Claim Preclusion Archives

Claim Preclusion

Fourth Estate Redux: Dismissal for Lack of Registration Not on the Merits

by Karen Gover | Jun 20, 2024 | Copyrights

In the latest development of a complicated eight-year court battle regarding a copyright infringement claim, the US Court of Appeals for the First Circuit vacated and remanded the district court’s dismissal on claim preclusion grounds. The Court concluded that dismissal for failure to register the copyright was not “on the merits,” and therefore preclusion did not apply. Foss v. Marvic Inc. et al., Case No. 23-1214 (1st Cir June 10, 2024) (Barron, C.J.; Lipez, Kayatta, JJ.)

In 2006, Cynthia Foss designed a brochure for Marvic, a purveyor of sunrooms, for $3,000. Foss’s grievance with Marvic began in 2016 when she discovered that Marvic had been using a modified version of that brochure without permission. Foss filed a copyright infringement claim in January 2018 demanding $264,000. She inaccurately alleged that she had applied to register the copyright for the brochure. Eight months later, Foss amended her complaint, falsely alleging that she had registered the brochure with the US Copyright Office in February 2018 when in fact she had only applied for registration.

The district court stayed the action pending the Supreme Court’s decision in Fourth Estate v. Wall-Street, which construed 17 U.S.C. § 411(a) to require registration before a copyright claimant may sue for infringement. After Fourth Estate was issued, the district court dismissed Foss’s copyright infringement claim because the Copyright Office had not acted on her application for copyright. Later, the Copyright Office granted Foss a copyright registration in the brochure. Rather than move for reconsideration of the dismissal of her claim in the first action, Foss filed an appeal, which she lost.

After losing the appeal, Foss filed a second copyright infringement complaint against Marvic based on the same facts as the first. Foss also filed an amended complaint naming Charter Communication. She sought a declaratory judgment that Charter was not entitled to assert a safe harbor defense under the Digital Millenium Copyright Act (DMCA). Marvic and Charter filed motions to dismiss. In February 2023, the district court granted the motions, finding that “[b]ecause Foss’s prior copyright infringement claim against Marvic was dismissed with prejudice, [we] agree[d], for substantially the reasons stated in their supporting memorand[a], that her copyright claims . . . are barred by res judicata.” Foss appealed.

On the issue of claim preclusion, the First Circuit concluded that the first dismissal had not been a “final judgment on the merits” because it was based exclusively on the failure to satisfy the precondition of registration. The Court noted that it had ruled on this issue in Foss v. Eastern States Exposition, another copyright infringement action brought by Foss. The Court explained that, as it concluded in the Eastern States Exposition case, dismissal due to lack of prior registration is “too disconnected from the merits of the underlying claim” to be claim preclusive.

Marvic argued that the prior dismissal “with prejudice” constituted a final judgment on the merits and that the dismissal was “a sanction” based on Foss’s “repeatedly ignoring court directives [...]

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Not on the Merits: Claim Preclusion Doesn’t Bar Inducement Claims After Direct Infringement Case

by Hannah Cohen | Jul 13, 2023 | Patents

Applying Seventh Circuit law to determine whether the dismissal of patent infringement claims should be upheld on the basis of claim preclusion, the US Court of Appeals for the Federal Circuit reversed a district court ruling that the claims were precluded by res judicata. Inguran, LLC v. ABS Global, Inc., Case No. 22-1385 (Fed. Cir. July 5, 2023) (Lourie, Bryson, Reyna, JJ.)

At the district court, ABS argued that a previous infringement suit brought by Inguran precluded it from bringing the instant suit. At issue was whether the previous suit asserting direct infringement of Inguran’s “GSS technology” used to create “single-sexed semen straws” barred the current suit, which alleged that ABS induced third parties to infringe upon the same technology by entering into licensing agreements with these third parties. The district court agreed with ABS. Inguran appealed.

To successfully assert claim preclusion under Seventh Circuit law, a party must meet the following three-factor test:

An identity of the parties or their privies in the first and second lawsuits
An identity of the cause of action
A final judgment on the merits in the first suit.

