CAFC Revisits “Loser Estoppel” in Patent Reexamination

While reexamination is often initiated parallel to litigation, some have relied upon reexamination in post-trial settings to get out from under injunctions and/or jury verdicts. 

One of the more well known cases in this regard is In re Trans Texas Holdings Corp., 498 F.3d 1290 (Fed. Cir. 2007). In Trans Texas, the patent being reexamined was subject to an infringement suit, in which the district court had issued its claim construction ruling (in a district court opinion) as to the definition of a term. The parties ultimately reached a settlement before trial, and the district court issued an “Order of Dismissal with Prejudice.” The patent owner relied on that district court claim construction ruling in a reexamination proceeding, and argued that the Office was bound by that district court claim construction ruling, under the doctrine of issue preclusion. The Federal Circuit stated that issue preclusion could not be applied against the Office based on a district court holding in an infringement proceeding, since the Office was not a party to that earlier infringement proceeding. See Also In re Translogic Tech. Inc. (CAFC 2007)

Yesterday, the CAFC heard oral argument in the case of In re Construction EquipmentConstruction appealed from a decision of the BPAI in ex parte patent reexamination that found the claims of the patent anticipated and/or obvious. Previously, the CAFC found the Construction patent not invalid on appeal from the District Court. Thereafter, the appellant pursued ex parte reexamination on some of the very same art previously considered.

During oral argument the court, sua sponte, questioned the propriety of the USPTO’s seeming dismissal of the Court’s previous validity ruling.

It is long established that the USPTO may conduct patent reexamination independent of district court proceedings. As held in Ethicon v. Quigg, 849 F.2d 1422, 1428, 7 USPQ2d 1152, 1157 (Fed. Cir. 1988) that the Office is not bound by a court’s holding of patent validity and should continue the reexamination. The Court noted that District Courts and the Office use different standards of proof in determining invalidity, and thus, on the same evidence, could quite correctly come to different conclusions. Specifically, invalidity in a District Court must be shown by “clear and convincing” evidence, whereas in the Office it is sufficient to show non-patentability by a “preponderance” of the evidence. Since the “clear and convincing” standard is harder to satisfy than the “preponderance standard,” a court’s holding of patent validity is not controlling. If sufficient reasons are present, claims held valid by the court may be rejected in reexamination. 

Still, the Court questioned the fairness of allowing the same losing party in Construction a chance to essentially re-litigate some of the very same issues. Judge Newman in particular questioned the finality and certainty of such a practice. (12min-17min marks of oral argument). (Althought, it was acknowledged that the USPTO was essentially the appellee in this instance, not the Requester)

Of course, the Court has considered the issue previously (In re Swanson (CAFC 2008)) holding:

[the relevant statutory] language and legislative history, as well as the differences between the two proceedings, lead [to the conclusion] that Congress did not intend a prior court judgment upholding the validity of a claim to prevent the [USPTO] from finding a substantial new question of validity regarding an issue that has never been considered by the [USPTO]. To hold otherwise would allow a civil litigant’s failure to overcome the statutory presumption of validity to thwart Congress’ purpose of allowing for a reexamination procedure to correct examiner errors, without which the presumption of validity would never have arisen.  Swanson, 540 F.3d at 1382.

(emphasis added)

In Construction, while some of the art of the reexamination was previously used in the district court, the SNQ determination hinges upon issues previously considered by the USPTO, not the courts. (note, there is no statutory estoppel in ex parte patent reexamination)

During oral argument Construction indicated that they intend to pursue the “loser estoppel” theory to the District Court should the CAFC affirm, which seems likely.