Silicon Image, Inc. v. Genesis Microchip Inc.

United States Court of Appeals for the Federal Circuit

04-1207

SILICON IMAGE, INC.,

Plaintiff-Appellee,

v.

GENESIS MICROCHIP INCORPORATED
and GENESIS MICROCHIP (DELAWARE) INC.,

Defendants-Appellants.

David Larson, McDermott Will & Emery LLP, of Palo Alto, California, argued for
plaintiff-appellee. On the brief was Paul Devinsky, of Washington, DC. Of counsel on
the brief were Terrence P. McMahon and Behrooz Shariati, of Palo Alto, California. Of
counsel was Michael S. Wilcox, of Palo Alto, California.

Robert E. Hillman, Fish & Richardson P.C., of Boston, Massachusetts, argued for
defendants-appellants. On the brief were Ruffin B. Cordell, Linda Liu Kordziel, Richard
G. Green and Tina M. Chappell, of Washington, DC. Of counsel were Robert P.
Feldman and Maura L. Rees, Wilson Sonsini Goodrich & Rosati, of Palo Alto, California.

Appealed from: United States District Court for the Eastern District of Virginia

Judge Robert E. Payne
 United States Court of Appeals for the Federal Circuit

04-1207

SILICON IMAGE, INC.,

Plaintiff-Appellee,

v.

GENESIS MICROCHIP INCORPORATED,
and GENESIS MICROCHIP (DELAWARE) INC.,

Defendants-Appellants.

________________________

DECIDED: January 28, 2005
________________________

Before MICHEL, Chief Judge,* GAJARSA, and LINN, Circuit Judges.

GAJARSA, Circuit Judge.

Genesis Microchip Incorporated and Genesis Microchip (Delaware) Inc.

(collectively “Genesis”) appeal from the decision of the United States District Court for

the Eastern District of Virginia granting the motion of Silicon Image, Inc. (“Silicon”) to

enforce the terms of a settlement agreement requiring Genesis to make certain

payments and to pay royalties on the total sales of certain Genesis products. Silicon

*
Paul R. Michel assumed the position of Chief Judge on December 25,
2004.
Image, Inc. v Genesis Microchip Inc., 271 F. Supp. 2d 840 (E.D. Va. 2003). The issue

before us is whether or not there is a final judgment from which an appeal may be taken

within the meaning of 28 U.S.C. § 1295(a)(1) (final judgment rule). Because we

conclude that there is no final judgment, we dismiss for lack of jurisdiction.

BACKGROUND

As a member of the Digital Display Working Group (“DDWG”), Silicon is a

Promoter (“Promoter”) of the Digital Visual Interface, Revision 1.0 Specification (“DVI

Specification”). The DVI Specification, which DDWG developed and released,

describes and adopts a technical standard for digital interface between a computer and

a digital display.

The Promoters of the DVI Specification owned certain patents whose claims

would be infringed by the manufacturers and users of products that adopt the DVI

Specification. In order to foster and develop the standard and have it adopted industry-

wide, the Promoters agreed to grant a royalty-free license limited to those claims of their

patents that would necessarily be infringed (“Necessary Claims”) by anyone practicing

the standards set forth in the DVI Specification. However, the remaining claims of any

patent that were not Necessary Claims (“Non-Necessary Claims”) would be outside the

terms of the license and would subject a party to suit if practiced.

In 1999, Genesis signed a DVI Adopters Agreement and began developing DVI

receiver technology. Genesis incorporated that technology in a number of its products.

Like other Promoters, Silicon owns a number of the patents required to develop and

manufacture products that adopt the DVI Specification, including U.S. Patent Nos.

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5,974,464 (“the ‘464 patent”) and 5,905,769 (“the ‘769 patent”), the two patents at issue

in this action.

In April 2001, Silicon filed an action against Genesis in the Eastern District of

Virginia alleging infringement of the Non-Necessary Claims of the ‘769 and the ‘464

patents. Genesis counterclaimed, contending that the asserted patent claims were

invalid, not infringed, or subject to the DVI Adopters Agreement.

