United States: Expecting The Unexpected - Markman´s Revenge

The claim construction adopted by the court, as well as that urged by counsel, will influence the litigation as it proceeds through pre-trial to trial and any appeal. The interpretation of claim language in one action might very well have a preclusive effect on related, as well as future litigation. This is particularly important where multiple law suits over the same patent are anticipated. It is vital for trial counsel to prepare for an unexpected adverse claim construction ruling while effectively advocating the client’s best position.

In 1999, the American Bar Association's Section of Intellectual Property Law conducted a survey of its members, asking them to report on their experiences regarding the timing and practices adopted by various courts to construe patent claims. American Bar Association Section of Intellectual Property Law 1999 Markman Survey, IPL Newsletter, Spring 2000. As reported, 57.8% of the time, claim construction proceedings were conducted after the close of discovery, but before trial; 21.9% were conducted during discovery; and 7.8% were conducted prior to discovery. Finally, 12.5% of the reported claim construction proceedings were during trial; half before closing argument and half after. While the survey did not include the timing of a Markman hearing with respect to expert discovery, the responding members did report that expert testimony was heard 80% of the time. Id. at 12.

It is clear that due to the lack of a uniform set of rules of practice specific to the timing and conduct of a Markman determination¹, parties find themselves in a variety of post-Markman scenarios. Fact discovery may or may not be complete. A Markman determination may be scheduled before, after, or during expert discovery. Expert reports may have to be supplemented. The court's claim construction may place parties in a position ripe for summary judgment, or a party may seek to stipulate to a judgment or otherwise proceed in order to appeal without delay to the Federal Circuit. Some courts reserve claim construction until trial, often placing counsel in the awkward position of not knowing how to put forward their case, particularly before a jury. Since each situation raises different questions of strategy, the effect a Markman ruling will have on a case will vary from court to court and case to case.

Accordingly, we do not attempt with this article to chart every possible post-Markman scenario. Rather, the focus of this exercise is to note important issues usually common to all litigation that are implicated by a court's claim construction. We begin with a discussion of the interlocutory nature of a claim construction ruling and the circumstances under which a party can obtain immediate review of an adverse Markman ruling. We then turn to a discussion of why proper planning of expert testimony is necessary and various suggestions for planning expert discovery to anticipate an adverse claim construction. We will conclude with the legal ramifications of a court's construction, including findings of fact by the judge and its collateral estoppel and judicial estoppel effect.

In every patent lawsuit, before questions of infringement and validity can be answered by the trier of fact, the language of the asserted claims must first be interpreted by the court as a matter of law. The construction of the claim language is the first of a two part inquiry. Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995) (en banc), aff'd 517 U.S. 370 (1996). While the second inquiry for infringement: whether all of the claim elements are found in the accused product, process etc. Id., differs from the second inquiry for validity: whether the claim limitations are elements of the prior art reference(s), see Key Pharmaceuticals v. Hercon Labs. Corp., 161 F.3d 709, 714 (Fed. Cir. 1998), both questions require claim interpretation. The scope of the claim, including for each claim limitation, must be the same for both validity and infringement findings.

Notwithstanding its importance, a district court's Markman ruling is an interlocutory order. See Cybor Corp. v. FAS Tech., Inc., 138 F.3d 1448, 1479 (Fed. Cir. 1998); Vivid Techs. Inc. v. American Science & Eng'g, Inc., 997 F.Supp. 93, 95 (D. Mass. 1997). Accordingly, in most instances, a party may not appeal the ruling as a matter of right until after a final judgment is entered. Consequently, litigants must ordinarily prepare for trial with the understanding that the jury will be instructed that the meaning of the claims is as interpreted by the court. However, proceeding to trial with a claim construction that one believes is wrong as a matter of law is clearly not desirable, and certainly inefficient, if there is a credible risk that the Federal Circuit will vacate and remand any eventual judgment due to an erroneous claim interpretation.

As one district court noted, it is inefficient to proceed with a trial before the claim interpretation is reviewed by the Federal Circuit. Infringement and validity issues are complicated and expensive to try. Yet, since claim construction is a matter of law, subject to de novo review by the Federal Circuit, the parties can be forced to go through the process two or even more times. See Schering Corp. v. Amgen, Inc., 35 F. Supp. 2d 375 (D. Del. 1999) (entering judgment of non-infringement upon patentee's request, in order to immediately appeal the court's claim construction). Although, generally disfavored by the Federal Circuit, there are circumstances where early appellate review of a Markman ruling is possible and even favored.

