by Dennis Crouch
I am struggling somewhat to wrap my head around the Federal Circuit’s recent claim preclusion decision in Sowinski v. California Air Resources Bd. (CARB) (Fed. Cir. 2020). I believe that it turns out to be a really poor decision — probably prompted by poor lawyering in the first-place. In particular, the court reaches its result here only after mischaracterizing both (1) the lower court holding and (2) its own prior precedent.
Claim preclusion always involves (at least) two lawsuits. Here, Sawinski’s first lawsuit against CARB was dismissed “with prejudice” for lack of subject-matter-jurisdiction based on sovereign immunity (12(b)(1)) and also for failure to state a claim upon which relief can be granted (12(b)(6)). Sowinski later re-filed his lawsuit — but focusing on subsequent acts of alleged infringement that occurred after the prior case ended. The district court dismissed on res judicata and the Federal Circuit here affirms.
Sowinski’s Patent No. 6,601,033 claims a pollution credit system that he argues is infringed by California’s Cap-and-Trade Program.
Sowinski originally sued CARB (and others) for patent infringement in California state court. The defendants first removed the case to Federal Court and then moved for dismissal for lack of subject matter jurisdiction and failure to state a claim. One minor note about that filing is that Kamala Harris represented CARB in her role as California AG.
After some wrangling, Sowinski failed to respond to the motion to dismiss and the district court subsequently dismissed the case. In dismissing, the C.D.Cal. court pointed to a local rule that “failure to file any required document, or the failure to file it within the deadline, may be deemed consent to the granting or denial of the motion . . . .” And, the court dismissed the case “with prejudice.” That dismissal was affirmed by the Federal Circuit back in 2017 — with the court noting that Sowinski had recognized that the Motion to Dismiss was potentially dispositive but still failed to oppose.
Sowinski then re-filed the lawsuit which was dismissed on res judicata grounds. On appeal, Sowinski raised two arguments.
[Sowinski] raises two principal arguments:
(1) that res judicata does not apply because his present complaint seeks damages only for infringement that occurred after conclusion of his prior suits and
(2) that res judicata does not apply because the prior suit was resolved on procedural grounds, without reaching the merits of infringement.
Failure to Prosecute Was not the Reason: Taking these grounds in reverse-order. In its decision here, the Federal Circuit characterized the original court’s dismissal as one of failure-to-prosecute. And, there is prior precedent supporting claim preclusion following from dismissal on those grounds.
Federal Rule of Civil Procedure 41(b) provides that a dismissal for failure to prosecute “operates as an adjudication on the merits,” with exceptions not here applicable
Slip Op. The problem with the court’s holding here is that it somehow failed to delve into the details of the three-page dismissal order. [DismissalOrder].
Contrary to the appellate panel’s statements here, the original case was not dismissed for failure to prosecute. Rather the case was dismissed for failure state a claim and lack of subject matter jurisdiction. But, those motions were granted because of Sowinski’s failure to oppose. The distinction is appropriate because R.41(b) (quoted by the Federal Circuit in its decision) distinguishes between the two scenarios: Dismissals for failure to prosecute are treated as “adjudication[s] on the merits.” Dismissals for “lack of jurisdiction” are not treated as such. FRCP 41(b). The court should pick-up this case a second time and consider the impact of lack-of-jurisdiction on the res judicata question or else explain how the issue was waived (and is waivable).
Later Infringement: The court also held that Sowinski was barred from pursuing action against post-judgment infringement — so long as the infringing activity was the same. The court quoted a 10% rule of thumb from the 9th Circuit:
[T]he plaintiff alleges facts which by the defendants’ own concession are at least 10 percent different from the facts alleged in Harkins I, and, of course, the plaintiff alleges conduct that occurred in a different time period.
Harkins Amusement Enters., Inc. v. Harry Nace Co., 890 F.2d 181 (9th Cir.
1989) (finding no preclusion).
Here, Sowinski did not allege any different behavior by the defendants except that it occurred after the original lawsuit. So — less than 10% difference. The oddity of the decision is that it then draws in what seem to be issue preclusion and Kessler doctrine principles:
[W]hen the act has been adjudged not wrongful, its repetition cannot be challenged in a subsequent suit. . . .
