McDermott Will & Emery

The US Court of Appeals for the Federal Circuit held that a counterclaim plaintiff was estopped from relitigating antitrust claims in a separate action where the prior judgment allegedly involved separate and alternative grounds for dismissal. Intellectual Ventures I, LLC v. Capital One Financial Corporation, Case No. 18-1367 (Fed. Cir. Sept. 10, 2019) (Bryson, J).

Capitol One brought antitrust counterclaims against Intellectual Ventures (IV) in a patent infringement action in the US District Court for the Eastern District of Virginia. Capitol One asserted that IV was engaged in monopolization and attempted monopolization under Section 2 of the Sherman Act and the unlawful acquisition of assets in violation of Section 7 of the Clayton Act. Capitol One alleged that IV violated these antitrust laws by acquiring a large portfolio of weak or unenforceable patents for commercial banking services and using the threat of serial litigation to extort unreasonable licensing fees from Capitol One. The Virginia district court ultimately found that Capitol One failed to adequately plead a relevant market and dismissed its antitrust counterclaims.

During the pendency of the Virginia action, IV brought new patent infringement claims against Capitol One in the US District Court for the District of Maryland. Capitol One moved to add antitrust counterclaims based on the same factual and legal theories as the Virginia action. The Maryland court granted summary judgment in favor of IV, finding that Capitol One was estopped from asserting its antitrust counterclaims. Capital One appealed.

The Federal Circuit affirmed. Applying Fourth Circuit law, the Court explained that collateral estoppel is warranted when:

  • The issue of fact is identical to the one previously litigated.
  • The issue or fact was actually decided in the prior proceeding.
  • The issue or fact was critical and necessary to the judgment in the prior proceeding.
  • The judgment was valid and final.
  • The party foreclosed has had a full and fair opportunity to litigate the issue.

In this case, Capitol One argued that the third requirement was not met because an issue or fact cannot be “critical or necessary” when there are two alternative and independent grounds for the judgment.

The Federal Circuit rejected Capitol One’s argument for two reasons. First, it found that the grounds for dismissal were not separate and independent but in fact were integrally related because the first issue necessarily adjudicated the second issue. Second, the Court found that even if the grounds for dismissal were actually independent, collateral estoppel would still apply because the case involved defensive rather than offensive collateral estoppel. That is, the counterclaim defendant was seeking to preclude the counterclaim plaintiff from relitigating its claims. The Federal Circuit reasoned that courts are less cautious about applying defensive collateral estoppel where, as here, the two cases are co-pending. Because all of the alternative grounds for dismissal present in the first case equally applied to the second case, Capitol One was aware of the danger of estoppel and had incentive to litigate its antitrust claims to the fullest in the first case. Although Capitol One tried to argue that it alleged two factually distinct relevant markets, Capitol One failed to challenge the Virginia court’s characterization of the market, resulting in a valid final judgment based on the same material facts and issues.

Practice Note: Litigants should be mindful that a final decision on the merits in another related case can be used to preclude a party from raising the same issues in the later-filed case, even if that final determination is grounded in alterative reasons supporting the judgment.