Brain Life – The seldom-used Kessler Doctrine (Kessler v. Eldred, 206 U.S. 285 (1907)) bars patent infringement litigation against systems found not to infringe in a prior action but sold subsequent to that action, even though claim and issue preclusion do not.

Brain Life, LLC v Elekta Inc., Fed. Cir. Case 2013-1239 (3/24/2014)

In an opinion that discusses claim preclusion, issue preclusion and the Kessler Doctrine, the Circuit affirmed the district court’s dismissal of a subsequent case brought against the same defendant for the same imaging system found not to infringe in a prior action. In doing so the panel relied not on claim preclusion as the district court had, but instead on the so-called Kessler Doctrine. The panel also ruled that none of the foregoing doctrines precludes an action alleging infringement by equipment that was different from that found to infringe in the prior action, and was introduced after the judgment in the earlier case.

In a prior infringement action between Elekta and MIDCO, a predecessor in interest to Brain Life, the district court found that system claims were infringed by Elekta’s GammaKnife, GammaPlan and SurgiPlan medical imaging systems. The patent-in-suit also included method claims, but those claims were not pressed by MIDCO. MIDCO did not oppose Elekta’s motion to dismiss the method claims from the case shortly prior to trial and those claims were dismissed without prejudice. MIDCO prevailed at trial and was awarded $16 million, but the Federal Circuit reversed the judgment of infringement based upon faulty claim construction and ordered that a judgment of noninfringement be entered. On remand, MIDCO attempted to reopen the case as to the dismissed method claims and the district court’s refusal to reopen the case was affirmed by the Circuit.

Several years later Brain Life acquired a license under the patent and sued Elekta for infringement of the method claims by the same GammaKnife, GammaPlan and SurgiPlan imaging systems, and by a new ERGO++ imaging system. Brain Life argued that the similarity of the products did not bar its assertion of the method claims since the method claims were dismissed without prejudice. Because MIDCO could have pursued the method claims in the first litigation but chose not to do so, the court granted Elekta’s motion for summary judgment that the present case was barred by claim preclusion. The court did not differentiate the ERGO++ product despite Brain Life’s argument that ERGO++ was entirely new to Elekta, having been purchased from a third party after the MIDCO judgment and appeal.

In its de novo review of the dismissal, the Federal Circuit panel took an entirely different approach from that taken by the district court. The panel divided its analysis into claim preclusion, issue preclusion and the Kessler Doctrine, based on Kessler v. Eldred, 206 U.S. 285 (1907).

Claim Preclusion

The panel defined claim preclusion as follows:

In the simplest construct, claim preclusion bars the relitigation of a claim, or cause of action, or any possible defense to the cause of action which is ended by a judgment of the court. Claim preclusion applies whether the judgment of the court is rendered after trial and imposed by the court or the judgment is entered upon the consent of the parties. And, claim preclusion bars both claims that were brought as well as those that could have been brought. (citations deleted)

The panel determined that “without a doubt” claim preclusion barred the assertion of either the method or system claims to the extent the acts of infringement predated the final judgment in the MIDCO litigation. However, this doctrine does not entirely bar the present action because preclusion encompasses only the particular infringing acts that were accused in the first action or that could have been made subject to that action. It will not preclude acts of alleged infringement that postdate the final judgment in the MIDCO litigation. Moreover, because the new ERGO++ system could not have been included in the prior action, the claim as to the ERGO++ system similarly was not barred by claim preclusion.

Issue Preclusion

The panel then turned to issue preclusion:

Issue preclusion bars subsequent litigation on an issue of law or fact that was actually litigated. If an issue of fact or law is actually litigated and determined by a final judgment, and the determination is essential to the judgment, that determination is conclusive in any later action between the parties on the same or a different claim. Importantly, where the parties consent to a judgment on an issue prior to trial, it cannot be said that the issue was actually litigated to finality. (citations deleted)

The system claims were litigated to final judgment so they would have been barred by issue preclusion but, understandably, Brain Life did not assert the system claims in the present case. The method claims, on the other hand, were not “fully, fairly and actually litigated to finality between these parties” so issue preclusion did not bar the present action based on the method claims. Similarly because the ERGO++ system was never at issue in the prior litigation, issue preclusion is not a bar to assertion of that cause of action.

