Distinguishing between “Res Judicata” and “Law of the Case”

by Dennis Crouch

DBN Holdings v. International Trade Commission (Fed. Cir. 2018)

In 2013, accused-infringer DeLorme signed a stipulated settlement with the ITC agreeing to stop importing products certain products accused of infringing U.S. Patent No. 7,991,380.  Later that year, the ITC re-opened the action — finding that DeLorme violated the Consent Order and assessed a $6.2 million penalty.  Subsequently, a district court found the asserted patent claims invalid.   Those cases were appealed and the Federal Circuit and the court affirmed both: (1) agreeing that the patent was invalid, but that DeLorme was still liable for violating the Consent Order. DeLorme Publ’g Co. v. BriarTek, 622 Fed. App’x. 912 (Fed. Cir. 2015).

Following the Federal Circuit decision, DeLorme petitioned the ITC to rescind the civil penalty in light of the invalidity finding — based upon “changed conditions
in fact or law or in the public interest.” 19 C.F.R. § 210.76.  However, the Commission refused act — finding the whole matter “res judicata” based upon the prior Federal Circuit decision.

Now on appeal, the Federal Circuit has sided with DeLorme — finding that the ITC improperly relied upon estoppel principles to refuse to reconsider its civil penalty.

Res judicata usually refers to the doctrine of claim preclusion, although it sometimes applies to both claim preclusion and issue preclusion (also known as collateral estoppel).  Regardless, both of those doctrines require a prior determination in a separate lawsuit.  Here, the ITC’s res judicata reference was based upon the prior Federal Circuit decision in this same case — that doesn’t work. The Federal Circuit explains here:

For either issue or claim preclusion to apply, a second, separate case must exist. Here, where we have a continuation of the same proceeding, Investigation Number 337-TA-854, neither issue nor claim preclusion apply.

The court went on to discuss the right doctrine to apply – law of the case. “[R]econsideration of matters already resolved ordinarily is referred to [as] law-of-the-case theory” or “direct estoppel.” Wright & Miller.  However, that doctrine doesn’t apply here because neither the ITC nor the appellate court had previously decided the issue of “whether the Commission should rescind or modify the civil penalty in light of the district court’s grant of summary judgment of invalidity.”  Thus, on remand, the ITC can consider this question.

= = = =

I’ll note here that the Commission’s confusion likely arose from the Federal Circuit’s statement in its prior decision that “the [ITC] penalty or sanction cannot be vacated by subsequent events such as invalidation of the claims.”  Here, the court further explained that statement to mean that the parallel invalidation does not automatically cancel a prior-issued sanction.  However, it does open the door to request reconsideration.

5 thoughts on “Distinguishing between “Res Judicata” and “Law of the Case”

  1. 2

    It’s an interesting philosophical argument….if the claims were invalid, there was never an invention, so there could never have been infringement, and one cannot be fined when when has committed no offense. For example, what is the status of a plea agreement if it is discovered that no crime was committed?

    OTH, it’s well accepted that pre-trial settlements stand even if the patent is later invalidated- the assumption being that all parties knew the score and would take their chances.

    1. 2.1

      It’s more than merely a philosophical argument.

      At the time of the consent order, you have the option of violating that order – or not.

      Even if you want to continue to contest the issue, you STILL have to obey the order while you are contesting the issue. As I noted below, there is NO such “void ab initio” as you want to imbue philosophically when it comes to following the consent orders issued by the ITC.

  2. 1

    I would also add that the Commission’s confusion was likely exacerbated by the fact that Judge Taranto’s dissent in the 2015 appeal would have remanded the case to the Commission for consideration of the district court invalidity decision, but the majority (Judge Moore, Judge Reyna) decided that a remand was unnecessary because the Consent Order unambiguously indicated that it applied regardless of some future invalidation of the patent claims.

    1. 1.1

      So what happens (and what further avenues are there) if the commission picks this up and comes back with the single paragraph of:

      “The court waxed semantic and states that we used the incorrect term of ‘Res Judicata’ when we should have used the term ‘Law of the Case;” further, DeLorme asked the court to change and find that it was not liable for violating the then in place consent order — and the court refused — thus, for the pertinent facts, we affirm that DeLorme is, and remains liable for violating the then existent consent order and no facts have been shown to change that violation. There is no void an initio and the proper action of DeLorme would have been to follow our consent order until it had prevailed. By choosing to flaunt our order it remains liable, and were it within our powers, we would increase the penalty for violating our order willfully, and for pursuing this on nothing more than semantics that does not – and could not – change the fact of the violation of our order.

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