Last week, the Federal Circuit issued its opinion in Teradata Corporation v. SAP SE, a case we have been following because it attracted amicus briefs. In this case, the Federal Circuit considered an appeal asking it to review a district court’s grant of summary judgment dismissing tying and trade secret claims. In an opinion authored by Judge Taranto and joined by Judges Lourie and Hughes, the Federal Circuit transferred the appeal to the Court of Appeals for the Ninth Circuit. This is our opinion summary.
Judge Taranto began by highlighting the factual and procedural background of the case:
Teradata Corp., Teradata Operations, Inc., and Teradata US, Inc. (collectively, Teradata) brought the present action against SAP America, Inc., SAP Labs LLC, and SAP SE (collectively, SAP) in the U.S. District Court for the Northern District of California. Teradata’s allegations, as it ultimately narrowed them, were that SAP (1) tied the offering of two of its products together in violation of antitrust laws, see 15 U.S.C. §§ 1, 14, and (2) misappropriated Teradata’s technical trade secrets relating to its “batched merge” method and certain business trade secrets, actionable under 18 U.S.C. § 1836 et seq. and California Civil Code § 3426 et seq. SAP was permitted to file counterclaims asserting, as ultimately narrowed by SAP, that Teradata infringed SAP’s U.S. Patent Nos. 9,626,421, 8,214,321, and 7,617,179. Eventually, as relevant here, the district court granted summary judgment in favor of SAP on Teradata’s tying claim and technical-trade-secret claim and entered final judgment under Federal Rule of Civil Procedure 54(b) on those claims (while staying proceedings on Teradata’s business-trade-secret claim and SAP’s patent counterclaims, having partially addressed the latter). Teradata timely appealed.
After a more detailed retelling of the factual and procedural background of the case, Judge Taranto then moved to the primary issue of the opinion: jurisdiction. He mentioned how the court holds “exclusive jurisdiction . . . of an appeal from a final decision of a district court of the United States . . . in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents or plant variety protection.” He then remarked how the court’s “jurisdiction in this appeal turns on the applicability of the ‘compulsory counterclaim’ clause.”
Judge Taranto looked to “Federal Rule of Civil Procedure 13(a) for what constitutes a compulsory counterclaim.” This rule “deems a counterclaim ‘compulsory’ if it ‘arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.’” He then described “three tests to determine whether the transaction or occurrence test of Rule 13(a) is met: (1) whether the legal and factual issues raised by the claim and counterclaim are largely the same; (2) whether substantially the same evidence supports or refutes both the claim and the counterclaim; and (3) whether there is a logical relationship between the claim and the counterclaim.”
He explained that the “jurisdictional question before us is thus whether SAP’s claims for infringement of the ’421, ’321, and ’179 patents arise out of the same transaction or occurrence that is the subject matter of Teradata’s claims for misappropriation of its trade secrets 24–31, 58, and 59.” If so, Judge Taranto explained, “SAP would lose its ability to bring these claims (against the accused products) if it did not press them in this action initiated by Teradata.” He noted that, to “prevail on any of its patent-infringement counterclaims as presented, SAP must demonstrate that an accused Teradata product satisfies all limitations of an asserted patent claim.” By contrast, he noted, to “prevail on its trade-secret claims under the federal Defend Trade Secrets Act, . . . Teradata must show the existence and misappropriation of an asserted trade secret.”
After highlighting that the “the first two of the three ‘tests’ we have used for the compulsory-counterclaim inquiry . . . point against Teradata’s suggested affirmative answer” to the jurisdictional question, the opinion shifted to the third test for compulsory counterclaims. Judge Taranto highlighted that an important consideration with regard to the third test “is that different parties’ different products are the direct subjects of Teradata’s claims (addressing SAP products), on one hand, and SAP’s counterclaims (addressing Teradata products), on the other.” He also pointed out how “even shared specific subject matter of a claim and counterclaim, though significant, is not always sufficient to make the latter compulsory.”
Judge Taranto noted how “SAP’s counterclaim is a claim of infringement by Teradata’s products and does not assert invalidity of Teradata’s asserted trade-secret right.” In this regard, he noted the court “assess[es] the compulsory or noncompulsory nature of the counterclaim based on what the counterclaim asserts, which is, simply, infringement by Teradata’s products, not invalidity of the Teradata trade secrets.” In particular, he acknowledged how “SAP did not counterclaim that the asserted trade secrets are invalid because of disclosures in the patents at issue that (either publicly or in SAP’s hands) predate the asserted trade-secret misappropriation.”
The court ultimately concluded that “SAP’s patent-infringement claims are not compulsory counterclaims in this case,” and that, as a result, the court “lack[s] jurisdiction over this appeal, which instead belongs in the Ninth Circuit.”
Interestingly, the court noted that “SAP’s claims of patent infringement (currently counterclaims), if and when adjudicated in an appealable judgment, will not necessarily end up part of an eventual Ninth Circuit appeal.” If a severance occurs, Judge Taranto noted, “an eventual appealable judgment on the patent-infringement allegations made by SAP might well be reviewed in this court while an appealable judgment on Teradata’s non-patent claims would be reviewed in the Ninth Circuit.”
As a result of its analysis, the Federal Circuit transferred the case to the Court of Appeals for the Ninth Circuit.