Federal Circuit Review - Issue 276
276-1 Federal Circuit Affirms Dismissal of Patent Infringement under Res Judicata
The Federal Circuit recently affirmed a decision by the U.S. District Court for the Northern District of California dismissing a complaint for patent infringement on the grounds of res judicata. See Sowinski v. Cal. Air Res. Bd., No. 2019-1558, 2020 U.S. App. LEXIS 26616 (Fed. Cir. Aug. 21, 2020) (Before Newman, Lourie, and Schall, Circuit Judges) (Opinion for the Court, Newman, Circuit Judge).
On November 24, 2015, Dr. Richard Sowinski, the owner of Patent No. 6,601,033 (the ’033 patent), sued the California Air Resources Board (CARB) and several individual and corporate defendants for infringement of the ’033 patent. After Dr. Sowinski failed to file a response to several motions to dismiss, the district court dismissed the complaint with prejudice and without leave to amend pursuant to Central District of California Local Rule 7–12. On appeal, the Federal Circuit affirmed the dismissal, concluding that the Central District of California had considered all of the relevant factors and that there was no clear error of judgment.
A few years later, Dr. Sowinski filed a complaint in the U.S. District Court for the Northern District of California against CARB, stating the same counts as in the previous case. The Northern District of California dismissed the complaint on the grounds of res judicata, observing that the dismissal of the same claims in the prior litigation against the same defendant was an adjudication on the merits, i.e., CARB did not infringe.
On appeal, Dr. Sowinski argued that res judicata was improper because the first case was not decided on the merits but on procedural grounds. Dr. Sowinski further argued that res judicata was inapplicable because, in the present case, he sought relief only for infringement after the decision in the first case.
Following case precedent set forth in Brain Life, LLC v. Elekta Inc., 746 F.3d 1045 (Fed. Cir. 2014), the Federal Circuit acknowledged that preclusion does not apply to new or changed products or methods, but does apply when the accused products or methods are essentially the same and an accused infringer that has demonstrated non-infringement acquires the status of a “non-infringer.” Because Dr. Sowinski alleged the same infringing activity of the same patent against the same defendant, the Federal Circuit affirmed the Northern District of California’s decision finding that the district court had properly applied res judicata to dismiss the case.
When an alleged infringer has demonstrated non-infringement, the specific accused devices acquire the status of “non-infringing devices” and res judicata will apply to an action brought for the same acts of infringement. See also, Brain Life, LLC v. Elekta Inc., 746 F.3d 1045 (Fed. Cir. 2014).
276-2 Patent Trial and Appeal Board Decisions can only be Appealed Directly to the Federal Circuit
The Federal Circuit recently issued a ruling affirming the U.S. District Court for the Northern District of California’s dismissal of an Administrative Procedure Act suit due to lack of subject matter jurisdiction. See Security People, Inc. v. Iancu, No. 2019-2118, 2020 U.S. App. LEXIS 26431 (Fed. Cir. Aug. 20, 2020). (Before Lourie, Wallach, and Hughes, Circuit Judges) (Opinion for the Court, Hughes, Circuit Judge).
Security People is the owner of U.S. Patent No. 6,655,180 titled “Locker Lock with Adjustable Bolt.” Security People instituted a suit alleging patent infringement against a competitor. Subsequently, the competitor filed a petition for inter partes review (IPR) of the patent. The Patent Trial and Appeal Board instituted review of the patent, and ultimately found the only challenged claim to be unpatentable. Security People then appealed the Board’s final written decision to the Federal Circuit, raising only patentability issues. The Federal Circuit affirmed the Board’s decision. Security People attempted to appeal to the Supreme Court, but the Court denied the petition for certiorari. Showing persistence, Security People then filed suit against the USPTO in the Northern District of California, challenging the constitutionality of the cancellation of the patent in the IPR proceeding. The USPTO moved to dismiss the suit, asserting the district court did not have subject matter jurisdiction because Congress specifically established a framework for judicial review of IPR decisions and, accordingly, collateral APA suits in the district court was improper. The district court agreed with the USPTO and dismissed the suit, explaining that the America Invents Act dictates the Federal Circuit reviews final written decisions of the Board. Subsequently, Security People appealed to the Federal Circuit.
On appeal, Security People asserted the district court improperly dismissed the suit on two grounds: (1) the Board lacked authority to consider constitutional claims arising from an IPR final written decision, and thus Security People was required to bring such claims in the district court; and (2) the constitutional claim was not ripe until cancellation of the patent claims and affirmation of the Board’s final written decision by the Federal Circuit, and accordingly, Security People was required to exhaust the non-constitutional claims before raising constitutional claims.
The Federal Circuit disagreed with Security People’s first ground. The Federal Circuit stated that Congress specifically designated the Federal Circuit as the court that reviews a Board’s final written decision, and the Federal Circuit can also resolve constitutional questions related to such final written decision. See Elgin v. Dep’t of the Treasury, 567 U.S. 1, 17 (2012). The Federal Circuit further explained that unresolved factual questions did not prevent the Federal Circuit from reviewing the Board’s final written decision. The Federal Circuit noted when factual issues arise, the Federal Circuit can take judicial notice of facts. Additionally, in the unlikely situation where a constitutional claim requires further factual resolution beyond judicial notice of facts, the Board has appropriate fact-finding authority. For example, the Board can issue subpoenas and initiate discovery of relevant evidence in IPRs.
The Federal Circuit also disagreed with Security People’s second ground. The Federal Circuit explained the “PTO’s decision-making process in an IPR is complete after issuance of the final written decision,” and issuance of a certificate of cancellation is not required for finality of the agency’s action since there is no decision making in deciding to issue such certificate. Instead, issuing the certificate is merely a “non-discretionary formality.” Additionally, the Federal Circuit noted the doctrine of administrative exhaustion did not prevent Security People from raising the constitutional challenges on direct appeal to the Federal Circuit.
The Federal Circuit further explained that the statutory framework dictates exclusive review of a final written decision of the Board in the Federal Circuit, and thus, the district court was precluded from exercising APA jurisdiction over the constitutional claims asserted by Security People. As evidence of Congress’ intent to foreclose review by other courts, the statutory language of 35 U.S.C. § 141(c) recites a “party to an inter partes review . . . who is dissatisfied with the final written decision of the Patent Trial and Appeal Board . . . may appeal the Board’s decision only to the United States Court of Appeals for the Federal Circuit.” (emphasis added). The Federal Circuit explained “[a]llowing [patentees] to collaterally attack [IPR decisions] through suits under the APA would destroy the Patent’s Act careful framework for judicial review at the behest of particular persons through particular procedures.” Cf Pregis Corp. v. Kappos, 700 F. 3d 1348, 1359 (Fed. Cir. 2012).
Accordingly, the Federal Circuit affirmed the district court’s dismissal of the Security People’s suit for lack of subject matter jurisdiction.
Inter partes review decisions by the Patent Trial and Appeal Board can be appealed only directly to the Federal Circuit. Additionally, the Board can properly consider constitutional claims, and thus, if a party fails to assert such claims during the IPR proceeding, the constitutional claims are waived, and the party is prevented from asserting the claims in the district court under the Administrative Procedure Act.