Kessler Doctrine Cuts-Short Customer Lawsuit

SpeedTrack v. Office Depot (Fed. Cir. 2015)

In a civil procedure focused decision, the Federal Circuit has affirmed that SpeedTrack’s infringement action is precluded under an expanded version of the “Kessler doctrine” originally created by the Supreme Court in Kessler v. Eldred, 206 U.S. 285 (1907).  As interpreted by the Federal Circuit, Kessler generally operates to preclude “a patent infringement action against a customer of a seller who has previously prevailed against the patentee because of invalidity or noninfringement of the patent.” Quoting MGA, Inc. v. Gen. Motors Corp., 827 F.2d 729, 734 (Fed. Cir. 1987).  In Brain Life, the Federal Circuit affirmed that the Kessler Doctrine extends beyond ordinary issue preclusion — particularly holding that, since a first defendant won final judgment of non-infringement of some claims in the asserted patent, those non-infringing products are now immune from all claims of the patent.

The allegedly infringing Information Access Platform software in this case originated at Endeca Tech but is now owned by Oracle. The patentee sued a number of customers for infringement.  In the first case to be decided on the merits, the district court judge held that Walmart’s implementation of the IAP did not infringe the asserted claims (affirmed on appeal).   The question is whether this second case should not be cut-short based upon that final judgment.

In its decision, the Federal Circuit “reaffirmed the continued vitality” of the Kessler doctrine – and seemingly expanded the doctrine to find that a win by one customer on at least one claim applies to protect all customers against all claims of the asserted patent. “Given these circumstances, the judgment in the Walmart case ‘settled finally and everywhere’ that the IAP software does not infringe the [asserted] Patent.” (quoting Kessler).  The court also held (extending Kessler), that the doctrine is available to be invoked by a customer even if the manufacture has not intervened:

We conclude that the rationale underlying the Kessler doctrine supports permitting customers to assert it as a defense to infringement claims. Although the Supreme Court in Kessler focused exclusively on the manufacturer’s rights, and expressed no opinion on whether a customer could assert the defense, it recognized the fact that the manufacturer and customer’s interests are intertwined, remarking that ‘[n]o one wishes to buy anything if with it he must buy a law suit.’ Allowing customers to assert a Kessler defense is consistent with the Court’s goal of protecting the manufacturer’s right to sell an exonerated product free from interference or restraint. A manufacturer cannot sell freely if it has no customers who can buy freely. . . Because it is a right that attaches to the noninfringing product, and it is a right designed to protect the unencumbered sale of that product, SpeedTrack’s argument that the Kessler doctrine can only be invoked by a manufacturer must fail.

Why not simply res judicata? One reason is that the Federal Circuit has held that res judicata does not apply to preclude actions when the alleged infringement occurs subsequent-in-time to the original decision.

40 thoughts on “Kessler Doctrine Cuts-Short Customer Lawsuit

  1. There was a recent case in which a party successfully sued two different entities one the same family of patents (multiple but related – same specification – patent). The suit included different types of claims from the different patents in the successful production of device makers and later service providers.

    Below, SSH appears to be trying to get to the “gist” that the recent case evidenced (quite apart from ANY larger “Gisted” invention).

    Interesting.

  2. Still Scratching: Res judicata applies between two parties. If we’re talking infringement, there’s no reason it should extend to other parties not involved in the suit.

    If it’s the same product at issue, there’s a great reason: judicial economy and fairness. The patentee had its chance to prove that product X infringed one or more claims of its patent. It failed to do that. Pack up. Go home. It’s over.

    1. Moonbeams: “Still scratching”

      Try Nix. Works for me.

      Maybe he meant collateral estoppel. I believe once an issue (claim validity) has been litigated no party (patentee) to the litigation can raise it in any court.

      Not sure about how international jurisdiction works here. If the EU invalidates a claim, does the same claim go belly-up in the US pat? Probably not. Not sure I passed this part of the bar exam.

      Also, not certain what perclusive effect an administrative decision has in the courts.

