Thursday, February 12, 2015

CAFC addresses collateral estoppel in United Access Technologies

The CAFC relied on an 1876 case in United Access Technologies.  Judge Stark of D Del was reversed.

The overview of the case:

 This appeal by a patent owner requires us to address
the collateral estoppel effects of a general jury verdict in a
prior action involving the same patents. The district
court held that the jury’s verdict against the patentee in
the prior action was entitled to collateral estoppel effect in
this proceeding. We reverse.


Of the appellant's argument

On appeal, United argues that the district court misapplied
the principles of collateral estoppel, as those
principles are applied by the Third Circuit.1 The essence
of United’s argument is as follows: The JMOL order in
the EarthLink case established only that the jury could
permissibly have reached its verdict on either of two
possible grounds—either that EarthLink’s system did not
infringe because it lacked a telephone or that the standard
ADSL technology was not within the scope of the
patents in suit. The EarthLink JMOL decision therefore
did not establish that the jury necessarily based its verdict
on a conclusion that the standard ADSL technology
did not infringe United’s patents. Accordingly, it was
improper for the district court to hold that United is
collaterally estopped from litigating that issue in this

That analysis is correct. To be sure, United’s argument
in the district court was not nearly as focused as it
is in this court. In fact, before the district court United
directed its argument in large measure to irrelevant
matters and barely alluded to the argument that it now
vigorously presses on appeal.


As to the 1876 case:


In its 1876 decision in Russell v. Place, 94 U.S. 606
(1876), the Supreme Court dealt with a case roughly
analogous to this one and set out the principles that
govern our decision in this case. In Russell, a patentee
obtained a jury verdict for patent infringement, upon
which judgment was entered. The verdict was obtained
over a defense of patent invalidity. The patentee later
filed a second action on the same patent against the same
defendant and sought to invoke the judgment in the first
case to estop the defendant from asserting patent invalidity
in the second case. The Supreme Court held that
collateral estoppel was not available, because of uncertainty
as to the scope of the verdict in the first case.

The Russell Court ruled that in order for collateral estoppel
to apply,

it must appear, either upon the face of the record
or be shown by extrinsic evidence, that the precise
question was raised and determined in the former
suit. If there be any uncertainty on this head in
the record—as, for example, if it appear that several
distinct matters may have been litigated upon
one or more of which the judgment may have
passed, without indicating which of them was
thus litigated, and upon which the judgment was
rendered—the whole subject-matter of the action
will be at large, and open to a new contention, unless
this uncertainty be removed by extrinsic evi-
dence showing the precise point involved and determined.
94 U.S. at 608. Because the initial action had been tried
on two claims, and it was unclear whether the jury had
based its liability decision on only one of the two claims,
the Supreme Court held that “[t]he validity of the patent
was not necessarily involved, except with respect to the
claim which was the basis of the recovery.” Id. at 609.
Even though the Court acknowledged that the prior jury
might have found infringement based on either claim or
both, it held that the record lacked “that certainty which
is essential to its operation as an estoppel and does not
conclude the defendants from contesting the infringement
or the validity of the patent in this suit.” Id. Accordingly,
the Court held that the jury’s verdict in the first action
was not entitled to be given collateral estoppel effect in
the second.

Normally, the court’s
finding that the verdict could have been based on alternative
grounds would be sufficient to render collateral
estoppel unavailable. The court, however, ruled that
collateral estoppel was available to the defendants because
the trial court in the EarthLink case had held, in
response to the plaintiff’s JMOL motion, that the jury’s
verdict could be sustained on either of the two theories of
noninfringement that were presented to it. The defendants
argued to the district court, and continue to argue
here, that under Third Circuit law, if there are alternative
grounds for a decision, collateral estoppel can apply to
both of them.

As to the Jean Alexander case, the CAFC noted

In so doing, the Third Circuit adopted a position
that had been endorsed in the First Restatement of
Judgments, but rejected in the Second Restatement of
Judgments, and on which there is a split among the

In the Second Restatement of Judgments,
the American Law Institute changed its position and
adopted the view that, where the decision of the first
tribunal rests on alternative grounds, none of those
grounds is entitled to be accorded collateral estoppel
effect. Restatement (Second) of Judgments § 27 cmt. i (“If
a judgment of a court of first instance is based on determinations
of two issues, either of which standing independently
would be sufficient to support the result, the
judgment is not conclusive with respect to either issue
standing alone.”).

The key legal distinction between the present case and
Jean Alexander:

In so arguing, the
defendants necessarily contend that the Earthlink JMOL
ruling is analogous to the TTAB decision in the Jean
Alexander case. But that contention is mistaken. The
decision of the prior tribunal in Jean Alexander was an
explicit ruling that two independent grounds supported
the tribunal’s decision in the first case. By contrast, the
court’s JMOL ruling in the EarthLink case was simply a
decision that a rational jury could reasonably have found
non-infringement based on either of two theories. The
JMOL ruling did not hold that the jury had, in fact,
decided in favor of EarthLink on both of those grounds.

That difference is dispositive.


The CAFC case:
Appeal from the United States District Court for the
District of Delaware in No. 1:11-cv-00339-LPS, Chief
Judge Leonard P. Stark.


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