In due course, the district court held a Markman hearing and issued a claim

construction ruling. On December 17, 2002, following almost six months of discovery,

the district court advised the parties that an opinion resolving the parties’ summary

judgment motions would be entered on the following day and suggested that further

settlement discussions might be in the best interests of both parties. In a telephone

conference on December 18, 2002, the parties represented to the district court that they

had reached an agreement to settle the action. The parties memorialized their

agreement in a Memorandum of Understanding (“MOU”), which was executed by the

Chairman and Chief Executive Officer (“CEO”) of each company.

The MOU required the parties to prepare “Definitive Agreements” by December

31, 2002. In preparing the Definitive Agreement, the parties discovered that they sharply

disagreed on the meaning of the MOU’s terms that defined which products would be

subject to royalties. Specifically, Silicon argued that the MOU requires Genesis to pay

royalties on certain products regardless of whether the products infringe Silicon’s

Necessary or Non-Necessary patent claims. Genesis believed the MOU left the royalty-

free license intact and required royalty payments only on products using the additional

license rights granted in the MOU. The parties were unable to come to an agreement

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and ultimately failed to draft a Definitive Agreement. Consequently, pursuant to a

clause in the MOU, the MOU became the binding settlement agreement.

On January 13, 2003, the parties filed cross-motions to interpret and enforce the

MOU. Silicon filed a motion to interpret the MOU (“Motion Re December Proceedings”)

in which it alleged that that the MOU was binding on the parties. Silicon requested the

district court to interpret the MOU to require Genesis to pay the stated royalties on its

entire product base and find that Genesis was in breach of the MOU. Genesis filed a

motion to dismiss (“Motion to Dismiss”) urging its own construction of the MOU and

arguing that the terms of the MOU required Silicon to dismiss the pending patent

infringement action. On March 7, 2003, the district court held an evidentiary hearing to

resolve disputed factual issues regarding the MOU, its formation, and the conduct of the

parties immediately following its formation. The district court ultimately concluded that

an agreement had been formed on the terms and conditions advanced by Silicon. On

July 15, 2003, the district court issued an opinion (“Memorandum Opinion”) adopting

Silicon’s construction of the MOU as the binding settlement agreement of the parties.

See Silicon Image, Inc. v. Genesis Microchip, Inc., 271 F. Supp. 2d 840 (E.D. Va.

2003). On August 6, 2003, the district court entered an order, which it called a “Final

Judgment Order,” directing Genesis to either: (a) remit to Silicon the cash payments

provided for in paragraph 2 of the MOU; or (b) remit such payments to the Clerk of the

Court for deposit in an escrow account. Genesis chose to remit the funds to the Clerk

of Court.

The Final Judgment Order, however, expressly incorporated the terms of the

MOU. As negotiated by Silicon and Genesis, the MOU stipulated that the underlying

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patent infringement action would be dismissed with prejudice on the condition that

Silicon receive payment of a stated settlement sum. On August 18, 2003, Silicon

moved the district court to amend the Final Judgment Order, arguing that because

Section 0 of the MOU conditioned dismissal of the action upon payment of the specified

settlement amount to Silicon, the Final Judgment Order was inconsistent with the July

15 Memorandum Opinion. The district court agreed and, in accordance with the terms

of the MOU, the district court’s Amended Final Judgment Order of December 19, 2003

(the “December 19 Order”) made dismissal of the action with prejudice contingent upon

certification to the court that Genesis had paid Silicon the specified settlement amount.

Paragraph 3 states:

as provided by paragraph 0 of the MOU, this action shall be dismissed
with prejudice immediately after Silicon shall certify to the court in a
pleading that it has received from Genesis the [stated dollar] payment
provided in paragraph 2 of the MOU . . .

Notwithstanding this provisional dismissal, the district court sought to make the decision

appealable by stating:

nothing in paragraphs (3), (4) or (5) above shall preclude this Amended
Final Judgment Order from being a final and appealable order,
notwithstanding that the Court shall retain limited jurisdiction to enter the
order of dismissal with prejudice referred to in paragraph (3) and to
dispose of the issues to be briefed pursuant to paragraphs (4) and (5).

On January 2, 2004, Genesis filed a Motion for Stay of the Amended Final

Judgment Order and Regarding the Proper Disposition of Funds Deposited with the

Clerk. In this motion Genesis sought a stay of the December 19 Order pursuant to Fed.