      One would hope that some statute somewhere would ‘splain that if an allowed claim is invalidated by the PTO or federal courts, the claim is thereafter not enforceable, and if the entire patent is invalidated on grounds other than IC, the patentee should get his issue fee and all maintenance fees refunded from the examiner’s salary.

      Of course, that would cut down on allowances substantially.

      1. Babel, under what provision of the constitution does Congress draw its power to revoke issued patents on its own motion, or to authorize the PTO to do so?

        1. Ned, not sure I follow your premise, but when anyone asks me a question about the constitutional basis for something, I almost always say “The 14th Amendment.” Even if it’s not correct it usually slows ’em down long enough for me change the subject.

          Now in patent cases the answer to a where-in-the-Constitution question has to be Art I, Sec. 8, “To” #8. Short of violating some other provision of the Constitution, just about any patent statute Congress passes could be deemed to be w/in its powers to promote science and the useful arts.

          I forget — when’s the last time the USSCt invalidated a patent statute as unconstitutional? No, not Jacobellis. That was porn.

          1. Just because Congress can pass laws pursuant to a power does not give it the power to oust the courts and to deny rights to a trial by jury.

      2. BB: Maybe he meant collateral estoppel. I believe once an issue (claim validity) has been litigated no party (patentee) to the litigation can raise it in any court.

        It doesn’t matter what “he meant”.

        It is incorrect to state there is “no reason” to extend the non-infringement finding to other parties not in the suit. There is at least one great reason and I told him what it was.

        1. MM:There is at least one great reason and I told him what it was.

          Yeah, dude. And well done, too. Good on ya’.

  3. We all know how General Counsel like the swagger about and pretend they’re important. I encountered one case where the General Counsel had settled an interference where he divided the claims in our patent giving ownership of some claims to the other party in the interference.

    Now think about that for a second.

  4. Probably the right result. Basically, you better be sure to assert all the claims that might apply the first time.

    But, I will notice how easily the court talks about public policy. I was taught in law school that the last reason a judge should use to decide a case is public policy. From what I’ve seen recently with the SCOTUS, it is the first consideration.

    1. Nothing at all wrong with including policy considerations – for common law items.

      For strictly statutory law (especially such law as expressly demarcated by the Comstitution), there are completely different guidelines.

      And yet for some strange and unknown (well, perceptions may abound) reason, comments directed to recognizing and understanding the differences between statutory law and common law – and statutory construction rules – are deemed “offensive.”

      C’est la vie.

      1. comments directed to recognizing and understanding the differences between statutory law and common law – and statutory construction rules – are deemed “offensive.”

        Let us know when you’re ready to give it up already. I have the party hats.

  5. MPEP 2000
    “The Supreme Court in Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 169 USPQ 513 (1971) set forth the rule that once a patent has been declared invalid via judicial inquiry, a collateral estoppel barrier is created against further litigation involving the patent, unless the patentee-plaintiff can demonstrate “that he did not have” a full and fair chance to litigate the validity of his patent in “the earlier case.”

    1. This “only one bite if you lose” patent litigation reducing doctrine is expanded in the doctrine being re-affirmed in the present case to any claim of the patent that could have been timely asserted in the first suit bite against the same product.

  6. Interesting.

    While the expansion is what appears troubling, since claims are infringed (not patents), and it is each claim that stands on its merits (one claim knocked out does not invalidate other claims), patents are for “one invention,” so at least for one perspective, the doctrine may make some sense…

    I think though that the expansion (as discussed here – fair warning: I have not yet absorbed the case) goes too far and wrecks too many concepts such as claim differentiation and unasserted claims retaining presumption of validity. Will this create the patent profanity of making losing a patent suit too unbearable? Lose a minor suit and risk losing the entire patent? What about losing a patent family? The trend is once again ominous.

    1. I think though that the expansion (as discussed here – fair warning: I have not yet absorbed the case) goes too far and wrecks too many concepts such as claim differentiation and unasserted claims retaining presumption of validity.

