“It would be a waste of judicial resources to send this case initially to a three-judge panel when the final destination of the case would be before this Court en banc (or the Supreme Court) based on the clear conflict between the panel’s decision in XY, LLC and Supreme Court decisions in Grogan and B&B Hardware, Inc.– Jump Rope Systems
On April 19, exercise equipment developer Jump Rope Systems filed a motion with the United States Court of Appeals for the Federal Circuit (CAFC) seeking an initial hearing. bench to challenge a consent judgment rendered in a patent infringement case filed in the Southern District of Ohio. Jump Rope Systems is asking the entire Federal Circuit to reverse its own decision in XY, LLC vs. Trans Ova Genetics, LC (2018), arguing that prejudicial effect cannot be given to invalidity determinations issued by the Patent Trial and Appeal Board (PTAB) because XY conflicts with decisions of the United States Supreme Court on the doctrine of collateral estoppel.
Dissent of Judge Newman XY SARLCollateral estoppel decision proves premonitory
Jump Rope Systems’ motion comes directly after U.S. District Judge Michael H. Watson issued a consent judgment invalidating Jump Rope Systems’ asserted patent claims against alleged infringer and gym equipment maker Coulter Ventures, doing business as Rogue Fitness. The claimed claims originated from US Patent No. 7789809, Jump rope systemand US Patent No. 8136208, handle systemboth of which were invalidated in inter partes review procedure (IPR) at the PTAB. Judge Watson’s consent judgment applied collateral estoppel without regard to any exceptions, a legal conclusion mandated by the Federal Circuit’s decision in XY SARL.
In XY SARL, the alleged infringer, Trans Ova Genetics, has appealed the district court’s dismissal of post-trial motions challenging a jury verdict that found XY’s patent claims covering the sorting of sperm carrying chromosomes. Instead of addressing Trans Ova Genetics’ invalidity arguments, the Federal Circuit spontaneously found that XY was incidentally precluded from asserting the validity of its patent claims, which were first invalidated in IPR proceedings before the PTAB, and then the invalidations upheld by the Federal Circuit.
Judge Pauline Newman wrote a dissent in XY SARL challenging the court’s majority decision on the disability issues in this case. Judge Newman pointed out that there was no reciprocity of parties involved in the matter, as Trans Ova Genetics was not the petitioner challenging the validity of XY’s patent claims to the PTAB. Further, when considering exceptions to collateral estoppel under which matters are not excluded from relitigation, as provided in the (Second) reformulation of judgments §§ 28-29, Justice Newman found clear inconsistencies in the different burden of proof standards for validity issues applied to the PTAB, where validity decisions must be supported by “substantial evidence” and decisions of validity of the United States district courts, which must be substantiated. by “clear and convincing evidence”.
Judge Newman also raised issues of constitutional balance between administrative agencies and Article III courts that Jump Rope Systems’ motion considers prescient. In September 2019, the Federal Circuit issued Chrimar Systems vs. FTA USAby applying the outfit XY SARL to invalidate patent claims that have been upheld as valid by jury verdict and post-trial motions.
Judge Watson’s consent judgment invalidating Jump Rope Systems’ patent claims in the district court action under XY SARL noted that the legal standards of the United States Court of Appeals for the Sixth Circuit, the regional circuit court responsible for appeals in southern Ohio, normally discriminate against appeals of consent judgments. Jump Rope Systems petition for the premiere bench Hearing by the Federal Circuit, however, notes that several circuit courts, including the Sixth Circuit, have recognized exceptions to the ban on appealing consent judgments. In addition, the Appellant raised objections to the Consent Judgment raised in a Final Joint Status Report submitted to Judge Watson, including the stated intention to appeal the Judgment to challenge XY SARLas evidence that she had explicitly reserved the right to appeal the consent judgment to the district court level.
Skipping systems: collateral estoppel problem solved by Grogan, Bed and breakfast hardware
“The resolution of [the collateral estoppel] the question is simple and is clearly dictated by binding Supreme Court precedent,” argues Jump Rope Systems in its motion for the first bench audience. The appellant cites the 1991 Supreme Court decision in Grogan vs. Garner as fully supporting the points raised by Justice Newman in his XY SARL CONTESTATION. Grogan discussed the different evidentiary standards applied in a civil action for securities fraud and a bankruptcy proceeding for the release of damages awarded in the judgment for fraud. Although the evidence of the securities fraud charges in the civil action was assessed on a standard of preponderance, the Supreme Court held that if the non-discharge of the debt incurred by the judgment for fraud was based on a clear and convincing standard of proof, then collateral estoppel would not apply. The Supreme Court’s decision in Grogan ultimately concluded that the preponderance standard should be applied by bankruptcy courts to determine “actual fraud” under the U.S. bankruptcy code, but GroganFindings of collateral estoppel should also apply in the context of patent validity, argues Jump Rope Systems.
By passing the America Invents Act (AIA), Congress created an overriding standard of proof for petitioners challenging validity in IPR proceedings, codified at 35 USC § 316(e). Like Grogan had been decided two decades before the AIA was passed, Jump Rope Systems argues that Congress could have created a statutory exception to Grogan allowing collateral estoppel to apply to PTAB decisions despite differences in evidentiary standards between the PTAB and the U.S. District Court. Where the AIA has addressed issues of collateral estoppel, Jump Rope Systems notes that the only such provision, 35 USC § 315(e)affects the petitioner’s ability to bring civil actions for disability in a U.S. district court.
Jump Rope Systems also argues that reversing XY SARL is also constrained by the Supreme Court decision in B&B Hardware vs. Hargis Industries (2015), a trademark case that examined different applications of the likelihood of confusion test to the Trademark Trial and Appeal Board (TTAB) and the United States Court of Appeals for the Eighth Circuit, which vary depending on the factors of confusion assessed. The Supreme Court ultimately found that the issue exclusion applied in this case because the likelihood of confusion tests used in trademark registration and infringement litigation were essentially the same. The Court also recognized that “the issues are not identical if the second action involves the application of a different legal standard, even though the factual framework of the two actions may be the same”. Bed and breakfast hardware also cited the Reprocessingon the issue of exclusion with approval, which adds weight to Justice Newman’s consideration of the Reprocessingexceptions to collateral estoppel in it XY SARL dissent, according to Jump Rope Systems.
“It would be a waste of judicial resources to send this case initially to a three-judge panel when the final destination of the case would be before this Court en banc (or the Supreme Court) based on the clear conflict between the panel’s decision in XY, LLC and Supreme Court decisions in Grogan and B&B Hardware, Inc.reads the Jump Rope Systems petition. Accordingly, Jump Rope Systems is asking the Federal Circuit to grant its motion for the first bench hearing, set aside the Southern Ohio District Court’s decision on the consent judgment and remand for a determination of patent validity on fact and law.