Last year, a district court applied the doctrine of collateral
estoppel to dismiss an infringement suit after the Patent Trial and
Appeal Board decided to cancel the asserted patent’s claims in
an inter partes review. In the ensuing appeal of the court’s
decision, the Federal Circuit granted the patent owner’s (Jump
Rope’s) unopposed motion for summary affirmance. Jump Rope
Sys., LLC v. Coulter Ventures, LLC, Appeal 22-1624 (Fed. Cir.
June 28, 2022). Jump Rope presented the unopposed motion after the
Federal Circuit denied its motion that the court go en
banc. Jump Rope had sought a determination by the court as a
whole that parallel civil litigation seeking to enforce those
canceled claims was not moot and could proceed, potentially to an
infringement judgment and consequent remedy. Jump Rope has since
presented the same argument to the Supreme Court in a petition for a writ
of certiorari. Brief of Petitioner, Jump Rope Sys., LLC v.
Coulter Ventures, LLC, Sup. Ct. Dkt. 22-298 (Sept. 26, 2022).
The argument seems absurd, but in the petition, Jump Rope
asserts a conflict exits between the Federal Circuit’s decision
in XY, LLC v. Trans Ova Genetics, L.C.,
890 F.3d 1282 (Fed. Cir. 2018) (applying collateral estoppel to a
factually similar situation), and the Supreme Court’s decisions
in Grogan v. Garner, 498 U.S. 279,
284-85 (1991) (determining that collateral estoppel may not apply
where two proceedings involve different standards of proof on
common factual findings), and B&B Hardware, Inc. v. Hargis Industries,
Inc., 575 U.S. 138, 154 (2015) (stating that, for
collateral estoppel purposes, similar legal issues are not
identical if different legal standards apply). The Court’s
review is necessary, according to the petition, to overrule
XY, on which the district court relied. Amicus briefs were
filed encouraging the Court’s review, complaining estoppel
should not apply because of the different standards of proof in
Board and court proceedings, even though that difference rarely
matters in assessing what a prior art publication discloses.
XY (discussed in detail here) concerned assertions of patent
infringement and patent invalidity in federal court. During the
pendency of that litigation, the Board had canceled the patent
claims in a final written decision in an inter partes review. That
decision was affirmed by the Federal Circuit in a separate appeal
on the same day it issued its decision in XY. Said the
court, its “affirmance renders final a judgment on the
invalidity of the [patent] and has an immediate issue-preclusive
effect on any pending or co-pending actions involving the
patent.” XY, 890 F.3d at 1294. Continuing, the court
“f[ou]nd that an affirmance of an invalidity finding, whether
from a district court or the Board, has a collateral estoppel
effect on all pending or co-pending actions.” Id.
(citing support in the Supreme Court’s decision in Blonder-Tongue Laboratories, Inc. v.
University of Illinois Foundation, 402 U.S. 313 (1971),
among other cases).
But Circuit Judge Newman dissented in XY, complaining
that the panel’s majority was wrong to apply collateral
estoppel given the different standards of validity, different
burdens of proof, and different appellate review standards.
XY, 890 F.3d at 1300 (Newman, J., dissent). She suggested
that the Supreme Court’s decision in Blonder-Tongue
rejected the majority’s automatic application of estoppel where
the question in the litigation (validity) is not identical to the
question in the earlier proceeding (patentability). Id. at
1299-1300. Judge Newman has similarly dissented in numerous cases
like this one, most recently and notably in Fresenius USA, Inc. v. Baxter International,
Inc., 721 F.3d 1330 (Fed. Cir. 2013), cert.
denied, 572 U.S. 1115 (2014). Jump Rope’s petition asserts
that Judge Newman was correct.
Jump Rope’s petition also complains the panel majority in
XY did not address the Supreme Court’s Grogan
decision. Grogan, according to the petition, “held
that collateral estoppel does not apply in [] circumstances”
where “a subsequent litigation involving the same party is
governed by a different standard of proof than applied in the
[earlier case].” Jump Rope Pet. at 8. Grogan
concerned issues regarding bankruptcy, not patents, but
importantly, perhaps, also concerned a juxtaposition between
evidentiary standards (preponderance and clear and convincing)
across different proceedings adjudicating issues based on common
facts. In Grogan, the Supreme Court wrestled with whether
different evidentiary standards exist in the different bankruptcy
proceedings. That’s not an open question in patent proceedings.
The evidentiary standard of proving unpatentability before the
Board is a preponderance of evidence, codified at 35 USC
§316(e), and the standard of proving invalidity in court is
clear and convincing evidence. Microsoft Corp. v. i4i Ltd.
P’ship, 564 U.S. 91, 97 (2011) (holding that 35 USC
§282 “requires an invalidity defense to be proved by
clear and convincing evidence”). Continuing, the petition
notes that the Supreme Court’s B&B Hardware
decision explained that “‘issues are not identical if the
second action involves application of a different legal standard,
even though the factual setting of both suits may be the
same.'” Jump Rope Pet. at 12 (quoting B&B
Hardware, 575 U.S. at 154).
If Jump Rope is correct, then the Board’s final written
decision canceling claims on a preponderance of evidence and the
court’s subsequent affirmance under a substantial evidence
review standard have no collateral estoppel effect in the parallel
infringement action. Jump Rope’s petition notes the “issue
raised in this case is one of nationwide importance in patent
infringement litigation, as it affects countless patent disputes
all over the country.” Id. at 14-15. Post-grant and
inter partes reviews exist to offer a faster and cheaper
alternative to adjudicating validity in federal court. If Board
decisions canceling claims in these reviews are not going to have a
collateral estoppel effect in court, then why pursue these reviews?
Congress makes mistakes. But in authorizing these reviews in the
AIA-after Microsoft-could Congress really have overlooked
the import of Blonder-Tongue and Grogan in
purposely setting a lower standard of proving unpatentability
before the Board? Regardless of whether the petition presents a
plausible conflict, it invites an absurd result. The accused
infringer waived its right to respond to the petition, but recently
filed a response, upon the
Court’s request. The case is pending.
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