R. Civ. P. 62(d). On March 23, 2004, the district court granted Genesis’s request:

It is ORDERED that the Defendants’ Motion for Stay of the Amended Final
Order and Regarding the Proper Disposition of Funds Deposited with the
Clerk (Docket No. 313) will be GRANTED upon Genesis’ posting of a

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 supersedeas bond in the amount of [a stated amount]. Moreover, Genesis
may use the [dollar amount] it has already deposited in escrow with the
Clerk of the Court to fund this bond.

Genesis posted the bond, thereby complying with the March 23 Order. Genesis never

paid and Silicon never received the stated cash payment required pursuant to

Paragraph 3 of the December 19 Order. Consequently, Silicon never certified receipt of

the stated payment.

Genesis filed a Notice of Appeal on January 15, 2004, after it had filed its motion

seeking to amend the December 19 Order, but before that motion was decided. On

January 20, 2004, Genesis filed a second Notice of Appeal, listing specific orders and

rulings from which it appealed. Despite the fact that Genesis had, in the January 20

Notice of Appeal, reserved the right to amend its appeal in light of any further

developments concerning matters over which the district court had retained jurisdiction,

it failed to file an amendment to its Notice of Appeal.

Since it appeared that there might be no appealable final judgment and no

determination pursuant to Fed. R. Civ. P. 54(b), this Court issued an order directing the

parties to address the jurisdictional issue. In supplemental briefing, the parties

disagreed over whether the judgment of the district court was final and which, if any, of

the district court’s judgments are appealable.

Before oral argument, the Court again raised the issue of the finality of the district

court's judgment and asked both parties to comment on whether this court had

jurisdiction over the appeal. Both parties verified that the certification condition of the

December 19 Order had not been satisfied and that consequently the district court had

not issued an order dismissing the action. Genesis again argued that the infringement

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claims remained stayed pending appeal and that it considered the district court’s actions

to have finally disposed of the case for purposes of appeal. The parties confirmed that

the district court had not made any determination, nor entered any certification, under

Rule 54(b). The court, after a brief conference, announced at oral argument, that

because the underlying claims remained pending, the judgment of the district court was

not final, leaving this court without jurisdiction to hear the appeal. The court then ruled

that the case was dismissed and adjourned the proceeding without entertaining

argument on the merits.

DISCUSSION

“Every federal appellate court has a special obligation to satisfy itself . . . of its

own jurisdiction . . . even though the parties are prepared to concede it.” Bender v.

Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986) (internal quotation marks and

citations omitted); see also Nystrom v. TREX Co., 339 F.3d 1347, 1349 (Fed. Cir.

2003). Consequently, despite the fact that neither party initially raised an objection to

our jurisdiction over this appeal, we must consider whether there is a final decision of

the district court within the meaning of 28 U.S.C. § 1295(a)(1). Nystrom, 339 F.3d at

1349; see also Pandrol USA, LP v. Airboss Ry. Prods., Inc., 320 F.3d 1354, 1362 (Fed.

Cir. 2003). We determine the scope of this court’s jurisdiction by applying Federal

Circuit law, not that of the regional circuit from which the case arose. Nystrom, 339

F.3d at 1350; see also H.R. Techs., Inc. v. Astechnologies, Inc., 275 F.3d 1378, 1382

(Fed. Cir. 2002); State Contracting & Eng'g Corp. v. Florida, 258 F.3d 1329, 1334 (Fed.

Cir. 2001); Woodard v. Sage Prods., Inc., 818 F.2d 841, 844 (Fed. Cir. 1987) (en banc).

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We conclude that we do not have jurisdiction under 28 U.S.C. § 1295(a)(1) because the

judgment of the district court in this matter is not yet final.

In order for a party to appeal from a judgment, that judgment must be final.

Nystrom, 339 F.3d at 1350. The Supreme Court has defined a final judgment as a

decision by the district court that “ends the litigation on the merits and leaves nothing for

the court to do but execute the judgment.” Catlin v. United States, 324 U.S. 229, 233

(1945); see also Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978). Requiring

parties to “raise all claims of error in a single appeal following final judgment on the

merits,” Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 374 (1981), “forbids

piecemeal disposition on appeal of what for practical purposes is a single controversy.”

