Jump Rope Company Asks High Court to Weigh in on CAFC Approach to Collateral Estoppel for PTAB Invalidations
“Metz and her company were never allowed to have their patent infringement claims heard by an Article III court or federal jury…. because of the Federal Circuit’s entrenched and oft-repeated misapplication of the collateral estoppel doctrine.” – Jump Rope Systems petition
The inventor of a novel jump rope system (the Revolution Rope), Molly Metz, is petitioning the U.S. Supreme Court through her company, Jump Rope Systems, LLC, to seek clarification of the collateral estoppel doctrine as applied by the U.S. Court of Appeals for the Federal Circuit (CAFC) to bar a patent infringement suit in district court where the CAFC has affirmed a Patent Trial and Appeal Board (PTAB) finding of unpatentability. Jump Rope Systems is arguing that the CAFC’s decision in XY, LLC v. Trans Ova Genetics, L.C. (2018) conflicts with the Supreme Court decisions in B&B Hardware, Inc. v. Hargis Indus., 575 U.S. 138 (2015); Medtronic, Inc. v. Mirowski Family Ventures, LLC, 571 U.S. 191 (2014); and Grogan v. Garner, 498 U.S. 279 (1991).
The petition specifically asks the High Court to consider the following question:
“Whether, as a matter of federal patent law, 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.”
Metz told her patent infringement story and experience with the PTAB to IPWatchdog in June of this year. After filing a patent infringement suit against Rogue Fitness in 2018 for infringement of her patents (US 7,789,809 B2 and US 8,136.208 B2) for a unique jump rope handle technology, Rogue filed a petition for inter partes review (IPR) and the PTAB ultimately invalidated the patents. After an initial appeal to the Federal Circuit, Metz received a Rule 36 summary affirmance of the PTAB’s decision.
In April 2022, following a consent judgment entered by the district court, Jump Rope Systems sought an initial hearing en banc asking the CAFC to overturn its own decision in XY, LLC v. Trans Ova Genetics, L.C. (2018), arguing that preclusive effect cannot be given to invalidity determinations issued by PTAB because XY conflicts with U.S. Supreme Court rulings on collateral estoppel doctrine. However, the CAFC denied this request with no explanation. Jump Rope Systems then filed an unopposed motion for summary affirmance of the district court’s judgment in recognition that XY, LLC foreclosed its appeal and, on June 28, 2022, a three-judge panel of the Federal Circuit granted that motion.
In its petition, Jump Rope Systems argues that “Metz and her company were never allowed to have their patent infringement claims heard by an Article III court or federal jury…. because of the Federal Circuit’s entrenched and oft-repeated misapplication of the collateral estoppel doctrine beginning in XY, LLC v. Trans Ova Genetics, L.C.”
Newman Got it Right
In XY LLC, the alleged infringer, Trans Ova Genetics, appealed the district court’s denial of post-trial motions challenging a jury verdict that found no invalidity for XY’s patent claims covering the sorting of chromosome-bearing sperm cells. Instead of addressing Trans Ova Genetics’ invalidity arguments, the Federal Circuit sua sponte found that XY was collaterally estopped from asserting the validity of its patent claims, which were first invalidated in IPR proceedings at the PTAB and then those invalidations affirmed by the Federal Circuit.
Judge Pauline Newman authored a dissent in XY LLC challenging the panel majority’s disposal of the invalidity issues in that case. Newman pointed out that there was non-mutuality of parties involved in the issue, as Trans Ova Genetics was not the petitioner challenging the validity of XY’s patent claims at the PTAB. Further, when considering the exceptions to collateral estoppel under which issues are not precluded from relitigation, as set out by the Restatement (Second) of Judgments §§ 28-29, Judge Newman found clear inconsistencies in the different evidentiary burden of proof standards for validity issues applied at the PTAB, where validity rulings must be supported by “substantial evidence,” and U.S. district court validity rulings, which must be supported by “clear and convincing evidence.” Newman also raised issues of constitutional balance between administrative agencies and Article III courts. In September 2019, the Federal Circuit issued Chrimar Systems v. ALE USA, applying the holding in XY LLC to invalidate patent claims that were upheld as valid by a jury verdict and through post-trial motions.
