March 2015

District Court Erred by Applying Collateral Estoppel to a General Jury Verdict That Could Have Rested on Multiple Grounds
Kumiko Kitaoka*

In United Access Technologies, LLC v. CenturyTel Broadband Services LLC, No. 14-1347 (Fed. Cir.
Feb. 12, 2015), the Federal Circuit reversed the district court’s dismissal of the action on collateral estoppel grounds based on a prior action involving the same patents where a general jury verdict found against the patentee.

United Access Technologies, LLC (“United”) owns U.S. Patent Nos. 5,844,596; 6,243,446; and 6,542,585 (collectively “the United Patents”).  The asserted claims of the United Patents recite systems for using a landline telephone connection for both voice communication and data transmission.  In 2002, Inline Connection Corporation (“Inline”), United’s predecessor in interest, brought suit against EarthLink, Inc. (“EarthLink”), charging EarthLink with direct infringement of the United Patents by offering its customers an Internet connection service based on a broadband digital communications technology known as Asymmetrical Digital Subscriber Line (“ADSL”).  EarthLink asserted that ADSL technology did not infringe the United Patents, and even if it did, EarthLink’s accused ADSL system did not include a “telephone device” as required by the claims.  

The jury in the EarthLink case returned a general verdict of noninfringement with respect to all of the asserted claims.  Nothing in the verdict form or the record indicated the jury’s grounds it had adopted in reaching its verdict.  Inline moved for JMOL and the trial court denied the motion.  The district court found that the jury’s verdict could be upheld on either of the following two theories:  (i) Inline failed to meet its burden to establish that ADSL technology infringed the asserted claims of the United Patents, or (ii) EarthLink did not infringe because none of its systems included a telephone, a required element of the asserted claims.  The Federal Circuit affirmed the district court’s decision.

In 2011, United, as Inline’s successor, filed this action against CenturyTel Broadband Services LLC and Qwest Corporation (collectively “Appellees”), charging infringement of the same claims asserted in the EarthLink case.  Appellees sought dismissal of the claims based on collateral estoppel.  United argued that this case should be distinguished from the EarthLink case because EarthLink provided services distinct from any services involving the use of a telephone, while Appellees’ service included telephone services.  The district court rejected United’s argument, stating that the proposed distinction from the EarthLink case did nothing to account for the fact that the issue as to whether industry standard ADSL infringes the United Patents was already litigated and lost.  The district court further held that the second ground for the EarthLink court’s ruling of noninfringement, which was based on the impeachment of Inline’s expert, was fatal to United’s claims because independently sufficient alternative findings give preclusive effect under Third Circuit law.  The district court held that collateral estoppel barred United from seeking to relitigate that same issue in this case.

“In holding that the jury verdict in the EarthLink case could have been based on the absence of a telephone from EarthLink’s systems, rather than on the failure of proof that the ADSL technology infringes United’s patents, the trial court in EarthLink found that a rational jury could have grounded its verdict on an issue other than the one the defendants now seek to foreclose from consideration—precisely the finding that the Supreme Court in Ashe held to be fatal to an effort to apply collateral estoppel to the jury’s verdict.”
Slip op. at 14.

On appeal, the Federal Circuit found that the EarthLink JMOL decision did not establish that the jury necessarily based its verdict on a conclusion that the standard ADSL technology did not infringe the United Patents and, thus, collateral estoppel did not apply.  The Court noted that “[i]t is well established that a general jury verdict can give rise to collateral estoppel only if it is clear that the jury necessarily decided a particular issue in the course of reaching its verdict.”  Slip op. at 7 (citing Ashe v. Swenson, 397 U.S. 436, 444 (1970)).  The Federal Circuit further explained that “[w]here there is doubt as to the issue or issues on which the jury based its verdict, collateral estoppel is inapplicable.”  Id. at 8 (citation omitted).  After considering the First and Restatement of Judgments and the rationales underlying each, the Court applied the Second Restatement and held that if a judgment of a court of first instance is based on determinations of two issues, either of which standing independently would be sufficient to support the result, the judgment is not conclusive with respect to either issue standing alone. 

The Court concluded that the JMOL ruling in the EarthLink case did not hold that the jury had decided in favor of EarthLink on both of those grounds, and held that a rational jury could have grounded its verdict on an issue other than the one Appellees seek to foreclose from consideration.  Accordingly, the Court ruled that application of collateral estoppel to the jury’s verdict would contradict Supreme Court precedent and, thus, it reversed the district court’s decision applying collateral estoppel against United.  Finally, the Court noted that it held only that “it was error to apply collateral estoppel to a general jury verdict that could have rested on multiple grounds, simply because the first court held, in its JMOL ruling, that the evidence would have been sufficient to support the jury’s verdict on either theory of liability presented to it.”  Id. at 16.

In conclusion, the Court reversed the district court’s dismissal of the action on collateral estoppel grounds and remanded the case. 

*Kumiko Kitaoka is a Law Clerk at Finnegan.