The Federal Circuit’s analysis focused on the second requirement. In determining whether there was an identity of the cause of action, the Court examined whether the second claim was based on the same set of transactional facts as the earlier litigation between the parties. In patent infringement cases, the general rule is that res judicata does not bar the assertion of new rights acquired during the previous action, which could have been litigated but were not (i.e., claims that arose while the litigation was ongoing but after the original complaint was filed).

The Federal Circuit determined that the transactional facts between the present case and the previous litigation were different because the cases respectively centered around theories of induced infringement by third parties and direct infringement. As the Court noted, “The evidence needed to support these two claims (induced infringement vs direct infringement) is different.” To allege and prove induced infringement, Inguran needed to establish additional facts beyond what it asserted in the previous case to show direct infringement. As the Court noted, an “induced infringement claim rests on evidence and elements beyond those required by direct infringement.” Although minimal evidence regarding the activities of the third parties was part of the record in the previous litigation, the parties ultimately stipulated that direct infringement occurred. The issue of induced infringement, however, was never presented to the jury.

The Federal Circuit held that although both cases implicated similar facts, including extensive discussions of the “GSS technology,” the direct infringement allegations could not reasonably serve to bar later allegations regarding the actions of third-party licensees. The Court accepted Inguran’s argument that any induced patent infringement claim it might have brought at the time of the earlier case would have been based on speculation: “[w]e agree with ST that it could not have asserted an inducement claim during ABS I.” The Court therefore rejected the district [...]

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District Court Finding Doesn’t Preclude PTAB Proceeding

by Mike Baldwin | Jun 15, 2023 | America Invents Act, Patents

The Patent Trial & Appeal Board refused to terminate an inter partes review (IPR) proceeding, finding that collateral estoppel and claim preclusion do not apply to previous findings from a district court proceeding. Patent Quality Assurance, LLC v. VLSI Technology LLC, IPR2021-01229, Paper No. 128 (PTAB June 3, 2023) (Melvin, Giannetti, McNamara, APJs).

Patent Quality Assurance filed a petition for IPR on July 7, 2021, against a patent owned by VLSI. The Board granted institution. The Board later instituted on a substantively identical petition filed by Intel and granted Intel’s motion for joinder to add Intel to the Patent Quality Assurance IPR proceeding. Prior to the July 7, 2021, petition, litigation between VLSI and Intel resulted in a jury verdict that Intel infringed certain claims of the challenged patent. Invalidity was not presented to the jury. On May 10, 2022, the district court entered final judgment, including a finding that Intel had not proven invalidity. Based on the district court’s judgment, VLSI asserted that claim preclusion barred Intel from challenging validity of the asserted patent in IPR and sought termination of the IPR as to Intel.

VLSI argued that the elements of claim preclusion were met because both VLSI and Intel were parties to both cases, the district court entered a final judgment for infringement and no finding of invalidity, and the effect of Intel’s IPR was to collaterally attack the final judgment in the first case. Intel responded, arguing that claim preclusion does not apply to IPRs from the district court under the America Invents Act (AIA).

The Board agreed with Intel that estoppel did not apply. Intel argued that if Congress had intended for IPRs to be precluded by claims in a parallel district court, it would have identified that as one of the estoppel circumstances in the AIA. VLSI argued that the Supreme Court’s 1991 decision in Astoria Federal sav. & Loan Ass’n v. Solimino applies only when an agency decision precludes a later court decision and, therefore, common-law claim preclusion would apply to the IPR proceeding barring a plain statement from Congress showing intent to overcome preclusion.

The Board disagreed, noting that the cited case law related to statutes where a later statute superseded the earlier one and required a clear and manifest intent to repeal the earlier statute. The Board found that there was no express intent to repeal the earlier statute regarding estoppel, and the jurisprudence constantly counsels against repeal “by implication.” The Board also crucially noted that there was no statutory conflict between the earlier and later statutes, and the question, therefore, was whether (under Astoria) the AIA showed congressional intent that common-law claim preclusion should apply to IPRs.

