Patent law: Federal Circuit clarifies application of collateral estoppel from IPRs

Reuters

20-03-2025

March 20, 2025 - In February 2025, the U.S. Court of Appeals for the Federal Circuit clarified when collateral estoppel might apply in a district court case following an invalidity determination by the Patent Trial and Appeal Board ("PTAB") in a parallel inter partes review (IPR). In Kroy IP Holdings, LLC v. Groupon, Inc., No. 2023-1359, 2025 WL 440509 (Fed. Cir. Feb. 10, 2025), Groupon filed two IPRs challenging 21 claims of the asserted patent.
The PTAB found all the challenged claims to be unpatentable, a finding that was appealed to the Federal Circuit and affirmed by the court. After Groupon's IPR filing deadline had passed, Kroy amended its complaint in district court to allege infringement of 14 additional claims, none of which were challenged in Groupon's IPRs.
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Groupon filed a Rule 12(b)(6) motion to dismiss arguing that the PTAB's IPR determinations collaterally estopped Kroy from asserting the additional 14 claims in district court. The district court agreed, finding that the PTAB's determinations have preclusive effect on any pending or co-pending district court actions involving the same claims.
The court further determined that collateral estoppel applies to claims that were not previously adjudicated "if the differences between the unadjudicated claims and the adjudicated claims 'do not materially alter the question of invalidity.'" The court then found that the 14 additional claims were "immaterially different" from the claims that were found invalid by the PTAB, and granted the motion to dismiss.
On appeal, the Federal Circuit disagreed.
The court agreed that collateral estoppel applies under the following conditions:
(1) the identical issue was previously adjudicated;
(2) the issue was actually litigated;
(3) the previous determination was necessary to the decision; and
(4) the party being precluded from relitigating the issue was fully represented in the prior action.
The court, however, noted that application of collateral estoppel is subject to various exceptions, one of which is that collateral estoppel does not apply "when the second action involves application of a different legal standard, such as a different burden of proof."
The case at issue did not involve collateral estoppel from one district court to another, where invalidity would be determined under the same burden of proof. In district courts, invalidity of the newly asserted claims would be determined under the higher clear-and-convincing standard of proof. The Supreme Court established that invalidity in district court must be proven under the clear-and-convincing standard because a patent is "presumed valid" under 35 U.S.C. § 282. Microsoft Corp. v. I4I Ltd. P'ship, 564 U.S. 91, 102 (2011).
However, in IPRs, Congress provided in 35 U.S.C. § 316(e) that a patent challenger must prove invalidity under the lower preponderance of the evidence standard of proof. Therefore, before the PTAB, Groupon established unpatentability of the challenged claims under the lower preponderance of the evidence standard.
As the claims challenged in the IPR were found unpatentable under a different evidentiary standard, the Federal Circuit found that collateral estoppel was not available to estop Patent Owner from asserting other, unadjudicated claims in district court, even if they were deemed "immaterially different" from the claims found to be invalid by the PTAB.
The Federal Circuit explained that "[t]o hold otherwise would deprive patent owners of their property right without first requiring proof of patent invalidity that satisfies the statutorily-prescribed clear and convincing evidence standard."
While this decision certainly clarified when collateral estoppel does not apply, it leaves open some questions as to when it might still apply in the PTAB-to-district court context. Claim construction issues come to mind. The PTAB and district courts construe disputed terms under the same Phillipsv. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005), standard. The court's holding in Kroy certainly suggests that collateral estoppel might well apply — at least because the issue is resolved under the same Phillips standard — in such circumstances assuming all other factors needed for collateral estoppel are met. This is certainly an area where practitioners should continue to monitor the relevant case law and adjust trial strategies as appropriate.
This article reflects only the present personal considerations, opinions, and/or views of the authors, which should not be attributed to any of the authors' current or prior law firm(s) or former or present clients.