Order Granting Stay Of Claims Not An Appealable Final Judgment Or Effectively An Injunction

This article previously appeared in Last Month at the Federal Circuit, October 2011

Judges: Rader, Lourie, O'Malley (author)

[Appealed from N.D. Ill., Judge Gettleman]

In Spread Spectrum Screening LLC v. Eastman Kodak Co., No. 11-1019 (Fed. Cir. Sept. 26, 2011), the Federal Circuit held that a district court order staying claims against customers of an accused infringer was not an appealable final judgment under 28 U.S.C. § 1295 and not "effectively an injunction" appealable under 28 U.S.C. § 1292(a)(1).

Spread Spectrum Screening LLC ("S3") owns U.S. Patent No. 5,689,623 ("the '623 patent") drawn to methods and systems for commercial printing technology called "digital half-toning." The S3 technology involves "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." Slip op. at 3 (citation omitted). Half-toning is commonly used in the production of newspapers, magazines, and other print materials.

Eastman Kodak Company ("Kodak") manufactures, uses, and licenses commercial printing products under the brand name Staccato. Four of Kodak's customers, Continental Web Press, Inc., Graphic Partners, Inc., Genesis Press, Inc., and Johns-Byrne Company (collectively "the Kodak Customers") use Kodak's Staccato software under license to generate half-toned images, and manufacture and sell their own binary reproductions. Id. at 4.

On February 18, 2010, S3 brought suit against Kodak and the Kodak Customers in the Northern District of Illinois alleging infringement of the '623 patent. Two months into the case, Kodak moved to sever and stay the claims against the Kodak Customers, and to transfer the Kodak claims to the Western District of New York. The district court granted Kodak's motion in all respects. According to the district court's order, the Kodak Customers were "merely peripheral" to S3's claims and would not be "helpful to determine whether Kodak's Staccato product infringes the '623 patent." Id. at 6-7. S3 timely appealed.

On appeal, S3 argued that the district court's stay order was an appealable "final decision" under § 1295 because it cast S3 "out of court," is "practically final," or is "effectively an injunction" under § 1292(a)(1). S3 further argued the district court's stay order was made in error and should be reversed for abuse of...