IOENGINE Ruling Helps Clarify The Application Of Collateral Estoppel To PTAB Decisions Of Invalidity

• Published date: 12 July 2023
• Subject Matter: Intellectual Property, Patent
• Law Firm: Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
• Author: Mr Joseph Myles, Lionel Lavenue, Amanda Murphy and Peter Rozewicz

Holding

In IOENGINE, LLC v. PayPal Holdings, Inc., Judge William C. Bryson, sitting by designation in the United States District Court of the District of Delaware, rejected the application of collateral estoppel to Plaintiff's, IOENGINE, LLC's ("IOENGINE"), arguments related to a PTAB decision invalidating some, but not all, of the claims asserted in the litigation.¹

Background

IOENGINE sued defendant PayPal Holdings, Inc. ("PayPal") for infringing claims of two patents.² PayPal filed an IPR petition challenging each asserted claim.³ The PTAB invalidated all but three of the challenged claims, and the three remaining claims depended from invalidated claims.⁴ IOENGINE then asserted five new dependent claims in the litigation, bringing the total claims in the litigation to eight.⁵

Before the district court, PayPal argued that IOENGINE was collaterally estopped from arguing that subject matter in the already invalidated independent claims was absent from PayPal's cited prior art because the PTAB already decided that issue.⁶

Collateral estoppel, or issue preclusion, normally applies if the party seeking estoppel can prove (1) the identical issue was already decided, (2) the issue was actually litigated, (3) the prior determination was needed to make a decision in the previous litigation, and (4) the party estoppel is sought against was fully represented in the previous litigation.⁷

Decision

Largely, the outcome of the case depended on the analysis of XY, LLC v. Trans Ova Genetics, L.C. ("XY appeal").⁸ XY, LLC's ("XY") patents disclose devices and methods for sorting X- and Y-chromosome-bearing sperm cells.⁹ Prior to the appeal, XY licensed its patented technology to Inguran, LLC ("Inguran"), which used the technology to make and sell sorted semen.¹⁰ Trans Ova Genetics, L.C. ("Trans Ova") was a purchaser of sorted semen from Inguran but grew disappointed in its quality, so Trans Ova sought to license XY's technology itself.¹¹ Trans Ova and XY entered a licensing agreement, but a few years later, Inguran acquired XY and sought to terminate the agreement with Trans Ova.¹²

The parties unsuccessfully attempted to negotiate a resolution to the dispute.¹³ To support its position that the agreement was never terminated, Trans Ova continued to make payments during the negotiations, although XY declined all but one of the payments.¹⁴ Later, XY sued for breach of contract and patent infringement.¹⁵ Trans Ova counterclaimed, asserting patent invalidity, antitrust...