Reading 35 U.S.C. § 315(e), the codification of the AIA’s estoppel provision, the Board noted that the statute clearly imposes estoppel on future agency and district proceedings but says nothing about applying adjudications in district court proceedings at the Board. As the Board explained, there would be no reason for § 315(e) to spell [...]

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First Circuit: Claim Preclusion Shouldn’t Apply to Bar Claims Under VARA

by Hannah Cohen | May 25, 2023 | Copyrights

Addressing for the first time whether federal res judicata law recognizes the alternative determinations doctrine, the US Court of Appeals for the First Circuit determined that a plaintiff’s claims under the Visual Artists Rights Act (VARA) were not precluded by a previous action in which she brought a federal copyright claim against the defendant. Foss v. Eastern States Exposition, Case No. 22-1313 (1st Cir. May 10, 2023) (Barron, Howard, Montecalvo, JJ.)

Cynthia Foss previously brought a federal copyright action against Eastern States Exposition that was dismissed. The previous action did not involve any claim under VARA. Eastern argued that claim preclusion should apply to bar the claim, and the district court agreed. Foss appealed.

To establish federal claim preclusion, a party must establish that there is a final judgment on the merits in an earlier suit, sufficient similarity between the causes of action asserted in the earlier and later suits, and sufficient identicality between the parties in the two suits. Foss did not dispute that the first and third requirements were satisfied, and thus the First Circuit’s decision turned on whether the second requirement was met.

Foss argued that the “alternative determinations” doctrine should apply. This doctrine strips a dismissal of claim preclusive effect if the dismissal rests on multiple grounds, not all of which would on their own render the dismissal claim preclusive. Whether the doctrine should apply was a matter of first impression in the First Circuit. Foss argued that the previous dismissal was in part based on “her failure to allege that she had satisfied the registration-related precondition to copyright infringement suits under § 411(a),” which was not a merits-based dismissal and therefore had no preclusive effect. Eastern argued that even if the First Circuit adopted the alternative determinations doctrine, the Court should limit the doctrine because the district court “rigorously considered” the merits-based rationale for dismissal in the previous action.

The First Circuit adopted the alternative determinations doctrine and rejected Eastern’s contention that the doctrine should not apply in the instant case because Eastern did not provide support for the contention that the district court in the previous action “rigorously considered” the merits-based grounds for dismissal of Foss’s federal copyright claims. The Court then remanded the case for further consideration, noting that Eastern might argue that the alternative disputes doctrine should be limited in this instance because of Foss’s failure to allege satisfaction of the precondition to suit, which might be prejudicial to Eastern.

Color Me Unsurprised: No Preclusion of Plaintiff’s Claims

by Paul Devinsky | Oct 27, 2022 | Trademarks

The US Court of Appeals for the Seventh Circuit reversed the lower court’s order determining that the plaintiff’s federal lawsuit was barred under the doctrines of claim and issue preclusion, noting an Illinois law exception on claim preclusion and finding no issue preclusion. Creation Supply, Inc. v. Selective Ins. Co. of the Southeast, Case No. 21-3172 (7th Cir. Oct. 19, 2022) (Rovner, Hamilton, Scudder, JJ.)

Creation Supply is a producer of markers. In 2012 one of its competitors sued it for trademark violations. Creation requested that Selective Insurance provide coverage for the lawsuit, but Selective refused. Creation entered into a settlement agreement with its competitor that prevented Creation from selling one of its primary lines of markers. As a result, Creation lost much of its business and struggled financially.

Selective did not provide coverage for Creation’s legal defense. It also sought a declaration in Illinois state court that it owed Creation no duty to defend. Creation countersued, seeking a declaration that Selective did owe it a duty to defend. Creation also alleged that Selective breached the insurance policy between the parties. The Illinois circuit court entered partial summary judgment for Creation on its duty to defend the claim and finalized an award of incidental relief in October 2017.

