Nisus v. Perma-Chink Systems v. Michael H. Teschner (CAFC 06-1592)

The backdrop, from the CAFC -

In the underlying case, Nisus brought suit against Perma-Chink in the United States District Court for the Eastern District of Tennessee. Nisus alleged that Perma-Chink had infringed Nisus’s U.S. Patent No. 6,426,095 B2 (“the ’095 patent”). Perma-Chink asserted the affirmative defense that the patent was unenforceable due to inequitable conduct. Perma-Chink alleged that the attorneys who prosecuted the patent—Mr. Teschner and Mr. Allan Altera—engaged in inequitable conduct when they failed to disclose to the U.S. Patent and Trademark Office the existence of an earlier lawsuit involving related patents as well as material documents that were at issue in that lawsuit. Following a bench trial, the district court held that the ’095 patent was unenforceable because of inequitable conduct and entered judgment in Perma-Chink’s favor. Nisus and Perma-Chink subsequently settled all aspects of the litigation between them and have disclaimed any interest in appealing from the judgment.

After the district court entered its judgment, Mr. Teschner filed a motion to intervene in the litigation and a motion to amend and reconsider the judgment. In his submissions to the district court, Mr. Teschner alleged that the district court erred in finding that he engaged in inequitable conduct. Mr. Teschner pointed out that although he served as Nisus’s patent counsel in connection with the application that matured into the ’095 patent, Mr. Altera replaced him in that capacity early in the prosecution. Mr. Teschner represented that he turned over to Mr. Altera all the relevant materials in his possession at the time of the transition between the two counsel. Because the time for submitting pertinent materials to the patent examiner had not expired at the time of the transition, Mr. Teschner argued that the document turnover fulfilled his duty of disclosure and that the district court was therefore in error in characterizing his behavior in the course of the prosecution as constituting inequitable conduct.

The district court denied the motion to intervene. Although the court amended its opinion in response to the motion to amend the judgment, it otherwise denied the motion.

Though Teschner felt his reputation smudged, he was a stranger to the proceedings, and had no recourse. An attorney may appeal being directly sanctioned, but otherwise, if not directly involved in a litigation, can't butt in.

Ordinarily, nonparties may not appeal from judgments or other actions of a district court. See Marino v. Ortiz, 484 U.S. 301, 304 (1988); Karcher v. May, 484 U.S. 72, 77 (1987); Gautreaux v. Chicago Hous. Auth., 475 F.3d 845, 850 (7th Cir. 2007). That is true even if the nonparty asserts that the judgment, or some action taken by the court in reaching the judgment, has an adverse effect on him. Marino, 484 U.S. at 304.

As an exception to that general rule, a nonparty such as an attorney who is held in contempt or otherwise sanctioned by the court in the course of litigation may appeal from the order imposing sanctions, either immediately or as part of the final judgment in the underlying case. See U.S. Catholic Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 76 (1988); Sanders Assocs., Inc. v. Summagraphics Corp., 2 F.3d 394, 395-98 (Fed. Cir. 1993).

Critical comments, such as in an opinion of the court addressed to the issues in the underlying case, are not directed at and do not alter the legal rights of the nonparty. We recognize that critical comments by a court may adversely affect a third party’s reputation. But the fact that a statement made by a court may have incidental effects on the reputations of nonparties does not convert the court’s statement into a decision from which anyone who is criticized by the court may pursue an appeal.

We have taken the position that a court’s order that criticizes an attorney and that is intended to be “a formal judicial action” in a disciplinary proceeding is an appealable decision, but that other kinds of judicial criticisms of lawyers’ actions are not reviewable. In Precision Specialty Metals, Inc. v. United States, 315 F.3d 1346 (Fed. Cir. 2003), we considered an attorney’s appeal from an order formally reprimanding the attorney for misconduct before the court.

We adhere to the standard applied in Precision Metals. In the absence of some type of formal judicial action directed at Mr. Teschner, such as an explicit reprimand or the issuance of some mandatory directive, see, e.g., Dawson v. United States, 68 F.3d 886, 894 (5th Cir. 1995) (order that an attorney attend an ethics course), a court’s criticism of an attorney is simply commentary made in the course of an action to which the attorney is, legally speaking, a stranger. To allow appeals by attorneys, or others concerned about their professional or public reputations, merely because a court criticized them or characterized their conduct in an unfavorable way would invite an appeal by any nonparty who feels aggrieved by some critical statement made by the court in an opinion or from the bench. Treating such critical comments by a court as final decisions in collateral proceedings would not only stretch the concept of collateral proceedings into unrecognizable form, but would potentially result in a multiplicity of appeals from attorneys, witnesses, and others whose conduct may have been relevant to the court’s disposition of the case but who were not parties to the underlying dispute. Nor would it be appropriate to limit such appeals to attorneys, while forbidding others from appealing from critical court comments, as such a limitation would smack of special treatment for members of the bar and would be difficult to justify as a matter of principle. Accordingly, we hold that absent a court’s invocation of its authority to punish persons before it for misconduct, actions by the court such as making adverse findings as to the credibility of a witness or including critical language in a court opinion regarding the conduct of a third party do not give nonparties the right to appeal either from the ultimate judgment in the case or from the particular court statement or finding that they find objectionable.