Federal Circuit’s Quirky (and Incorrect) Doctrine of Retroactive Preclusion

by Dennis Crouch

Chrimar Systems v. ALE (Alcatel-Lucent) (Fed. Cir. 2019)(en banc petition)

This case raises important Federal Courts questions that have had a major impact on patent law.  Chrimar has petitioned for en banc rehearing and five amici briefs have been filed in support — all focusing on “the rules of finality that attach to an Article III judgment, when a later PTAB decision conflicts with that judgment.”

The current Federal Circuit rule stems from a 2013 decision captioned Fresenius:

A PTAB unpatentability decision takes precedence over prior court rulings and retroactively precludes those decisions so long as any issue of liability/damages remains pending in the court case, even if validity questions were waived or finally decided in the court case.

[This is my restatement of the holdings] See XY, LLC v. Trans Ova Genetics, 890 F.3d 1282 (Fed. Cir. 2018).

The en banc petition explains that the Federal Circuit’s preclusion rule is out of line with “every other circuit” and the Restatement (Second) of Judgments.

The difficulty for the Federal Circuit in this case is the 1922 Supreme Court case of John Simmons Co. v. Grier Bros. Co., 258 U.S. 82 (1922) that the briefs do a good job of explaining away (as does Prof. Paul Gugliuzza in his article (In)Valid Patents). “It is a stretch to claim, as the Federal Circuit has, that Simmons is controlling in modern cases involving inconsistent validity decisions by a court and the PTO.”

= = = =

Looking particularly at Chrimar’s case.  In 2016, a jury sided with Chrimar against ALE — finding the patent infringed and not invalid. In a 2018 appeal, the Federal Circuit affirmed the damages award but modified the claim construction of one of the infringed claims (one of many). Chrimar I. On remand, the district court dismissed the challenged claim after Chrimar provided ALE with a covenant not to sue on that claim.  ALE then appealed again — arguing that the disclaimer was insufficient because it did not expressly cover ALE’s customers. In response, Chrimar expressly expanded its disclaimer to make clear that it was a complete disclaimer of the claims (not just for ALE). 

Meanwhile, in 2018 the same claims at issue were all found unpatentable by the PTAB in an IPR brought by a separate party. Chrimar appealed that PTAB case that was affirmed without opinion (R.36 Judgment). Chrimar II. Relying on that R.36 Judgment, the Federal Circuit then vacated the jury verdict and district court damage award. Chrimar IIIIt is this final vacatur – Chrimar III – that is the subject of the en banc petition.  Chrimar argues that the Federal Circuit was wrong to use the PTAB decision to collaterally and retroactively undermine the already final determination of the district court.

9 thoughts on “Federal Circuit’s Quirky (and Incorrect) Doctrine of Retroactive Preclusion

  1. 5

    The principles of finality and the retroactive effect of a final agency adjudication on a later Art. III proceeding are cornerstones of patent law in the U.S. It is unforunate that court decisions sometimes sway away from these principles.

    Bashar Malkawi

  2. 4

    Just to assist a little bit; there are three separate doctrines in play in Chrimar II and Chrimar III: (1) principles of finality; (2) the retroactive effect of a final agency adjudication on a later Art. III proceeding; and (3) the preclusive effect of a later federal judgment on an early non final agency adjudication. Unfortunately, all the cited USSC cases in the en banc petition are not directly applicable to the legal doctrines in play and thus are not on point. Sad, because this case could have been a great cert petition based on the facts and procedural posture. Just a hint: although decided more than 60 years ago, SEC v Chenery Corp., 332 U.S. 194 (1947) (the famous so called “Chenery II” case) remains today the Court’s leading statement on the issue of retroactivity in administrative adjudication. According to Chenery II, administrative agencies may give meaning to statutory terms through adjudication, even if the rules applied in a particular adjudication have not been previously announced. The Court acknowledged that “announcing and applying a new standard of conduct” in an adjudicative proceeding would have a retroactive effect, but concluded that the agency’s duty to be faithful to the “statutory design or to legal and equitable principles” may override concerns about retroactivity. The Court has since reaffirmed the Chenery II principle in NLRB v Bell Aerospace Co., 416 US 267 (1974), but neither the Rehnquist nor the Roberts Courts have revisited in detail the issue of adjudicative retroactivity in the administrative law scenario. Another way to challenge the current CAFC case law is to rely on the fact that the Court has recognized that courts should work (collaborate) with administrative agencies “through coordinated action” to accomplish legitimate legislative ends/purpose. The most famous statement/paragraph on this “demand”/ expectation is in United States v. Morgan, 307 U.S. 183, 191 (1939), Justice (later Chief Justice) Stone, writing for the five member majority (“Court and agency are the means adopted to attain the prescribed end, and so far as their duties are defined by the words of the statute, those words should be construed so as to attain that end through coordinated action.”) Stone’s dicta was restated in subsequent cases.

    1. 4.1

      In shorter words, Jonathan, you appear to be saying that Ends should be coordinated through proper Means.

      When the Means are proper (and properly coordinated), the Ends will take care of themselves.

  3. 3

    Someday the US will have the best online bingo management software in the world. For now, we will just have to stand in the shadow of the Chinese.

    Also why can’t all the best judges play by the Lindsey Graham rules? He’s truly one of the great Rep-u-k-k-kes but let’s face it he’s no Matt Bevins.

  4. 1

    More accurately, a decision of invalidity not proven in non-final D.C. litigation applying only to its two parties* vis a vis a statutory in rem system for complete removal of claims from the patent expressly intended to run in parallel with litigation. Not all that quirky.
    *Thus still subject to an invalidity attack by any other party

    1. 1.1

      Some folks seem to what to stand on its head the Sup. Ct. decision in Blonder-Tongue v. Univ. of Ill. (1971). Collateral estoppel Prevents a patentee from suing on a patent that has been found INvalid in a final merits determination.

      1. 1.1.1

        Correct, provided that:

        – the party against whom an estoppel is asserted had a full and fair opportunity to litigate;

        – the patentee was plaintiff in the prior suit and chose to litigate at that time and place;

        – the patentee-plaintiff must be permitted to demonstrate, if he can, that he did not have a fair opportunity procedurally, substantively and evidentially to pursue his claim the first time;

        – the first validity determination purported to employ the standards announced in Graham v. John Deere Co.;

        – whether the prior case was one of those relatively rare instances where the courts wholly failed to grasp the technical subject matter and issues in suit;

        – the patentee was [not] deprived of crucial evidence or witnesses in the first litigation;

        – as so often is the case, no one set of facts, no one collection of words or phrases, will provide an automatic formula for proper rulings on estoppel pleas. In the end, decision will necessarily rest on the trial courts’ sense of justice and equity;

        – Res judicata and collateral estoppel are affirmative m defenses that must be pleaded

      2. 1.1.2

        PTAB determinations fail most of these requirements, do they not? (BTW, this is not even the issue in Chrimar, but happy to discuss it in case some lawyers wish to avoid as malpractice claim for prematurely dismissing their infringement case).

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