Does Collateral Estoppel Bar Patent Claims That Were Never Actually Litigated?

Morris Reese v. Verizon California, Inc. and AT&T California (Fed. Cir. 2012)

Collateral estoppel in a patent case prevents a defendant from having to relitigate issues that were fully and fairly litigated in a previous action. Thus, a plaintiff who previously litigated a claim that a certain technology infringed its patent (and lost) is prevented from taking “another bite at the apple” by reasserting that the same technology infringes the same patent. As shown in Reese, whether collateral estoppel applies to patent claims that were never actually litigated but were agreed to be dismissed in the first lawsuit depends on the intent of the parties.

Reese owns US Patent 6,868,150 (Method for Use with Caller ID system), which provides landline telephone Caller ID with Call Waiting. In 2007, Reese asserted the ’150 patent against Verizon and AT&T alleging that they infringed claims 1, 7, 13, 18, 23, 25, 32, and 36 of that patent. Following an unfavorable claim construction order, Reese stipulated to the entry of final judgment of noninfringement of claims 1, 7, 13, 18, 25, and 36, and to the dismissal of claims 23 and 32 with prejudice.

In 2011, Reese again sued Verizon and AT&T reasserting that the same landline telephone services offering so-called Call Waiting ID, which were at issue in Reese I, infringed claims 23 and 32 of the ’150 patent. Verizon and AT&T then filed a motion to dismiss Reese’s complaint under Fed. R. Civ. P. 12(b)(6). The district court granted the motion on the ground that the case was barred by collateral estoppel based on the judgment in Reese I.

On appeal, Reese argued that there was no identical issue between this action and the previous case because the dispute at bar, i.e. the infringement of claims 23 and 32 of the ’150 patent, was not “actually litigated” and expressly decided by the district court. Reese also argued that the stipulated dismissal with prejudice in the previous case was not a final judgment for the purposes of collateral estoppel as to claims 23 and 32 of the ’150 patent because the issue of infringement of those claims was never decided.

On appeal, the Federal Court held that collateral estoppel prevented Reese from relitigating the case as shown by his own intentions because he explicitly consented to dismiss with prejudice his previous action involving the same patent claims asserted against the same technology and agreed to an entry of final judgment on the merits regarding infringement for the express purpose of precluding future duplicative litigation.