Federal Circuit Reverses District Court Judgment Under Theory Of Issue Preclusion

In Soverain Software LLC v. Victoria's Secret Direct Brand Management, LLC, Nos. 12-1649, -1650 (Fed. Cir. Feb. 12, 2015), the Federal Circuit reversed the district court's judgment that the asserted patents were infringed and not invalid.

Soverain Software LLC ("Soverain") is the assignee of two patents, U.S. Patent Nos. 5,715,314 ("the '314 patent") and 5,909,492 ("the '492 patent"), which are directed to virtual shopping carts. Soverain asserted the '314 and '492 patents against multiple defendants in separate suits in the Eastern District of Texas, including against Victoria's Secret Direct Brand Management, LLC ("Victoria's Secret") and Avon Products, Inc. ("Avon"). Following a jury trial, the district court entered judgment that Victoria's Secret and Avon infringed the asserted claims and that the asserted claims were not invalid. Victoria's Secret and Avon appealed.

"Complete identity of claims is not required to satisfy the identity-of-issues requirement for claim preclusion." Slip op. at 15 (citing Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013)).

On appeal, the Federal Circuit reversed the district court's judgment, holding that issue preclusion applied in light of its previous decision in Soverain Software LLC v. Newegg Inc., 705 F.3d 1333 (Fed. Cir.), amended on reh'g, 728 F.3d 1332 (Fed. Cir. 2013), which held claims of the asserted patent invalid as obvious.

To determine whether issue preclusion should apply to the asserted claims as a result of the Newegg decision, the Court used the four-part test applied in the Fifth Circuit: (1) the issue under consideration in the subsequent action must be identical to the issue litigated in the prior action; (2) the issue must have been fully and vigorously litigated in the prior action; (3) the issue must have been necessary to support the judgment in the prior case; and (4) there must be no special circumstance that would render preclusion inappropriate and unfair. The Federal Circuit applies a similar test to determine whether issue preclusion applies.

As an initial matter, the Court noted that in Newegg, it explicitly held that most of the asserted claims were invalid for obviousness. The Court also held that although one of the asserted claims was not explicitly invalidated in Newegg, the Court did find one of its dependent claims invalid and, therefore, the invalidity determination extended to it as well.

The Court then addressed whether Victoria's...