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In Mattress Patent Case, Judgment Vacated under Rule 60(b)(3) Based on a Witness’s False Testimony

Audrey Sparschu and Richard F Kurz

In Mattress Patent Case, Judgment Vacated under Rule 60(b)(3) Based on a Witness’s False Testimony
Anastasiia Krivenok via Getty Images

The Federal Circuit recently affirmed a district court ruling setting aside a final judgment of patent infringement, including a $1.1 million damages award and a permanent injunction, in Cap Export, LLC v. Zinus, Inc.  The appellee brought the motion to vacate the judgment under Federal Rule of Civil Procedure 60(b)(3), which states:

(b) Grounds for Relief from a Final Judgment, Order, or Proceeding.  On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons
:. . .
(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party . . . .

Fed. R. Civ. P. 60(b)(3).

Zinus owns U.S. Patent No. 8,931,123 (“the ’123 patent”), directed to an assemblable mattress support that can be shipped with all of its components packed into the headboard. See Cap Exp., LLC v. Zinus, Inc., No. 20-2087, 2021 U.S. App. LEXIS 13322, at *1 (Fed. Cir. May 5, 2021). In 2016, Cap Export filed a declaratory judgment action, alleging that the ’123 patent’s claims were invalid and not infringed. Id. at *2. Zinus then filed a motion for partial summary judgment of no invalidity, relying on a declaration provided by Zinus’s then-president Colin Lawrie. Id. Counsel for Cap deposed Lawrie in October 2016, and he denied knowledge of the existence of prior art. Id. at *3. The district court granted Zinus’s motion, and the parties stipulated to the entry of a final judgment of infringement, including damages and a permanent injunction. Id. at *3-4.

Cap later discovered Lawrie’s testimony was false. Id. at *4. While Lawrie had testified that he was unaware of any prior art, a separate lawsuit by Zinus against an unrelated party revealed an invoice dated before the ’123 patent’s filing date—and bearing Lawrie’s signature—for a purchase of 405 beds which allegedly had “all components fitting in the headboard.” Id. at *4-5. These invoiced beds were highly relevant prior art to the ’123 patent. Id. at *17. After learning of this evidence, Cap moved to vacate the judgment under Rule 60(b)(3). Id. at *6.

The court granted the motion because, during Lawrie’s October 2016 deposition, Cap asked him repeatedly about his knowledge of disassembled beds. Id. at *6-8. For example: “Q. Prior to September 2013 had you ever seen a bed that was shipped disassembled in one box?  A. No.  Q. Not even—I’m not talking about everything stored in the headboard, I’m just saying one box.  A. No, I don’t think I have.” Id. at *6. But the later-discovered invoice contradicted this testimony.  When challenged about this contradiction, Lawrie submitted another declaration admitting that his testimony that he had never seen “a bed that was shipped disassembled in one box” was “literally incorrect,” but alleging that he did not “intend to answer falsely” because he “meant that [he] had not seen a bed shipped disassembled in one box with all of the components in the headboard.” Id. at *7 (emphasis in original). The court found Lawrie’s explanation “wholly implausible,” and granted Cap’s Rule 60 motion to set aside the judgment because the invoiced beds were “functionally identical in design to the claims in the ’123 patent,” and Lawrie’s “repeated denials” of knowledge of prior art were affirmative misrepresentations. Id. at *8-9.

On appeal, the issue was whether Lawrie’s misrepresentations about his knowledge supported relief under Rule 60(b)(3). Id. at *10. According to applicable Ninth Circuit law, “the moving party must prove by clear and convincing evidence that the verdict was obtained through fraud, misrepresentation, or other misconduct,” “the conduct complained of prevented the losing party from fully and fairly presenting the defense,” and the fraud must not have been “discoverable by due diligence.” Id. at *11. Zinus argued that Cap did not meet its burden under Rule 60(b)(3), focusing “primarily on the due diligence requirement.” Id. at *12. Zinus argued that emails relating to the invoiced beds would have been discovered if Cap’s “incompetent lawyers” had “exercised due diligence and propounded standard document production requests.” Id.

The Federal Circuit Panel stated that “[i]n other contexts, due diligence in discovering fraud does not require investigation unless there is reason to suspect fraud.” Id. at *13. The Panel decided that Cap had “no . . . reason to suspect that Lawrie’s statements were fraudulent.” Id. at *15. Lawrie repeatedly misrepresented his knowledge; Cap undertook numerous prior art searches that failed to reveal evidence of the invoiced beds; and the material evidence concealed was not widely available, a matter of public record, or already in Cap’s possession. Id. The other two prongs of the Rule 60(b)(3) test were also satisfied: Lawrie’s answers constituted affirmative misrepresentations, and evidence of the invoiced beds would have been material to invalidity, preventing Cap from fully and fairly presenting its defense. Id. at *16-17. The Panel explained that “showing the material’s likely worth as trial evidence or by elucidating its value as a tool for obtaining meaningful discovery” is enough to establish that withheld material “deprived the movant of a full and fair opportunity to present its case.” Id. at *17. The Panel therefore affirmed the vacated judgment. Id. at *19.

Here, ironically, Zinus tried to argue that the lack of due diligence by Cap’s “incompetent lawyers” was the reason the fraud was not discovered. The Federal Circuit’s decision demonstrates that this argument had no merit. Under Rule 60(b)(3), the fraud was justification for the court to set aside the judgment. This decision thus demonstrates that misrepresentations of knowledge of highly material prior art can result in overturning a judgment that relied on such misrepresentations.