There are many instances where the claim construction will be determinative of infringement, validity, and/or enforceability. As a result, courts often find that after adopting the construction urged by one party, that party files a motion for summary judgment. Similarly, the party receiving an adverse claim construction may believe that infringement or validity is a foregone conclusion. Under these circumstances proceeding to trial would be expensive and useless. Furthermore, where a party believes the court erred as a matter of law in its construction, proceeding to trial will merely delay a final determination of the conflict.

To avoid this, the "losing" party to a Markman determination often considers conceding a motion for summary judgment in order to get a final, appealable judgment, or otherwise asking for entry of a final judgment. See, e.g., Schering Corp. v. Amgen, Inc., 35 F. Supp.2d 375, 377 (D. De. 1999) (noting that "the Federal Circuit has decided appeals from judgments that were entered based on a party's concession that it cannot succeed under the Court's claim interpretation.") (citations omitted). In fact in at least one case noted in Schering, the Federal Circuit approved of this approach. See York Prods., Inc. v. Central Tractor Farm & Family Center, 99 F.3d 1568 (Fed. Cir. 1996).

Obviously, summary judgment is not always a final judgment from which an appeal can be sought. For example, a patentee may wish to concede non-infringement, but the defendant has an outstanding counterclaim for invalidity. In this case the patentee would have to get the defendants' consent to dismiss, perhaps without prejudice, its counterclaim. In exchange for a judgment of non-infringement, this may be very appealing to a defendant.

Even where the defendant is not agreeable to dismiss its counterclaim, a district court has discretion to dismiss certain claims and enter final judgment. Schering, 35 F. Supp.2d at 378 (quoting Phonometrics, Inc. v. Northern Telecom, Inc., 133 F.3d 1459, 1468 (Fed. Cir. 1998) ("a district court has discretion to dismiss a counterclaim alleging that a patent is invalid as moot where it finds no infringement"); see also Fed. R. Civ. P. 54(b) ("the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon the express determination that there is no just reason for delay . . .")

Another avenue for obtaining interlocutory review of a Markman ruling is through a motion for preliminary injunction. An interlocutory order granting or denying a motion for preliminary injunction is appealable as of right pursuant to 28 U.S.C. § 1292(a)(1). Consequently, where the district court conducts a Markman determination and renders an interpretation of the asserted claims in order to rule on the preliminary injunction, the Federal Circuit will review the claim interpretation. See Sofamor Danek Group, Inc. v. DePuy-Motech, Inc., 74 F.3d 1216 (Fed. Cir. 1996); see also, Microchip Tech., Inc. v. Scenix Semiconductor, Inc., Nos. 558, 559, 1998 WL 743923 (Fed. Cir. 1998) ("We deem the appropriate course is to review the district court’s pretrial claim construction in the context of any appeal of a preliminary injunction.") (unpublished op). The appellate review will not necessarily be a final construction of the claim language. In one appeal from a denial of a preliminary injunction, the Federal Circuit reserved its right to review the claim construction again after final judgment. The court noted

International Communication Materials, Inc. v. Ricoh Co., Ltd., 108 F.3d 316, 318-19 (Fed. Cir. 1997).

It is also possible, pursuant to 28 U.S.C. 1292(b), to seek permission to appeal a claim construction ruling.

28 U.S.C. § 1292(b).

A request for permission to appeal pursuant to Fed. R. App. P. 5(a) must be filed within 10 days of the entry of the order. If the court's claim construction ruling does not so specify, a party may ask for an amended ruling to allow for an appeal and the ten days will run from entry of the amended order. Fed. R. App. P. 5 (3).

This procedure is generally viewed with disfavor. See Schering, 35 F. Supp.2d at 377 (citing Cybor Corp. v. FAS Tech., Inc., 138 F.3d 1448 (Fed. Cir. 1998) and noting that "to date the Federal Circuit has declined interlocutory review of claim construction decisions in all certified questions brought before it.) In the ABA survey mentioned above, 7% of the respondents reported asking the court to certify its claim construction for appeal. Four percent of respondents reported that the district court certified the case for appeal. No known cases were reported as having been reviewed by the Federal Circuit upon certification. See, e.g., Microchip Tech., Nos. 558, 559, 1998 WL 743923 (rejecting a motion for leave to appeal a Markman ruling rendered in connection with a preliminary injunction).

At least one district court judge noted that

TM Patents, L.P. v. International Business Machines Corp., 72 F.Supp. 2d 370, 377 n.1 (S.D.N.Y. 1999).

Even where an appeal is unavailable, a party may move the district court to reconsider or modify its interpretation. This may be particularly useful where the claim construction proceeding was conducted early in the litigation process. Several courts have noted that claim interpretation reached at an early stage of a litigation will likely be modified in some fashion as the case proceeds to trial. The reason being that the factual questions surrounding infringement and validity are not fully discovered until the close of discovery and even as late as trial itself.

