Chapter §15.08 Collateral Estoppel Effect of Prior Claim Interpretation Decisions
| Jurisdiction | United States |
§15.08 Collateral Estoppel Effect of Prior Claim Interpretation Decisions
[A] Generally
[1] Elements
When patent claim terms have previously been construed in a federal court or an administrative proceeding, does that first construction of the terms bind, prevent, or estop a party in a second proceeding involving the same (or a related) patent from seeking a different interpretation? If not absolutely binding, must the second decisionmaker afford some degree of deference to the claim interpretation of the first decisionmaker?
The outcome-critical process of patent claim interpretation frequently invokes this issue, often including cases in which a federal court in a first proceeding construed the claims in a Markman hearing.505 More recently, the issue has arisen in administrative proceedings such as AIA-implemented inter partes reviews (IPRs) and federal court litigation parallel thereto. Often cited in these cases is the Supreme Court's emphasis in Markman on "uniformity in the treatment of a given patent."506 The answer to the question posed is not straightforward, and may involve consideration of several different legal doctrines—collateral estoppel (also known as "issue preclusion"), stare decisis,507 and judicial estoppel. This treatise section will focus on Supreme Court and Federal Circuit application of the first doctrine, collateral estoppel/issue preclusion, to patent claim interpretation.
Judge Rich's opinion for the Federal Circuit in its 1994 decision In re Freeman offered a detailed analysis of why collateral estoppel applied to the patent claim interpretation issue central to the USPTO reexamination proceeding on appeal.508 Introducing the issue, Rich explained that
[u]nder the doctrine of issue preclusion, also called collateral estoppel, a judgment on the merits in a first suit precludes relitigation in a second suit of issues actually litigated and determined in the first suit. Lawlor v. National Screen Serv. Corp., 349 U.S. 322, 326, 75 S.Ct. 865, 867–68, 99 L.Ed. 1122 (1955). Issue preclusion, as distinguished from claim preclusion, does not include any requirement that the claim (or cause of action) in the first and second suits be the same. Rather, application of issue preclusion centers around whether an issue of law or fact has been previously litigated. International Order of Job's Daughters v. Lindeburg & Co., 727 F.2d 1087, 1091, 220 USPQ 1017, 1019 (Fed.Cir.1984). The underlying rationale of the doctrine of issue preclusion is that a party who has litigated an issue and lost should be bound by that decision and cannot demand that the issue be decided over again. Mother's Restaurant, Inc. v. Mama's Pizza, Inc., 723 F.2d 1566, 1569, 221 USPQ 394, 397 (Fed.Cir.1983). 509
Application of the doctrine of collateral estoppel is relatively strict. Four elements must be established:
(1) the issue [disputed in the second action] is identical to one decided in the first action; (2) the issue was actually litigated in the first action; (3) resolution of the issue was essential to a final judgment in the first action; and (4) plaintiff [i.e., the party to be bound] had a full and fair opportunity to litigate the issue in the first action. 510
The identity of the issue (prong one) is not always crystal clear. Two important interests must be balanced: the desire not to deprive a litigant of an adequate day in court, versus a desire to prevent repetition litigation.511 In Freeman, a federal district court in earlier litigation had interpreted the claim phrase "buoyant uplift" as requiring at least neutral buoyancy, and the Federal Circuit had affirmed the district court's interpretation. In the subsequent reexamination proceeding (which the USPTO had suspended upon commencement of the infringement trial), the examiner predicated his rejection under 35 U.S.C. §305 (for improperly enlarging claim scope in a reexamination) on the district court's prior interpretation of "buoyant uplift." The Circuit held that the claim interpretation issue in the two proceedings was identical.512
The same claim interpretation issue was unquestionably "actually decided" in the earlier district court proceeding (prong two) of Freeman, because "most of the [previous federal district court] trial involved interpreting th[e] phrase" "buoyant uplift." After resolving the meaning of the phrase, the district court found that defendant 3M Corporation had not infringed.513
To be given preclusive effect in a later proceeding, a particular finding must have been "necessary to the judgment" rendered in the earlier case (prong three). This requirement "prevents the incidental or collateral determination of a nonessential issue from precluding reconsideration of that issue in later litigation."514 In Freeman, interpretation of the claim language "buoyant uplift" to require at least neutral buoyancy was necessary to the district court's judgment of no infringement by 3M. The district court even indicated that if it had not interpreted the phrase as it did, all models of 3M's accused products would have infringed. As required by the Circuit's 1984 decision in Jackson Jordan, Inc. v. Plasser Amer. Corp.,515 the interpretation of the claim phrase "buoyant uplift" was the reason for patentee Freeman's loss on the issue of infringement in the district court. Thus, it was clearly necessary to the district court's judgment.
