Invalidating issue preclusion: rethinking preclusion in the patent context.

Author:DeSalvo, Stephen C.
Position:COMMENT
 
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Preclusion is a complex doctrine to apply in any given case, and patent litigation presents no exception. Ever since the Supreme Court ruled in Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation that issue preclusion applies to prevent litigation on a patent that previously has been declared invalid in a court of competent jurisdiction, courts have applied issue preclusion summarily to end disputes over previously invalidated patents. But issue preclusion may not be an appropriate procedural tool in all such cases. In fact, analysis of a number of district court opinions demonstrates that some judges may explicitly or implicitly realize the same. This Comment both systematically analyzes the application of issue preclusion in the patent validity context from a doctrinal perspective and addresses significant practical concerns derived from the doctrinal findings. Interestingly, this analysis suggests that the Federal Circuit and most district courts are applying the law of issue preclusion incorrectly and that this practice has significant implications for litigants. Primarily, courts' treatment of patent invalidity as a whole as a "single issue" for the purposes of issue preclusion is out of line with the application of that doctrine in other areas of civil law. Although the misapplication of issue preclusion is a moot point in most cases where a patent is adjudged invalid and that holding is maintained on appeal, it is of practical significance for simultaneous litigation over a single patent in multiple district courts. A new procedural framework is proposed to remedy the doctrinal and practical problems raised by the current application of issue preclusion in the patent validity context. Instead of entering judgment based on issue preclusion, which is inappropriate in many cases, there are substantial policy concerns favoring either applying claim preclusion, dismissing the plaintiff's action for failure to state a claim upon which relief may be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure, or simply staying the patent litigation pending final appeal of an earlier proceeding over the same property right.

INTRODUCTION I. DEFINING ISSUE PRECLUSION IN FEDERAL COURT A. Variation by Regional Circuit B. Policy Considerations Supporting Issue Preclusion Doctrine II. HISTORICAL TREATMENT OF ISSUE PRECLUSION IN PATENT LAW A. The Origins of Issue Preclusion in the Patent Invalidity Context B. Defining "Single Issue" for Issue Preclusion Purposes C. Disagreement Over Framing the "Issue" in the Patent Invalidity Context III. MAKING THE CASE FOR A NEW PRECLUSION FRAMEWORK IN PATENT LAW A. When Issue Preclusion Is an Improper Procedural Tool B. The Search for a Better Procedural Tool in the Patent Invalidity Context 1. Applying Claim Preclusion 2. Applying Federal Rule of Civil Procedure 12(b)(6) 3. Staying Litigation 4. Policy Considerations Favoring Application of the Proposed Procedural Framework CONCLUSION INTRODUCTION

The interplay between litigation over patent invalidity disputes (1) and preclusion doctrine is historically complex and has developed over time from one strict standard to another. (2) The Federal Circuit has made clear that it will apply the issue preclusion (3) and claim preclusion rules of the regional circuit court where the relevant district court lies when the issue involved is purely procedural. (4) However, when the preclusion issue involves a matter of substantive patent law, the Federal Circuit applies its own issue preclusion rules. (5) In this Comment, I argue that the Federal Circuit and most district courts are applying the law of issue preclusion incorrectly and that this has significant implications for litigants. Primarily, courts' treatment of patent invalidity as a whole as a "single issue" for purposes of issue preclusion is out of line with the application of the doctrine in other areas of civil law. Regardless of what actually constitutes a "single issue" in the patent invalidity context, it must be something less than the final judgment of patent invalidity itself. Although the misapplication of issue preclusion is a moot point in many cases, including where a patent is adjudged invalid and that holding is maintained on appeal, it is of practical significance when a single patent is simultaneously litigated in multiple district courts. I argue that instead of entering judgment based on issue preclusion, which is inappropriate in many cases, substantial policy considerations favor applying claim preclusion, dismissing the plaintiff's action for failure to state a claim upon which relief may be granted, or simply staying the litigation pending final appeal of an earlier proceeding.

