Preclusion in Patent Litigation

By Dennis Crouch

Brain Life, LLC v. Elekta (Fed. Cir. 2014)

Res Judicata: Patent litigation preclusion doctrines are – at times – confusing. The doctrine of claim preclusion is linguistically challenging in patent cases because the precluded “claim” does not refer to a patent claim as found in the issued patent but instead to a legal claim or cause of action asserted in a lawsuit. I think it is helpful to think of the legal claim as being broader than a patent claim. As an example, lawsuit alleging that a product of infringes patented Claim 1 and its dependent Claim 2 would be seen as asserting a single legal claim that is, for claim preclusion purposes, indivisible. In that vein, if the patentee had instead asserted infringement of only Claim 1, claim preclusion may well block a later lawsuit asserting infringement of Claim 2.

This case involves the second time that Elekta is defending its products against Brain Life’s medical imaging software patent. U.S. Patent No. 5,398,684 (claiming functional integration of scans from a variety of image sources). In the first case, Elekta’s products were found non-infringing based upon a Federal Circuit claim construction decision. However, the original case only focused on the asserted patent’s apparatus claims. (Prior to trial, the court had dismissed the method claim allegations without prejudice.) In the new lawsuit, Brain Life has asserted the accompanying method claims from the patent that appear to be somewhat broader in scope (and thus may well capture Elekta’s activities).

In defense, Elekta argues res judicata. Res Judicata, a.k.a. claim preclusion, bars a later lawsuit where a prior lawsuit (1) involved the same legal claim or cause of action; (2) reached a final judgment on the merits; and (3) involved the same parties or their privies. Importantly, claim preclusion applies both to legal claims that were actually asserted as well as those that could have been brought. (Note here that issue preclusion is a wholly separate, but often overlapping preclusion doctrine).

In thinking through the problem here, the Federal Circuit first noted that “without a doubt” the final judgment associated with the apparatus patent claims has a res
judiciata effect later assertion of the method claims. However, the court notes two major caveats:

  1. Scope of Infringement: The res judicata effect will only apply when the accused infringing acts are “essentially the same” as those that were the subject of the original lawsuit; and
  2. Timeline of Infringement: The res judicata effect will only apply to accused infringing acts that could-have-been the subject of the original lawsuit.

According to the Federal Circuit this second caveat means that res judicata does not apply to acts of infringement that occurred following final judgment in the original case. This result follows from the Federal Circuit’s legal construct that each act of infringement is a separate and distinct tort rather than merely being part of a flow or a temporally extended tort.

[T}o the extent Brain Life's allegations of infringement are directed to products created and, most importantly, acts of alleged infringement occurring after entry of the final judgment in the MIDCO Litigation, those claims are not barred by the doctrine of claim preclusion. Quite simply, Brain Life could not have asserted infringement claims against the products in question for acts of alleged infringement that postdate the final judgment in the MIDCO Litigation in the current litigation.

The district court had applied claim preclusion and thus was reversed-in-part on that issue.

Issue Preclusion: Where claim preclusion is applied to entire causes of action, issue preclusion is more narrowly focused on issues of fact or law decided in prior cases:

Issue preclusion bars subsequent litigation on an issue of law or fact that was actually litigated. If an issue of fact or law is actually litigated and determined by a final judgment, and the determination is essential to the judgment, that determination is conclusive in any later action between the parties on the same or a different claim. Importantly, where the parties consent to a judgment on an issue prior to trial, it cannot be said that the issue was actually litigated to finality.

Here, the now-asserted the method claims from the '684 patent were, in the original case, dismissed without prejudice and with consent of the parties. Thus those infringement claims "were not fully, fairly, and actually litigated to finality between these parties" and, consequently, " issue preclusion does not stand as a bar to a second suit on those claims."

Kessler Doctrine: In a 1907 case, the Supreme Court announced the little-known Kessler doctrine that adds an additional wrinkle to patent litigation preclusion doctrine. See Kessler v. Eldred, 206 U.S. 285 (1907). Eldred's patent covered an electric lamp lighter. U.S. Patent No. 492,913. Eldred first sued Kessler in Indiana -- alleging that Kessler's electric cigar lighters infringed the patent. The issue as between Eldred and Kessler was fully decided when the Indiana court found no infringement. Issue preclusion would then apply to bar Eldred from re-litigating this issue against Kessler. However, Eldred was not deterred. Rather, the then sued Kirkland in New York for selling a similar lighter and won (on appeal) an infringement holding. Emboldened, Kessler then sued one of Kessler's customers in New York and Kessler intervened on its customer's behalf. After considering the issues, the Supreme Court held that, because the infringement issue was already decided in Kessler's favor, that equity requires that original holding to apply in this subsequent case where Kessler intervened. The Supreme Court expressly refused to speculate what the outcome of the case would have been if Kessler had not intervened.

Interpreting this holding, the Federal Circuit writes:

In sum, the Court granted Kessler a limited trade right to continue producing, using, and selling the electric lighters that were the subject of the first suit and to do so without fear of allegations of infringement by Eldred—even when the acts of infringement occurred post-final judgment and even when it was third-parties who allegedly engaged in those acts of infringement. The Supreme Court concluded that Kessler was entitled to continue the same activity in which it engaged prior to the infringement allegations once it had defeated those contentions in the first suit. The Court did not rely on traditional notions of claim or issue preclusion in crafting this protection for Kessler.

The Federal Circuit applied Kessler in MGA, Inc. v. General Motors Corp., 827 F.2d 729 (Fed. Cir. 1987) in a similar scenario where a manufacturer first won its case and then intervened in a customer lawsuit.

In the current case, we do not have the issue of customer lawsuits. However, the Federal Circuit still found that Kessler applies as something of a broadened issue preclusion doctrine. The court holds that since Elekta's won final judgment of non-infringement of some claims in the '684 patent, those non-infringing products (while in Elekta's hands) are now immune from all claims of the '684 patent. "Elekta's GammaKnife, GammaPlan, and SurgiPlan products have acquired the status of noninfringing products as to the '684 patent."

The hook for this outcome comes from Kessler's statement that "The [trial] court … conclusively decreed the right of Kessler to manufacture and sell his manufactures free from all interference from Eldred by virtue of the [Eldred] patent, and the corresponding duty of Eldred to recognize and yield to that right everywhere and always.” In my view, the Federal Circuit here is likely taking Kessler’s statements out of context since the Supreme Court did not consider the effect of non-asserted patent claims. The oddity of the Federal Circuit’s broad interpretation of Kessler is that the court also expresses reticence about the value of the doctrine altogether. Thought in the end, I would argue that the rule is likely a good one from a policy perspective.

 

32 thoughts on “Preclusion in Patent Litigation

  1. Dennis: Are you suggesting that, with final judgment that an accused product does not infringe an asserted patent, if the accused infringer builds another identical accused product the day after final judgment, it may have been a good idea to allow the patentee to file a new suit to try to get a different answer, but now you think it is a good policy to let the accused infringer sell the accused but clearly non-infringing product?
    From an academic standpoint, was there ever a case that someone actually sued a adjudged non-infringer on the same claims and an identical product? Did it make sense?
    So, rather than expressing doubt as to the value of Kessler rule, I think the Federal Circuit merely questioned its foundation as an exception to mutuality, because that foundation is no longer necessary. Kessler involved identical patent claims (that were asserted) applied in a subsequent suit against identical accused devices. This case involves different patent claims (that could have been asserted) applied against identical accused devices. The Federal Circuit applied the Kessler rule against claims that could have been made, which sounds like claim preclusion. This seems odd, given that the opinion had just pondered whether Kessler is perhaps moot given the elimination of mutuality as a prerequisite for the application of issue preclusion. But mere application of issue preclusion requires that the issue actually be litigated, which is not the case here. Kessler is expanded by this case to cover claims that could have been asserted.
    Without the Kessler rule, an accused infringer, once clear, could be sued repeatedly, without limit, until the asserted patent expires, so long as the accused infringer keeps on selling the cleared product. A rule preventing this is better than ” likely a good one from a policy perspective.”

