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Collateral Estoppel Based on a Rule 36 Affirmance


VirnetX Inc. v. Apple Inc., Case No. 2017-2490 (Fed. Circ. December 10, 2018)

Collateral Estoppel based on a Rule 36 Affirmance

Jaeyong Shin

On December 10, 2018, U.S. Court of Appeals for the Federal Circuit ("Federal Circuit") reached its decision for VirnetX Inc. v. Apple Inc., No. 17-2490, 2018 U.S. Dist. LEXIS 6212 (Fed Cir. Dec. 10, 2018) ("VirnetX II"). An important issue was whether a party may be collaterally estopped based on a Federal Circuit Rule 36 ("Rule 36") affirmance in a related case involving a different patent.

Apple filed two petitions for inter parties review ("IPR") of U.S. Patent No. 8,504,696 (the "'696 patent") assigned to VirnetX. The Patent Trial and Appeal Board ("Board") found that a majority of the claims of the '696 patent were invalid as obvious over various combinations involving a non-patent literature document, the RFC 2401 reference. RFC stands for "Request for Comments" and is a document published by technology communities, such as Internet Engineering Task Force (IETF).

One of the issues raised during the IPR was whether RFC 2401 qualifies as a printed publication. The Board decided that RFC 2401 was a printed publication and therefore could be applied as prior art in the IPR. VirnetX appealed, arguing that RFC 2401 was not a printed publication.

Concurrently, Apple also had filed multiple petitions seeking to invalidate other VirnetX patents. The PTAB invalidated the other patents, and VirnetX had appealed to Federal Circuit. VirnetX Inc. v. Apple, Inc., No. 17-1131, 715 F. App’x 1024 (Fed. Cir. Mar. 16, 2018)("VirnetX I"). In relevant part, VirnetX had also argued that RFC 2401 was not a printed publication in both the Federal Circuit appeal in VirnetX I and the underlying PTAB proceedings.

Before the Federal Circuit decided the appeal regarding validity of the claims of the '696 patent, the Federal Cirucuit reached a decision in VirnetX I and issued a Rule 36 affirmance of the PTAB decision. Therefore, the key question in VirnetX II was whether VirnetX, the appellant, was collaterally estopped from relitigating the issue of whether RFC 2401 was a printed publication, when (1) VirnetX had litigated the same issue in a different litigation involving a different patent and (2) the Federal Circuit had issued a Rule 36 affirmance.

In general, there are two types of estoppel: res judicata, also called claim preclusion, and collateral estoppel, also called issue preclusion. Under the doctrine of claim preclusion, a cause of action may not be relitigated once it has been judged on the merit. Regardless of whether the plaintiff wins the case or loses the case, the plaintiff cannot bring the same claims against the defendant. Collateral estoppel prohibits a party from bringing a subsequent litigation that relies on determinations of fact and law that resulted in a valid final judgment. That is, the doctrine of collateral estoppel prevents a party from relitigating an identical issue that has already been litigated by the same party in another court. Collateral estoppel was the type of estoppel at issue in VirnetX II.

Under the doctrine of collateral estoppel, a party is collaterally estopped from relitigating an issue if: (1) a prior action presents an identical issue; (2) the prior action actually litigated and adjudged that issue; (3) the judgment in that prior action necessarily required determination of the identical issue; and (4) the prior action featured full representation of the estopped party. Stephen Slesinger, Inc. v. Disney Enterprises, Inc., 702 F.3d 640, 644 (Fed. Cir. 2012).

In VirnetX II, the only disputed aspect of the standard was the third prong, whether the determination of the issue was necessarily required for the judgment of VirnetX I.

Federal Circuit's previous decision in Phil-Insul Corp. v. Airlite Plastics Co., 854 F.3d 1344, 1356 (Fed. Cir. 2017)("Phil-Insul") sets forth the prior caselaw regarding application of collateral estoppel to Rule 36 affirmances. . In a prior case , the plaintiff appealed the court's claim constructions. The Federal Circuit issued a Rule 36 affirmance in that prior case. In Phil-Insul, the plaintiff sued another defendant, alleging infringement of the same patent. The Federal Circuit held that its claim constructions were essential to the Federal Circuit's previous affirmance in the prior case and that the plaintiff is collaterally estopped from arguing that the elements should be construed differently in the second case. Therefore, Phil-Insul sets forth that collateral estoppel based on Rule 36 affirmance is permitted when the same party is seeking to re-litigate same issue stemming from the same patent.

Consistent with Phil-Insul, the Federal Circuit in VirnetX II found that the standard for collateral estoppel applies the same to Rule 36 affirmances. The next question was whether the issue of whether RFC 2401 qualifies as a printed publication was necessary for the judgment in VirnetX I. The court decided that it was necessary for RFC 2401 to qualify as a printed publication because each ground of unpatentability in the PTAB decisions underlying VirnetX I relied on RFC 2401. Therefore, the court in VirnetX II held that VirnetX is collaterally estopped from raising the issue and affirmed the PTAB's decision.

The fact that VirnetX II and VirnetX I involved different patents appears to have had no impact on the court's analysis. If the issue that is necessary for judgment is identical and not dependent on a particular patent, the Federal Circuit will apply collateral estoppel even if the cases involve different patents.