Last Week in the Federal Circuit (February 22-26): Who Needs Cross Examination? Issue Preclusion Before the PTAB

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All eyes are on Arthrex this week, right?  So of course we decided to take a look at a Board decision, and one that—so says the dissent—creates a circuit split.  Below we provide our usual weekly statistics and our case of the week—our highly subjective selection based on whatever case piqued our interest.

Precedential opinions: 3

Non-precedential opinions: 4

Rule 36: 1

Longest pending case from argument:  SynQor, Inc. v. Vicor Corp., No. 19-1704 (290 days)

Shortest pending case from argument (non-Rule 36): MModal LLC v. Nuance Communications, Inc., No. 20-1693 (18 days)

Case of the week:  SynQor, Inc. v. Vicor Corp., No. 19-1704 (Fed. Cir. Feb. 22, 2021)

Panel:  Judges Dyk, Clevenger, and Hughes, with Judge Hughes writing the opinion and Judge Dyk dissenting.

You should read this case if:  You’re interested in issue preclusion or have one of the 10 remaining inter partes reexamination cases

Last week a divided Court took a look at issue preclusion in administrative proceedings, and that definitely caught our eye.  The appeal involves inter partes reexaminations—so if you haven’t had one, you aren’t likely to since they began their slow sunset after Congress passed the AIA and replaced them with inter partes reviews.  In this reexamination, the Board found the patent owner’s claims would have been obvious, ruling against the patent owner on whether certain prior art references were incompatible and on motivation.  The details don’t really matter for our purposes.  What does matter is that in another, earlier (and now final) reexamination involving a different but related patent and the same parties, the Board reached the opposite conclusion on those two issues.  So patent owner took an appeal in the later case, arguing that issue preclusion (also known as collateral estoppel) precludes relitigation of the issues that the patent owner won in the earlier case but lost in the later one.  Not to bury the lede:  the patent owner won.

Much of the Court’s opinion addressed whether common law issue preclusion applied to inter partes reexaminations.  The Court noted it previously held preclusion applied to inter partes reviews, and that courts presume issue preclusion applies to administrative proceedings absent evidence of contrary intent from the statutory text.  We won’t pause long on this part of the decision.  The Court noted—on that front—that its decision would govern a limited number of cases.  How limited?  In a footnote, the Court noted that only 10 inter partes reexaminations remain pending before the Board.  So the short of it:  issue preclusion applies and is consistent with the now defunct statutory scheme governing inter partes reexaminations.

Now for the slightly longer version:  the parties (and the Court) disputed whether issue preclusion could apply if inter partes reexaminations are “examinational” or “inquisitorial” proceedings rather than “adversarial” or “adjudicatory” ones—since the examiner, not the parties, frames and drives the proceeding.  The Court determined that inter partes reexaminations gave the patent owners and third-party requestors enough rights to present and rebut evidence and arguments, even though the parties have no discovery rights or subpoena powers, depriving the parties of deposing (and therefore cross-examining) witnesses.  On the latter point, the Court acknowledged the importance of cross-examination of witnesses, but said it’s not the only way to test credibility.  It pointed to the presentation of contrary evidence.  Of course, the Court noted that not everyone agrees with it that issue preclusion can apply without cross-examination or live testimony, and it cited other courts and commentators suggesting otherwise.

Turning to the merits of whether preclusion applied to the facts before it, the Court recited the familiar requirements for issue preclusion:  “(1) the issue is identical to one decided in the first action; (2) the issue was actually litigated in the first action; (3) resolution of the issue was essential to a final judgment in the first action; and (4) plaintiff had a full and fair opportunity to litigate the issue in the first action.”  The Court emphasized that the question is whether the issues are identical, not whether the patent claims in the earlier and later inter partes reexaminations are identical.  And on that point, the Court held that whether two prior art references were compatible and there was motivation to combine them were resolved in the earlier inter partes reexamination proceeding:  “The Board, acting as trier of fact, decided this issue.”  And because these issues were essential to the Board’s earlier patentability decision and both parties had a full and fair opportunity to litigate the issues, issue preclusion barred relitigation.  The Court emphasized that “collateral estoppel applies “even if new evidence exists” in the later proceeding.

Finally, the Court addressed new claims that had been added during reexamination.  Because the patent expired before the new claims issued, the patent owner’s appeal over those new claims became moot.  The patent owner thus requested that the Board’s decision on the new claims be vacated under Munsingwear.  The Court agreed, and vacated the Board’s decision as to those new claims to prevent “an unreviewable decision from spawning any legal consequences”—like, for example, the issue preclusion issues the Court just decided.

Of course there is more:  Judge Dyk dissented.  He disagreed that issue preclusion applies to inter partes reexaminations because they are examinational (or inquisitorial) and not adjudicatory and fail to include court-like procedures.  For support, Judge Dyk pointed to Supreme Court and Federal Circuit precedent describing inter partes reexamination proceedings as inquisitorial rather than adjudicative.  He zeroed in on the absence of any right to cross-examine witnesses, stating that the Supreme Court has emphasized the importance of cross-examination for the discovery of truth and that other circuits have refused to apply issue preclusion when cross-examination was unavailable.  And here, Judge Dyk highlighted the importance of cross-examination in this case.  He noted that one difference potentially explaining the different outcomes in the first versus the second Board decision was that the patent owner’s witnesses had been deposed in related district court litigation after the first case and before the second case.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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