Issue Preclusion: Claim Construction in Prior Lawsuit

US5428933-1by Dennis Crouch

Phil-Insul Corp. (IntegraSpec) v. Airlite Plastics (Fed. Cir. 2017) [IntegraSpec].

IntegraSpec’s U.S. Patent No. 5,428,933 covers an insulated concrete form (Styrofoam molds) used in building construction.

Back in 2011, IntegraSpec sued Reward Wall and Nudura Corp. for infringing the ‘933 patent. In that case, the district court sided with the defendants – finding no infringement. That decision was affirmed in 2014 by the CAFC without opinion.  During the interim, the USPTO also confirmed the patentability of several claims of the patent.

Meanwhile, IntegraSpec sued Airlite in May 2012 alleging infringement, but the district court dismissed the case in 2014 (after a two year stay) finding them precluded based upon the common law doctrine of collateral estoppel (these days usually called issue preclusion).  Here, we might term this non-mutual defensive collateral estoppel.

Basically, IntegraSpec was asking for a different claim construction in the second case than what was awarded in the first case.  The district court saw the problem with this since accused products were virtually identical and the narrow claim construction in the original case was critical to the non-infringement outcome.

Collateral estoppel kicks-in to prevent a party from re-litigating an already decided issue when:

(1) Same Party: the party being precluded was a party (or in privity with a party) in the prior action.

(2) Same Issue: the issue being precluded is the same as the issue in the prior action;

(3) Actually Litigated: the issue being precluded was actually litigated in the prior action;

(4) Final Judgment: the issue being precluded was determined by a valid final judgment; and

(5) Essential: the determination of the issue in the prior action must have been essential to the prior judgment.

The list above is 8th Circuit law, but is fairly standard.  The Federal Circuit has created some additional patent-specific rules regarding issue preclusion – For infringement, two infringement claims are “the same” if the accused products are “essentially the same,” i.e., differences are either “merely colorable” or else unrelated to the limitations of the asserted patent claims. Roche Palo Alto LLC v. Apotex, Inc., 531 F.3d 1372 (Fed. Cir. 2008)

On appeal, the Federal Circuit has affirmed – specifically holding that its prior R.36 Judgment may be used in support of an issue preclusion conclusion so long as only a single dispositive issue was appealed in that prior appeal.

The second issue – in the first case claim 1 was asserted. Meanwhile, claim 1 was cancelled in a reexam and formerly dependent claim 2 rewritten to include all of the prior limitations.  In this new action, claim 2 is asserted.  In the appeal, the Federal Circuit confirmed that collateral estoppel applies even though the original court interpreted claim 1.  The court based this upon its bare statement that “It is well-established, however, that claim terms are to be construed consistently throughout a patent.”

 

14 thoughts on “Issue Preclusion: Claim Construction in Prior Lawsuit

  1. The argument was made in this case [perhaps inspired by a prior blog here?] that the Fed. Cir. Rule 36 affirmance was not sufficient for this purpose, but it got short shrift. [Logically, since the question should be if the same issue got a full and fair hearing in the D.C. below, not whether or not it got fully re-hashed within a final written decision on appeal at the Fed. Cir.]

    1. Paul,

      In principle you are correct. Considering the finality issue for collateral estoppel to arise the prior decision need not have been final in the sense of 28 U.S.C. §1291 but, in the words of the Restatement, the prior adjudication must have been “sufficiently firm to be accorded conclusive effect”. Restatement (Second) of Judgments § 13 (1982). Sufficient firmness, according to the Restatement, requires that the party against whom the estoppel is asserted, have had the right, even if not exercised, to challenge on appeal the correctness of the earlier decision. Restatement (Second) of Judgment, § 13 reporter’s note comment f (1982). The Supreme Court has followed the Restatement (Second) of Judgments on issue preclusion issues since 1982 in every single opinion.

