Carotek, Inc. v. Kobayashi Ventures, LLC, Equaphor, Inc., James Dechman, and Jacklin Associates, Inc.

NOTE: This order is nonprecedential.

# United States Court of Appeals for the Federal Circuit

CAROTEK, INC.,
Plaintiff-Appellant,
AND
EVENT CAPTURING SYSTEMS, INC.,
Plaintiff,
v.
KOBAYASHI VENTURES, LLC, EQUAPHOR, INC.,
JAMES DECHMAN, AND JACKLIN ASSOCIATES,
INC.,
Defendants-Appellees.

2010-1368

Appeal from the United States District Court for the
Southern District of New York in consolidated case nos.
07-CV-11163 and 08-CV-5706, Judge Naomi Reice Buch-
wald.

ON MOTION
.

Before LINN, DYK, and PROST, Circuit Judges.
PROST, Circuit Judge.

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## ORDER

Carotek, Inc. moves to vacate the United States Dis-
trict Court for the Southern District of New York's entry
of final judgment pursuant to Rule 54(b) of the Federal
Rules of Civil Procedure as to Kobayashi Ventures, LLC
et al.'s claim for minimal annual fees in the amount of
$101,578.11 with interest as being improperly certified.
Kobayashi opposes.

I.

This dispute arises out of a 1998 patent license agree-
ment whereby Carotek as licensee obtained certain rights,
including a "most favorite licensee" provision in consid-
eration for the payment of royalties, including a minimum
annual royalty payment. Carotek made royalty payments
until June of 2005 at which point it stopped payments.

Carotek filed suit in the district court seeking declara-
tion that the agreement had been breached by a failure to
fulfill the most favored licensee provision. Carotek al-
leged that the breach of contract caused it damages of
approximately $100,000.00. Carotek also sought other
declaratory relief, including that the patents in question
were invalid and unenforceable.

Kobayashi counterclaimed that the agreement had
never been breached, that the agreement was still in
effect, and that Carotek was in breach of the agreement
for failure to make royalty payments and minimum
guaranteed annual fee payments it estimated at
$1,500,000.00. Kobayashi also asserted several other
claims, including patent infringement claims to the extent
that the contract had been terminated. .

The district court issued two orders relevant to this
motion. On August 31, 2009, the court issued an order,
inter alia, denying Carotek's motion for summary judg-
ment with regard to the most favorite licensee provision.

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Then, on April 12, 2010, the court issued a second order,
inter alia, granted Kobayashi's motion for partial sum-
mary judgment and directing Carotek to pay $101,578.21
with interest for missed annual minimal royalty pay-
ments owed between 2001 and 2007. The court sua
sponte directed entry of final judgment with regard to
Kobayashi's claim for minimal annual fees. Carotek filed
a timely appeal and now seeks to have the April 31, 2009
order vacated as improperly certified as a judgment
pursuant to Fed. R. Civ. P. 54(b).

II.

Rule 54(b) permits the district court to "direct entry of
a final judgment as to one or more but fewer than all of
the claims or parties only upon an express determination
that there is no just reason for delay and upon an express
direction for the entry of judgment." Fed.R.Civ.P. 54(b).
As the statute makes clear, our inquiry is two fold: First,
was the certified claim final, which we review de novo;
and second, was the court's determination that there is
"no just reason for delay" correct, which we review more
deferentially under an abuse of discretion standard. W.L.
Gore & Assoc. v. Int'l Med. Prosthetics Research Assocs.,
Inc., 975 F.2d 858, 862 (Fed. Cir. 1992).

"[I]n deciding whether there are no just reasons to
delay the appeal of individual final judgments . . . a
district court must take into account judicial administra-
tive interests as well as the equities involved." Curtiss-
Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 9 (1980). It is
thus proper for a district court "to consider factors such as
whether the claims under review were separable from the
others remaining to be adjudicated and whether the
nature of the claims already determined was such that no
appellate court would have to decide the same [underlying
facts and] issues [of law] more than once even if there
were subsequent appeals." Id.

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Here, the district court determined that the minimal
annual fee claim was separable from other license agree-
ment claims and from other claims asserted by the par-
ties. The court further determined without any
explanation that there was no just reason for delay of
entry of final judgment with regard to that claim.

Although we do not take issue with the court's finality
determination, there are nevertheless concerns regarding
judicial efficiency. For example, if this court were to
review and affirm the court's judgment regarding the
minimum annual royalty claim, it appears that this court
could nevertheless later be asked to reach a different
conclusion on the underlying issues based on the most
favored licensee provision or another related claim. In
other words, this court will likely have to decide multiple
appeals with the potential of overlapping factual and
perhaps legal issues.

While such potential does not necessarily negate
proper Rule 54(b) certification when the district court
provides a sufficiently important reason for doing so,
Curtiss-Wright Corp., 446 U.S. 9, n.2, no such reason was
provided by the court in its order. We deem it the proper
course to grant this motion and vacate the portion of the
court's order granting 54(b) certification and entry of final
judgment on the minimum annual royalty claim so that
Carotek is not immediately liable for damages.

Accordingly,

IT IS ORDERED THAT:

(1) The motion is granted. The portion of the district
court's April 12, 2010 order certifying Rule 54(b) final
judgment is vacated and this case is remanded.

(2) Each side shall bear its own costs.

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FOR THE COURT

OCT 2 8 2010

Date

/s/ Jan Horbaly
Jan Horbaly
Clerk

cc: W. Thad Adams, III, Esq.
Jeffrey Martin Schwaber, Esq.

FILED
U.S. COURT OF APPEALS FOR
THE FEDERAL CIRCUIT
OCT 2 8 2010

s19

JAN HORBALY
CLERK