Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Kroy IP Holdings v. Groupon, Inc., No. 2023-1359 (Feb. 10, 2025).
Kroy sued Groupon for infringement of U.S. Patent No. 6,061,660, which relates to providing incentive programs over a network. Groupon filed two inter partes review (IPR) petitions challenging 21 claims of the ’660 patent. The PTAB found all challenged claims unpatentable. Kroy amended its complaint to allege infringement of 14 claims of the ’660 patent, none of which were at issue in the IPRs. Groupon moved to dismiss, arguing that Kroy was estopped from alleging infringement of the newly asserted claims based on the IPR decisions. The district court granted Groupon’s motion. Kroy appealed.
The Federal Circuit reversed. Collateral estoppel did not bar Kroy’s suit for infringement of claims not at issue in the IPRs, even though the newly asserted claims were not materially different from the unpatentable claims for purposes of invalidity.
The Court explained that collateral estoppel does not apply where the second action on an issue previously adjudicated applies a different burden of proof. Before the PTAB, Groupon proved unpatentability of the challenged claims by a preponderance of the evidence. However, in district court, Groupon’s burden to prove invalidity of the newly asserted claims was clear and convincing evidence. To apply collateral estoppel in the district court, the Court held, would deprive the patent owner of its property right without proof of invalidity under the statutorily prescribed evidentiary standard.
The Court rejected Groupon’s argument that the PTAB’s decision may give rise to collateral estoppel in the district court notwithstanding the differing burdens of proof. A PTAB decision on unpatentability of a claim, once affirmed by the Court, precludes assertion of that claim in district court. But in Kroy’s case, the newly asserted claims had not been found unpatentable in the IPRs and therefore remained presumptively valid. It was irrelevant that Kroy’s newly asserted claims and the claims adjudged unpatentable by the PTAB were not materially different. The Court explained that a prior district court invalidity ruling may estop a patentee from asserting claims in district court that are immaterially different. But it was legal error for the district court to rely on such precedent to dismiss Kroy’s newly asserted claims as estopped based on a PTAB invalidity ruling of immaterially different claims.
