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Rigidly Interpreting Precedents May Foreclose an Equitable Doctrine


The Federal Circuit’s Judge Bryson has been presiding over two district court cases where he decided an important and recurring issue regarding collateral estoppel. In a consolidated order, he refused to apply collateral estoppel to certain fact-finding by the Patent Trial and Appeal Board on what prior art publications disclose relative to patent claims the patent owner contends are infringed. IOENGINE, LLC v. PayPal Holdings, Inc., Nos. 18-cv-452-WCB and 18-cv-826-WCB, Dkts. 511 and 450, respectively (D. Del. June 15, 2022) (Memorandum Opinion and Order). Until the Federal Circuit clearly addresses this issue, his decision may influence district judges facing the same issue.

In these cases, the patent owner asserted infringement of claims in two patents. Soon thereafter, one of the accused infringers successfully petitioned the Board to institute inter partes review of these claims. Only three asserted claims—all dependent claims—survived the review (and an appeal is pending). Afterwards, the patent owner asserted five more dependent claims, for a total of eight claims. All of these claims depend from claims the Board decided were not patentable. In response, the accused infringers complained these claims are invalid. More importantly, they unsuccessfully asked the court for summary judgment that the patent owner should be collaterally estopped from contesting that the limitations recited in the canceled base claims are found in the prior art. These cases present a seemingly simple collateral estoppel issue that surprisingly has split district courts.

Collateral estoppel may apply when the identical issue was previously argued and decided, that decision was necessary to the disposition of the earlier dispute, and the party (to be estopped from now re-litigating the issue) was represented in the earlier dispute. “Importantly,” said Judge Bryson, “when the burden of proof on an issue in the prior proceeding was less stringent than the burden of proof on the issue as to which preclusion is sought in the second proceeding, collateral estoppel typically does not apply.” Id. at 22 (emphasis supplied). But should the district court have to find—under a clear and convincing standard of proof—that the prior art discloses limitations that the Board already found under a preponderance of evidence standard? Judge Bryson effectively answered “yes,” because he denied the motion, refusing to apply collateral estoppel here.

“The problem” with the accused infringers’ argument, Judge Bryson notes, “is that the standard for determining [patentability] that is applied in proceedings before the [Board] differs from the standard of proof [for determining validity] that is applied in proceedings before a district court.” IOENGINE at 24. And “that difference forecloses [the district court] from applying collateral estoppel.” Id. His decision cites numerous authorities, including Supreme Court cases, the Restatement (Second) of Judgements § 28(4) cmt. f, illus. 11 (Am. Law Inst.1982), and well-known treatises, even though none addresses the specific type of fact-finding relevant here. That may be problematic:

On the subject of issue preclusion. … Formulations make a difference.  It may be true that general propositions do not decide concrete cases in the sense that major premises are not sufficient to generate outcomes. But a major premise sets in motion the train of analysis; if misdirected, it may foreclose an appropriate outcome.

Geoffrey C. Hazzard, Jr., Revisiting the Second Restatement of Judgments: Issue Preclusion and Related Problems, 66 Cornell L. Rev. 564, 581 (1981) (link) (commenting as the lead Reporter of the American Law Institute that wrote this Restatement). Sure, the standards of determining validity versus patentability are different. But how does that meaningfully matter to the underlying fact-finding both tribunals need to undertake? The decision offers no explanation suggesting the standard of proof on fact-finding might matter in these cases.

Judges are supposed to apply the judicially-created doctrine of collateral estoppel equitably to resolve issues that, in some form, were previously the subject of an earlier decision. When that doctrine is construed too narrowly, the court risks unnecessarily burdening itself and the parties with a potentially complicated, time-consuming, and costly side-show. On the other hand, if construed too broadly, the court risks jettisoning a potentially novel and meritorious defense deserving the court’s fulsome consideration.

The precise burden of proof, though, rarely matters when the fact-finding concerns whether a prior art publication describes a feature recited in a patent claim: a feature is either disclosed or it’s not. Before the Board, the parties understand the importance of that fact finding because it can be dispositive of patentability. Accordingly, the parties have the same strong incentives to contest that fact finding at the Board as they do before the courts. District courts are supposed to decide cases efficiently, for the parties’ sake if not the courts’. Of course, there may be a situation—e.g., in an obviousness assessment as to whether there exists a motivation to combine references—where the standard of proof may matter. But nothing in Judge Bryson’s decision suggests these cases present such a situation.

The Federal Circuit has already said that collateral estoppel may apply to the Board’s decisions. See MaxLinear, Inc. v. CF CRESPE LLC, 880 F.3d 1373, 1376 (Fed. Cir. 2018); see also, Nestle USA, Inc. v. Steuben Foods, Inc., 884 F.3d 1350, 1351 (Fed. Cir. 2018). And Federal Circuit “precedent does not limit collateral estoppel to patent claims that are identical. Rather, it is the identity of the issues that were litigated that determines whether collateral estoppel should apply.” Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013); see also, ArcelorMittal Atlantique et Lorraine v. AK Steel Corp., 908 F.3d 1267, 1274 (Fed. Cir. 2018) (“Collateral estoppel may bar litigation in cases with different but related patents when there are common issues.”).

Yet, Judge Bryson states that the Federal Circuit has not “created an exception to the general rule of the law of judgments that collateral estoppel does not apply in circumstances in which the standard of proof that the party asserting collateral estoppel is more exacting in the second action than in the first.” IOENGINE at 27. He concedes that some district courts have created that exception.* If those courts were wrong, he does not say. Instead, he stands with other district courts who have refused to apply collateral estoppel in similar situations.** Reasonable minds, of course, may differ. But why is that happening here?