There have been several cases, under various circumstances, where district courts have modified their claim construction. For example, a court may be called upon to construe the claim language in a preliminary injunction setting. Yet, court's recognize that at such an early stage in the litigation the parties may not appreciate the full extent of the dispute and will therefore entertain a modification of the earlier interpretation. See Ricoh Co. v. Int’l Communication Materials, Inc., 93-1196 (W.D. Pa. Aug. 17, 1995), aff’d, 108 F.3d 316 (Fed. Cir. 1997) (holding that the district court did not abuse its discretion when it deferred a final claim construction until after the preliminary injunction stage because it perceived that there were substantial issues to be litigated).

In other cases where a Markman determination was conducted before discovery was complete, the courts recognized that in light of the incomplete record, the interpretation of the claims may have to be revised later in the litigation. Nova Biomedical Corp. v. I-STAT Corp., 980 F.Supp 614, 616 (D. Mass. 1997) (inviting the parties to comment on the court's tentative construction), rev’d on other grounds, 215 F.3d 1351 (Fed. Cir. 1999) (upholding claim construction but remanding for determination of infringement under the doctrine of equivalents); see also Vivid Techs. Inc. v. American Science & Eng’g, Inc. 997 F.Supp. 93 (D. Mass. 1997). One court has gone so far as to state that if it turns out later that a given construction renders a claim invalid, the court may have to revise its construction to preserve the validity of the claim. Stairmaster Sports/Medical Prods., Inc. v. Groupe Procycle, Inc., No. Civ.A.97-396 MMS, 1998 WL 290296, at *2 n.5 (D. Del. May 20, 1998).

Sometimes parties believe they have a strong case notwithstanding the fact that the district court did not adopt its claim construction. When proceeding to trial following a Markman determination, counsel should consider the likelihood that the Federal Circuit will reverse the district court and adopt a different claim construction, and plan accordingly.

Whether or not one believes there is a strong likelihood of reversal of the Markman ruling, counsel must carefully plan the use of expert testimony. Pursuant to Fed. R. Civ. P. 26(a)(2) parties must disclose expert testimony in a written report. The timing for exchanging expert reports is determined by each court, often with input from the litigants.

Many attorneys prefer to complete the exchange of expert reports prior to any Markman determination in the belief that by exchanging reports and deposing their adversary's expert all of the claim construction issues will come to light. Consequently, the parties will be in their best position to argue their respective claim interpretations. The potential for problems rises dramatically when no provision is made for an adverse claim interpretation and a party finds itself on the eve of trial with an expert who has taken a position contrary to the court's claim interpretation.

Some attorneys, after receiving an adverse Markman ruling, seek leave to supplement their expert reports. Others consider providing in the initial discovery plan the opportunity to supplement expert reports after receiving the court's interpretation. These approaches suffer from at least two shortcomings. First, judges are becoming more inclined to shorten the pre-trial process. Many judges will simply not agree to a two-phase expert discovery plan. Second, supplemental reports will not shield the expert from cross examination. Opposing counsel will certainly attempt to call the expert's prior opinions to the jury's attention. A motion in limine to prevent this may be appropriate.

Perhaps the better way to prepare for the contingency of an adverse claim construction is to refrain, to the extent possible, from having the expert opine as to the meaning of the asserted claims. This is not to suggest that the expert should not state his or her assumptions regarding the meaning of the claims. But the assumptions should be clearly phrased as such, as opposed to definitively stating an opinion as to the proper claim construction. The expert's report should be concerned with explaining the technical subject matter, the significance of the prior art references, the level of skill in the art, and the issue of infringement. Indeed, the judge in the first instance is not supposed to interpret claims based on expert testimony. See Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996) (noting that in most situations the analysis of intrinsic evidence alone will resolve claim construction issues and in those instances it is improper to rely on expert testimony).

On the other hand, if it is believed that the meaning of a term is ambiguous from the intrinsic evidence, the expert must so state and include his or her interpretation in the report. As to those claim terms that the attorney intends on demonstrating from the intrinsic evidence, using expert testimony will often backfire. The expert should opine that given the following interpretation of the asserted claims, my opinion concerning validity or infringement is as stated.

Furthermore, one might consider using a "reply" opinion not only to respond to an opponent's position, but to provide an opinion using one's adversary's proposed interpretation. In this way, should the court adopt that interpretation, or any interpretation adverse to one's position, the expert will not have lost credibility before the jury and counsel will have complied with Rule 26(a)(2).

