In 1907, the U.S. Supreme Court in Kessler v. Eldred, held that a patentee is not entitled to litigate a patent infringement claim against a customer of a product if a court had already determined that the seller of the product did not infringe the asserted patent claim.
In the first case, Technology Properties Limited, LLC v. Canon, Inc., (N.D. Cal. June 24, 2015), defendants to a patent infringement suit, invoking Kessler, filed a motion for judgment on the pleadings because the plaintiff had previously made the same claims before the International Trade Commission (ITC) and lost. The ITC held that the defendants did not infringe the asserted patents. The plaintiff did not appeal the ITC's ruling to the Federal Circuit. Instead, the plaintiff proceeded with a district court action asserting the same patents. The district court declined to invoke the Kesslerdoctrine and denied the motion to dismiss. The district court held that because the ITC is an administrative agency, not a court, ITC decisions cannot have preclusive effect. If the plaintiff had appealed, and the Federal Circuit upheld the decision of the ITC, the Federal Circuit decision would have prohibited the plaintiff from litigating further on the asserted patents.
In the second case, Speedtrack, Inc. v. Office Depot, Inc., (Fed. Circ. June 30, 2015), the Federal Circuit not only applied the Kessler doctrine, but expanded it. InSpeedtrack, the plaintiff sued two customers for patent infringement because of its use of third party software. The case against the second customer was stayed while the first one was litigated. The court found that the first customer's use of the third party software did not literally infringe the patent. The stay of the second case was lifted, but the plaintiff amended its complaint to allege infringement by the second customer under the doctrine of equivalents for use of the same third party software. The second customer moved to for summary judgment under Kessler, which was granted. On appeal, the plaintiff argued that the Kessler doctrine did not apply because 1) Kessler only applies if the seller is sued whereas here it was just two customers, 2) the customer had combined the software with different hardware, and 3) infringement of doctrine of equivalents was not at issue in the first case.
The Federal Circuit affirmed summary judgment of non-infringement rejecting all three arguments. First, Kessler applies even if the manufacturer has not been sued. The public is entitled to rely on a finding that a product does not infringe regardless of who was first sued. Second, although the hardware customers may use are different, the claims are directed at the use of the software. Hence, the customers' use of the product is the same in both cases. Third, Kessler applies to the entire patent. It was the patentee who chooses which claims to assert in a litigation. If the patentee chooses not to assert a claim, then it should bear the risk that it cannot assert the patent later. The public is entitled to rely on a finding of non-infringement and should not have to review the litigation history to determine which claims had been raised.