Court Bars Second Patent Suit Under Claim-Preclusion Doctrine
On January 11, 2018, Judge William J. Martinez of the United States District Court for the District of Colorado granted a defendant’s motion to dismiss some patent-infringement claims, ruling they were barred in light of an earlier patent suit between the two parties, but withheld for later decision the question of whether other patent-infringement claims were barred. XY, LLC v. Trans Ova Genetics, LC, case no. 1:17-CV-944-WJM-NYW.
Plaintiff XY, LLC, (“XY”) owns a portfolio of patents related to technology for sorting non-human, mammalian semen based on whether a sperm cell carries a Y chromosome. The technology is used to ensure that offspring of a desired sex result from artificial insemination.
XY had previously sued Trans Ova Genetics, LC (“Trans Ova”) for breach of a license contract and for patent infringement, and won a liability verdict. However, the jury in that case ruled in favor of Trans Ova on an unclean-hands defense, thus preventing XY from receiving injunctive relief. (Despite the unclean-hands finding, the court in that case imposed an ongoing royalty obligation on Trans Ova.) An appeal in that case is ongoing.
When the district court litigation in the previous case had finished, XY brought a second lawsuit against Trans Ova. In that case, XY asserted infringement of other patents in its portfolio, patents that were not part of the first suit. Trans Ova moved to dismiss, arguing claim preclusion.
The judge included in his opinion a lengthy analysis of the Federal Circuit law of claim preclusion, pointing out that the court “has endorsed the ‘pragmatic,’ ‘transactional’ Restatement approach” to claim preclusion, but also that “many Federal Circuit cases do not explicitly engage in a pragmatic evaluation, but instead focus on the similarities between the patents asserted in the earlier and later lawsuits; and the similarities between the devices or processes accused in the earlier and later lawsuits.”
As to some of XY’s patents, Trans Ova argued that the infringement claims “could have been brought” in the earlier case, because some of the patents existed when the earlier case began, and others were issued during the earlier lawsuit and could have been added to the case by amended pleading. XY responded to the “could have been brought” argument by alleging that “it did not obtain evidence of infringement of these three patents until long after the deadline for amending pleadings had passed.” As to these patents, the court pointed out that the Federal Circuit has held that “[t]he res judicata doctrine does not apply to new rights acquired during the action which might have been, but were not, litigated.” Nonetheless, the court declined to apply this apparently bright-line rule, inferring that “the Federal Circuit did not intend to draw a non-rebuttable line on the date a party files its lawsuit,” because such an approach would violate the pragmatic Restatement approach, because “the Federal Circuit itself has had difficulty remaining consistent” with this holding,” and because a bright-line rule would “raise serious policy concerns” about the multiplication of litigation that would result from such a rule. The court therefore considered the totality of the circumstances, per “the Restatement’s pragmatic approach endorsed by the Federal Circuit,” and granted the motion to dismiss, finding XY to be precluded from asserting its patents that issued before or during the first litigation.
XY has also asserted one patent that issued after judgment was entered in the first case. As to that patent, the court declined to rule one way or the other. However, the court did hold that claim preclusion would apply even to this newly issued patent if the claims of that patent are “not materially different” from those in the earlier patents. The court found the record to be insufficient for it to make the necessary technical findings about the similarities and differences in the patent claims, and therefore, as to the newly issued patent, denied the motion to dismiss without prejudice.
As one basis for its decision that under the Restatement approach and the “materially different” standard, the new patent could be the subject of claim preclusion if its claims are sufficiently similar to those in the earlier patents, the court cited to the Federal Circuit’s 2012 decision in Aspex Eyewear, Inc., v. Marchon Eyewear, Inc. In that case, the Federal Circuit found that certain patent claims were barred from assertion by claim preclusion even though they did not exist at the time of the first lawsuit. Those claims were issued from a reexamination, which the Federal Circuit appeared to find to be an important distinction from claims that might appear in a reissue patent or in a continuation patent, thus appearing to suggest that reissue claims, which come with a new patent number, would not be subject to preclusion.
It will be interesting to track further proceedings and any appeal in the XY case. From one point of view, the Federal Circuit’s Aspex opinion holding that claims that are the product of reexamination can be the subject of preclusion, and suggesting that claims that are the product of reissue or continued prosecution cannot, is illogical. If the district court ultimately holds that the judgment in the first litigation bars XY from asserting its patent that was issued after that judgment, the Federal Circuit may be called upon to reconsider the issue.
In the meantime, the XY decision is a reminder to practitioners that patent owners take on substantial risk if they choose to litigate some, but not all, of their patents. As impractical as it may seem, even if a portfolio contains hundreds or thousands of potentially infringed patents, a patent owner should assert all of the patents that a defendant is infringing in connection with one product or service, on pain of later being precluded from asserting them at all.