In XY, LLC v. Trans Ova Genetics, L.C., Nos. 2016-2054, 2016-2136 (Fed. Cir. May 23, 2018), an appeal from the District of Colorado, the Federal Circuit gave preclusive effect to a PTAB finding, something it has done several times in the recent past. This time, however, the Federal Circuit acted sua sponte, mooting Trans Ova Genetics’ appeal of the district court’s refusal to grant a new trial after a jury found the patent not invalid, without considering arguments by either party to the appeal. The Federal Circuit acted as it did because on the same day, it also affirmed a PTAB final written decision of unpatentability in an IPR proceeding involving a challenge of the same patent by a different party. The Federal Circuit held that its affirmance of a PTAB unpatentability finding “has an immediate issue-preclusive effect on any pending or co-pending actions involving the patent.” Slip op. at 19.

In March 2012, XY had asserted six patents against Trans Ova Genetics, each relating generally to the sorting of X- and Y-chromosome bearing sperm cells. One of the patents, U.S. Patent No. 7,820,425 (the “Freezing Patent”), was subsequently challenged in an IPR proceeding filed by ABS Global, Inc., who was not a party to the lawsuit. ABS Global, Inc. v. XY, LLC, Case IPR2014-1550 (filed Sept. 29, 2014). At trial in the XY case, the jury found that none of the asserted patents were invalid and that Trans Ova willfully infringed the patents, awarding damages of $4.5 million to XY. The district court denied Trans Ova’s motion for a new trial on validity. Shortly thereafter, the ABS Global IPR proceeding concluded with a final written decision of unpatentability. XY appealed the PTAB decision to the Federal Circuit. Trans Ova appealed the district court’s ruling to the Federal Circuit.

In an opinion authored by Judge Chen and joined by Judge Dyk, the panel majority found it was unnecessary to consider Trans Ova’s arguments on appeal as to the validity of the Freezing Patent. Instead, the Court noted that its affirmance of the PTAB’s finding of unpatentability in the ABS Global IPR proceeding—a decision rendered by the Federal Circuit on the same day its decision in XY—“collaterally estops XY from asserting the patent in any further proceedings.” Slip op., at 18. This is because “a patentee, having been afforded the opportunity to exhaust his remedy of appeal from a holding of invalidity, has had his ‘day in court,’ and a defendant should not have to continue defend[ing] a suit for infringement of [an] adjudged invalid patent.” Slip op., at 19.

In a partial dissent, Judge Newman argued that a decision of the PTAB, an administrative agency, should not automatically override and estop a district court’s earlier “validity judgment,” even if the Federal Circuit affirms the PTAB’s decision. Judge Newman stated that collateral estoppel is subject to a variety of exceptions, none of which were considered when the Court acted sua sponte. For example, the parties were not given an opportunity to argue, and the Court did not consider possible exceptions that might prevent the application of collateral estoppel, such as the differing standards of validity in the PTAB and in the district court, the differing burdens of proof, and the differing standards of appellate review. Judge Newman noted that collateral estoppel was not raised by either party in the appeal, was not briefed, was not argued at the hearing, and was not briefed post-hearing. The panel majority responded by pointing out that both parties’ statements in oral argument assumed estoppel would apply, and there was no indication from XY that “it did not have a full and fair opportunity to litigate the validity of its patent in a parallel case.” Slip op., at 20.