“Judge Newman was clearly correct, and her dissenting opinion is fully supported by this Court’s decision in Grogan v. Garner…,” Jump Rope’s petition says. Grogan was a bankruptcy case that addressed the same question of whether “a prior adjudication of a claim against a party requires application of the collateral estoppel bar when a subsequent litigation involving the same party is governed by a different standard of proof than applied in the prior adjudication.” The Supreme Court there ultimately held:
“In this case, a creditor who reduced his fraud claim to a valid and final judgment in a jurisdiction that requires proof of fraud by a preponderance of the evidence seeks to minimize additional litigation by invoking collateral estoppel. If the preponderance standard also governs the question of nondischargeability, a bankruptcy court could properly give collateral estoppel effect to those elements of the claim that are identical to the elements required for discharge and which were actually litigated and determined in the prior action. See Restatement (Second) of Judgments § 27 (1982). If, however, the clear-and-convincing standard applies to nondischargeability, the prior judgment could not be given collateral estoppel effect.”
Jump Rope’s petition argues that the collateral estoppel issue in Grogan is identical to the one in XY, LLC, and that it is a bankruptcy proceeding rather than a patent infringement lawsuit is “a distinction without a difference.” In a PTAB proceeding, a petitioner must prove obviousness by a preponderance of the evidence, while in district court invalidity must be proven by clear and convincing evidence. The petition notes that the Federal Circuit did not cite Grogan in its decision in XY, LLC.
Furthermore, in B&B Hardware, Inc., the Supreme Court said that “issues are not identical if the second action involves application of a different legal standard, even though the factual setting of both suits may be the same.” And in Medtronic, Inc. the Court explained that the “Restatement (Second) of Judgments [§ 28(4)] says that relitigation of an issue (say, infringement) decided in one suit ‘is not precluded’ in a subsequent suit where the burden of persuasion ‘has shifted’ from the ‘party against whom preclusion is sought . . . to his adversary….’” Ultimately, these cases and the points raised in Judge Newman’s dissent support the conclusion that the PTAB’s determinations that Jump Rope’s claims are unpatentable were not subject to collateral estoppel effect in the patent infringement action in the district court and the CAFC erred by concluding the PTAB’s determinations foreclosed Jump Rope’s patent infringement lawsuit.
A Good Candidate
The petition also argues that the case warrants the Court’s review because “[t]he collateral estoppel issue raised in this case is one of nationwide importance in patent infringement litigation, as it affects countless patent disputes all over the country.” According to the petition, there are presently “427 pending Federal Circuit appeals that involve PTAB’s IPR/PGR proceedings” and “353 of these 427 pending appeals (more than 83%) have co-pending district court litigations where the same patents, challenged at PTAB, are being asserted.” This data was taken from PACER and cross-referenced with PTAB statistics collected by Unified Patents.
Jump Rope Systems’ case is an excellent vehicle for review because “both the district court and Federal Circuit categorically applied the collateral estoppel doctrine, without any exception set forth in § 28(4) of the Restatement, based on the Federal Circuit’s decision in XY, LLC.” Jump Rope additionally asked the CAFC for en banc review and cited the conflicting precedent, but “the full Federal Circuit summarily denied en banc review without any reasons or dissent.”
Finally, the petition notes that, under the preponderance of the evidence standard, the respondent “convinced the PTAB to combine two pieces of prior art (patents known in the PTAB decision as ‘Wolf ‘ and ‘Terper’).” This would not have happened in the district court, Jump Rope explains:
“The PTAB held that such combination yielded the claimed invention. But such PTAB reasoning occurred without a finding that ordinary artisans would have perceived a problem in the Wolf reference requiring a solution. The PTAB instead considered a problem solved by the inventor and held (in hindsight) that the same problem existed in the Wolf prior art…. Standard jury instructions in a trial in district court would warn the jury that hindsight cannot be used to combine prior art in this way under the clear and convincing standard.”
Ultimately, “[t]he teachings of the inventor should not be used against her to invalidate her patent,” the petition argues. And Rogue would still have the opportunity to argue invalidity in an Article III court under Jump Rope’s interpretation of the law.
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