SimpleAir v. Google: Consider the Scope of the Claims in a Claim Preclusion Analysis

On March 12, 2018, the Federal Circuit held in SimpleAir, Inc. v. Google LLC, No. 2016-2738, that a terminal disclaimer does not raise a presumption that a continuation patent is patentably indistinct from its parent patent.  In SimpleAir, the issue was whether an action asserting infringement of two patents was barred by claim preclusion or the Kessler doctrine when the same activity had been judged not infringing in earlier litigations involving other patents in the same family, all of which were related as continuations, and all of which included terminal disclaimers to the ultimate parent patent.  The Federal Circuit held that notwithstanding the terminal disclaimers, the district court could not simply rely on a presumption that the claims were patentably indistinct, and instead must compare the scope of the claims to determine whether claim preclusion or the Kessler doctrine applies.  SimpleAir, Inc. v. Google LLC, No. 2016-2738, slip op. at 2 (Fed. Cir. March 12, 2018).

SimpleAir filed a series of patent infringement actions against Google, asserting various patents in one family, all related as continuations from U.S. Patent No. 6,021,433, and all terminally disclaimed to the ’433 patent.  Id.  The first action asserted the parent ’433 patent and continuation U.S. Patent No. 7,035,914.  Id. at 2-3.  The claims involving the ’433 patent were dismissed with prejudice, and trial ensued only on the ’914 patent.  Id. at 3.  The jury found the ’914 patent infringed, but on appeal the Federal Circuit reversed the district court’s claim construction ruling, vacated the verdict, and remanded with instructions to enter a judgment of non-infringement.  Id.  During the pendency of that case, SimpleAir filed two more infringement actions asserting two more patents in the family, which were consolidated.  Id.  One of those actions was dismissed with prejudice, and the other produced a jury verdict of non-infringement.  Id.

This case arose when SimpleAir subsequently sued Google for infringement based on two more continuation patents, U.S. Patent Nos. 8,639,838 and 8,656,048, both of which are also terminally disclaimed to the ’433 patent.  Id. at 4.  The district court dismissed the complaint under Rule 12(b)(6) as barred by claim preclusion and the Kessler doctrine.  Id.  The only disputed issue with regard to claim preclusion was whether the current case and the previous cases involved the same claim or cause of action.  Id.  Without comparing the claims in the current case to those in the previous cases, the district court held that the underlying invention in the related applications was the same because the patents shared the same title and specification, and that the terminal disclaimers filed in each patent to overcome obviousness-type double patenting rejections indicated that the PTO believed them to be patentably indistinct.  Id.  The district court also held that although claim preclusion did not bar SimpleAir’s assertion of the ’838 and ’048 patents against the alleged infringing uses occurring after the judgment in the earlier case, the Kessler doctrine did.  Id. at 5.

The doctrine of claim preclusion forbids a second suit based on the same cause of action that already received a judgment on the merits in a prior suit involving the same parties or their privies.  Id. at 6 (citing Lawlor v. Nat’l Screen Serv. Corp., 349 U.S. 322, 326 (1955)).  Because claim preclusion is not unique to patent law, Fifth Circuit law applies.  Claim preclusion requires the following elements:

(1) the parties in the later action are identical to, or in privity with, the parties in the earlier action;

(2) the judgment in the earlier case was rendered by a court with proper jurisdiction;

(3) there has been a final judgment on the merits; and

(4) the earlier case and later case involve the same cause of action.

Id. (citing Duffie v. United States, 600 F.3d 362, 372 (5th Cir. 2010)).

The only element at issue in this case was the fourth, i.e., whether the earlier and later cases involve the same cause of action, which the Federal Circuit held was a legal question to be reviewed de novo.  Id. at 7.  In the circumstances of this case, the court stated that the issue was unique to patent law, and therefore Federal Circuit law applied and the later action would be precluded if the overlap between the transactional facts of the suit was substantial, but the court noted that transactional facts are “not capable of a mathematically precise definition.”  Id. (citing Restatement (Second) of Judgments (1982) § 24 cmt. b).

Although claim preclusion does not bar an infringement action based on actions after judgment in an earlier suit, the Kessler doctrine does, “if the earlier judgment held that ‘essentially the same’ accused activity did not infringe that patent.”  Id. at 15; see Kessler v. Eldred, 206 U.S. 285 (1907).  The Kessler doctrine protects “an adjudged noninfringer” from “repeated harassment for continuing its business as usual post-final judgment.”  SimpleAir, No. 2016-2738 (March 12, 2018), slip op. at 15-16 (quoting Kessler, 206 U.S. at 1056).

Considering the facts of the patents at issue, the Federal Circuit found that despite the substantial overlap between the current and earlier cases, the shared specifications and terminal disclaimers alone did not require claim preclusion.  Id. at 8.  The problem was that the district court did not analyze the claims—and the claims define the invention.  Id.