While claim construction in the first instance is to be based on intrinsic evidence, courts sometimes have to receive expert testimony and other extrinsic evidence to resolve an ambiguity. Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576 (Fed. Cir.1996). The Supreme Court and the Federal Circuit have repeatedly stated that even if a court hears witness testimony, it "is not crediting certain evidence over other evidence or making factual evidentiary findings. Rather, the court is looking to the extrinsic evidence to assist in its construction of the written document .

Nonetheless, courts will at times have to reach certain factual findings. As one district court noted, "[t]he issues now reserved for the finder of fact are nearly indistinguishable from those the Court has just resolved as matter of law." Mediacom Corp v. Rates Technology, Inc., 34 F. Supp.2d 76, 84 (D. Mass. 1998). For example, a court may have to resolve a dispute as to what a claim term means to one skilled in the art. Experts will be called to testify as to the meaning, and as to who is one skilled in the art. As part of its role as construer of claims, the court will have to reach a finding of fact at least as to the level of skill in the art.

This situation also arises where, in performing "its duty as the construer of patent claims," the court cannot discern from the intrinsic evidence a distinct meaning for a claim term in the relevant art. In this situation, the district court may, depending upon the facts, rule that the claim is indefinite under section 112  2. Solomon v. Kimberly-Clark Corp., 216 F.3d 1372, 1377 (Fed. Cir. 2000) (citation and internal quotation omitted). Since the test for definiteness is "whether those skilled in the art would understand what is claimed when the claim is read in light of the specification." Morton Int'l, Inc. v. Cardinal Chem. Co., 5 F.3d 1464, 1470 (Fed. Cir. 1993) (citing Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1576 (Fed. Cir. 1986)), the court will have to determine the level of skill in the art.

The question arises, assuming the court reached a finding of level of skill in the art, is the jury later bound by that finding, for example in considering the issue of enablement? We are not aware of any published decisions addressing this issue.

We now explore the circumstances under which a district court's claim interpretation can give rise to collateral estoppel, which in the parlance of the Federal Circuit and §13 of the Restatement (Second) of Judgments (1980), refers to issue preclusion. Foster v. Hallco Mfg. Co., 947 F.2d 469, 478 (Fed. Cir. 1991); Chromalloy Am. Corp. v. Kenneth Gordon (New Orleans), Ltd., 736 F.2d 694, 696-97 (Fed. Cir. 1984); International Order of Job's Daughters v. Lindeburg & Co., 727 F.2d 1087, 1090-91 (Fed. Cir. 1984); Mother's Rest., Inc. v. Mama's Pizza, Inc., 723 F.2d 1566, 1569-72 (Fed. Cir. 1983); Young Eng'rs v. USITC, 721 F.2d 1305, 1314-15 (Fed. Cir. 1983).

The Restatement states that issue preclusion arises "[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." Restatement (Second) of Judgments §27 (1980) (emphasis added). "'[F]inal judgment' includes any prior adjudication of an issue in another action that is determined to be sufficiently firm to be accorded conclusive effect. Restatement (Second) of Judgments §13 (1980). As stated by the Federal Circuit, where (i) parties to an action are provided with a full and fair opportunity to litigate an issue; (ii) the issue was actually litigated; and (iii) the court's ruling on the issue provides the basis for final judgment, the parties may not re-litigate the same issue in another action. See e.g., Hartley, Jr. v. Mentor Corp., 869 F.2d 1469 (Fed. Cir. 1989).

Prior to 1971, collateral estoppel required mutuality. This effectively meant the affirmative defense was available if both parties were parties to the prior proceeding where the issue was previously decided. Triplett v. Lowell, 297 U.S. 638, 56 S.Ct. 645, 80 L.Ed. 949 (1936) (overruled in part). In the patent context this meant that a patentee could assert a patent against an accused infringer, even where the patent was previously held invalid against another infringer.

In 1971 the Supreme Court overruled Triplett and held that mutuality of estoppel is not required. Blonder-Tongue Labs., Inc. v. University of Ill. Found., 402 U.S. 313 (1971). Consequently, collateral estoppel can be used defensively against a patentee either by the same, or a different party.

Returning to the original question, it is well settled that claim construction is an issue of law. Markman v. Westview Instr., Inc., 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1966). Furthermore, it is an essential determination in a judgment regarding infringement or validity, Cybor Corp. v. FAS Tech., Inc., 138 F.3d 1448 (Fed. Cir. 1998) (en banc), and consequently in most instances, the issue is actually litigated. It follows then that a claim construction ruling should give rise to collateral estoppel. Indeed, the Federal Circuit has addressed this issue on several occasions; acknowledging the principle, but finding exceptions under certain circumstances.

