by Dennis Crouch
VirnetX Inc. v. Apple Inc., (Fed. Cir. December 10, 2018)
The PTAB sided with Apple in the underlying IPR proceedings, finding that VirnetX patent claims were obvious. U.S. Patent No. 8,504,696 (claims 1–11, 14–25, and 28–30). On appeal, the Federal Circuit has refused to consider the patentability merits — rather holding that the appeal is barred by issue preclusion (collateral estoppel).
Issue preclusion involves two separate legal actions — and operates to bar a party from relitigating an issue of law or fact already decided in a separate case involving the same party. Elements:
- A prior action presents an identical issue to an issue in the later action;
- The prior action actually litigated and adjudged that issue;
- The judgment in that prior action necessarily required determination of the identical issue; and
- the prior action featured full representation of the estopped party.
The case here started in December 2015 when Apple filed two separate IPR challenges to VirnetX’s ‘696 patent — both relied upon a 1998 Request for Comments from the Internet Engineering Task Force (IETF) – RFC 2401 – as a key prior art reference. The PTAB followed Apple’s suggestions and determined that RFC 2401 was a prior art printed publication that rendered the claims unpatentable (when combined with other references).
Meanwhile, the RFC 2401 had already been used by the PTAB to cancel several other VirnetX patents. In March 2018, the Federal Circuit affirmed those decisions in a R.36 No-Opinion Judgment.
Often, a R.36 Judgment (without opinion) cannot be used for issue preclusion purposes because it is impossible to tell whether the issue-at-issue was the reason for the judgment. However, the court has ruled that “a Rule 36 judgment may serve as a basis for collateral estoppel so long as … the resolution of the issue was essential or
necessary to the Rule 36 judgment.” Citing Phil-Insul Corp. v. Airlite Plastics Co., 854 F.3d 1344 (Fed. Cir. 2017).
Here, collateral estoppel works since – in the prior appeal – each ground of unpatentability relied upon RFC 2401. Thus, the court’s affirmance required an implicit rejection of VirnetX’s argument that the reference was not prior art. The court explains:
Indeed, in three of the seven final written decisions appealed in VirnetX I, the only issue raised was whether RFC 2401 was a printed publication. Accordingly, by affirming all
seven of the Board’s decisions, this court in VirnetX I necessarily found that RFC 2401 was a printed publication.
I’ll note here that the court particularly focused on this issue at oral arguments in the second case and the litigating attorney was forced to admit that the issue was necessary to the decision.
Other Federal Circuit decisions make clear that a R.36 judgment cannot be used for issue preclusion when there are alternative explanations for the judgment.
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As an interesting inside-issue. Oral arguments in this case were heard in September 2018. On November 28, 2018, VirnetX filed a motion with the Federal Circuit asking the appeal to be dismissed — expressly admitting that the Rule 36 judgment had collateral estoppel effect. By then, the court had already written its almost-final-draft opinion and so denied the motion. In this circumstance, is the decision only advisory (and thus not precedential?)