A Claim of Patent Infringement May Be Brought Against New Products that Did Not Exist When an Earlier Lawsuit Was Filed Even Though Similar Claims Were Asserted Against Similar Accused Products in the Earlier Lawsuit

Authored by D. Brian Kacedon, Jack A. Kelly, and John C. Paul

The doctrine of res judicata, also known as claim preclusion, bars relitigation of claims that were, or could have been, asserted in a previous case. Questions concerning its application periodically arise in intellectual property cases, where products are constantly evolving and injunctions are no longer issued as a matter of course. In such cases, questions may also arise as to the effect a prior settlement agreement may have on a later lawsuit against products that are essentially the same as those in the case that was ultimately settled. The Federal Circuit recently addressed these issues in its opinion in Aspex Eyewear, Inc. v. Marchon Eyewear, Inc., No. 2011-1147 (Fed. Cir. Mar. 14, 2012).¹

Background

Aspex Eyewear, Inc. held a patent covering primary eyeglass frames designed so that auxiliary frames, typically containing sunglass lenses, could be attached to the primary frames by magnetic force. Revolution Eyewear, Inc. manufactured eyeglass frames and auxiliary sunglass frames that could be attached to the front of eyeglass frames. Revolution initially had an "Old Design" where magnetic elements in the auxiliary frames attached to the bottom of magnetized projections on the primary frames. After the patent-in-suit was reissued, Aspex successfully sued Revolution for infringement based on this "Old Design" and was awarded $4 million in damages as a result.

While the case against Revolution was pending, Aspex sued Marchon Eyewear, Inc., a licensee of Revolution's Old Design, for infringement. At the same time, Revolution introduced a "New Design" where the magnetic elements in the primary frames were embedded in the frame instead of in projections as in the "Old Design." After the New Design was introduced, Aspex and Marchon entered into a settlement agreement, which extinguished any claim that either party might have. The agreement, however, specifically referenced only the Old Design.

In the meantime, the PTO reexamined the patent-in-suit and granted an amended version of one claim as well as a new dependent claim, which depended from the amended claim. Following that grant, Aspex sued both Revolution and Marchon, alleging that the New Design infringed these two claims. Both defendants moved to dismiss based on res-judicata grounds, arguing that Aspex already prevailed on these claims in the prior action. Marchon also moved to dismiss the claims as barred by its settlement agreement with Aspex. The district court granted summary judgment, holding that the accused products in this case were essentially the same as the products from the earlier cases. The court also noted that the settlement agreement with Marchon dismissed with prejudice any claim that could have been made by and between the parties arising from or connected with the earlier action.

The Aspex Decision

The Federal Circuit first addressed Aspex's argument that res judicata does not bar the current action because it was based on claims amended and added during reexamination. Aspex contended that because the claims were not in existence when the earlier actions were filed, a new cause of action was therefore created, which could not have been pursued before. The Federal Circuit, however, rejected this argument, holding that the asserted claims were merely new versions of claims found in the original patent-in-suit. Moreover, the reexamined claims were necessarily narrower than the original claims; claims can be broadened only by reissue. Finally, the Federal Circuit held that any differences between the original and new claims were insubstantial, and thus, did not create a new cause of action.

Turning to Revolution and Marchon's argument that the Old Design and New Design were essentially the same and that res judicata should therefore apply equally to the latter design as well, the Federal Circuit disagreed. It held that because the New Design was not in existence when the earlier actions were filed, res judicata could not bar a subsequent lawsuit against that design because a claim was not, and could not have been, asserted against that design. Whether the designs were essentially the same was of little relevance to the court. Thus, the Federal Circuit accepted this alternative theory requiring reversal and remanded the case. The Federal Circuit noted that the district court should also consider the implications of the doctrine of collateral estoppel, also known as issue preclusion, but that its ruling on res judicata was unaffected by this because it was not based on an attempt by Aspex to relitigate an issue it had lost on previously.

Revolution also argued that Aspex's current action should be barred because it failed to request a broader injunction. In fact, the Federal Circuit noted, Aspex had received an injunction on the Old Design, and the district court dutifully granted one only as broad as was necessary. Thus, contrary to Revolution's argument, Aspex's only recourse was to bring a subsequent suit against the New Design because it could not have been covered by the original injunction. The Federal Circuit noted how peculiar it would be if this avenue were foreclosed and the accused infringers could receive what would amount to an unpaid license for the remainder of the life of the patent.

Turning to Marchon's settlement agreement with Aspex, the Federal Circuit noted that parties can determine for themselves what preclusive effect the settlement will have on any potential subsequent action between them. Here, the agreement specifically referenced only the Old Design, so the Federal Circuit concluded that it extinguished any claims pertaining to the Old Design after the effective date of the agreement but that it did not apply to New Design products that had not been made or sold as of the effective date. Thus, the court accepted Aspex's argument that the agreement was limited to the Old Design even though the New Design was introduced after the suit was brought but before the case was settled. The only question for the court was whether the agreement applied to New Design products made or sold before the effective date of the agreement. Not finding express evidence that the parties intended to depart from the normal rule that the products-in-issue in a patent suit are those in existence when the suit is filed (particularly because the agreement pertained only to the Old Design), the Federal Circuit concluded that the settlement agreement did not extinguish any claims concerning the New Design. Thus, the settlement agreement did not act as a res-judicata bar to Aspex's subsequent suit against Marchon either.

Strategy and Conclusion

1. Products not in existence when an earlier action was filed will likely not be protected by a defense of claim preclusion. Alleged infringers should be aware that any new products developed or released after the institution of suits directed at similar products may be subject to follow-on litigation based on the same or similar patent claims. Thus, if an alleged infringer wants to prevent litigation over follow-on designs, it should seek to include those products in the scope of any settlement agreement.
2. Claims minimally amended in reexamination may be subject to a res-judicata bar if the original claims were already litigated. Unlike reissued claims, claims amended in reexamination are necessarily narrower than the original claims. Thus, if a claim was, or could have been, previously asserted in a prior litigation, and emerges from reexamination with only insubstantial differences from the original claim, res judicata would apply to prevent that claim from being asserted in a later case.
3.  Parties can determine for themselves what, if any, preclusive effect a settlement may have on any potential subsequent action between them. For this reason, it is important to expressly identify which accused products are covered by the settlement agreement and consider whether any future modifications of that product should be included within the scope of the agreement. Otherwise, the agreement may be interpreted as being limited to the products at issue in the underlying patent suit.
   
   Endnotes
   ¹  The Aspex decision: http://www.cafc.uscourts.gov/images/stories/opinions-orders/11-1147.pdf.

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