Shattuck et al., Plaintiffs.meredity D. Shattuck, Ulo Vahtra and International Businessmachines Corporation, Plaintiffs-appellants, v. Hoegl et al., Appellees, 555 F.2d 1118 (2d Cir. 1977)

Appellant Shattuck is an employee of International Business Machines Corporation ("IBM"), one of the real parties in interest. He is the holder of a patent on a photo-conductive compound, known as "equal weight TNF/PVK," which is used in office copiers manufactured by IBM, the assignee of the patent. Hoegl is an employee of Xerox Corporation ("Xerox"), the other real party in interest. Xerox claims that Hoegl discovered "equal weight TNF/PVK" before Shattuck, and therefore that IBM's patent properly belongs to Xerox. In 1973, Xerox asserted this claim in an interference proceeding in the Patent Office against IBM.¹ 

IBM responded by charging Xerox with fraud on the Patent Office. In support of this contention, IBM offers evidence that the prior inventor was not Hoegl, but Weigl, another Xerox employee. IBM claims that this earlier, non-disclosed discovery by Xerox constituted fraud on the Patent Office and thus defeats the interference claim. See Beckman Instruments, Inc. v. Chemtronics, Inc., 428 F.2d 555, 564-66 (5th Cir.), cert. denied, 400 U.S. 956, 91 S. Ct. 353, 27 L. Ed. 2d 264 (1970); Kayton, Lynch and Stern, Fraud in Patent Procurement: Genuine and Sham Charges, 43 Geo. Wash. L. Rev. 1 (1974).

IBM has conducted discovery in the Western District of New York under 35 U.S.C. § 24.²  At an earlier stage of this proceeding, Karembelas and Kondo, both attorneys employed by Xerox, as well as Weigl, appeared at depositions. All three refused to produce certain documents, making claims of work product and privilege.³  At IBM's request, Judge Burke ordered Weigl to produce the documents he had withheld. Xerox attempted to appeal that order to this Court. We held that the order was non-final, and dismissed the appeal. Shattuck v. Hoegl, 523 F.2d 509 (2d Cir. 1975) ("Shattuck I").

Some time after that, IBM moved to compel Karembelas and Kondo to produce the documents in their control.⁴  This time, Judge Burke refused to compel discovery, and IBM appealed.⁵ 

As a general rule, orders granting or denying discovery are not appealable. Xerox Corp. v. SCM Corp., 534 F.2d 1031 (2d Cir. 1976); 4 Moore's Federal Practice P 26.83(3) (1976). However, when, as here, the only relief sought in the district court is discovery, a number of exceptions to this rule exist. Id. at P 26.83(4). Appellants vigorously urge us to carve out another such exception.

The law governing appealability of orders issued under 35 U.S.C. § 24 is in almost hopeless disarray.⁶  4 Moore's Federal Practice P 26.83(4), at 26-590 n. 7; C. Wright, A. Miller, and E. Cooper, Federal Practice and Procedure § 3914, at 584-85 (1976). Over 50 years ago, this Circuit held all such orders non-appealable. Tucker v. Peiler, 297 F. 570 (2d Cir.), cert. denied, 265 U.S. 587, 44 S. Ct. 461, 68 L. Ed. 1193 (1924). In Shattuck I, we followed Tucker, and held that all orders granting discovery under 35 U.S.C. § 24 would be non-appealable:

None of these cases convinces us that we should decline to follow our decision in Tucker v. Peiler, especially where, as here, production of documents and testimony of witnesses has been ordered. We thus distinguish the instant case from one where a district court has denied production of documents or taking of testimony. In that situation, the district court order may very well be final since, as the Sixth Circuit pointed out in Oschner, no other court may ever be in a position to order production.

523 F.2d at 516.

However, not all orders denying discovery are appealable under our decision in Shattuck I. The opinion went on to distinguish Natta v. Zletz, 379 F.2d 615 (7th Cir. 1967), which held that all such orders were appealable on the authority of Carter Prods., Inc. v. Eversharp, Inc., 360 F.2d 868 (7th Cir. 1966):

In allowing review in Natta, we think that the Seventh Circuit failed to distinguish between the situation of a party, as distinguished from that of a non-party. Such distinction strikes us as crucial. In the Carter Products situation, the court to which the appeal in the main action would be taken would have no power to direct production by a non-party outside its jurisdiction; hence no review of such a disclosure order would be possible unless in the ancillary jurisdiction.

Similarly, a court which reviews a Patent Office determination may order production by a party to the interference if it thinks such production is warranted.

On the other hand, where disclosure is sought from a party, the court which reviews the main action will always have the requisite jurisdiction to order disclosure.

523 F.2d at 514-15 (citations omitted) (emphasis added).

Thus, the rule in this Circuit is that collateral discovery orders are appealable only when they deny discovery against a non-party. This is not such a case. In Shattuck I, we held that Weigl, while nominally a non-party, had the status of a party for discovery purposes:

If this rationale applies to an ordinary witness, it should apply with even more force to a witness such as Weigl. Although nominally a non-party to the patent interference, he is an employee of Xerox, one of the real parties in interest. His refusal to testify or produce the documents sought was pursuant to instructions from the Xerox attorneys.

523 F.2d at 516. The witnesses in this appeal have precisely the same status. Accordingly, Judge Burke's order is non-appealable.⁷ III.

A party in the position of IBM is not left without a remedy. The Patent Office has recently adopted a rule under which discovery may be conducted in interference proceedings.⁸  Moreover, a party disappointed by an interference proceeding has access to two Article III courts. An appeal may be taken to the Court of Customs and Patent Appeals. If that court finds that discovery against a party should have been ordered, it can vacate the decision of the Patent Office. Alternatively, the losing party may seek review in a district court, in which a trial de novo will be held. In such a proceeding, the full panoply of discovery procedures provided by Rule 26 is available, and further review is possible. Inasmuch as the chosen forum for review will be able to remedy any error in the discovery proceedings, there is no reason to allow this interlocutory appeal.⁹ 

Appellees urge, as a second ground of affirmance, that the scope of discovery under 35 U.S.C. § 24 be limited to enforcement of Patent Office orders. This view has been adopted in the First and Third Circuits, Sheehan v. Doyle, 513 F.2d 895 (1st Cir.), cert. denied, 423 U.S. 874, 96 S. Ct. 144, 46 L. Ed. 2d 106 (1975); Frilette v. Kimberlin, 508 F.2d 205 (3d Cir.), cert. denied, 421 U.S. 980, 95 S. Ct. 1983, 44 L. Ed. 2d 472 (1975), and by a judge of the United States District Court for the Southern District of New York who was a distinguished member of the patent bar before his appointment, Spaite v. Marsh, 191 USPQ 684 (S.D.N.Y. 1976) (Conner, J.). See Note, Discovery in Patent Interference Proceedings, 89 Harv. L. Rev. 573 (1976). In view of our decision that we lack jurisdiction over the appeal, we do not reach this question.

Appellees also ask us to assess double costs and an attorney's fee for taking what it characterizes as a "frivolous" appeal. The law in this area is far too confused for us to conclude that this appeal was taken in bad faith, especially in view of some of the language contained in Shattuck I. The request for double costs and an attorney's fee is denied.

The appeal is dismissed for lack of jurisdiction.