In one case the Federal Circuit expressly held that

judicial statements regarding the scope of patent claims are entitled to collateral estoppel effect in a subsequent infringement suit only to the extent that determination of scope was essential to a final judgment on the questions of validity or infringement.

A.B. Dick Co. v. Burroughs Corp., 713 F.2d 700, 704 (Fed. Cir. 1983). In other words, a court's claim construction gives rise to collateral estoppel, but only if it was essential to a final judgment. Echoing this exception, the Federal Circuit more recently held that where a first action was concerned with a dispute over a particular claim term, the court's construction of the claim terms not in dispute was "merely dictum, and therefore has no issue preclusive effect . . . ." Phonometrics, Inc. v. Northern Telecom, Inc., 133 F.3d 1459, 1464 (Fed. Cir. 1998).

In Jackson Jordan, Inc. v. Plasser American Corp., 747 F.2d 1567 (Fed. Cir. 1984), the Federal Circuit took this exception to collateral estoppel a step further. The Jackson Jordan Court held that where a patent is held valid based on a construction that was narrower than necessary, since the patent owner cannot appeal that construction, he is not estopped from arguing a different construction in another action, whether against the same, or a different party. Jackson Jordan, 747 F.2d at 1578 ; see Restatement (Second) of Judgments §28(1) (1980). However, in another case, the court restricted this exception where the right to appeal was voluntarily relinquished by settlement. Hartley, 869 F.2d 1469, 1473 (Fed. Cir. 1989). In contrast to Jackson Jordan the Hartley court declared the patent invalid and the parties settled prior to appeal. The court found that since the issue of validity was litigated to judgment and the patentee could have appealed, but voluntarily relinquished that right, issue preclusion attached to the judgment of invalidity. Id. at 1470-71.²

One concludes from these cases that a patentee will be bound to an earlier construction with two preconditions: One, there was a judgment of invalidity or non-infringement, or infringement or validity and the claim construction was reviewed on appeal; and, two, the construed terms were essential to the judgment. Indeed, this would be consistent with the Restatement. On the other hand, claim construction that does not lead to a judgment should not give rise to collateral estoppel.

Two recent district court cases, have differed on whether this conclusion and indeed this line of case law remains valid in the post-Markman era. In TM Patents, L.P. v. International Business Machines, 72 F.Supp.2d 370 (S.D.N.Y. 1999) the district court gave preclusive effect to a prior claim construction rendered in an action against a different defendant and where the case was settled prior to trial. In other words, there was no final judgment for purposes of appeal. The trial court explained its decision on two grounds. First, applying Second Circuit jurisprudence, a judgment may be final for purposes of estoppel, even if its is not appealable. See Hartley, 869 F.2d 1469, 1471 n.1³ (collateral estoppel is governed by the law of the applicable circuit).

Second, the court distinguished the earlier Federal Circuit precedent, including Jackson Jordan, that claim construction should only give rise to collateral estoppel if essential to a final judgment. The district court reasoned that the earlier decisions were written in an era where juries interpreted claims. However, since the current law dictates that claim interpretation is for the court to decide, the claim interpretation is sufficiently final even before trial, to raise issue preclusion. TM Patents, 72 F.Supp.2d at 376-77.

While the rational seems sound, there is an established exception to collateral estoppel in a subsequent action with another defendant, is where "[t]he issue is one of law and treating it as conclusively determined would inappropriately foreclose opportunity for obtaining reconsideration of the legal rule upon which it was based." Restatement (Second) of Judgments §29(7) (1980). It is possible that this exception was not before the TM Patents court. The patentee did not argue that the earlier ruling was incorrect. The issue was whether a Markman determination alone, without a final judgment, was sufficiently final to give rise to issue preclusion. Perhaps, this court would have conducted its own Markman determination if the parties had argued the earlier one was incorrect as a matter of law.

In Graco Children's Prods., Inc. v. Regalo Int'l, LLC, 77 F.Supp.2d 660, 663 (E.D. Penn. 1999), the Pennsylvania district court disagreed with TM Patents, holding that the Supreme Court's decision in Markman does not compel the conclusion that collateral estoppel attaches to every claim construction. The patentee in Graco had received a claim construction in a prior action that was not favorable in the present action. The defendant wanted the Graco court to adopt the earlier construction. Noting Jackson Jordan and Hartley, the court held that collateral estoppel as to the prior claim construction did not arise because the patentee won on infringement and validity and therefore could not appeal as of right and the claim construction was not essential to the final judgment.

