United States: Collateral Estoppel Applied To Claim Limitation Despite Intervening Reexamination

In e.Digital Corp. v. Futurewei Technologies, Inc., Nos. 14-1019, -1242, -1243 (Fed. Cir. Nov. 19, 2014), the Federal Circuit affirmed the district court's application of collateral estoppel to U.S. Patent No. 5,491,774 ("the '774 patent"), reversed the district court's application of collateral estoppel to unrelated U.S. Patent No. 5,839,108 ("the '108 patent"), held that the district court did not abuse its discretion in converting a stipulated partial judgment into a final judgment, and remanded for further proceedings.

The '774 patent, owned by e.Digital Corporation ("e.Digital"), discloses an audio recording and playback device with a microphone and a removable, interchangeable flash memory recording medium.  Prior to the cases at issue in the instant appeal, e.Digital asserted claims 1 and 19 of the '774 patent in the U.S. District Court for the District of Colorado ("Colorado Court").  The Colorado Court construed the sole memory limitation in the claims as requiring that the device use only flash memory, and then granted the parties' stipulation to dismiss the case with prejudice.  In a subsequent ex parte reexamination, the PTO cancelled claims 1 and 19 of the '774 patent and issued reexamined claim 33, which, among other limitations, recites the sole memory limitation of the cancelled claims.

Following reexamination, e.Digital asserted reexamined claim 33 of the '774 patent and claims 2 and 5 of the '108 patent in the U.S. District Court for the Southern District of California against Futurewei Technologies, Inc. and Huawei Device USA (collectively "Huawei") and four other defendants.  Based on the Colorado Court's previous claim construction, the defendants moved to apply collateral estoppel to the sole memory limitation in both the '774 and '108 patents.  The district court granted the motions and adopted the Colorado Court's construction, finding that the '774 patent reexamination never addressed the sole memory limitation, and that the '108 and '774 patents were "closely related."  e.Digital stipulated to final judgment of noninfringement with Huawei, and stipulated to a nonfinal partial judgment of noninfringement with the other defendants.  The district court converted the partial judgments to final judgments, and e.Digital appealed.

"Though we do not hold that reexamination history cannot ever create a new issue that would preclude the application of collateral estoppel, such a scenario does not exist here because the reexamination history in no way modifies, clarifies, or even informs the construction of the sole memory limitation."  Slip op. at 5.

On appeal, the Federal Circuit held that the district court correctly applied collateral estoppel to the '774 patent.  The Court reasoned that the sole memory limitation in reexamined claim 33 was identical to that in the cancelled claims, and that the reexamination did not address the limitation.  The Court emphasized that although reexamination history may "create a new issue that would preclude the application of collateral estoppel, such a scenario does not exist here because the reexamination history in no way modifies, clarifies, or even informs the construction of the sole memory limitation."
Slip op. at 5.

Regarding the '108 patent, the Court held that collateral estoppel did not apply.  The Court reasoned that the '108 patent presented a separate claim construction issue, and that while the '108 patent discloses an improvement to the '774 patent and may incorporate by reference the '774 patent as prior art, the patents were not related.  The Court explained that "[t]he '108 patent discloses a separate invention, includes a distinct prosecution history, and is supported by a different written description," and that "[t]hese distinctions reinforce the well-understood notion that claims of unrelated patents must be construed separately."  Id. at 6 (citing Tex. Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1211 (Fed. Cir. 2002)).

The Court clarified that its decision does not automatically permit courts to "impose collateral estoppel to bar a claim construction dispute solely because the patents are related."  Id.  Instead, the Court explained that "[e]ach case requires a determination that each of the requirements for collateral estoppel [is] met, including that the issue previously decided is identical to the one sought to be litigated."  Id. at 6-7.

The Court also held that the district court did not abuse its discretion in converting the partial judgment of noninfringement as to the other defendants to a final judgment under Fed. R. Civ. P. 54(b).  The Court explained that the district court did not err in determining that there was no just reason for delay and that its decision ensured that the collateral estoppel order would be appealed only once.

Judges:  Moore (author), O'Malley, Reyna

[Appealed from S.D. Cal., Judge Sabraw]

This article previously appeared in Last Month at the Federal Circuit, December 2014

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