What's Next for Issue Preclusion and Patent Invalidity

Collateral estoppel (or issue preclusion) is a well-known legal doctrine that generally prevents a party that unsuccessfully litigated an “issue” to a final decision from relitigating that same issue in future proceedings against the same adversary. One question that naturally arises in the application of collateral estoppel is: What is the scope of the “issue” that was previously litigated?

In patent litigation, a single patent can be asserted multiple times in multiple cases, involving different products made by a single defendant. In that context, some district courts treated patent invalidity as constituting a single, monolithic issue — such that unsuccessfully litigating one invalidity theory precluded litigating other invalidity theories in the future, rather than just precluding the specific invalidity theory that was previously litigated and rejected. However, the Federal Circuit recently held in Voter Verified Inc. v. Election Systems & Software LLC (rehearing denied June 19, 2018) that issue preclusion did not apply to prevent a defendant from asserting a § 101 invalidity defense, despite that party having previously litigated and lost other invalidity theories in an earlier suit.

Going forward, district courts may begin to rethink their approach to issue preclusion as it applies to invalidity to consider which specific invalidity theories were actually litigated to a final decision by the party, and to determine the precise scope of any preclusive effects arising from earlier cases rejecting that party’s challenges to the validity of the patent.

Background

Prior to Voter Verified, some district courts addressing the application of collateral estoppel to invalidity challenges reasoned that “validity is a single issue,” and that an accused infringer who had asserted any invalidity theory in a prior proceeding “cannot later assert additional validity challenges under alternative theories of validity.”[1] In other words, a party that unsuccessfully asserted a single invalidity defense was thereafter estopped from raising any invalidity theory under any statutory grounds in any subsequent suit. For example, if a party unsuccessfully challenged validity only under § 112, then that party would not be able to later assert an invalidity challenge under a theory of § 103 obviousness.[2] Courts following this approach reasoned that “[t]he application of validity as a single issue is to prevent a losing party from mounting successive challenges,” therefore preventing multiple bites at the invalidity apple.[3] Under that approach, even a defendant that wins a judgment of noninfringement, but loses its invalidity counterclaims could potentially be precluded from litigating any invalidity theories in future actions over other products.

By contrast, other district courts had found that collateral estoppel principles prevented only the relitigation of the particular invalidity theory asserted in the earlier suit. Those courts treated “each theory of invalidity [a]s a separate issue” for purposes of issue preclusion.[4] Courts following this approach reasoned that the “identicality” requirement of collateral estoppel was not met “if different theories of invalidity are presented in [a] second suit, or if the invalidity theories are based on different claim constructions or different prior art.”[5]

The Voter Verified Decision

The Federal Circuit’s decision in Voter Verified supports the latter approach, treating different statutory theories of invalidity as separate issues for purposes of collateral estoppel. Several aspects of the court’s decision are notable. First, even though there was a finding of no invalidity (indeed, a finding affirmed on appeal), the court found the § 101 invalidity theory had not been “actually litigated” because the defendant had not presented arguments on the issue. Second, it was sufficient for the court to find that the § 101 theory of invalidity had not been actually litigated to find that theory was not precluded — the court did not find it necessary to consider whether other theories of invalidity had been actually litigated and decided. But if invalidity writ large were a single “issue” for preclusion purposes, then consideration of previous litigation of other invalidity theories would have been critical to the analysis.

To understand the Voter Verified decision, some background on the earlier litigation is required. In the prior suit, plaintiff-patentee Voter Verified alleged that Election Systems infringed certain claims of its patent. Although the claims were found not infringed, the district court rejected various invalidity counterclaims and defenses asserted by Election Systems. In particular, the district court entered summary judgment that all the claims that would be asserted in the later litigation were not invalid under §§ 101 or 112 because Election Systems failed to present any evidence or arguments regarding such invalidity defenses. The court later concluded that those claims were also not invalid under §§ 102 or 103.[6]

In the second suit — the one that is the subject of the Federal Circuit’s recent decision — Voter Verified again sued Election Systems in a different venue, alleging infringement of the same patent. Election Systems filed a motion to dismiss, arguing that all asserted claims are invalid under § 101. The district court granted Election System’s motion to dismiss because the claims were directed to patent-ineligible subject matter.[7] In so doing, the district court rejected the patent owner’s arguments that collateral estoppel barred the invalidity challenge. It reasoned that “the issue of patent validity is not precluded from further litigation” because “Alice provided an authoritative decision that substantially changed the law.”[8]

On appeal, the Federal Circuit disagreed with the argument that Alice was an intervening change in the law that prevented the application of collateral estoppel. However, the court nonetheless concluded that collateral estoppel did not bar Election Systems’ challenge because the § 101 invalidity theory had not actually been litigated in the earlier case.[9] Despite having asserted the theory, Election Systems had abandoned it, failing to present any arguments or evidence on the issue in response to the patentee’s summary judgment motion. The district court, in turn had granted summary judgment with no analysis of the § 101 invalidity theory. In the Federal Circuit’s words, the issue “was in fact barely considered. The district court disposed of the § 101 issue when Election Systems chose not to respond. From the court’s opinion, it appears, as Election Systems has argued, that the § 101 issue was never ‘actually litigated,’ because the court did not evaluate that question.”[10]

Of course, even though the § 101 invalidity theory was not “actually litigated” in the earlier case, other invalidity theories were — at least as to some of the asserted claims.[11] Thus, necessary to the court’s decision is the idea that invalidity is not a single “issue” for purposes of collateral estoppel. Under the court’s rationale, a § 101 theory is at least distinct from a § 102 theory or a § 112 theory (for example).