Graco is also interesting for two other reasons. First, the defendant in the earlier case had filed a Notice of Appeal, thereby opening the door to the patentee to appeal the claim construction. The parties agreed to withdraw the appeal and settle their dispute. Under Hartley, the district court could have viewed this as voluntary relinqiushment, justifying collateral estoppel. But, it did not.

Second, the court concluded that the earlier claim construction was not essential to the final judgment of infringement, because infringement was only found under the doctrine of equivalents. The district court was under the belief that infringement under the doctrine of equivalents does not depend on the interpretation of the claims.

A third district court decision, Abbott Labs v. Dey, L.P., 110 F. Supp.2d 667 (N.D. Ill. 2000), recently reviewed TM Patents and Graco in reaching its decision that the patentee was estopped from arguing a claim construction that differed from a claim intrepretation rendered in a prior action. Like TM Patents, Abbott did not rule collateral estoppel takes effect even if the earlier claim construction is wrong. The issue before the court was whether under the given facts the prior Markman determination was a final judgment.

The Abbott court did not take a clear position that it was following TM Patents' lead in abrogating Jackson Jordon. On the other hand, the Illinois district court in Abbott did not come out with a complete endorsement of Graco. It merely reflected that "[g]iven the particular circumstances of the Graco case . . . this Court does not reasonably disagree with the outcome reached in that case." Abbott Labs, 110 F. Supp.2d at 671.

One other interesting point to note about Abbott is that the court considered the §29 Restatement exception mentioned above, but found it inapplicable. The court reasoned that while claim interpretation is a matter of law, "this issue is not a matter of general interest [and] . . . the issue of how these particular claims should be construed is unlikely to arise again." Abbott, 110 F.Supp.2d at 670.

These cases suggest uncertainity in the lower courts as to the applicability of the pre-Markman jurisprudence on collateral estoppel vis a vis claim construction. Accordingly, until the Federal Circuit revisits this issue, patentees would be well advised to exercise caution in settling an action after a claim construction ruling is entered. Except as to the same party, the patentee cannot use the interpretation offensively, but the interpretation may be used defensively against it by another accused infringer.

There exists, however, a potential for unfairness with giving preclusive effect to a prior claim construction when the patent is being asserted against a different product, or process. For the same reason that courts will entertain a motion to modify a claim construction rendered early in a case, it is difficult to fully appreciate the extent to which a term must be interpreted until the factual questions relating to infringement and validity are developed. See Ricoh Co. v. Int’l Communication Materials, Inc., 93-1196 (W.D. Pa. Aug. 17, 1995), aff’d, 108 F.3d 316 (Fed. Cir. 1997) (holding that the district court did not abuse its discretion when it deferred a final claim construction until after the preliminary injunction stage because it perceived that there were substantial issues to be litigated).

As noted above, the Federal Circuit has held that where the meaning of a particular term was not essential to the judgment, it will not be given preclusive effect. Phonometrics, 133 F.3d at 1464. Similarly, if a term is construed more narrowly than a judgment required that narrow meaning does not give rise to issue preclusion. Jackson Jordan, 747 F.2d at 1578 ; see Restatement (Second) of Judgments §28(1) (1980). Even where the interpretation of a disputed term is essential to the judgment and is not unnecessarily narrow, the court's ruling might still not have reached far enough to be meaningful for deciding infringement or validity. Should collateral estoppel mean that you can’t argue the interpretation of the claim that would have changed the final judgment of the earlier case? Or, should the preclusive effect be that whatever the court construed will be the entire meaning of the claims for the life of the patent? There is no case law on point, but the first interpretation seems more equitable.

Another potential for unfairness arises where in one action a court adopts a construction to preserve the validity of a claim and in a later case other prior art arises which renders the patent invalid under the first court's construction. Should the patentee be precluded from arguing a different interpretation of the claim?

One possible approach to this situation may exist if the patentee can demonstrate that another interpretation is supported by the intrinsic evidence, would not be inconsistent with the earlier judgment and which also preserves the validity of the patent in light of all of the prior art. If this is demonstrated then it logically follows that the earlier construction was in fact not essential to the judgment and under Jackson Jordan, collateral estoppel would not arise. Jackson Jordan, 747 F.2d 1567.

A few additional points regarding collateral estoppel and claim construction are worth noting. Consider an action that included a claim construction ruling and was settled with an agreement that included a provisions for issue preclusion. In a later case against a different party, can the defendant argue collateral estoppel? As discussed above, Foster which involved the same parties, held that parties can enter into a consent decree that includes issue preclusion and it will be given effect. But again, Foster was concerned with the same parties looking to repudiate their own agreement. It is not clear whether the same would apply to a different defendant where the patentee would argue that the agreement to issue preclusion was not a necessary part of the judgment, nor was it fully litigated. It was merely a contract provision and the later defendant is not in privity with the first defendant, nor did the later defendant provide consideration for this contract provision.

