Last Week in the Federal Circuit (June 15-19): Patent plaintiff denied do-over

It was a busy week at the Federal Circuit, as the Court issued 15 decisions, including a number of Rule 36 affirmances in cases argued during its June sitting. Our case of the week highlights a patent case involving several civil procedure issues: claim preclusion and a related doctrine known as the Kessler doctrine.

Precedential opinions: 5

Non-precedential opinions: 5

Rule 36: 5

Longest pending case from argument: Dropbox, Inc. v. Synchronoss Technologies, Inc., Nos. 19-1765, 19-1767, 19-1823 (162 days from argument to decision)

Shortest pending case from argument (non-Rule 36): Tie between Oliva v. Dep’t of Veterans Affairs, No. 19-1990, and Alford v. United States, No. 19-1678 (39 days from argument to decision)

Case of the week: In re: PersonalWeb Technologies LLC, No. 19-1918 (June 17, 2020)

Panel: Judges Wallach, Bryson, and Taranto, with Judge Bryson writing the opinion.

Read this case if: You have a case involving claim preclusion or the Kessler doctrine.

What happens when a patentee sues a defendant, voluntarily dismisses its suits, and then turns around to sue that defendant’s customers? The Federal Circuit answered that question in PersonalWeb and held that there was no second bite at the apple.

Patentee PersonalWeb first sued Amazon for patent infringement in 2011, but following claim construction, PersonalWeb stipulated to dismissal of all its claims with prejudice. The district court then entered final judgment against PersonalWeb.

Skipping ahead to 2018, PersonalWeb filed “dozens of new lawsuits in various districts,” including some against Amazon’s customers that made essentially the same allegations as in its prior suit. Amazon intervened and sought a declaratory judgment precluding PersonalWeb’s new lawsuits. The district court ruled against PersonalWeb.

The Federal Circuit affirmed, holding that claim preclusion barred PersonalWeb’s claims for infringement occurring before the final judgment in the 2011 action. And it further held that the Kessler doctrine, first adopted by the Supreme Court in Kessler v. Eldred, 206 U.S. 285 (1907), barred PersonalWeb’s infringement claims post-dating the final judgment.

The Court explained that claim preclusion bars both claims that were brought and those that could have been brought in the earlier lawsuit. It noted that claim preclusion applies only if the accused products at issue in the earlier and later suits are “essentially the same,” which requires that the differences between the products are merely colorable or unrelated to the limitations of the claim of the patent. The Court also explained that whether the same patents are involved in both lawsuits was a consideration. But the Court emphasized that mere differences in “arguments or assertions in support of liability” between the earlier and later suits do not preclude claim preclusion. And applying those principles, the Court held PersonalWeb’s claims barred: “At most, PersonalWeb has shown that it emphasized different facts in support of a different theory of infringement in the prior case. But that is not enough to avoid claim preclusion.”

Although claim preclusion generally does not apply to acts of alleged infringement occurring after the final judgment in the earlier suit, the Supreme Court’s Kessler doctrine “fills the gap” left by claim and issue preclusion. In certain circumstances, it precludes a plaintiff from engaging in repeated harassment of an “adjudged non-infringer” for continuing its business as usual after having obtained a favorable judgment against that plaintiff in a patent action. The Court noted that the Kessler doctrine creates a “limited trade right”—that is, the earlier judgment of non-infringement extends to protect any products as to which the manufacturer established a right not to be sued for infringement in the earlier suit.

The Court rejected PersonalWeb’s argument that the Kessler doctrine could not apply because there was no “adjudged non-infringer” because PersonalWeb merely dismissed its case. The Court noted that, in the earlier lawsuit, PersonalWeb abandoned its claims and that the judgment in that case “stands as an adjudication that Amazon was not liable for the acts of infringement alleged by PersonalWeb.” And the Court further explained that the policy that drove the Supreme Court’s decision in Kessler would be ill-served if PersonalWeb could just dismiss its suit with prejudice and then sue a defendant’s customers.