Summary Judgment Granted to Defendants, SpeedTrack, Inc. v. Office Depot, Inc., et al., Case No. C 07-3602 (Judge Hamilton)
How can you prevent serial patent litigation over the same product against different defendants? Let us count the ways. After considering three different arguments for barring SpeedTrack's patent infringement claims, Judge Hamilton granted summary judgment to defendants on two grounds: (1) res judicata and (2) the Kessler doctrine, which has recently gained new life from the Federal Circuit.
This was not the first case brought by SpeedTrack on its patent covering category-based search filters: SpeedTrack had earlier sued Wal-Mart under the same patent. Endeca Technologies, the supplier of the allegedly infringing technology, intervened in that case, and the court ultimately granted summary judgment of non-infringement based on the court's claim construction of the term "category description." Defendants in the second case, sued for their use of the same Endeca search technology, then sought summary judgment against SpeedTrack on three grounds: (1) res judicata, or claim preclusion, (2) collateral estoppel, or issue preclusion, and (3) the Supreme Court's "Kessler doctrine."
On res judicata, Judge Hamilton agreed with defendants that the three-prong test had been met. As a preliminary matter, Judge Hamilton found that res judicata could apply to all acts that occurred before the date of final judgment in the earlier case. Under Federal Circuit case law, it did not matter that SpeedTrack had sued Endeca only for infringement occurring before the date of its counterclaims and had not supplemented its pleadings to include ongoing infringing acts. Turning to the first prong, Judge Hamilton found that the two suits involved the same claim or cause of action because defendants had presented evidence that they used Endeca's technology in "essentially the same" way as Wal-Mart, particularly with respect to the "category description" claim element, while SpeedTrack had failed to rebut this evidence by pointing out material differences between defendants' use and Wal-Mart's non-infringing use. SpeedTrack did not dispute that the earlier case ended in a final judgment on the merits, and thus the second prong was met. Finally, Judge Hamilton found that defendants' indemnification agreements with Endeca satisfied the third prong, which requires that the cases involve the same parties or their privies. In particular, Judge Hamilton found that the privity analysis depended only on the parties' relationship with respect to the relevant lawsuits, and thus a provision limiting the broader relationship between Endeca and defendants did not undermine her conclusion.
On collateral estoppel, Judge Hamilton found that defendants could not meet the second element—that the issue was actually litigated—because SpeedTrack was asserting infringement under the doctrine of equivalents. The court had denied SpeedTrack's attempt to add that theory in the earlier case because SpeedTrack had not acted diligently in raising the issue.
On the Kessler doctrine, Judge Hamilton followed the Federal Circuit's lead in confirming the viability of the Supreme Court's reasoning in Kessler v. Eldred, 206 U.S. 285 (1907). Under Kessler, explained Judge Hamilton, a product once found not to infringe is "immunized" from future infringement suits brought by the patent holder. Judge Hamilton rejected SpeedTrack's argument that the Kessler doctrine was obsolete because it pre-dated the development of non-mutual collateral estoppel. SpeedTrack had argued in its opposition brief that the Federal Circuit had applied Kessler only once in the past thirty years. Since then, however, the Federal Circuit issued Brain Life, LLC v. Elekta Inc., — F.3d —, 2014 WL 1139469 (Fed. Cir. 2014), which confirmed that the Kessler doctrine exists and may preclude some claims that are not otherwise barred by claim or issue preclusion. Judge Hamilton concluded that "the Kessler doctrine, as applied by the Brain Life court, is directly applicable to this case." Because of the Wal-Mart case, the accused Endeca technology acquired the status of a non-infringing product, and defendants used the software in "essentially the same" manner as Wal-Mart. Thus, the Kessler doctrine barred the entirety of SpeedTrack's suit.
Having fit the case into two out of three categories of preclusion doctrine, Judge Hamilton granted summary judgment to defendants.
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