In 2014, during the state court litigation, Creation filed a suit against Selective in federal court for breach of contract and a claim under the Illinois Insurance Code for vexatious and unreasonable conduct. In 2016, Creation requested voluntary dismissal of the state court breach of contract claim. The Illinois circuit court granted the motion and expressly reserved Creation’s right to maintain its federal action on its breach of contract claim. After the end of the state court litigation in 2017, the federal court case continued. The district court granted summary judgment for Creation on the insurance coverage question. After a bench trial on the Illinois Insurance Code claim, the court found for Creation and awarded almost $3 million in damages. On appeal, the Seventh Circuit reversed and remanded, instructing the district court to resolve the remaining issue of contract damages.

After the remand, Creation sought to amend the complaint to seek punitive damages. The district court denied that request. Selective then moved for judgment on the pleadings, contending that the doctrines of claim and issue preclusion barred Creation’s remaining contract claim. The district court agreed and entered judgment for Selective because the Illinois state courts had resolved the issue of Selective’s duty to defend. Creation appealed.

The Seventh Circuit affirmed the district court’s denial of Creation’s leave to amend, then turned to the issue of claim preclusion, a legal doctrine that prevents a party from repeatedly litigating the same cause of action against the same adverse party. Claim preclusion requires the following:

A court with proper jurisdiction must have issued a final judgment on the merits.
The claims in the two actions must be the same.
The parties in the second action must be the same (or in privity with) those [...]

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Check Step One: It’s Not Ova until the Court Compares Claims

by McDermott Will & Emery | Aug 13, 2020 | Patents

The US Court of Appeals for the Federal Circuit reversed a district court’s decision finding a patent directed to a method of sorting particles using flow cytometry technology ineligible under 35 U.S.C. § 101. The Federal Circuit also vacated the district court’s conclusion that the patent owner was precluded from asserting certain patents based on claim preclusion. XY, LLC v. Trans Ova Genetics, LC, Case No. 19-1789 (Fed. Cir. July 31, 2020) (Stoll, J.).

XY, Beckman Coulter and Inguran (collectively, XY) sued Trans Ova in 2016 for infringement of seven patents relating to technology for sex selection of non-human mammals. Trans Ova filed a motion for judgment on the pleadings, arguing that the asserted claims of one of the patents are ineligible under 35 U.S.C. § 101. Applying the Supreme Court’s two-step Alice framework for determining patent eligibility, the district court determined that the claims are ineligible under § 101. At Alice step one, the district court found that the patent’s sole independent claim was directed to the abstract idea of a “mathematical equation that permits rotating multi-dimensional data.” At Alice step two, the district court found that the asserted claims lacked an inventive concept because XY admitted that each claim element was known in the art.

Trans Ova also filed a motion to dismiss, arguing that the district court should hold XY’s infringement allegations barred by claim preclusion. The argument was based on XY’s 2012 lawsuit against Trans Ova on infringement of different patents directed to similar technology (which was pending on appeal when the 2016 case was filed). The district court granted Trans Ova’s motion to dismiss infringement allegations of three patents cited in the 2016 suit, and stayed proceedings on XY’s remaining causes of action pending the outcome of the 2016 suit’s appeal. XY appealed the district court’s dismissal decision.

On appeal, the Federal Circuit found that the district court erred in finding that the claims are directed to a mathematical equation under Alice step one. The Court concluded that the asserted claims are directed to a patent-eligible improvement of a method of sorting particles using flow cytometry technology, not to an abstract idea. XY’s claim described detailed improvements to a physical technique, a step-by-step method for a laboratory process, which is patent eligible.

As to the issue of claim preclusion, the parties’ only dispute was whether the district court properly concluded that XY’s 2012 and 2016 lawsuits present the same cause of action. A cause of action is defined based on the transactional facts from which it arises, which in a patent case include both the asserted patents and the accused activity. Claim preclusion will be triggered by different patents only if the scope of the asserted patent claims in the two suits is essentially the same.

XY argued that the district court erred by failing to compare the currently asserted patent claims to the previously asserted patent claims to determine whether the causes of action in the two lawsuits are essentially the same. The Federal Circuit [...]

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