In Part I, I review issue preclusion as defined and applied by the federal courts, including the numerous policy considerations that support the application of issue preclusion. In Part II, I analyze the historical treatment of issue preclusion in patent law. After reviewing this history, I pivot to a discussion of how courts have recently framed what constitutes an "identical" issue, or "single issue," for purposes of preclusion law. I find some disagreement among courts about whether patent invalidity as a whole is properly treated as a single issue to be precluded under issue preclusion. In Part III, I argue that patent invalidity should not be treated as a single issue. As a result, I propose a new framework for courts to use when disposing of cases involving patent invalidity contentions where there has been litigation over the same matter in an earlier proceeding. This proposed framework ameliorates the adverse effects associated with the current use of issue preclusion in the patent invalidity context, while maintaining the policy goals and litigant incentives that support application of preclusion doctrine.

  1. DEFINING ISSUE PRECLUSION IN FEDERAL COURT

    1. Variation by Regional Circuit

      Issue preclusion is a common law doctrine that differs among both states and federal circuits, (6) although the core elements of the doctrine are similar in every court. Because patent issues are litigated exclusively in federal court, (7) a brief review of the requirements for issue preclusion in federal courts is provided below.

      In many federal circuits, including the First, Second, Third, Seventh, Eighth, Tenth, and Eleventh Circuits, as well as the Federal Circuit, a four-prong test is employed to determine whether issue preclusion applies in a given case. The First Circuit requires that (1) the issue be the same in the second proceeding as in the first; (2) the issue be actually litigated and determined in the first proceeding; (3) a valid and final judgment be produced in that proceeding; and (4) the issue be essential to the first judgment. (8) This test also reflects the Restatements view of issue preclusion. (9) The Second and Eleventh Circuits, as well as the Federal Circuit, use a similar test. These circuits require both that the party to be precluded had a full and fair opportunity to litigate the issue and that the determination of the issue be necessary to support the earlier case's judgment. (10) The four-prong test in the Third and Seventh Circuits requires substantially the same showing, except that the party to be precluded from relitigating the issue must have been fully represented in the first action. (11) The Eighth and Tenth Circuits use a four-prong test that is similar to that of the Third and Seventh Circuits. However, the Eighth and Tenth Circuits also require that the party to be estopped be either a party or in privity with a party in the earlier action. (12)

      The Fourth Circuit has adopted a five-part test that requires (1) identity of issues between cases; (2) that the issue was actually resolved in the prior case; (3) that the issue was critical and necessary to the judgment in the prior case; (4) that the judgment was final and valid in the earlier case; and (5) that the precluded party had a full and fair opportunity to litigate that issue in the prior proceeding. (13) The Sixth Circuit applies a similar five-element standard, except that the party being precluded must have been a party or in privity with a party to the prior proceeding. (14)

      The Fifth and D.C. Circuits both apply a three-part test. In the Fifth Circuit, issue preclusion applies when: (1) the identical issue was previously litigated; (2) the issue was actually litigated; and (3) the previous decision on the issue was necessary to the judgment in the earlier proceeding. (15) The D.C. Circuit applies issue preclusion under the same circumstances, but also considers whether applying preclusion would work a basic unfairness on the party being estopped. (16)

      Regardless of the test set out by each regional circuit, it is clear that all of the federal courts require that the issue being precluded in the present action be identical to the issue actually litigated and determined in an earlier proceeding. (17) Only if the issue decided in a previous case was the same as the single issue to be determined in the current litigation will issue preclusion apply in federal court. Therefore, defining what constitutes a "single issue" in the patent validity context is of critical importance in assessing when it is appropriate to apply issue preclusion. (18)

    2. Policy Considerations Supporting Issue Preclusion Doctrine

      There are numerous policy considerations supporting the application of issue preclusion. First, issue preclusion reduces litigation and conserves the resources of both the court and the litigants. (19) Second, fairness dictates that a party should not be permitted "to relitgate an issue that has already been decided against it." (20) Third, issue preclusion minimizes the risk that courts will produce inconsistent decisions. (21) Finally, issue preclusion promotes finality of judgments. (22) Issue preclusion is often distinguished from claim preclusion because it...

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