United States: Federal Circuit Reverses District Court Judgment Under Theory Of Issue Preclusion

In Soverain Software LLC v. Victoria's Secret Direct Brand Management, LLC, Nos. 12-1649, -1650
(Fed. Cir. Feb. 12, 2015), the Federal Circuit reversed the district court's judgment that the asserted patents were infringed and not invalid. 

Soverain Software LLC ("Soverain") is the assignee of two patents, U.S. Patent Nos. 5,715,314 ("the '314 patent") and 5,909,492 ("the '492 patent"), which are directed to virtual shopping carts.  Soverain asserted the '314 and '492 patents against multiple defendants in separate suits in the Eastern District of Texas, including against Victoria's Secret Direct Brand Management, LLC ("Victoria's Secret") and Avon Products, Inc. ("Avon").  Following a jury trial, the district court entered judgment that Victoria's Secret and Avon infringed the asserted claims and that the asserted claims were not invalid.  Victoria's Secret and Avon appealed. 

"Complete identity of claims is not required to satisfy the identity-of-issues requirement for claim preclusion."  Slip op. at 15 (citing Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013)).

On appeal, the Federal Circuit reversed the district court's judgment, holding that issue preclusion applied in light of its previous decision in Soverain Software LLC v. Newegg Inc., 705 F.3d 1333 (Fed. Cir.), amended on reh'g, 728 F.3d 1332 (Fed. Cir. 2013), which held claims of the asserted patent invalid as obvious. 

To determine whether issue preclusion should apply to the asserted claims as a result of the Newegg decision, the Court used the four-part test applied in the Fifth Circuit:  (1) the issue under consideration in the subsequent action must be identical to the issue litigated in the prior action; (2) the issue must have been fully and vigorously litigated in the prior action; (3) the issue must have been necessary to support the judgment in the prior case; and (4) there must be no special circumstance that would render preclusion inappropriate and unfair.  The Federal Circuit applies a similar test to determine whether issue preclusion applies. 

As an initial matter, the Court noted that in Newegg, it explicitly held that most of the asserted claims were invalid for obviousness.  The Court also held that although one of the asserted claims was not explicitly invalidated in Newegg, the Court did find one of its dependent claims invalid and, therefore, the invalidity determination extended to it as well. 

The Court then addressed whether Victoria's Secret and Avon could properly use a defense of issue preclusion.  The Court relied on the Supreme Court's holding "that a defense of issue preclusion applies where a party is 'facing a charge of infringement of a patent that has once been declared invalid,' even though the party asserting the defense was not a party to the action where the patent was invalidated."  Slip op. at 7 (quoting Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313, 349-50 (1971)).  The Court noted that its own precedent similarly establishes that "once the claims of a patent are held invalid in a suit involving one alleged infringer, an unrelated party who is sued for infringement of those claims may reap the benefit of the invalidity decision under principles of collateral estoppel."  Id. at 7-8 (quoting Mendenhall v. Barber-Greene Co., 26 F.3d 1573, 1577 (Fed. Cir. 1994)).

After addressing these initial considerations, the Court proceeded in assessing the four-factor test to determine whether issue preclusion applies.  Soverain agreed that issue preclusion would normally apply, but that it did not in this case because the second factor had not been met, namely, Soverain had not been given a full and fair opportunity to litigate the issue of obviousness.  The Court rejected Soverain's argument, however, holding that during the appeal from the district court in the Newegg case, the Court addressed the question of obviousness.  Specifically, the Court noted that after determining that the claims at issue were invalid as obvious, Soverain petitioned for rehearing to address claims that were not considered by the Court.  The Court also noted that it allowed for additional briefing and arguments, and again held the additional claims invalid for obviousness.  In addition, the Court rejected Soverain's argument that a new trial should have been granted at the district court, stating, "We implicitly rejected the patentee's argument that the court should have granted a new trial rather than JMOL, implicitly rejecting the idea that Soverain did not have a full and fair opportunity to litigate."  Id. at 11 (citation omitted). 

The Court similarly rejected Soverain's assertion that it would have raised different arguments had it known that the Court would reverse the district court on invalidity rather than only granting a new trial.  The Court noted, however, that the basic issue of obviousness was central to the question of whether there were grounds for a new trial.  In addition, the Court noted that Soverain presented the same arguments about limitations in the asserted claims that it put forth in the instant case, which were rejected in Newegg.  The Court also rejected Soverain's assertion that it would have presented evidence that Newegg's expert did not properly establish obviousness, given that the Court already concluded that the expert indeed established that each element of the asserted claims was present in the prior art system on which his testimony relied.  Given that Soverain had a full and fair opportunity to litigate the issues presented in Newegg, the Court held that the invalidity determination in Newegg was properly applied in the instant case. 

Finally, the Court ruled that the asserted claim not invalidated in the Newegg decision was also invalid.
Soverain argued that issue preclusion should not apply because the claim was not previously held obvious, and thus did not present identical issues.  The Court explained that "[c]omplete identity of claims is not required to satisfy the identity-of-issues requirement for claim preclusion."  Id. at 15 (citing Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013)).  The Court further explained that collateral estoppel applies when "the differences between the unadjudicated patent claims and adjudicated patent claims do not materially alter the question of invalidity."  Id. (quoting Ohio Willow Wood, 735 F.3d at 1342).  The unadjudicated limitation here, transmitting a hypertext statement over the Internet, according to the Court, did not materially alter the question of validity of the claim, stating that it reasoned in Newegg that the patentee "did not invent the Internet, or hypertext, or the URL."  Id. at 16 (quoting Newegg, 705 F.3d at 1343).

For the above reasons, the Court reversed the judgment of the district court, finding the asserted claims of the '314 and '492 patents invalid. 

Judges:  Dyk (author), Taranto, Hughes

[Appealed from E.D. Tex., Chief Judge Davis]

This article previously appeared in Last Month at the Federal Circuit, March 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
13 Nov 2018, Conference, Washington, DC, United States

Finnegan is an Event sponsor of the PTAB Bar Association Thought Leader Summit. The program will take place at the Westin Hotel in Alexandria, Virginia.

13 Nov 2018, Conference, California, United States

Finnegan is a Lunch sponsor of the fifth annual Corporate IP Strategy Conference, hosted by Unified Patents.

14 Nov 2018, Speaking Engagement, Washington, DC, United States
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions