“Unforeseen” Market Changes Do Not Justify Reopening Old Patent Case

In Louisville Bedding Co. v. Pillowtex Corp. . (July 25, 2006), the Federal Circuit affirms a denial of a motion to reopen a long-settled patent infringement case to modify the final judgment. In 1994, Louisville sued Pillowtex for infringement of several patents, including a patent on an expandable mattress pad skirt. After summary judgment of non-infringement of the pad skirt patent was granted, the parties settled the case and final judgment was entered. Louisville then sued a second competitor, Perfect Fit Industries, in the same court. The district court gave its claim construction in the Pillowtex case collateral estoppel effect, and shortly thereafter this second case was also settled. The Perfect Fit settlement included a provision for arbitration of future disputes, and when invoked in 2003, the arbitrator chose to not give collateral effect to the district court's original claim construction, instead finding infringement. Judgment was then entered on the arbitrator's award in 2005.

Having prevailed in the arbitration, Louisville moved the Pillowtex court to reopen and partially vacate the 1998 judgment of non-infringement in order to remove collateral estoppel as a barrier to suit against other infringers in Federal court. “Unforeseen events” in the marketplace were argued as the basis for reopening. Louisville maintained that when it entered into the Pillowtex agreement, it had not anticipated ever having other competitors because Pillowtex had an exclusive supply relationship with its supplier of the pad skirt material at issue, but that Pillowtex's subsequent bankruptcy and termination of the exclusive supply agreement changed the market. On appeal the Federal Circuit agrees with the district court's denial of the motion to reopen, noting that such motions are granted only for “exceptional or extraordinary circumstances.” Louisville's “fateful business decision” to settle with Pillowtex on terms which did not address the possibility of changing market conditions is not deemed a circumstance sufficient to overcome the strong public interest in finality of judgments.