  2. I think this opinion is correct although several prior CAFC opinions on issue preclusion are legally wrong (i.e., Allergan v. Sandoz). In B&B Hardware the Supreme Court defined issue preclusion as follows: “When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the [prior] judgment, the [prior] determination is conclusive in a subsequent action between the parties whether on the same or a different claim.” In Bobby v. Bies, 556 U.S. 825 (2009) the Court invoked the Restatement’s essential-to-the-judgment requirement for issue preclusion. Going so far to suggest that incidental issues or those issues that merely provide evidence relevant to the determination of the major subject matter in dispute, even though litigated, have no issue preclusive effect. Similar in Schiro v. Farley 510 U.S. 222 (1994) the Court held that even if it is clear that an issue was been fully litigated, it may not be given collateral estoppel effect unless the (second) court can find that the determination of that issue in the first law suit was necessary/essential to the first judgment) (“Issue preclusion attaches only to determinations that were necessary to support the judgment entered in the first action”). And in the famous and seminal opinion on issue preclusion Montana v. United States, 440 U.S. 147 (1979) the Court defines collateral estoppel [as] “once an issue is actually and necessarily determined by a court of competent jurisdiction.” Thus there is no room for “essentially the same” criteria in the issue prelusion doctrine. The Federal Circuit again deviced an patent exceptionalism to a common law doctrine. The Supreme Court will not like this.

    1. Thanks J. Your perspective and citations are helpful. The two potential errors here are (1) allowing “essentially the same” (but still different) issues to be precluded; and (2) the holding here that claim terms are always interpreted consistently throughout a patent (or before/after a reexamination). I agree with you that the first issue is much more likely to get traction from the Supreme Court

      1. Dennis,

        Thank you for your reply.

        In re Microsoft Corp. Antitrust Litig., 355 F.3d 322, 325–29 (4th Cir. 2004) is very instructive on the first point.

        The Restatement (Second) of Judgements (1982) offers some guidance for situations where “there is a lack of total identity between the particular matter presented in the second action and that presented in the first,” resulting in a need to determine whether “the `issue’ in the two proceedings is the same.” See Restatement (Second) of Judgments § 27 cmt. c. According to the Restatement four factors are to be considered: (1) whether there would be “a substantial overlap between the evidence or argument” advanced in the two actions; (2) whether “the new evidence or argument involve[s] application of the same rule of law as that involved in the prior proceeding”; (3) whether “pretrial preparation and discovery” in the first action might have “embraced the matter sought to be presented in the second”; and (4) the degree of relatedness between the claims in the two proceedings. Id.

        There is also a wide and long and standing circuit split. Federal courts have used differing language to express the idea that legal issues are not “identical” for issue preclusion purposes if they are significantly different. Compare Raytech Corp. v. White, 54 F.3d 187, 191 (3d Cir.1995) (the differences in the standards must be “substantial”) with Talcott v. Allahabad Bank, Ltd., 444 F.2d 451, 460 (5th Cir.1971) (the legal standards are not identical for issue preclusion purposes only when there is a “demonstrable difference” in the legal standards by which the facts are evaluated).

        And the two cases which present the biggest challenge are United States v. Stauffer Chemical Co., 464 U. S. 165, 172 (1984) (9:0) (Burger, C.J. for a unanimous Court) (Held: Issue Preclusion can apply to pure questions of law) (applying issue preclusion where a party sought to “litigate twice . . . an issue arising . . . from virtually identical facts” because the “factual differences” were “of no legal significance”) (issue preclusion involving the government) and Kremer v. Chemical Constr. Corp., 456 U.S. 461 (1982) (5:4) (White, J. for the Court) (Under collateral estoppel, once a court decides an issue of fact or law necessary to its judgment, that decision precludes relitigation of the same issue on a different cause of action between the same parties.). The Court in Kremer found the due process clause applicable, even on the assumption that a matter of issue preclusion was presented. Id. at481-82 n.22.

        And last but bot not least: what is left of Montana after Allen v. McCurry, 449 U.S. 90 (1980) (finding issue preclusion). Arguably the Court abandoned the three factor test of Montana in Allen v. McCurry when it limited its focus related to collateral estoppel in determining whether the party against whom the earlier decision is asserted had a “full and fair opportunity” to litigate that issue in the earlier case. Id. at 95.

        Returning to the CAFC: Ohio Willow Wood Co. v. Alps South, LLC, 735 F. 3d 1333 (Fed. Cir. 2013) is bad, but next to Aspex Eyewear, Inc. v. Marchon Eyewear, Inc., 672 F.3d 1335, 1341-42 (Fed. Cir. 2012) Allergan v. Sandoz (March 17, 2017 Fed. Cir. 2017) is the worst examples of misapplying the issue preclusive doctrine. When I read these FC decisions I have the impression there is some confusion between issue and claim preclusion doctrines. Neither Ohio Willow Wood , Aspex Eyewear nor Allergan are supported by Supreme Court precedent.