Finally, the party against whom collateral estoppel/issue preclusion is being asserted in a second proceeding must have had a full and fair opportunity to litigate the same issue in the first proceeding (prong four). If there is reason to doubt the quality, extensiveness, or fairness of the procedures followed in the first proceeding, then re-litigation of the disputed issue is warranted.516 Note that the party against whom collateral estoppel is being asserted must be the same in both proceedings, but there is no requirement that the other party have been involved in both proceedings. Thus, application of collateral estoppel is "non-mutual."517 In Freeman, the patentee took full advantage of his opportunity to have the claim interpretation decided in his district court litigation against 3M, and the Federal Circuit had affirmed the district court's conclusions on claim interpretation and non-infringement. These facts "strongly suggest[ed] that the district court proceedings were not deficient."518
[2] Relevant Supreme Court Decisions
Although not a patent case, the Supreme Court's 2015 trademark law decision in B&B Hardware, Inc. v. Hargis, Indus., Inc.,519 is likely the most important Supreme Court decision concerning application of the collateral estoppel doctrine to intellectual property law. In the view of this author, the B&B decision may have profound implications for patent clam construction in the post-AIA era, particularly in view of the 2018 action by the USPTO to change its claim interpretation standard for post-issuance review to the same standard used by federal courts.520 The new USPTO rule changes the standard used for claim construction in AIA trial proceedings (i.e., IPRs, PGRs, and CBMs) from the earlier "broadest reasonable interpretation" standard used only in the PTO to the standard for federal courts, announced in the Federal Circuit's 2005 en banc Phillips v. AWH Corp. decision and its progeny.521 Because the two standards are now the same, the probability that an earlier PTAB claim construction can have preclusive effect on a later federal district court's claim interpretation is heightened.522
As detailed more fully below,523 the issue reviewed by the Supreme Court in B&B was whether an earlier Trademark Trial and Appeal Board (TTAB) determination—that a mark published for opposition should be refused registration because it would likely cause confusion with a previously-registered mark—should have binding/preclusive effect on a federal district court's determination concerning likelihood of confusion in a parallel trademark infringement suit between the same two parties. The district court held that collateral estoppel from an administrative decision should not apply to an Article III federal court. The U.S. Court of Appeals for the Eighth Circuit affirmed, but on different grounds. Reversing the Eighth Circuit, the B&B Court answered the question affirmatively but narrowly, holding that as a legal matter, a presumption of "administrative preclusion" can potentially require the federal district courts to apply TTAB rulings (but without deciding the issue on the factual merits). The B&B Court ultimately ruled that "[s]o long as the other ordinary elements of issue preclusion are met, when the usages [of the marks] adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply."524
The B&B Court's overview of the purpose and elements of the collateral estoppel doctrine tracked substantially that set forth earlier by Judge Rich in In re Freeman. As Rich had noted, the B&B Court observed that "[a]lthough the idea of issue preclusion is straightforward, it can be challenging to implement." Accordingly, the Supreme Court "regularly" consults the Restatement (Second) of Judgments for a statement of the ordinary elements of issue preclusion.525 The Restatement explains that
subject to certain well-known exceptions, the general rule is that "[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim." Restatement (Second) of Judgments §27, p. 250 (1980); see also id., §28, at 273 (listing exceptions such as whether appellate review was available or whether there were "differences in the quality or extensiveness of the procedures followed"). 526
[B] Does Earlier Decision by Federal District Court Necessarily Bind USPTO?
[1] Pre-2018 Federal...
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