The Federal Circuit recently issued a decision in the ongoing dispute in Kroy IP Holdings, LLC v. Groupon, Inc., addressing the collateral estoppel effect of Patent Trial and Appeal Board (PTAB) decisions on subsequent district court patent invalidity litigation. The question presented was whether a PTAB finding of unpatentability in an inter partes review (IPR) proceeding should preclude relitigation of similar or patentably indistinct claims in district court, even though the standards of proof differ between the two forums.
In its decision, the Federal Circuit denied Groupon’s requests for both panel rehearing and rehearing en banc, leaving in place its earlier ruling in favor of patentee. The majority emphasized that collateral estoppel—a doctrine preventing the relitigation of issues already decided—does not apply when the standard of proof in the two proceedings at issue is materially different. Specifically, the PTAB applies a “preponderance of the evidence” standard for proving unpatentability, while district courts require “clear and convincing evidence” to invalidate a patent. The court cited Supreme Court precedent, including B & B Hardware, Inc. v. Hargis Industries, Inc. and Grogan v. Garner, to support the view that issue preclusion is inappropriate when the legal standards differ.
The majority further explained that policy considerations, even important ones such as efficiency or cost-effectiveness, cannot override the need for uniform application of law. The majority noted that parties seeking to challenge additional claims could file a second IPR petition rather than rely on collateral estoppel in district court.
The dissent argued that the majority’s approach undermines the central purpose of the America Invents Act (AIA), which was to provide an efficient, cost-effective alternative to district court litigation for challenging patent validity. The dissent contended that the traditional rules of collateral estoppel must be tailored to serve Congressional intent, especially when statutory structure and purpose demand it. Congress designed IPRs to be a substitute for district court invalidity proceedings, and denying collateral estoppel effect to PTAB decisions frustrates this objective. The dissent also highlighted that, in practice, both the PTAB and district courts routinely apply collateral estoppel to patentably indistinct claims within their own proceedings. The failure to extend this principle across forums, the dissent argued, creates a loophole that patentees can exploit, contrary to the AIA’s goals.
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