      This has nothing at all to do with validity, and has no implications for claim differentiation. The doctrine only affects suits against the same product. The “expansion” that Dennis speaks of is common sense – it simply requires that you present all of the legal claims that you have in your initial suit involving a particular product, or risk not ever being able to raise them against that particular product. That’s not a novel concept – the same approach holds for res judicata.

    2. While infringement is determined by looking at the individual patent “claims,” the patent statute creates a cause of action for infringement of the “patent” – not each individual claim. 35 USC 281. I would argue that all the claims of a patent that are allegedly infringed would need to be made part of one suit, otherwise the patent owner could run into a “claim splitting” (“claim” here in the cause of action sense) problem.

      1. Technically you mean patent splitting and not claim splitting.

        You are aware that bringing suit in the first place IS a form of patent splitting in the first place…

  7. I don’t get it. If my claims only cover a widget, then I can see the rationale for a doctrine that says that once I’ve sued the manufacturer or seller of a competing widget for patent infringement, and I lose, then I’m precluded from going after the customers of that manufacturer or seller. But what if there are also method claims that can only be infringed by the end-user – why should I be precluded from suing the end-users in such a case? And apparently, if I’d gotten the claims issued in two separate patents instead of one, such preclusion or estoppel or whatever you want to call it wouldn’t apply.

    Can someone explain this doctrine more clearly?

    It also appears that, under the CAFC’s recent decision, if the patentee doesn’tsue all the end-users at once, he’s precluded from suing any of the others later, or, worse from the patentee’s perspective, a negative disposition of one case disposes of any remaining cases. But under the AIA, the patentee pretty much *must* file separate suits. Catch-22?

    1. If Ned wins his personal suit does the AIA crash (since it had the choice and chose to reject separability) making your AIA concern moot?

    2. Scratching Head, this is an exceedingly simple concept because it is an offshoot of res judicata. Res judicata requires that all claims that could have been brought are resolved by the judgment in the first case between the parties. This legal doctrine prevents piecemeal litigation. Thus if one has in a patent 25 claims but sues on only one of them, tough luck. One cannot sue on the other claims. I hardly think there’s any distinction between types of claims in the patent. .

      (Although the Federal Circuit has not clearly addressed this issue yet, other courts have, but if the “invention” is divided among several patents because of a terminal disclaimer, the doctrine of res judicata should apply to all of them. This is why I view, personally, restriction requirements as beneficial as it specifically allows the claims that originally were in one patent application to result in two different patents that can be independently enforced.)

      Kessler is an extension to products of the manufacturer which had been adjudicated to be “noninfringing.” I presume the doctrine should also apply equally as well to products a manufacturer who have been adjudicated infringing when they are in the hands of privies. So long as they are the same products, they gain the benefit/burden of the res judicata status of the prior litigation.

      1. To what weight then, Ned, do you give to the statement that the AIA breaks this res judicata doctrine by forcing separate suits on the same patent?

          1. Is there not a tension in the reach of one suit-future effects and Congress mandating that “same patent” is not enough and that separate suits must be put into play?

            1. Only if you lose. :)

              I don’t really see the tension. If several cases involving exactly the same product are joined, you get only one shot to prove your infringement case. If you lose, you lose as to all the defendants. It seems to me that the Kessler doctrine is even more important in a post-AIA regime – why should a patentee get two, three, or more attempts to prove the same case, after failing the first time?

              1. Ned’s answer didn’t help. Res judicata applies between two parties. If we’re talking infringement, there’s no reason it should extend to other parties not involved in the suit. A reasonable doctrine – and what I assume Kessler is trying to say – is that if I sue Wal-Mart for selling what I think is an infringing item, and I lose on the infringement charge, then I’m estopped from going after Wal-Mart’s customers for possessing that item that has now been adjudicated to be non-infringing. Put differently, the finding that a particular item doesn’t infringe is really an in rem finding, not an in personam one that’s good only against the particular defendant. (It follows from this, though, that I am not precluded from suing someone for infringement for possessing an item that I say infringes, just because he happens to be a Wal-Mart customer. If he didn’t buy the item that has now been adjudicated to be non-infringing at Wal-Mart, but he instead made a similar item himself, I’m free to sue him.)

