United States: A Potential Setback For Defendants In The Race To Final Judgment

On September 26, 2022, Jump Rope Systems, LLC ("JRS") filed a petition for writ of certiorari to address the question of "[w]hether . . . a determination of unpatentability by the Patent Trial and Appeal Board in an inter partes review proceeding, affirmed by the Federal Circuit, has a collateral estoppel effect on patent validity in a patent infringement lawsuit in federal district court."¹ Courts have routinely applied the collateral estoppel doctrine in similar cases since the Federal Circuit's 2018 decision in XY, LLC v. Trans Ova Genetics, L.C. ("XY, LLC"), which JRS seeks to have overruled.² If the Supreme Court grants certiorari and JRS ultimately prevails, the race to final judgment between parallel district court and Patent Trials and Appeals Board ("PTAB") proceedings could change significantly. Specifically, if JRS's petition is successful, it could allow patentees to advance their infringement claims towards final judgment even after the Federal Circuit's affirmance of a PTAB's unpatentability determination all the way up until the U.S. Patent and Trademark Office ("PTO") issues its certificate of cancellation.

The dispute arose when JRS unsuccessfully sought to license its two patents to Coulter Ventures, LLC, d/b/a Rogue Fitness ("Coulter").³ After JRS presented its offer, Coulter began marketing the patented technology without any license from JRS.⁴ As a result, on July 18, 2018, JRS sued Coulter for patent infringement.⁵ About six months later, Coulter filed two petitions for inter partes review ("IPR") challenging both of JRS's patents.⁶ After the PTAB granted institution, the district court stayed the parallel litigation.⁷ Then, on July 17, 2020, the PTAB issued its final written decisions, wherein it found every challenged claim of both patents to be unpatentable.⁸ JRS appealed the PTAB's final written decisions to the Federal Circuit, which affirmed both on October 6, 2021.⁹

Under XY, LLC, the district court was bound to apply the collateral estoppel doctrine once the Federal Circuit affirmed the PTAB's unpatentability determinations, which precluded JRS from going forward with its court case against Coulter and from asserting its patents in any further proceedings.¹⁰ With this understanding, JRS stipulated to judgment against it, but preserved its right to seek en banc review at the Federal Circuit so it could challenge XY, LLC's collateral estoppel rule.¹¹ The Federal Circuit denied en banc review and granted summary affirmance of the district court's judgment.¹² JRS then filed its petition for certiorari, focusing largely on the impropriety of applying collateral estoppel in its case given the differing legal standards applicable in the United States Patent and Trademark Office ("PTO") and the district court.¹³

The outcome of JRS has the potential to alter the nature of what practitioners commonly refer to as the race to final judgment created by the Fresenius and Moffitt cases. In Fresenius USA, Inc. v. Baxter Int'l, Inc., the Federal Circuit made clear that if a patent challenger is able to cancel claims asserted against it in a parallel infringement litigation, "the patentee loses any cause of action based on that claim, and [the] pending litigation in which the claims are asserted becomes moot" even if significant issues in the litigation have already been decided in the patentee's favor.¹⁴ Conversely, if the patentee is able to secure a final damages judgment before the asserted claims are cancelled, then "the cancellation . . . cannot be used to reopen [the] final damages judgment ending a suit based on those claims," thereby leaving the defendant with a collectible judgment against it even if it later succeeds in extinguishing the underlying patent.¹⁵

Practically speaking, it can take a significant amount of time to reach the point of cancellation. For instance, under 35 U.S.C. § 318, before the PTO can issue a certificate of cancellation, a patent challenger must first secure a final written decision of unpatentability from the PTAB and then either prevail on appeal or wait for the time for appeal to expire.¹⁶ Similar requirements apply for reexamination proceedings under 35 U.S.C. § 307(a) as well.¹⁷ Moreover, in current practice, it may take anywhere from a few months to the better part of a year (if not more) after the Federal Circuit issues its decision before the PTO issues its certificate of cancellation.

The collateral estoppel requirement under XY, LLC essentially precludes patentees from advancing their infringement claims towards final judgment during the window of time between (1) the Federal Circuit's affirmance of a PTAB's unpatentability determination; and (2) the PTO's subsequent issuance of the certificate of cancellation. Put differently, XY, LLC's collateral estoppel requirement sets the finish line for defendants in the Fresenius/Moffitt race at the end of appeal rather than at the date the certification of cancellation is issued. But if JRS prevails in overturning the collateral estoppel requirement under XY, LLC, plaintiffs could potentially have all the way up until the date of cancellation to obtain their final judgment (assuming neither the Federal Circuit nor the district court institutes a stay).

