Vorys, Sater, Seymour and Pease LLP
In this edition of The Precedent, we outline the Federal Circuit’s decision in Kroy IP Holdings, LLC v. Groupon, Inc.
Overview
The Federal Circuit held that the Patent Trial and Appeal Board’s (PTAB) finding of unpatentability in an inter partes review (IPR) did not collaterally estop a patent holder from alleging infringement in district court based on other claims that were closely related to the claims in the IPR petition.
Issue
Whether a patent holder is collaterally estopped in district court from alleging patent infringement of claims that are closely related to claims previously found unpatentable by the PTAB.
Holding
A prior final written decision of the PTAB on unpatentability on separate patent claims (reached under a preponderance of the evidence standard) cannot collaterally estop a patentee from asserting other, unadjudicated patent claims in district court litigation (which applies a clear and convincing evidence standard) because of the different legal standards involved.
Background and Reasoning
Kroy IP Holdings, LLC (Kroy) sued Groupon, Inc. (Groupon) in district court for infringement of Kroy’s 6,061,660 patent, which relates to providing incentive programs over a computer network. Groupon then filed 2 IPR petitions to challenge 21 claims in the ‘660 Patent. Kroy amended its district court complaint before the PTAB ruled that Groupon had infringed additional claims. The PTAB found that all 21 claims that Groupon challenged in the IPR petition were unpatentable.
Kroy then amended its complaint again to allege infringement of 14 additional claims that were not included in the IPR petitions. Groupon filed a motion for dismissal of the amended complaint. Kroy argued that the PTAB had estopped Kroy from asserting new claims based upon the PTAB finding of unpatentability. The district court agreed and dismissed the complaint, reasoning that IPR findings of unpatentability have preclusive effects on pending district court actions involving the same claims or claims that are immaterially different for purposes of invalidity.
The Federal Circuit reversed. The court began by examining the four requirements of collateral estoppel according to Federal Circuit law: (1) the identical question was previously adjudicated, (2) the issue was litigated, (3) the previous determination had been necessary to the decision and (4) the party faced with preclusion was fully present in the prior action. The court acknowledged that even when these requirements were met, there are exceptions. One of them is that collateral estoppel doesn’t apply when the second legal proceeding involves a different standard of proof, or a different legal standard. The court noted that IPR petitions only apply a preponderance standard, whereas district court proceedings use a clear and compelling evidence standard. Due to the different standards, collateral estoppel is not applicable.
