Privity Admission Leads to Claim Preclusion from Earlier Judgment

In Transclean Corporation et al. v. Jiffy Lube International, Inc., et al (January 18, 2007) the district court granted summary judgment in favor of Jiffy Lube and eight other defendants holding that under the doctrine of claim preclusion, an earlier judgment against Jiffy Lube's supplier Bridgewood barred Transclean from bringing a separate infringement action against Bridgewood’s customers. The Federal Circuit agreed with the district court that under the doctrine of claim preclusion Transclean may not obtain relief because it admitted that Bridgewood and Jiffy Lube were in privity.

According to the opinion by Senior Circuit Judge Plager:

The issue is whether, having failed to bring infringement claims against the users in the first litigation, Transclean should be barred under the doctrine of claim preclusion from bringing those claims in this second suit. . . . In our view, the real question is whether the relationship between the
defendants and Bridgewood was so close that they were in privity for claim preclusion purposes.

The issue of privity was not in dispute before the trial court because Transclean admitted several times that the defendants in this case were in privity with Bridgewood. In its amended complaint, Transclean alleged that the defendants were bound by the infringement judgment in the Bridgewood litigation. To support this claim, Transclean took the position that issue preclusion
principles barred the defendants from relitigating the infringement issue. . . . Having already alleged that the defendants and Bridgewood were in privity when it argued that issue preclusion barred the defendants from raising a non-infringement defense, Transclean apparently felt compelled to admit that the parties were also in privity for claim preclusion purposes. Significantly, in its opposition to Jiffy Lube’s motion for summary judgment, Transclean admitted that for purposes of claim preclusion Jiffy Lube and Bridgewood "are in privity because Bridgewood was a manufacturer of the infringing product and Jiffy Lube is a user of the same infringing product."

The term ‘privity’ is a label that expresses the conclusion that a
particular nonparty in earlier litigation should be treated the same as a party to that litigation for claim preclusion purposes. Mars, 58 F.3d at 619. In the Eighth Circuit, privity exists when the parties are "so closely related" and their interests are "so nearly identical" that "it is fair to treat them as the same parties for purposes of determining the preclusive effect" of the first judgment. Ruple v. City of Vermillion, 714 F.2d 860, 862 (8th Cir. 1983).

It is important to recognize that under this standard, a manufacturer or seller of a product who is sued for patent infringement typically is not in privity with a party, otherwise unrelated, who does no more than purchase and use the product. Cf. Mars, 58 F.3d at 619 (concluding that corporate parent and its wholly owned subsidiary, defendants in separate patent infringement suits, were in privity for claim preclusion purposes). In other words, ordinarily such parties are not so closely related and their litigation interests are not so nearly identical that a patentee’s suit against one would bar a second action against the other under the doctrine of claim preclusion.

In this case, we find it appropriate to invoke judicial estoppel to hold Transclean to its concession that Bridgewood and its customers were in privity for claim preclusion purposes. The determination Transclean asks us to make—that Bridgewood and the defendants were not in privity for claim preclusion purposes—is clearly inconsistent with the position it advocated before the trial court and in its opening brief on appeal. The trial court accepted Transclean’s admission of privity, and the defendants relied on that admission during both the trial and appellate phases of this litigation. As part of its litigation strategy, Transclean made the choice to concede privity between Bridgewood and its customers after choosing not to join the customers in the first litigation. Under the circumstances presented by this case, we believe Transclean should be held to the consequences of its choices. Transclean should not be permitted to reverse course this late in the proceedings simply because it now realizes its litigation strategy was unsuccessful. Accordingly, we affirm the trial court’s grant of summary judgment in favor of the Defendants.