Another consideration is that presently, assuming no stay of the district court action, an appeal of the PTAB's final written decision often proceeds within just a few months before or after an appeal of the parallel district court case. In such situations, the Federal Circuit can view the two appeals as companion cases and may decide them on the same day.¹⁸ If the Federal Circuit first affirms an unpatentability determination by the PTAB, it typically moots or vacates the corresponding issues from the district court appeal.¹⁹ However, if XY, LLC is overruled, (again assuming no stay is instituted), the immediate benefit to defendants of having the district court appeal mooted and underlying judgment vacated could be lost.

In sum, a party's final disposition in patent infringement cases can hinge on the relative timing in which respective decisions are issued from the PTO and the courts. And if JRS succeeds at the Supreme Court, it could profoundly change the conduct of parallel district court and PTAB actions.

Footnotes

1. Petition for Writ of Certiorari, Jump Rope Systems, LLC v. Coulter Ventures, LLC, __ U.S. __ (No. 22-298) (filed Sept. 26, 2022) (hereafter "Pet. for Cert.").

2. See id.; XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1294-95 (Fed. Cir. 2018); see also Chrimar Sys., Inc. v. ALE USA Inc., 785 F. App'x 854, 855 (Fed. Cir. 2019); Sunoco Partners Mktg. & Terminals L.P. v. U.S. Venture, Inc., 32 F.4th 1161, 1174 (Fed. Cir. 2022); Intell. Ventures I, LLC v. Lenovo Grp. Ltd., 370 F. Supp. 3d 251 (D. Mass. 2019); Reversible Connections LLC v. AS Rock Am., Inc., 2022 WL 2200413, at *3 (C.D. Cal. Jan. 26, 2022); Capella Photonics, Inc. v. Ciena Corp., 546 F. Supp. 3d 977, 985 (N.D. Cal. 2021).

3. Pet. for Cert., at 1-3.

4. Id. at 2-3.

5. Id. at 3.

6. Id. at 3-4.

7. Id. at 4.

8. Id.; see also Coulter Ventures, LLC v. Jump Rope Systems, LLC, IPR2019-00586, Paper 22, 2020 Pat. App. LEXIS 12578 (P.T.A.B. July 17, 2020); Coulter Ventures, LLC v. Jump Rope Systems, LLC, IPR2019-00587, Paper 25, 2020 Pat. App. LEXIS 12899 (P.T.A.B. July 17, 2020).

9. Jump Rope Sys., LLC v. Coulter Ventures, LLC, No. 2020-2284, 2021 WL 4592276, at *1 (Fed. Cir. Oct. 6, 2021) (unpublished).

10. Pet. for Cert. at 5.

11. Id.

12. Id. at 5-6; see also Jump Rope Sys., LLC v. Coulter Ventures, LLC, No. 2022-1624, 2022 WL 2313969, at *1 (Fed. Cir. June 28, 2022).

13. Pet. for Cert. at 6-14.

14. 721 F.3d 1330, 1340 (Fed. Cir. 2013).

15. Id.; see also Moffitt v. Garr, 66 U.S. 273, 283 (1861).

16. See 35 U.S.C. § 318(b).

17. See 35 U.S.C. § 307(a).

18. See, e.g., XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1295 (Fed. Cir. 2018); Dragon Intell. Prop., LLC v. Apple Inc., 700 F. App'x 1005, 1006 (Fed. Cir. 2017); Chrimar Sys., Inc. v. ALE USA Inc., 785 F. App'x 854, 855 (Fed. Cir. 2019); Sunoco Partners Mktg. & Terminals L.P. v. U.S. Venture, Inc., 32 F.4th 1161, 1174 (Fed. Cir. 2022).

19. See, e.g., XY, LLC, 890 F.3d at 1295 (dismissing district court appeal as moot in view of concurrent affirmance of PTAB's unpatentability determination); Dragon Intell. Prop., LLC., 700 F. App'x 1005, 1006 (same); Chrimar Sys., Inc., 785 F. App'x at 855 (vacating and remanding for dismissal under same conditions); Sunoco Partners Mktg., 32 F.4th at 1174 (same).

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