    1. Mr. Crockett, the Supreme Court has spoken on this issue in the context of privity where the second suit involves the same patent, same products and the second defendant is in privity. See, e.g., Hart Steel Co. v. Railroad Supply Co., 244 U.S. 294, 37 S. Ct. 506, 61 L. Ed. 1148 (1917), a case that relied on Kessler.

      Privity was a reserved issue in Kessler because Kessler was controlling the defense of its customer.

        1. Mr. Crockett, I don’t know the details of the case, but was reading a story about second case going to trial in the ND Cal., the first not having resulted in an injunction. I was just wondering, but do not know, whether Apple was compelled to license Samsung an arch competitor, or whether they will have to repeatedly sue Samsung on the same products, or colorable variations, and with respect to the same patents. If anything, Kessler would say that Apple’s victory in the first case against Samsung should settle the issue for all time against Samsung with respect to the same patents and products, and that Samsung should only have a right to defend against products that are not colorable imitations.

  2. Seems bizzare to me that had the examiner required a divisional application for the method claims, from the outset, the resulting patent (containing only method claims) would be assertable?

        1. I think Brain Life expanded it: Kessler originated as an early expression of issue preclusion without mutuality (that is, defensive collateral estoppel not tied to offensive collateral estoppel). But as expressed in Kessler, it applied only to issues actually litigated (issue preclusion). Brain Life applied the Kessler rule against claims (causes of action) that were not litigated, but could have been litigated (like claim preclusion/res judicata).

          Without getting scholarly (that’s Crouch’s job), Kessler could have been restated in terms of claim preclusion, rather than as an exception, except the Federal Circuit is hanging on to semantics (that each act of infringement is a separate tort) and invocation of Kessler was the only way out once they got tongue tied.

          So, I think that expansion of Kessler is the only sensible approach left if the Federal Circuit cannot break through its own theoretical logjam (Aspex and its temporally limitations, and the concept that day-after infringement cannot be addressed in day-before litigation). I don’t know how far Kessler should be expanded, but expansion to exclude suit on concomitant method claims, whether issued in the same patent or a divisional (Former Lawyer raised that issue), makes sense to me. I have not considered whether application of a similar rule should apply to all patents that might cover an accused device in a first litigation.

          Res judicata/issue preclusion is a tricky issue for defendants: you can settle a case only to realize (a) that you can get sued the next day for infringing the same patent based on the same product design, just because you sold a new one the next day and (b) you lost your right to contest validity because it could have been raised in the first case but you didn’t because you settled (it’s a compulsory counterclaim).

  3. Great write-up Dennis. The discussion of the “Kessler doctrine” is especially interesting. I agree that the doctrine makes sense from a policy/equity perspective.

    1. MM, actually it shows that the Feds are wrong on claim preclusion. Consider what it said there: the patent owner may win on product X, but if the loser continues to sell product X, it must bring another suit.

      But such is why eBay and Kennedy’s concurrence makes no sense as well.

      1. Ned, there are too many indefinite articles (“it”) in your comment for me to follow your argument. Perhaps if you articulate what you believe to be the holding in Kessler and then contrast it with what you believe to be the holding of the Federal Circuit on claim preclusion (in this case, presumably?) I could make some sense of it.

        1. MM, The Feds held that there was no claim preclusion here even when the same products were involved. This is contrary to Kessler that held that the first judgment resolved all issues for all time between the patent owner and the defendant with respect to the same products.

          Here the Fed applies the so-called Kessler doctrine to provide an exception to its holding of no claim preclusion. But the obvious fact is, the Federal Circuit’s holding on claim preclusion is inconsistent with Kessler.

          Consider Apple v. Samsung and product X. Apple wins a holding of infringement with respect to product X and certain specified patents. The court denies Apple an injunction. Apple refuses to license Samsung, it is arch competitor. According to the Federal Circuit, claim preclusion does not apply with respect to further sales of product X with respect to the same patents. However, this is inconsistent with Kessler, that seems to hold that one litigation between the parties with respect to a patent and to a product resolves all matters between those parties with respect to that product and to that patent for all time. Thus, Apple should not have to sue Samsung again for further acts of infringement. They should have gotten an injunction.