The Kessler Doctrine

The panel’s analysis then turned to the Kessler Doctrine:

There exists a separate and distinct doctrine, known as the Kessler Doctrine, that precludes some claims that are not otherwise barred by claim or issue preclusion. ***[T]raditional notions of claim preclusion do not apply when a patentee accuses new acts of infringement, i.e., post-final judgment, in a second suit—even where the products are the same in both suits. Such claims are barred under general preclusion principles only to the extent they can be barred by issue preclusion, with its attendant limitations. The Kessler Doctrine fills the gap between these preclusion doctrines, however, allowing an adjudged non-infringer to avoid repeated harassment for continuing its business as usual post-final judgment in a patent action where circumstances justify that result.

After describing the Kessler case, the panel continued:

The principle that, when an alleged infringer prevails in demonstrating noninfringement, the specific accused device(s) acquires the “status” of a noninfringing device vis-à-vis the asserted patent claims is an essential fact of a patent infringement claim. The status of an infringer is derived from the status imposed on the thing that is embraced by the asserted patent claims. And, when the devices in the first and second suits are essentially the same, the “new” product(s) also acquires the status of a noninfringing device vis-à-vis the same accusing party or its privies.

The panel found the Kessler Doctrine directly applicable to the present case. Brain Life’s predecessor MIDCO initially asserted all of the patent claims against Elekta. While the method claims were eventually abandoned, it could have continued to assert those claims. Once the Elekta systems were adjudged to be noninfringing, Elekta was free to continue engaging in the accused commercial activity as a non-infringer. By virtue of gaining a final judgment of noninfringement in the first suit—where all of the claims were or could have been asserted against Elekta—the accused devices acquired a status as noninfringing devices, and Brain Life was barred from asserting that they infringe the same patent claims a second time.

The panel reached a different decision as to the ERGO++ product. Because that product never acquired the status of a noninfringing device in connection with the patent in suit, neither claim preclusion, issue preclusion, nor the Kessler Doctrine stood as a bar to Brain Life’s assertion of infringement as to that system.

Is Kessler Still Good Law?

In ruling that the Kessler Doctrine precluded further litigation on the patent against Elekta’s previously existing imaging systems, the panel expressed concern about dredging the Doctrine up from “the heyday of the federal mutuality of estoppel rule.” Citing Blonder-Tongue Labs., Inc. v. Univ. of Illinois Found., 402 U.S. 313 (1971), the panel noted at the time Kessler was decided, the doctrine of mutuality of estoppel ordained that, unless both parties in a second action were bound by a judgment in a previous case, neither party in the second action may use the prior judgment as determinative of an issue in the second action. The Supreme Court, therefore, may have created the Kessler Doctrine as an exception to the strict mutuality requirement that existed at that time, rather than to espouse a specific doctrine of substantive patent law.

Since that time, state and federal courts have created exceptions to the mutuality requirement, primarily when estoppel is pleaded defensively. And, the continuing force of the Kessler Doctrine in the face of the development of defensively applied issue preclusion may be questionable on the precise set of facts presented in the case at bar. But, the Kessler Doctrine exists, and we are bound by it, even if its viability under current estoppel law may be of less value now than it was at the time it was handed down. Whether the Kessler Doctrine is an exception to the mutuality of estoppel rule or a matter of substantive patent law is a question we cannot answer. *** We may only apply the law as it continues to exist.

By applying the Kessler Doctrine and then saying it is up to the Supreme Court to decide whether the Doctrine is still good law, the Circuit presents yet another issue ripe for review by the Supreme Court. However, unlike some other recent Circuit decisions, if the Supreme Court does not hear the case at least we have a unanimous panel of the Circuit providing a clear guide to litigating parties and to the lower courts. This decision will undoubtedly be a part of every future claim and issue preclusion discussion.

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