The US Court of Appeals for the Federal Circuit affirmed-in-part, vacated-in-part and remanded a district court's rulings on validity, finding that the patent owner was collaterally estopped from asserting certain patents as a consequence of a Patent Trial and Appeal Board (PTAB) invalidation in a separate proceeding between non-mutual parties. XY, LLC v. Trans Ova Genetics, L.C., Case Nos. 16-2054; -2136 (Fed. Cir., May 23, 2018) (Chen, J) (Newman, J, dissenting).

XY sued Trans Ova alleging infringement of six patents relating to the sorting of X- and Y-chromosome-bearing sperm cells, which can be used for gender selective breeding purposes. The six patents were grouped into four categories called (1) the Fluid Patents, (2) the Freezing Patent, (3) the In Vitro Fertilization Patent and (4) the Reverse Sort Patents. XY also included claims for breach of contract and unjust enrichment. Trans Ova asserted patent invalidity and breach of contract.   

After a jury trial, both parties were found to have breached the contract, and the jury awarded each party compensation for the other's breach. The jury found that none of the asserted patents were invalid and that Trans Ova willfully infringed. The district court subsequently denied Trans Ova's motion for judgment as a matter of law or, alternatively, a new trial or amended judgment as to the breach of contract and validity verdicts. The district court also calculated an ongoing royalty rate for gross sales by averaging the jury's 15 percent rate with the 10 percent rate in XY's prior licenses, and awarded an ongoing royalty rate for reverse sorting services that was half of the jury's awarded rate. Both XY and Trans Ova appealed.

The Federal Circuit affirmed the district court's denial of Trans Ova's motion on the breach of contract issues as well as the finding of validity for all but the Freezing Patent. The majority concluded that Trans Ova's invalidity arguments as to the Freezing Patent were moot because the Court had affirmed a Patent Trial and Appeal Board (PTAB) decision invalidating the same patent in a separate appeal. The majority explained that this "final judgment" on invalidity collaterally estopped XY from asserting the patent in any further proceedings because it had "an immediate issue-preclusive effect on any pending or co-pending actions involving the patent." Citing the Supreme Court of the United States' ruling in Blonder-Tongue, the majority explained that the Federal Circuit has long applied collateral estoppel in mooting pending district court findings of no invalidity based on intervening final decisions of patent invalidity. 

The Federal Circuit also vacated and remanded the royalty findings for further proceedings, explaining that the focus should have been on XY's improved bargaining position and any other changed economic factors, rather than on XY's past acts.

Judge Newman concurred-in-part and dissented-in-part, only disagreeing with the majority's holding that the district court's judgment of validity of the Freezing Patent was moot on the ground of collateral estoppel. Newman voiced concern that this "holding of estoppel is based on a PTAB ruling in a separate case involving non-mutual parties, and contravenes not only the America Invents Act's estoppel provision, but also the general law of collateral estoppel." In Newman's view, the PTAB's decision "does not automatically override and estop the district court's earlier validity judgment, and remove that judgment from our appellate cognizance." Newman stressed that inconsistent decisions can be reached in the PTAB and district court in view of the different standards of validity in the PTAB and the district court, the different burdens of proof and the different standards of appellate review in this court—all of which weigh heavily against estoppel.

PTAB Decision In Separate Case Collaterally Estops Patent Owner

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