Once The Federal Circuit Affirms A PTAB Finding Of Invalidity, Collateral Estoppel Prevents Patent Owner From Asserting The Claims In Any Further Proceeding

By Reza Mollaaghababa
On May 23, 2018, in XY, LLC v. Trans Ova Genetics, L.C., CAFC held that its affirmance of PTAB’s invalidity decision regarding certain claims of a patent owned by XY in a separate appeal involving a different defendant must be given “immediate issue preclusive effect” with respect to the same claims in the present case even though XY and Trans Ova had not raised the collateral estoppel issue.

XY owns patents that relate to methods of sorting mammalian sperms into X- and Y-chromosome-bearing populations based on their DNA content. In 2004, Trans Ova, which provides services related to embryo transfer and in-vitro fertilization for cattle, entered into a five-year licensing agreement with XY for the use of the technology embodied in the XY’s patents. The licensing agreement was subject to automatic renewal in 2009. In 2007, XY sent a letter to Trans Ova to terminate the licensing agreement alleging certain breaches by Trans Ova.  Although the parties negotiated over the next several years, they failed to resolve their dispute.  In 2012, XY sued Trans Ova for patent infringement of a number of its patents, one of which (U.S. Patent No. 7,820,425) relates to a method of freezing separated sperm cells.

The jury found that none of the asserted patent claims was invalid and that Trans Ova willfully infringed those claims. CAFC held that as a threshold matter, it did not need to address Trans Ova’s invalidity arguments as to the ‘425 patent in view of its affirmance in a separate appeal invalidating those same claims, “which collaterally estops XY from asserting the patent in any further proceedings.”  CAFC indicated that “in this separate case appealed to us and argued on the same day as the instant appeal, the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office (Board) held that these claims are unpatentable in a final written decision from an inter partes review proceeding … [and] [i]n a separate order issued today, we affirm the Board’s decision.”

In support of its decision, the CAFC reasoned that a patentee, having been afforded the opportunity to exhaust his remedy of appeal from a holding of invalidity has had his “day in court,” and a defendant should not have to continue defending a suit for infringement of an adjudged invalid patent.

Judge Newman dissented and indicated that this holding of “estoppel is based on a PTAB ruling in a separate case involving non-mutual parties, and contravenes not only the America Invents Act’s estoppel provision, but also the general law of collateral estoppel.” Judge Newman emphasized that “collateral estoppel was not pleaded and was not argued, yet is imposed on appeal without opportunity for response – contrary to precedent requiring that the precluded party ‘had a full and fair opportunity to present its arguments’ concerning estoppel.”

The majority responded that “[a]s to the Dissent’s concern of applying estoppel without briefing, both precedent and the parties’ positions allow application of collateral estoppel sua sponte here.  A remand for briefing is not a requirement to applying estoppel when there is no indication from the Patent Owner that ‘it did not have a full and fair opportunity to litigate the validity’ of its patent in the parallel case.”

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