Google attempted to argue that claim analysis was not necessary based on Senju Pharmaceutical Co., Ltd. v. Apotex Inc., 746 F.3d 1344 (Fed. Cir. 2014).  In Senju, the district court found patent claims to be obvious in one infringement suit, and then the patentee added new claims in a reexamination and filed a second infringement suit against the same alleged infringer.  Senju Pharm. Co., Ltd. v. Apotex Inc., 746 F.3d 1344, 1347 (Fed. Cir. 2014).  In that case, the second action was precluded because none of the reexamined claims were broader than in the first action, so the causes of action were the same.  Id. at 1348.  The Federal Circuit distinguished Senju, which it said held that “claims that emerge from reexamination do not in and of themselves create a new cause of action that did not exist before,” largely because broadening claims were not permitted in the reexamination.  SimpleAir, No. 2016-2738 (March 12, 2018), slip op. at 9 (citing Senju, 746 F.3d at 1352).  In that circumstance, the Federal Circuit explained that it was not necessary to make a detailed comparison of the claims.  Id.  In SimpleAir, the district court did not compare the scope of the claims in the current case with those previously litigated and, unlike Senju, there is no prohibition on broader claims in terminally disclaimed patents (as opposed to reexaminations), so the claims here could have broader scope than the parent.  Id.

The Federal Circuit defined the standard for comparing claims between asserted patents, holding that the claims must be “essentially the same” for claim preclusion to apply, adopting the same standard as for the accused activity between the two cases.  Id. at 10.  Applying that standard, the court concluded that “claims which are patentably indistinct are essentially the same.”  Id.

Google argued that the claims in the present case met the “patentably indistinct” standard because the claims of the ’838 and ’048 patents were rejected for obviousness-type double patenting, and SimpleAir chose to file terminal disclaimers to overcome the rejections.  Id.  The Federal Circuit rejected that argument, explaining that filing a terminal disclaimer does not settle the issue of claim preclusion because it is not an admission regarding the patentability of the resulting claims.  Id. at 10-11.  However, filing a terminal disclaimer is relevant to the question of whether a child patent involves the same cause of action as the parent, and is a “strong clue” suggesting that the claims may not be patentably distinct.  Id. at 11-12.  The Federal Circuit explained that a terminal disclaimer waives potentially valuable rights, so patent applicants do not do so lightly.  Id. at 11.  The court stated, “In construing the scope of claims, we give considerable weight to statements made by patent applicants during prosecution in order to overcome examiner rejections.  We see no reason to treat terminal disclaimers any differently.”  Id. (internal citation omitted).  However, although the suggestion is strong, it does not create a presumption that the claims are patentably indistinct.  Id. at 12.  The court must compare the patents’ claims and other relevant transactional facts in deciding claim preclusion.  Id.

Looking at the similarities between the claims in the current case and the earlier actions, the Federal Circuit noted, “we do not see how this is a fundamentally different invention from those patents asserted in the previous suits.”  Id. at 13.  However, the court did not decide whether the claims were patentably indistinct, instead directing the district court to decide on remand.  Id.  The court also suggested that formal claim construction proceedings may not be necessary to determine the claim scope, leaving that to the district court’s discretion.  Id.

The Federal Circuit rejected the district court’s policy considerations of judicial economy and fairness to parties in deciding the claim preclusion issue, stating,

While these policy considerations may be persuasive, it is our duty to faithfully apply our precedent, and that precedent is inconsistent with the critical premise of the district court that filing a terminal disclaimer during prosecution of a continuation patent implies that the continuation patent is patentably indistinct from its parent. Our holding, in this case, is limited to that error: a district court cannot presume that a terminally-disclaimed continuation patent presents the same cause of action as a parent patent based on the filing of the terminal disclaimer alone.

Id. at 14.

The court also rejected the district court’s application of the Kessler doctrine to bar SimpleAir’s claims arising from Google’s actions after the judgment in the earlier suit.  Id. at 15.  The court explained that the Kessler doctrine did not apply to bar assertion of a broader set of rights than would be barred by claim preclusion.  Id. at 16.  Nor does Kessler apply to activity that occurred before the earlier judgment.  Id.  According to the court, “the Kessler doctrine just fills a particular temporal gap between preclusion doctrines; it does not displace them.”  Id. (internal citation omitted).

Like claim preclusion, the Kessler doctrine can be applied if the claims are “essentially the same” as those previously adjudicated.  Id.  If the claim is precluded with regard to pre-judgment activities, then Kessler applies to assertions of those patents against the same post-judgment activity.  Id.

During prosecution, a terminal disclaimer can be critical to getting an application allowed over a patent for a related invention.  Although terminal disclaimers are often filed as expedients to prosecution, a terminal disclaimer surrenders significant rights.  Even if the patent with the terminal disclaimer has the same effective filing date as the parent patent (and thus the same original expiration date), the terminal disclaimer gives up potential patent term adjustment under 35 U.S.C. § 154(b), and the patents must remain co-owned.  Giving up these rights is not undertaken lightly, so a court can consider that if an applicant has filed a terminal disclaimer, this suggests that the applicant and the Patent Office agree that the claims may not be patentably distinct.  However, the Federal Circuit’s decision in SimpleAir does not allow the court to rely on a presumption that the claims are patentably indistinct in its claim preclusion analysis; instead, the court must consider the scope of the claims in both patents and determine whether the claims are “essentially the same”.

Despite the lack of a presumption, litigation strategies may be affected by the Federal Circuit’s guidance that the terminal disclaimer can be considered strong evidence that the claims may not be patentably distinct.  For example, a patentee asserting a patent with a terminal disclaimer may want to consider asserting it in the first infringement action against any potential infringer.  Waiting until a second (or later) action could lead to a ruling that the patentee is claim precluded from asserting the terminally disclaimed patent if the court determines that the claims are “essentially the same” as the claims litigated in the earlier action.