Nonetheless, until this issue is clarified it would be wise not to include such provisions in settlement agreements, or at the very least they should not be part of the judgment entered by the court.

Counsel should also be aware that a court's claim interpretation can have collateral estoppel effect against a patentee in the Patent and Trademark Office. This can arise, for example, during a reexamination proceeding that follows an action in which the claims were construed by a court. In re Freeman, 30 F.3d 1459 (Fed. Cir. 1994).

Finally, counsel should be aware "that the defense of collateral estoppel based on a final judgment of invalidity in another suit can 'be timely made at any stage of the affected proceedings.'" Mendenhall v. Barber-Greene Co., 26 F.3d 1573, 1579-80 (Fed. Cir. 1994) (citations omitted).

Mendenhall is an interesting case. The Federal Circuit had previously affirmed a district court's finding of validity, Mendenhall I. Subsequent to the Federal Circuit's affirmance of Mendenhall I, another court involving a different defendant construed the claims and entered a judgment of invalidity, Mendenhall II. The defendant in Mendenhall I sought to vacate the judgment of validity on the grounds of collateral estoppel in light of Mendenhall II. The district court denied the motion to vacate and the appeal cited above was filed.

Among other things, the patentee argued on appeal that to vacate the judgment of validity would overturn the Court of Appeal's prior affirmance of the district court's judgment. The Federal Circuit rejected this argument and reasoned that its prior affirmance was not an affirmative statement that the patent was valid, but rather a statement that the defendant had not proven its case of invalidity. Therefore, vacating the judgment on grounds of collateral estoppel would not be inconsistent with its prior decision. Mendenhall, 26 F.3d at 1580.

What effect Mendenhall has on different claim constructions being rendered by different courts is unknown. In light of this discussion, it should be apparent that a prudent defendant in a patent suit should explore during discovery (i) whether the asserted claims were ever construed; (ii) if so, before which tribunal; (iii) the disputed terms; (iv) the interpretation; (v) and the final judgment, if any and its circumstances (e.g. settlement, dismissal, appeal etc.)

C. Judicial Estoppel

In the prior section, we discussed whether and to what extent a patentee, after receiving an adverse claim construction ruling, would be precluded from arguing for a different construction in a later proceeding. The question of issue preclusion ordinarily arises where the court did not adopt the interpretation urged by one of the parties. Three recent cases have addressed the slightly different scenario, where a party on appeal urges a claim construction that is different from the construction it advanced at the district court.

The first case, Key Pharms. v. Hercon Labs. Corp., 161 F.3d 709 (Fed. Cir. 1998), was an appeal from a lower court decision which found the patent valid and enforceable. On appeal, the accused infringer argued that the district court's claim construction was wrong as a matter of law. However, the lower court had adopted the construction urged by the accused infringer.

In its opinion, the Federal Circuit stated:

we look with extreme disfavor on [appellant's] assertion that the trial court committed error in its claim construction. Ordinarily, doctrines of estoppel, waiver, invited error, or the like would prohibit a party from asserting as 'error' a position that it had advocated at the trial . . . . The impropriety of asserting a position which the trial court adopts and then complaining about it on appeal should be obvious on its face, and litigants hardly need warning not to engage in such conduct.

Id. at 715 (citations omitted). What makes this case particularly interesting is that in contrast to collateral estoppel which is applied defensively against a patentee and preserving a judgment of invalidity, the waiver was found against the accused infringer, in favor of the patentee and the validity of the patent.

Yet, for all practical purposes, these strong words were arguably dicta, since the court proceeded to examine the merits of the case. Reasoning that it had not previously "publicly condemned this practice and that the appellee did not raise the issue of waiver, the court exercised "an abundance of fairness," and proceeded to review the lower court's judgment. Id. at 715-16.

Although in this case the court affirmed the district court's construction, it seems that the Federal Circuit would find a waiver even where the court believed the construction was wrong as a matter of law. Indeed, it would seem that the court should determine the waiver issue before it reaches the merits of the claim interpretation. Furthermore, the court should be prepared to abstain from reviewing the lower courts interpretation of the claims even where the parties agree that if the appellant's interpretation were adopted the patent would be invalid, notwithstanding the strong public policy to remove invalid patents.

