Addressing the applicability of issue preclusion in inter partes review (IPR) proceedings, the US Court of Appeals for the Federal Circuit found that a patent owner’s arguments on appeal were precluded based on similar arguments made in two prior IPR proceedings that resulted in final decisions. Papst Licensing GMBH v. Samsung Elecs. Am., Inc., Case No. 18-1777 (Fed. Cir. May. 23, 2019) (Taranto, J).

The patent at issue, entitled “Analog Data Generating and Processing Device Having a Multi-Use Automatic Processor,” is owned by Papst Licensing and was challenged in an IPR proceeding by Samsung. In addition to the IPR of the patent in issue, Samsung challenged two other Papst patents via IPR proceedings, both of which share the same specification as the patent in issue and claim similar subject matter. The patent in issue is directed to an interface device for communication between a data device (e.g., a specialized multimeter or other data acquisition device) and a host computer. The interface is able to achieve high data transfer rates between the data device and the host computer without first installing a separate communication driver by utilizing communication drivers that are already present on the host computer, such as the driver for a hard drive.

In its final written decision, the Patent Trial and Appeal Board (PTAB) found that the challenged claims were invalid as obvious over three references: a patent to Aytac, a technical standards publication (SCSI) and admitted prior art. In order to arrive at its ultimate conclusion, the PTAB interpreted the claim limitation “without requiring any end user to load any software onto the computer” to mean “without requiring the end user to install or load specific drivers or software [] beyond that included [on the host computer].” Based on the admitted prior art, the PTAB found that SCSI drivers are among the drivers included on the host computer, and therefore found the claims obvious. Papst appealed.

Six weeks prior to the final written decision, the PTAB issued similar findings in the two other Samsung IPRs involving the two other related Papst patents that share a common specification to the patent in issue. Specifically, the PTAB found unpatentability based on the same three references (Aytac, SCSI and admitted prior art), and in order to do so, was required to construe a “materially identical ‘without requiring’ limitation.” Papst appealed these two IPR decisions and fully briefed the arguments before the Federal Circuit. However, shortly before the oral argument for both IPRs, Papst voluntarily dismissed both appeals, which rendered both PTAB decisions final.

Accordingly, in the present appeal, the Federal Circuit affirmed the PTAB’s ruling on the merits and additionally found that Papst’ s arguments were barred by issue preclusion. Issue preclusion applies “[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment.” In this scenario, “the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” The Federal Circuit made clear that issue preclusion applies to IPR proceedings (in both the mutual and non-mutual respects). Here, because the two prior IPRs (1) involved patents having the same specification as that of the patent in issue, (2) required construction of the same “without requiring” limitation (which was “essential to the Board’s ultimate determination”) and (3) “resolved [] in the same way,” i.e., a finding of obviousness based on the same prior art combination, the Court found that issue preclusion properly applied to Papst’s arguments.

Practice Note: The Federal Circuit noted some key exceptions to the applicability of issue preclusion, including where “the amount in controversy in the first action [was] so small in relation to the amount in controversy in the second that preclusion would be plainly unfair.” Although the point was not specifically argued by Papst, the Court found that “generally, given the heavy burdens that Papst placed on its adversaries [i.e., fully briefing an appeal only to voluntarily dismiss shortly before oral argument], Papst’s course of action leaves it without a meaningful basis to argue for systemic efficiencies as a possible reason for an exception to issue preclusion.” Thus, it is important to keep in mind the stage of litigation when arguing for a significant disparity in incentives as an exception to issue preclusion.