`role of oddsmakers rather than adjudicators. Thus, this Court carefully scrutinizes requests to
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`vacate orders where the request is not based on the merits.
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`Moreover, while settlement of disputes is generally encouraged as a policy matter, the
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`Supreme Court in “Bonner Mall intimate[d] that denying motions to vacate claim construction
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`should actually encourage parties to settle before courts expend substantial resources on Markman
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`hearings.” RE2CON, 2013 WL 1325183, at *5 (citing Bonner Mall, 513 U.S. at 28). The result
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`sought by Capella here “would do just the opposite by encouraging litigants to test their proposed
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`claim constructions via a full-blown Markman hearing and decision before settling.” Automated
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`Packaging Sys., 2018 WL 6251051, at *2 (quoting Allen-Bradlev Co., LLC v. Kollmorgen Corp.,
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`199 F.R.D. 316, 319–20 (E.D. Wis. 2001)). The same analysis applies to judgment on the
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`pleadings order: if the Court vacates its judgment on the pleadings order it would encourage
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`litigants like Capella to unnecessarily waste this Court’s time testing their merits arguments before
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`Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 4 of 6
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`deciding whether to settle the case.
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`Because vacatur can be abused as a mechanism for litigants to obtain a kind of trial run of
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`the merits of their patent claims without being subject to binding consequences, thus potentially
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`delaying settlement and wasting judicial resources, this factor weighs against vacatur.
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`B.
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`Potential Preclusive Effect (Second Factor)
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`As Capella admits in its motion, it is unclear whether the Contested Orders have any
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`preclusive effect. Mot. at 6; see also Automated Packaging Sys., 2018 WL 6251051, at *2 (“‘The
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`collateral or precedential value of Markman orders is an unsettled issue’ because collateral
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`estoppel depends on whether a judgment is deemed ‘final’ and ‘standards of finality vary by
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`circuit.’” (quoting RE2CON, 2013 WL 1325183, at *3–4)); Kollmorgen Corp. v. Yaskawa Elec.
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`Corp., 147 F. Supp. 2d 464, 467 (W.D. Va. 2001), dismissed sub nom. Kollmorgen Corp. v.
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`Yaskawa Elec. Corp, 33 F. App’x 496 (Fed. Cir. 2002) (“This Court believes that a consensual
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`settlement between the parties does not constitute a ‘final judgment.’ Accordingly, the doctrine of
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`collateral estoppel cannot apply.”). In the context of this uncertainty, courts have reasoned that
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`where settlement means “there has been no final determination [of a patent claim] on the merits,”
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`there is less reason to give interlocutory orders preclusive effect. Cisco Sys., 590 F. Supp. 2d at
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`831. The Cisco court therefore concluded that “the parties’ desire to avoid any preclusive effect
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`favor granting the vacatur.” Id.
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`On the other hand, if the Contested Orders were to have a preclusive effect or at least serve
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`as an important precursor to preclusion, see FlatWorld Interactives, 2014 U.S. Dist. LEXIS 75529,
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`at *6, this factor would weigh against vacatur. Moreover, there is “logic in preventing a party
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`from taking inconsistent positions in successive cases on issues that affect important public
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`interests such as invalidity and infringement of patents.” Id. Here, the risk of Capella taking
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`inconsistent positions in other cases is especially acute because it already has several pending
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`matters based on the same patent claims pending before this Court, including one against the
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`Cisco: Capella Photonics, Inc. v. Cisco Systems, Inc. (“Cisco I”), No. 3:14-cv-03348-EMC (N.D.
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`Cal. filed Feb. 12, 2014); Capella Photonics v. Fujitsu Network Communications, Inc. (“Fujitsu”),
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`No. 3:14-cv-03349-EMC (N.D. Cal. filed Feb. 12, 2014); Capella Photonics, Inc. v. Tellabs, Inc.
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`Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 5 of 6
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`(“Tellabs”), No. 3:14-cv-03350 (N.D. Cal. filed Feb. 12, 2014); and Capella Photonics, Inc. v.
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`Ciena Corporation (“Ciena”), No. 3:20-cv-08628-EMC (N.D. Cal. filed Mar. 17, 2020.
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`In view of these countervailing considerations, this factor is neutral.
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`C.
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`Court’s and Parties’ Time and Resources (Third and Fourth Factors)
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`Capella contends that vacatur advances the parties’ interest in “avoid[ing] the needless
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`waste of resources (private and judicial) that would be expended in resolving any future collateral
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`estoppel challenge based thereon.” Mot. at 1. And if denial of vacatur here meant that the parties’
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`litigation would proceed, the Court would “most likely need to expend substantial resources to
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`prepare and issue a post-trial opinion resolving the merits of the parties’ disputes.” Forest Labs.,
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`Inc. v. Teva Pharm. USA Inc., No. CV 14-121-LPS, 2016 WL 3606177, at *3 (D. Del. May 25,
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`2016). Thus, some courts have found that resource-conservation considerations weigh in favor of
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`vacatur.
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`But the Court has already been required to entertain briefing and hear oral argument not
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`just on the judgment on the pleadings and claim construction motions, but also on Capella’s
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`motions to reconsider and certify for interlocutory appeal the Court’s judgment on the pleadings
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`order. See Docket Nos. 53, 58. “‘The public paid for this use of court resources through its tax
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`dollars,’ and ‘[v]acatur would render that expenditure a waste.’” Automated Packaging Sys., 2018
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`WL 6251051 (quoting Zinus, 2008 WL 1847183, at *2)); see also Forest Labs., 2016 WL
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`3606177, at *2 (“When parties brief and argue claim construction disputes, which require
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`resolution by the Court, it will usually be inefficient . . . to treat the Court’s resolution of such
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`disputes as a nullity by granting [vacatur].”). A further concern is that granting vacatur “would
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`increase the possibility that other courts might be called on to expend duplicative resources in
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`construing the terms” of the patents at issue. RE2CON, 2013 WL 1325183, at *5. Here, this
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`Court faces that risk in the Cisco I, Fujitsu, Tellabs, and Ciena actions. Moreover, as noted above,
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`allowing vacatur under these circumstances would result in fewer settlements prior to claim
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`construction.
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`In any event, the parties have not demonstrated that the settlement “is expressly
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`conditioned upon the court’s granting this motion to vacate.” RE2CON, 2013 WL 1325183, at *4.
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`Case 3:20-cv-01858-EMC Document 125 Filed 08/03/21 Page 6 of 6
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`Thus, it has not established that the parties and the Court would expend additional resources if this
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`motion is denied. Cf. U.S. Gypsum Co. v. Pac. Award Metals, Inc., No. C 04-04941JSW, 2006
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`WL 1825705, at *1 (N.D. Cal. July 3, 2006) (granting motion to vacate claim construction order
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`where “the parties contend[ed] that the agreement to file the . . . motion was a significant factor in
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`successfully resolving this litigation.”).
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`On balance, these two factors weigh against vacatur.
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`III.
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`CONCLUSION
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`For the foregoing reasons, the motion to vacate is DENIED.
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`This order disposes of Docket No. 122.
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`IT IS SO ORDERED.
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`Dated: August 3, 2021
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`______________________________________
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`EDWARD M. CHEN
`United States District Judge
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