CAFC Affirms Dismissal of Patent Suit Over Peer-to-Peer Tech, Citing Waiver and Judicial Estoppel

The U.S. Court of Appeals for the Federal Circuit (CAFC) on Tuesday affirmed a district court’s dismissal of a patent infringement suit brought by Cooperative Entertainment, Inc. against Kollective Technology, Inc., over a patent for peer-to-peer (P2P) content distribution, holding that Cooperative had waived its new infringement theory and was judicially estopped from contradicting its previous arguments.

The dispute began when Cooperative Entertainment filed a patent infringement suit in the U.S. District Court for the Northern District of California, alleging that Kollective Technology infringed U.S. Patent No. 9,432,452. The ‘452 patent, titled “Systems and Methods for Dynamic Networked Peer-to-Peer Content Distribution,” relates to technology for distributing large files, such as videos and games, by using a P2P network to supplement traditional content distribution networks (CDNs).

In a previous 2022 decision, Cooperative I., the CAFC reversed the district court’s initial dismissal, which was based on a finding that the patent was invalid under 35 U.S.C. § 101 for being directed to nonpatentable subject matter.

Following the remand in Cooperative I, the U.S. District Court for the Northern District of California granted Kollective’s motion to dismiss for failure to state a claim. After Cooperative filed a second amended complaint (SAC), the district court again dismissed the case, this time with prejudice, finding that any further amendment would be futile. Cooperative’s appeal of this final dismissal followed.

The ‘452 patent claims require “content segmentation” based on “trace routes,” along with several other techniques, including CDN address resolution, dynamic feedback from peers reporting traffic rates, round-robin, and other server side scheduling techniques. In its earlier arguments, including in Cooperative I, Cooperative had contended that this use of trace routes to segment content was an inventive concept. Among the holdings in Cooperative I was that there were at least two alleged inventive concepts in claim 1 of the ‘452 patent, one of which was the requirement that “trace routes be used in content segmentation.”

On appeal, however, Cooperative argued that the claims were “directed to segmenting peer networks, not data or video files,” and that the content segmentation claimed was the “segmentation of the peer nodes” containing content. The CAFC noted this was a “marked departure” from the position Cooperative had advocated at every prior stage of the proceeding.

The Federal Circuit, in an opinion authored by Circuit Judge Stark, rejected Cooperative’s new theory on two primary grounds of waiver and judicial estoppel. The court found that Cooperative had waived its new argument by failing to raise it before the district court. The opinion explained that courts of appeals generally should not consider issues not decided below. With a few notable exceptions, such as some jurisdictional matters, “appellate courts do not consider a party’s new theories, lodged first on appeal.” If a litigant seeks to show error in a trial court’s overlooking an argument, it must first present that argument to the trial court. The court noted that Cooperative’s counsel even conceded during oral argument that the arguments were new and, therefore, the argument was waived.

Moreover, the CAFC held that Cooperative was judicially estopped from asserting its new position. The doctrine of judicial estoppel prevents a party from succeeding in one phase of a case on a particular argument and then adopting a contrary position in a later phase. The court explained that in Cooperative I, it had accepted Cooperative’s argument that the use of trace routes to segment content was a key part of the invention. The opinion quoted its own conclusion from the earlier case, stating that “Claim 1 requires the content segmentation to be based on trace route.” Having prevailed on that argument, Cooperative could not argue the opposite. “Where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position,” the court wrote, quoting the Supreme Court.

In addition to waiver and estoppel, the CAFC found that the “intrinsic evidence” contradicted Cooperative’s new interpretation. The claims expressly require that “content segmentation is based on [among other things] trace route.” The court pointed to multiple passages in the patent’s specification and prosecution history that explicitly stated that the content itself is segmented based on trace routes. In the SAC, Cooperative itself unambiguously alleged that the patentee had argued to the U.S. Patent Office that the claims use trace routes to further segment the actual content being delivered. The “intrinsic evidence” therefore confirmed that the claims require the use of trace routes to segment content, which was the position Cooperative had argued until this appeal.

Ultimately, the Federal Circuit affirmed the district court’s judgment. The CAFC found no abuse of discretion in the district court’s determination that allowing another amendment would be futile, given Cooperative’s “repeated failure to cure deficiencies by amendments previously allowed,” and also affirmed the decision to deny Cooperative leave to file a fourth complaint, awarding costs to Kollective.

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