        You may want to consider publishing on your blog the March 2017 Allegan opinion with your comments/thoughts.

        Jonathan

    2. The “essentially the same” prong is specific to patents so there’s very, very little dust to be kicked up there.

      The point is that you can’t avoid issue preclusion by relying on differences between accused products or claims, where the differences are irrelevant to infringement or invalidity.

      It makes sense.

    3. I can see this coming up to the Supreme Court sometime… but not in this case. I think by the Restatement that you cited below in 2.1.1, the issue was properly precluded.

      I just don’t see how this is the proper case for the Supreme Court to review this issue at this time.

      1. You are correct. This case is not a good fit for a cert petition or be likely a cert grant. But Allergan v. Sandoz (March 17, 2017 Fed. Cir. 2017) ) is a perfect opportunity! It comes down to the question whether Allergan preserved the legal issue in the opening brief by relying on either the “ultimate fact” doctrine (line of cases starting with Yates v. United States, 354 U.S. 298 (1957)) or the principle of foreseeability should govern (endorsed in Restatement (Second) of Judgments § 28 (5)b) (1982). I do not think Allergan preserved this argument?

    4. Jonathan, when validity is contested in court by the parties and a final judgment rendered/affirmed by the Federal Circuit, is that judgment, in your opinion, entitled to res judicata/claim preclusive effect in the USPTO in an IPR involving the same parties and the same claims?

      We had a recent Federal Circuit case that seemed to decide that the “USPTO” was not bound (odd that, when the issue is whether the petitioner is bound) because of the difference in standard of proof. If this actually were the standard applicable to res judicata, people could bring suit again again if there were subsequent court cases arguably lowering the standard of proof.

      (Actually, a lot of people wanted to do this when KSR was announced.)

      1. Ned,

        Sorry I missed your comment. A very interesting and challenging question. The SC has not ruled on a possible issue preclusive effect of a final federal judgment on a later federal agency proceeding between the same parties. Brand X is the interesting opinion somewhat related to this question. However I would say that in principle federal agencies are not bound on (re)interpreting a federal statute Congress asked the agency to administrate especially if the (re) issue is related to novelty or obviousness. But I could see good arguments going the other way as well.

    5. Jonathan, Isn’t Allergan v. Sandoz, Fed. Cir. March 17, 2017, really a case more about claim preclusion? The parties are the same and the same invention is involved in all the litigated patents? In it holding the Federal Circuit said, “Complete identity of claims is not required to satisfy the identity-of-issues requirement for claim preclusion.”
      Soverain Software, 778 F.3d at 1319 (citations omitted).” Allergan, slip at * 7.

      All: what happened here is that two patents in a series of continuations were invalidated over two references. In a continuation, the patentee filed an affidavit asserting that the references were the work of the inventor, thus removing them as prior art. The continuation issued, and the patentee sued the same set of generics. The Federal Circuit was convinced that the same invention was involved in all litigated claims of all the litigated continuation patents. The Court was also convince that the same issues of validity were actually litigated and decided.

      1. Ned,

        I missed this one as well. Sorry. Yes the opinion makes the impression that it discusses claim preclusion – it is very confusing. But Allergan v. Sandoz, Fed. Cir. March 17, 2017 can not be about claim preclusion because the asserted claim (Allergan IV patent-in-suit) did not exist at the time of the first proceeding; see Lawlor v. National Screen Service Corp., 349 U.S. 322 (1955) (8:0) (Warren, C.J., for the Court) (claim preclusion case) (If the claim did not exist at the time of the earlier action, it could not have been asserted in that action and is not barred by res judicata.) (A prior judgment “cannot be given the effect of extinguishing claims which did not even then exist and which could not possibly have been sued upon in the previous case”) (claim preclusion case, but extensive dicta on issue preclusion).

    1. Kristof, thanks for the link.

      Does Belgian or European law recognize differences in burdens of proof in applying or not applying res judicata to a second action involving the same res, the same legal issues and with a full opportunity to present all available evidence in both? In the US, “collateral” estoppel does not apply when the causes of actions are different, the burdens are different, but the parties are the same.

Comments are closed.