                But what if there are method of use claims that I couldn’t have sued Wal-Mart for? Why should I be precluded from suing Wal-Mart’s customers for infringement of the method claims (as dumb a litigation strategy as that may be)? And if the answer is that I should have joined the accused infringers in my suit against Wal-Mart, I say, AIA doesn’t allow me to.

                So despite Ned’s attempts at elucidation, I remain puzzled.

                As for DanH, yes, the idea is that a patentee has to assert all the claims of the patent against a particular defendant in a single suit. But in the AIA, IPR world, your question about multiple bites at the apple isn’t convincing: when the whole world can get multiple chances to knock out the patent, even AFTER it’s been litigated multiple times and not found invalid, in the context of IPRs, and the SAME challenger can file multiple IPRs against the same patent, there doesn’t seem to be a reason to prevent the patentee from multiple enforcement attempts, particularly when there’s no res judicata vis-a-vis the particular defendants.

                1. Still Scratching, there is only one “invention” per patent allowed even though you may have a number claims in the patent and may have different statutory classes. It makes no difference whether the particular infringer may infringe some claims and not others. It would make a mockery of res judicata to have “fine tuning” allowed whereby the patent owner could say that the reason I didn’t sue on so-and-so claim is that I didn’t believe that defendant infringed. I hope you can see this.

                  If you have independent and distinct inventions in different sets of claims you had better put them in different patents or else. If they appear in the same patent that is because both you and the patent office believe they cover the same invention albeit in different form. But formal differences are not enough to say that the claims are not covering essentially the same novel subject matter, the same invention.

                  Did you know that it is it makes no difference on the ultimate royalty or damages that one can collect just how many different claims a particular product infringes? Moreover, it makes no difference whether the product, or the process by which is made or used, infringes multiple classes of claims including method claims for article-of-manufacture claims. The royalty is the same.

                  At the end of the day, if there is a product and if that product is sold, the judgment of the case follows the product such that if the product is an infringement or is not an infringement, that issue has been finally determined between the two parties. Thus it is a violation of the judgment for one of those two parties to file suit against a customer, or to “intervene” (directly or indirectly) in defense of a customer, and take a position on infringement inconsistent with the judgment. This is the Kessler doctrine in a nutshell.

                  What is different about the present case is that the Federal Circuit has ruled that the customer can raise the Kessler defense independent of the presence the other party.

                  I also suspect that in a future case that a finding of infringement to follow the product such that a customer (who after all is in privity with their supplier) cannot raise noninfringement as a defense.

        1. The AIA does not force separate suits in situations where the Kessler doctrine would be applicable. The AIA permits joinder of parties where the right to relief is asserted “with respect to or arising out of the same transaction, occurrence, or series of transactions . . . .” This would permit joinder of the manufacturer and all of its customers, since the right to relief is traceable to the same product(s) of the manufacturer.

          1. Pilgrim, your post got me thinking about divided infringement of process claims. What if one sued every party that cooperated in the infringement of a process claim and then apportioned damages among them according to comparative fault? Thus if a party were only practicing the prior art steps, and someb sleep ody else were practicing the novel steps, perhaps fault to be fully attributed to the one party and not to the other.

            At times, I don’t seem to understand why the Federal Circuit does not “get it”and would deny the patent owner all damages if responsibility for the tort is divided among more than one party.

            One possible reason is that the Federal Circuit is entirely resistant, or lease has been entirely resistant, to the concept that there can be a point of novelty in the claim. They seem resistant to even thinking about Lincoln Engineering – undoubtedly a legacy of the Legend.

          2. And Pilgrim, if one’s theory is inducement against the “manufacturer” and once theory is direct infringement against the customer, one had better sue all the customers in the same suit are else one might be denied any damages at all because of the crazy ideas of the Supreme Court and of the Federal Circuit about mens rea and inducement.

  8. Dennis, res judicata requires the same parties. This is quasi res judicata, but also a species of in rem.

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