Board Not Precluded By District Court Claim Construction Where USPTO Was Not A Party

In TransTexas Holdings (August 22, 2007), the Federal Circuit held that the USPTO's Board of Patent Appeals and Interferences did not have to give preclusive effect to a district court’s Markman order on claim construction under the doctroine of non-mutual collateral estoppel:

Traditionally, issue preclusion, also known as collateral estoppel, applied only where the same parties to an earlier proceeding were involved in later litigation involving the same issue. See Restatement (Second) of Judgments § 27 (1982); Id. § 29 Reporter’s Note. More modern decisions in some circumstances apply issue preclusion even where the parties to the subsequent suit are not the same. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326-33 (1979); Restatement (Second) Judgments § 29. The latter doctrine is known as non-mutual collateral estoppel, and it is this latter doctrine that Trans Texas relies on here.

Issue preclusion is not warranted in this case because the PTO was not a party to the earlier litigation. Our case law has identified four prerequisites to the application of issue preclusion: "(1) identity of the issues in a prior proceeding; (2) the issues were actually litigated; (3) the determination of the issues was necessary to the resulting judgment; and, (4) the party defending against preclusion had a full and fair opportunity to litigate the issues." Jet, Inc. v. Sewage Aeration Sys., 223 F.3d 1360, 1365-66 (Fed. Cir. 2000) (emphasis added).

The PTO as "the party against whom the earlier decision is asserted" thus must have been accorded "a ‘full and fair opportunity’ to litigate that issue in the earlier case." Allen v. McCurry, 449 U.S. 90, 95 (1980); Freeman, 30 F.3d at 1467 (Fed. Cir. 1994). However, the PTO was not even a party to the earlier district court litigation and cannot be bound by its outcome. Trans Texas nevertheless argues that this requirement should somehow be excused because the PTO proceedings were ex parte.

This argument simply makes no sense. The PTO is plainly a party to these appeal proceedings, and if it were not treated as a party, there would be no basis for even considering the application of issue preclusion in the first place.

. . . Contrary to Trans Texas’s argument, our decision in Freeman does not require the application of issue preclusion. In Freeman, we held that a patentee in a PTO proceeding was barred by issue preclusion from asserting a claim construction already rejected in a district court infringement action brought by the patentee against a third party. 30 F.3d at 1469. Nothing in Freeman suggests that issue preclusion could be applied against the PTO or another non-party to the infringement proceeding. 7

7. In light of our resolution of Trans Texas’s issue preclusion argument, we have no need to decide whether non-mutual collateral estoppel against the government would be permissible at all in the circumstances of this case. See United States v. Mendoza, 464 U.S. 154 (1984).