          This shows there something very inconsistent between the current state of jurisprudence regarding patents and products, and the denial of an injunction, especially under circumstances where the parties are competitors and the patent holder is unwilling to license its competitor.

          1. Kessler might be best understood as a precursor to defensive collateral estoppel (issue preclusion): Only the accused infringer is protected. The patent owner cannot use collateral estoppel offensively. Make sense in the context of the case law, which developed when injunctions were automatic. Not so sure it makes sense in the real world.

            1. I don’t think Kessler thought it important at all that the same claims were at issue in the customer suit. They looked at the problem as one of res judicata. Once the issue of infringement of the patent was resolved for particular products, the court was adamant that there be no further litigation with respect to that patent and the same products again between the same parties.

              Thus I think Kessler would protect the winning patent owner just as much as the losing patent owner if the same defendant or its privies were to infringe again with respect to the identical products. (Of course, due process would require the privy be on notice.)

            2. Ned: The Federal Circuit thinks Kessler was one-sided, “allowing an adjudged non-infrigner to avoid repeated harassment for continuing its business as usual post-final judgment….”
              Like Blonder-Tongue, it was lopsided.
              A continuing infringer, after judgment, would most likely be dealt with in contempt proceedings, but if not perhaps Kessler would have become even-sided.

            3. On contempt: it only applies if there is an injunction. This is why I brought up Apple v. Samsung. Had there been an injunction, the only issue in the second case on the same patents is contempt.

              But now Apple has to sue Samsung once again on its next product which is arguably the same as the one in the first case. Kessler did not require the exact same products, just the same kind of products.

              To me, Kessler and Hart Steel would equally apply to a losing infringer as to a winning infringer where the products were the same products.

    1. bruce,

      Please elucidate the “policy questions” as you understand them related to who owns the personal property of the patent right.

      Please feel free to incorporate the intent of the Founding Fathers that the patent right be fully alienable, that the Supreme Court has recognized that there is no ‘use’ requirement in US patent law (in still controlling case law interpretation), and that 35 USC 101 (the ability to separately have improvement patents) rules out a de facto ‘use’ requirement into any “policy” position you may wish to advance.

      1. Issues about NPEs and patent litigation (pro and con) have been discussed to death here and elsewhere. Strange that you are not familiar with them.

        1. You mistake my question bruce.

          I ask that you elucidate as to your understanding, and to do so incorporating the points I provide.

          Try addressing what I actually ask instead of your strawman. Thanks.

            1. LOL – because clarifying bruce’s misconception is such an example of ‘control’….

              /major eyeroll.

              You use that word but it is apparent that that word does not mean what you think that word means.

    1. Not really.

      Corporations have never been considered “people” with the understanding of what a person is fully under the law.

      The phrase has only been used within certain contexts, and it is only by ignoring contexts that the ‘play’ by Jonas achieves its ‘interest.’

      Jonas is all about ignoring the contexts.

      Being glib is no way to go through life.

      1. One has to wonder about the wholesale eradication of Jonas comments…

        Did someone from the Patent Office give a call to Prof. Crouch?

  4. Kessler actually seems to suggest that the Federal Circuit’s views on claim preclusion is wrong.

      1. Not necessarily Ned – see the America Invents Act and the Prior User Rights section.

        Ask yourself what happens if Prior User Rights are not established – the shield for customers does not attach.

        The Kessler case only dealt with an actual stepping in the shoes of the customer by the seller. In that case, the seller took that step, incurring both any potential upside and potential downside.

        You would be over-reading (shocking as that may sound) case law to simply extend privity automatically by a mere presence of a buyer-seller customer protection aspect.

  5. The intersection of Kessler’s Doctrine and Prior User Rights (or of a situation where Prior User Rights fail to be established) might make for an interesting discussion.

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