Unanswered Questions

What Voter Verified does not expressly address is whether its logic extends to different theories of invalidity arising under the same statutory provision, or how closely related the prior invalidity theories can be. Put differently, if the “issue” for purposes of collateral estoppel is not validity writ large but rather the effects of having litigated obviousness, would that foreclose all § 103 obviousness theories, or instead just obviousness in light of the specific references considered? Would losing an invalidity challenge based on references A and B foreclose a later challenge based on references C and D? And if that is not precluded, must the references be completely different, or may they overlap and the argument not be precluded — i.e., would A and C be precluded? Similarly, if a party argues invalidity under § 102 based on a single reference X in a first suit, may it later argue invalidity under § 103 based on references X and Y?

Such a reference-by-reference approach to collateral estoppel is consistent with the legal principle that a patent is never held to be “valid” in litigation; it is only held to be “not invalid” over the facts and arguments presented. Thus, when a district court finds an accused infringer has failed to prove the invalidity of an asserted claim, the court is not making a finding that the patent is valid for all time, but rather only deciding that the accused infringer has failed to prove the patent invalid on the specific grounds asserted.[12] By the same logic, issue preclusion would not extend to validity challenges in a second suit that are either not identical to or were never actually raised or litigated in the first suit — the patent’s claims were never evaluated in light of such arguments or evidence. And collateral estoppel is not the same as res judicata (claim preclusion): Having the opportunity to litigate an issue is not enough for issue preclusion.

Voter Verified appears to bring to an end the monolithic, single-issue approach to issue preclusion for invalidity previously applied by some district courts. Under the logic of that decision, and consistent with other patent law principles, application of collateral estoppel to invalidity should be more narrowly focused on the particular challenges actually litigated in the prior case.

[1] Evonik Degussa GmbH v. Materia, Inc., 53 F. Supp. 3d 778, 794 (D. Del. 2014).
[2] See, e.g., Applied Medical Resources Corp. v. U.S. Surgical Corp., 352 F. Supp. 2d 1119, 1126 (C.D. Cal. 2005) (“[V]alidity, in the patent context, is a single issue for purposes of collateral estoppel.”); Zip Dee, Inc. v. Dometic Corp., 905 F. Supp. 535, 537-38 (N.D. Ill. 1995) (applying collateral estoppel to preclude defendant from asserting two invalidity defenses it did not asserted in the earlier suit); Pall Corp. v. Fisher Scientific Co., 962 F. Supp. 210, 213 (D. Mass. 1997) (stating that “it is the entire issue [of invalidity] that is precluded, not just the particular arguments raised in support of it in the first case”); Crossroads Systems (Texas), Inc. v. Dot Hill Sys. Corp., 2006 WL 1544621, at *5 (W.D. Tex. 2006) (“[T]he ‘issue’ to be given issue-preclusive effect to a judgment in the patent context is the ultimate determination on patent validity itself, not the sub-issues or the individual pieces of evidence and arguments that may have been necessary to support the validity determination.”).
[3] Evonik, 53 F. Supp. 3d at 794 n.20.
[4] Taser Int’l, Inc. v. Karbon Arms, LLC, 6 F. Supp. 3d 510, 519 (D. Del. 2013).
[5] Id.
[6] 887 F.3d at 1379.
[7] Id. at 1380.
[8] Voter Verified Inc. v. Election Sys. & Software LLC, 2017 WL 3688148, at *2 (N.D. Fla. Mar. 21, 2017).
[9] Voter Verified, 887 F.3d at 1382-83.
[10] Id.
[11] See, e.g., Voter Verified, Inc. v. Premier Election Sols., Inc., 698 F.3d 1374, 1383 n.3 (Fed. Cir. 2012) (“The Defendants did offer anticipation arguments as to claim 56, but the district court rejected those arguments.”).
[12] See, e.g., Ball Aerosol & Specialty Container, Inc. v. Ltd. Brands, Inc., 555 F.3d 984, 994 (Fed. Cir. 2009) (courts “do not declare patents to be valid[; they] … only declare that they have not been proved to be invalid …”); Durango Assocs., Inc. v. Reflange, Inc., 843 F.2d 1349, 1356 n.4 (Fed. Cir. 1988) (“A patent should not be declared ‘valid’ by a court because other challengers may be able to prove invalidity using different evidence.”); Shelcore, Inc. v. Durham Indus., Inc., 745 F.2d 621, 627 (Fed. Cir. 1984) (“A patent is not held valid for all purposes, but, rather, not invalid on the record before the court.”).

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