Undecided Inavilidity Counterclaim Precludes Appellate Jurisdiction

In Pause Technology LLC v. Tivo, Inc. (Fed. Cir., March 14, 2005) the court was confronted with an appellate jurisdictional defect caused by an undecided invalidity counterclaim that preclude the court from considering a noninfringement holding in favor of TIVO:

For whatever the reasons, parties too frequently are not reviewing the actions
of the district courts for finality before lodging appeals. When such actions
later are discovered to be not ripe for review, needless delay and inefficiency
result, as reflected in the proceedings in this appeal. To promote the policies
explained in Firestone, our court will insist upon diligent compliance by
counsel with the rule of finality. The importance of the rule of finality is
underscored by the court’s recent amendment of Federal Circuit Rule 28(a)(5),
which now requires that the jurisdictional statement also include a statement
that the judgment or order appealed from is final or otherwise appealable.

In the present case, the district court did not expressly dispose of
the invalidity counterclaim. Indeed, there was no adjudication of it and no
indication that TiVo concurred in a disposition that would permit a
dismissal without prejudice and without a finding of mootness. Furthermore,
there was no finding that there was no longer a "controversy," i.e., no finding
that the counterclaim was moot. Thus, the invalidity counterclaim remains
pending. A "judgment that does not dispose of pending counterclaims is not a
final judgment." Nystrom, 339 F.3d at 1351 (quoting Pandrol, 320 F.3d at 1362).

Pause contends that we should deem the invalidity counterclaim impliedly dismissed. However, even if the district court could impliedly dispose of the invalidity defense in its ruling on infringement, the invalidity counterclaim is a separate claim that remains unresolved. See Altvater v. Freeman, 319 U.S. 359, 363 (1943); see also Pandrol, 320 F.3d at 1361-63 (noting distinction between invalidity defense and counterclaim but recognizing finality of judgment where district court found invalidity defenses waived after counterclaim dismissed without prejudice and not revived).

There is no dispute that the district court did not expressly dismiss the invalidity counterclaim and that a pending counterclaim precludes jurisdiction absent certification under Rule 54(b) of the Federal Rules of Civil Procedure. Instead, Pause would have us find that the district court impliedly dismissed the invalidity counterclaim, that the judgment is final, and that no Rule 54(b) certification
is necessary. Such a finding would be contrary to the text and purpose of Rule
54(b), including its "negative effect" on whether an appeal is ripe for review. Moreover, such a ruling, that the district court impliedly dismissed claims in a multiple claims suit, would be the first step toward eviscerating Rule 54(b).

. . . Nevertheless, because this court has held that a premature notice
of appeal ripens upon subsequent action of the district court, we grant Pause leave to seek remedial action at the district court and thereafter to reinstate the appeal.
Accordingly, this appeal is dismissed for lack of jurisdiction, subject to
reinstatement under the same docket number without the payment of an additional
filing fee if, within 30 days of the date of this opinion, a party appeals from
the entry of a final judgment on the entire case or obtains a certification for
appeal pursuant to Rule 54(b). If the appeal is reinstated, it will be decided
by the present panel, based on the briefs already filed and the oral argument
heard on January 13, 2005.