Claim Preclusion Across Infringement Types

by Dennis Crouch

Inguran, LLC v. ABS Global, Inc., No. 22-1385 (Fed. Cir. July 5, 2023)

The court’s decision here makes two important res judicata holdings that favor patent holders: (1) a final judgment as to claims of literal infringement do not preclude the patentee from later suing the same party for inducing infringement since “an induced infringement claim rests on evidence and elements beyond those required by direct infringement;” (2) res judicata cannot bar a patentee from filing a lawsuit against  a defendant’s actions occurred after the first lawsuit began. This is true even (as here) when the original lawsuit was largely declaratory in nature; the later actions involved the same set of operative facts; and the patentee arguably had notice of the upcoming actions during the first lawsuit.

Both parties here sell gendered bovine sperm straws used for artificial insemination.  (Sorry, I’m not including images for this post).  Inguran (known as ST) sued ABS for infringement a decade ago and won the case. At the time of the lawsuit, ABS was just entering the market both in terms of selling straws and also licensing its technology so that others could make the straws.  But, the case focused on ABS direct infringement with ABS stipulating infringement and the patentee winning an award of $750k past damages (for internal field testing) and an ongoing royalty of $1.25 per straw.  Although it was discussed before the jury and in the litigation, no decision was made as to the infringement by ABS licensees resulting from the tech transfer.

Although the case included an ongoing royalty, those cause real monitoring and enforcement problems.  The parties privately agreed to a lump sum payment to satisfy the entire original judgment. (Undisclosed amount).

Now, ST is suing again, this time arguing that ABS is liable for inducing infringement by licensing/transferring its technology to others who are then making the straws.  ABS argued that ST already had its opportunity to prove ABS infringement, and that resulted in an award that is now fully paid. The district court agreed with ABS and concluded that the licensing/transfers are included within the original judgment and further arguments are precluded. On appeal though, the Federal Circuit concluded otherwise, finding (1) that inducement is a different cause of action than direct infringement and therefore is not automatically precluded; and (2) inducement itself had not been raised in the original case .

Lets backtrack a minute: Claim preclusion, also known as res judicata, prevents a party from bringing a lawsuit on a claim that has already been decided by a court in a previous lawsuit between the same parties or their privies. It aims to prevent repetitive litigation, save resources, and ensure consistent and final decisions.  The rules of res judicata are mostly  made-up by the courts and there is some variation among the states and circuits, but the standard approach requires:

1. Final, valid judgment on the merits in the initial action;
2. Same parties in both actions (privies may be included);
3. Same “cause of action” or “claim” in both actions.

The third prong – same cause of action – is the one that causes the most consternation.  The quirk is that in the context of claim preclusion, “cause of action” is much broader than you might think and as a consequence claim preclusion regularly bars particular causes of action that were never actually raised in the initial lawsuit.  Here is how it works – In order to encourage parties to litigate all their related claims at once, the rules of procedure adopt a broad understanding off same-cause-of-action to include all claims that are based upon the “same set of transactional facts.”  For patent infringement, these “facts” are found within the asserted patent and the infringement accusations.  Some rules of thumb in the patent context:

• Accusing one product in a first case; and a different product in a second case — different causes of action.
• Asserting one patent in a first case, and an entirely different patent in a second case — different causes of action.
• Asserting claim 1 of a patent in one case, and claim 2 of the same patent in a second case — same causes of action.

This gets tougher when the second case involves small changes to the product, or two different patents that are part of the same family. In those situations, the court will need to dig into the details and answer the functional question about whether the two claims involve the “same set of transactional facts.”  The court has also made clear that claim preclusion doesn’t attach to claims that could not have been raised in the first action. This could include situations where the infringement had not yet occurred or the patent had not yet issued.

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1. Aside: Although the court pays lip service to its notion that it follows regional circuit law of preclusion (here, 7th Circuit), the decision goes on to repeatedly cite and rely upon Federal Circuit precedent without reference to the 7th circuit doctrine.

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