December 10, 2018

Collateral Estoppel Exposes the Failure to have Legitimate Plan B

By Bryan K. Wheelock, Principal

In Virtnex Inc. v. Apple, Inc., [2017-2490, 2017-2494] (December 10, 2018) the Federal Circuit affirmed the PTAB’s decision that claims 1–11, 14–25, and 28–30 of U.S. Patent No. 8,504,696 owned by VirnetX are unpatentable as obvious, noting that VirnetX was collaterally estopped from relitigating the threshold issue of whether the prior art reference was a printed publication. It was also noted that VirnetX did not preserve the only remaining issue of whether Inter Partes Review procedures apply retroactively to patents that were filed before Congress enacted the America Invents Act.

During the pendency of VirnetX’s appeal, the Federal Circuit summarily affirmed seven final written decisions between VirnetX Inc. and Apple in which the Board found that RFC 2401 was a printed publication. The Federal Circuit said that a Rule 36 summary disposition could be the basis for collateral estoppel, and that the only issue was whether the printed publication issue was necessary or essential to the judgment in the prior cases. The Federal Circuit held that it was.

VirnetX also argued that it preserved in its opening brief the issue of whether Inter Partes Review procedures apply retroactively to patents that were filed before Congress enacted the AIA, pointing to a single paragraph in its Opening Brief, filed prior to the Supreme Court’s decision in Oil States. The Federal Circuit said that this paragraph raised the specific question later decided in Oil States, and under a very generous reading, the paragraph also arguably raises a general challenge under the Seventh Amendment, but it in no way provides any arguments specifically preserving the retroactivity issue.

The Federal Circuit concluded that VirnetX did not preserve the issue of whether Inter Partes Review procedures apply retroactively to patents that were filed before Congress enacted the AIA and that, therefore, the conclusion that VirnetX was collaterally estopped from raising the printed publication issue resolved all other issues in the appeal.

The lesson, of course, is to preserve the issues you will need. VirnetX can hardly be faulted for not preserving the issue when there was a more substantive issue before it, but it always pays to have a legitimate Plan B.