Here the accused CARB activity had been held not to be infringing, for Dr. Sowinski’s failure to respond to the motions to dismiss was treated as a judgment on the merits.
Slip Op. I’ll note here that the district court did not actually make any ruling regarding infringement, but instead dismissed the case on other grounds. Thus, while the infringement claim may have been dismissed on the merits, it is entirely improper to state that there was any holding of “non-infringement.”
The appellate court goes-on with this point by citing to Brain Life, LLC v. Elekta Inc., 746 F.3d 1045 (Fed. Cir. 2014). The panel applied Brain Life as follows:
[T]he [Brain Life] court considered the effect of a prior judgment of non-infringement; the court explained that preclusion does not apply to new or changed products or methods, but does apply when the accused products or methods are essentially the same.
Slip Op. Citing Brain Life at 1054. It turns out that Brain Life actually holds the opposite.
[W]e find that Brain Life’s second suit is not barred by claim preclusion—regardless of whether the same transactional facts are present in both suits—to the extent Brain Life’s current infringement allegations are temporally limited to acts occurring after final judgment was entered in the first suit. . . .
[T]raditional notions of claim preclusion do not apply when a patentee accuses new acts of infringement, i.e., post-final judgment, in a second suit—even where the products are the same in both suits.
Id. at 1054. The holding here is completely the opposite to what the Sowinski court described.
Now, the court in Brain Life does go on to apply the Kessler Doctrine to prohibit re-litigation of the infringement question for post-judgment products, but only after holding particularly that its decision is outside of the traditional bounds of claim preclusion. In Sowinski, the court does not cite the Kessler Doctrine as the basis for its decision, but rather misapplies the court’s claim preclusion precedent.
= = = = = =
In the end, Sowinski probably should lose anyway – because the patent is invalid under contemporary eligibility analysis.
1. A data processing apparatus for establishing one of a pollution offset and tax offset, for a seller using gas within gas distribution system of a home, business or the like, to bring about a reduction of known pollutants being emitted into the atmosphere associated with said seller’s home, business or the like, on a day-to-day basis or on a catastrophic basis, comprising:
(a) a central controller including a CPU and a memory operatively connected to said CPU,
(b) at least one terminal adapted for communicating with said central controller for transmitting thereto, pollution credit or tax credit information to gain a conditional pollution reduction credit (“CPRC”) for said seller,
(c) said memory containing a program adapted to be executed by said CPU for
(1) authenticating legal basis of the energy efficiency means employed against a data base of eligible energy efficiency means,
(2) authenticating the eligibility of the seller against a data base of eligible sellers,
(3) if the energy efficiency means relates to non-filtering of pollutants, generating a CPRC for tax credit offset purposes for said seller as a function of a seller identifier,
(4) if the energy efficiency means relates to filtering of pollutants, determining the eligibility of each pollutant against a pollutant data base,
(5) determining the amounts of reduction of each eligible pollutant normalized to a standard time duration;
(6) generating a CPRC for each pollutant based on (5), and
(7) storing each CPRC generating at (3) and (6) as a function of a seller identifier which may include a seller’s credit card number,
whereby economic incentive has been provided to said seller to bring about a substantial reduction of emission of pollutants to the atmosphere whether on a day-to-day basis or on a catastrophic basis.
Dr. Sowinski is the listed inventor on a number of other patents that all relate to technical aspects of gas and gas distribution. In a separate lawsuit, Sowinski sued cereal manufacturers Post, General Mills, and Kellogg– arguing that their products should include a Cancer warning under California’s Proposition 65 because of their acrylamide content. That case was dismissed on preemption grounds. In particular, the California appellate court found the existence of a comprehensive federal scheme promoting consumption of whole grains to preempt the marking requirement. Post Foods, LLC v. Super. Ct., 235 Cal. Rptr. 3d 641, 644 (Cal. App. 2d Dist. 2018), as modified on denial of reh’g (Aug. 15, 2018), review denied and ordered not to be officially published (Oct. 31, 2018).