Cobbledick v. United States, 309 U.S. 323, 325 (1940). Absent the full adjudication of

all claims for all parties, the dismissal of any unresolved claims, or an express

determination that there is no just reason for delay and an express direction for entry of

judgment as to fewer than all of the parties or claims under Fed. R. Civ. P. 54(b), there

can be no “final decision” under 28 U.S.C. § 1295(a)(1). See Nystrom, 339 F.3d at

1350.

The final judgment rule cannot be satisfied by stipulation of the parties.

Regardless of whether a case is resolved by being fully adjudicated on its merits or by a

settlement between the parties, the final judgment rule remains a precursor to an appeal

as of right before this court. Thus, even in a settled case, a final judgment must obtain.

In order to satisfy this requirement, the trial court must dismiss, with or without

prejudice, all of the claims as a predicate to a final judgment before appellate jurisdiction

may lie to challenge any matter relating to the settlement. Final dismissal of all claims

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with prejudice acts as a full adjudication on the merits, Inland Steel Co. v. LTV Steel

Co., 364 F.3d 1318, 1321 (Fed. Cir. 2004), and renders the controversy ripe for appeal.

Under the particular facts of this case there has been no final judgment and we cannot

assert jurisdiction over the case.

This case was resolved by the parties executing a settlement agreement

embodied in the MOU. The district court incorporated the terms of the MOU into its final

order, ostensibly disposing of the case.1 The December 19 Order requires Silicon to

certify that it received the payment stipulated by the terms of the MOU as a precondition

to the dismissal, with prejudice, of the underlying infringement cause of action. Thus,

Genesis’s payment and Silicon’s stipulation to the court that it had received such

payment are conditions precedent to dismissal of the underlying infringement claims.

The conditions precedent were never satisfied. As a result, the underlying claims were

never dismissed. At the time the defendants appealed to this Court, the plaintiff’s

claims regarding infringement remained pending in the district court, meaning that the

district court’s order was not final.

The district court explicitly required Silicon to certify that it had received certain

payments from Genesis, because the bargain embodied by the MOU made a dismissal

with prejudice of Silicon’s patent infringement claims consideration for providing the

agreed upon settlement amount and royalty payments. Once the district court

1
Indeed, had the terms of the MOU not been incorporated into the district
court’s final order, the district court would not have been able to exercise jurisdiction
over the subsequent efforts by the parties to enforce the agreement as such disputes
are in essence no more than contract disputes and not the proper subject of pendant
jurisdiction. See Nat’l Presto Indus., Inc. v. Dazey Corp., 107 F.3d 1576, 1583 (Fed. Cir.
1997) (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 381 (1994)).

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determined that this was the bargain entered into by the parties, it was powerless to

order a dismissal with prejudice of Silicon’s infringement claims until the parties

complied with the terms of the agreement. By stipulating that dismissal could not be

entered until the payment was received, Genesis foreclosed alternative solutions.

Furthermore, we hold that the district court cannot enter a dismissal until Silicon

receives the payment required as a condition precedent to dismissal and so certifies to

the court. Genesis contends that such a requirement would impair its right under Fed.

R. Civ. P. 62(d) to stay execution of the judgment pending appeal. We disagree. By

stipulating that dismissal could not be entered until the payment was received, Genesis

effectively waived whatever rights it might have had under Rule 62(d) to delay direct

payment to Silicon. Settlement agreements are contracts. As such, the district court

cannot alter the terms of the settlement agreement by judicial decree without the

parties’ consent. To hold otherwise would deny the parties the benefit of their bargain.

In this case, the parties were the architects of their own settlement structure.

However unfortunate their choices in designing their settlement agreement, these

choices may not now be unilaterally undone by a court. Once the district court

determined that the MOU was an enforceable agreement and that it would not be

necessary to resume a full trial on the merits of the case, there were only limited

avenues to establish a basis for appeal, namely, by interlocutory or final judgment.

Genesis could have sought permission under 28 U.S.C. § 1292(b) and (c)(1) to

immediately appeal the interlocutory judgment and order of the district court, or Genesis

could have made the required payment pursuant to the MOU with the appropriate

certification of receipt by Silicon. None of these avenues was followed, therefore there

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is no interlocutory or final judgment from which an appeal can be taken. Since under 28

U.S.C. § 1295(a)(1) this Court cannot review a decision by a district court that is not

final, we dismiss this case for lack of jurisdiction.

DISMISSED

COSTS

No costs.

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