In some part, these courts are interpreting XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282 (Fed. Cir. 2018), differently. The accused infringers argued to Judge Bryson that XY compels application of collateral estoppel to patentability issues decided by the Board when those issues arise again in litigation. The different standards of proof on the fact-finding in that case, they say, did not matter. IOENGINE at 24. Judge Bryson disagreed. He explained that the XY court dismissed the appeal of the district court litigation not specifically because of collateral estoppel, but because it upheld the Board’s decision canceling the patent claims asserted in the litigation, rendering the litigation-appeal moot:

In XY, the Federal Circuit had before it two appeals involving the same patent claims—an appeal from a district court judgment that, in relevant part, held the claims invalid, and an appeal from a final written decision of the PTAB that invalidated the same claims in an IPR proceeding. The Federal Circuit affirmed the PTAB’s decision and then gave collateral estoppel effect to that decision with respect to the appeal from the district court, dismissing that appeal as moot. The court noted that “both parties assumed that an affirmance of the Board’s decision would result in estoppel” and that there was “no indication that either party thought estoppel would not apply.” Under those circumstances, the court applied collateral estoppel sua sponte “to avoid unnecessary judicial waste from remanding an issue that has a clear estoppel effect.”

* * * *

[T]he court in XY dismissed the appeal from the district court litigation over certain [claims, sic] after upholding the [Board’s] decision invalidating those same claims. To be sure, the court in XY granted that relief before the [Patent Office] had formally canceled the claims. Perhaps for that reason, the Federal Circuit in XY treated its decision as being based on collateral estoppel ….

Id. at 24–25 (citations omitted). Judge Bryson explained away the XY court’s references to collateral estoppel based on his view that the case presented “special circumstances,” among which was the XY parties’ “agree[ment] that estoppel should apply to the [Board’s] decision once the Federal Circuit affirmed that decision. Id. at 26. And when that happened, he said, “the court had no reason to address whether collateral estoppel should apply despite the different legal standards.” Id. His interpretation of the case is not implausible.

But consider the inefficiencies attending steadfast adherence to sweeping pronouncements that differing standards of proof alone foreclose application of an equitable doctrine. Inter partes review petitions often challenge only the claims asserted in a litigation complaint. These petitions are often filed as the one-year anniversary of the complaint approaches. Once that anniversary passes, patent owners may assert more of the same patent’s claims, which the accused infringer can no longer petition for inter partes review. Even if the challenged claims are canceled, the added claims remain for litigation. The gamesmanship is manifest when those added claims depend from the challenged, canceled claims or recite features common to those claims. Absent insulation from inter partes review, the Board would apply collateral estoppel, see MaxLinear, 880 F.3d at 1377–78, or quickly make similar findings of fact regarding the disclosure of those common features in the prior art.

In the sport of kings, the expense of re-litigating this type of fact-finding is hardly trivial. The district courts applying collateral estoppel in this type of situation* no doubt have recognized as much. They are interpreting precedents flexibly to apply the doctrine equitably and drive these cases to a just, speedy, and inexpensive conclusion. Here, however, Judge Bryson presided over a five-day jury trial, where the jury returned a verdict that each of the infringed claims is invalid over prior art. Ingenico Inc. v. IOENGINE, LLC, No. 18-cv-826-WCB, Dkt. 500 (D. Del. July 25, 2022) (Verdict Form). So, was his decision correct?

See Trustees of the Univ. of Pa. v. Eli Lilly and Co., No. 15-6133, Dkt. No. 343, at 9–11 (E.D. Pa. Jan. 14, 2022) (Diamond, J.); M2M Solutions LLC v. Sierra Wireless Am., Inc., No. 14-cv-102, Dkt. No. 213, at 5–7 (D. Del. Mar. 31, 2021) (Andrews, J.); Cisco Sys., Inc. v. Capella Photonics, Inc., No. 20-cv-1858, 2020 WL 7227153, at *3–4 (N.D. Cal. Dec. 8, 2020) (Chen, J.); Intellectual Ventures I, LLC v. Lenovo Grp. Ltd., 370 F. Supp. 3d 251, 255–57 (D. Mass. 2019) (Saris, J.) (applying Board’s findings of unpatentability for independent claims to their dependent claims in the same patent asserted in litigation); Fellowes, Inc. v. ACCO Brands Corp., No. 10-cv-7587, 2019 WL 1762910, at *6 (N.D. Ill. April 22, 2019) (Leinenweber, J.).

**  See United Therapeutics Corp. v. Liquidia Techs., Inc., No. 20-755, 2022 WL 823521, at *4–5 (D. Del. Mar. 18, 2022) (Hall, Mag.), report and recommendation adopted on a different ground, 2022 WL 1503923 (D. Del. May 12, 2022) (Andrews, J.); TrustID, Inc. v. Next Caller Inc., No. 18-cv-172, 2021 WL 3015280, at *3 n.2 (D. Del. July 6, 2021) (Noreika, J.) (permitting an infringement trial to proceed after the Board canceled the asserted claims in a final written decision pending and while that decision was pending on appeal); Sanofi-Aventis U.S. LLC v. Mylan GmbH, No. CV 17-9105, 2019 WL 4861428, at *1 (D.N.J. Oct. 2, 2019) (Chesler, J.); Papst Licensing GmbH & Co. v. Samsung Elecs. Co., 403 F. Supp. 3d 571, 601–03 (E.D. Tex. 2019) (Schroeder, III, J.).



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