A few months after Key Pharmaceuticals was heard, the Federal Circuit heard arguments on a similar issue in Hockerson-Halberstadt, Inc. v. Converse, Inc., 183 F.3d 1369 (Fed. Cir. 1999). The court noted its recent opinion in Key Pharmaceuticals, but applying the same notions of fairness and recognizing that the parties had not had the benefit of the Key Pharmaceuticals decision, addressed the merits of the appeal. Hockerson-Halberstandt, 183 F.3d at 1374.

One thing to note from both Key Pharmaceuticals and Hockerson-Halberstandt is that one may be able to avoid the preclusive effect of waiver, or judicial estoppel by arguing grounds of fairness. It would also be prudent of the party urging affirmance of the lower court's construction to raise the issue of waiver on appeal.

Hockerson-Halberstadt is different from Key Pharmaceuticals and extends the concept of judicial estoppel another step. In this case the underlying issue was whether the patentee had impermissibly broadened a claim during reexamination. In an effort to demonstrate no broadening of the claim scope, the patentee had advanced two different claim interpretations. The district court rejected both. On appeal, instead of arguing that the district court erred in its interpretation of the claim, the patentee argued a new interpretation, which if adopted would preserve the validity of the claim. The court of appeals affirmed the district court's claim construction, but reversed the finding of invalidity.

Although, out of "fairness", the court did not apply waiver, it does seem that in the future the Federal Circuit might apply waiver whenever any party raises a legal argument that was not raised below, even claim construction.

Finally, in C.R. Bard, Inc. v. Boston Scientific Corp., No. 99-1304, 2000 WL 915241 (Fed. Cir. July 7, 2000) (table, text in Westlaw), since the parties had the benefit of the Key Pharmaceuticals and Hockerson-Halberstadt decisions, the Federal Circuit considered the waiver issue. Ironically, in the first case in which the court felt waiver was fairly raised, the court found no waiver. The court of appeals found that it was not clear that the accused infringer had taken a contrary position on claim construction before the district court. Accordingly, the court of appeals proceeded to review the merits of the case and affirmed the lower court's claim construction ruling.

Why was the court in Key Pharmaceuticals and Hockerson-Halberstadt concerned with fairness? Although the concept that claim construction is a matter of law is relatively new, the idea that one may not raise on appeal any new issues is well established. Indeed in C.R. Bard the court cited to its pre-Key Pharmaceuticals precedent for the proposition that a party may not raise a argument on appeal that was not raised at trial. Sage Prods., Inc. v. Devon Indus., Inc., 126 F.3d 1420, 1426 (Fed. Cir. 1997) (cited in C.R. Bard, 2000 WL 915241, at *1).

It is interesting that in each of the three cases raising the issue of waiver vis-a-vis claim construction, the Federal Circuit found one reason or another to reach the merits of the case. This is the same Federal Circuit that by its own admission, retroactively curtailed the scope of countless patents with its decision in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 234 F.3d 558 (Fed. Cir. 2000). Yet, it appears that the court has taken pains not to set forth clear precedent on this issue. Is the Federal Circuit really prepared to invoke waiver and forego its review of a lower court's claim interpretation? We will have to wait and see how the court of appeals applies waiver in the future.

1 We use the phrase Markman determination to refer to the complete process used by the trial court to reach an interpretation of the disputed claim terms. This process generally begins with the submission of briefs and claim charts, often involves oral argument and at times testimony, and culminates in a ruling setting forth the court's claim construction.

2 One possible exception to Hartley is suggested in a recent Federal Court decision Aqua Marine Supply v. AIM Machining, Inc., 2001 WL 392063, 58 U.S.P.Q.2d 1536 (Fed. Cir. 2001). After filing an appeal of the district court's summary judgment of invalidity, the parties in Aqua Marine entered into a settlement agreement in which the defendant agreed to move the district court with the patentee to vacate the judgment of invalidity. The district court refused and Aqua Marine proceeded unopposed with the appeal on the merits. The Federal Circuit, however, found that there no longer was any case or controversy and therefore it had no jurisdiction to review the judgment of invalidity. However, the court concluded "[i]n a future action it is possible that Aqua Marine could avoid collateral estoppel by arguing that it did not have a full and fair opportunity to litigate the issue of invalidity. . . We express no opinion on that question, which must be resolved if and when the question arises in a future case." Id. at 1539.

3 In Foster v. Hallco Mfg. Co., 947 F.2d 469 (Fed. Cir. 1971), the Federal Circuit chose not to look to the regional circuit law to decide that "despite the policies favoring challenges to validity expressed in Lear[, Inc. v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969)]", res judicata does apply with respect to a consent decree of validity. Foster, 947 F.2d at 475. The court reasoned that there was a "clear need for uniformity and certainty in the interpretation of Lear." Id.