CAFC: Prior suit against manufacturer precluded later suit against end users

Transclean v. Jiffy Lube (Fed. Cir. 2007).

I spent one summer of my youth in the lube & oil business.  It ends up being a pretty fun occupation, although the pay is quite low.

Transclean is the exclusive licensee to a patent covering a machine for changing automatic transmission fluid.  Bridgewood sold infringing machines, and lost an earlier patent battle with Transclean. (Although Bridgewood has apparently not paid-up yet).

Transclean — wanting its money — filed suit against end-users, including Jiffy Lube, who had purchased the Bridgewood products.

The courts, however, found Transcleans claims precluded. Under 8th Circuit claim preclusion law, an earlier suit bars a later asserted claim if:

1. the first suit resulted in a final judgment on the merits;
2. the prior judgment was rendered by a court of competent jurisdiction;
3. both suits involve the same cause of action; and
4. both suits involve the same parties or their privies.

Here, the only questionable factor was whether Jiffy was in privity with Bridgewood. In the 8th Circuit, privity is found when parties are closely related with nearly identical interests so that “it is fair to treat them as the same parties for the purpose of determining the preclusive effect of the first judgment.”

Generally, for this standard, a buyer-seller relationship does not create privity for claim preculsion and Jiffy would lose the appeal — except for Transclean’s litigation strategy . . . Earlier in the litigation, transclean had argued that Jiffy was in privity with the prior defendant Bridgewood. Using that ‘admission’ and the doctrine of judicial estoppel, the CAFC refused to hear Transclean’s new arguments about the lack of privity (even though it is clear that there was no privity in fact).

In this case, we find it appropriate to invoke judicial estoppel to hold Transclean to its concession that Bridgewood and its customers were in privity for claim preclusion purposes. The determination Transclean asks us to make—that Bridgewood and the defendants were not in privity for claim preclusion purposes—is clearly inconsistent with the position it advocated before the trial court and in its opening brief on appeal. . . . As part of its litigation strategy, Transclean made the choice to concede privity between Bridgewood and its customers after choosing not to join the customers in the first litigation. Under the circumstances presented by this case, we believe Transclean should be held to the consequences of its choices.

 

Comments

[Burt]

Looks like a lesson for the litigtors. There is a similar situation in the financial/banking industry. Patentee holds patents on check imaging which has now become quite popular post 911 after planes carrying checks to be cleared were grounded for a few days. Actual and potential defendants include the banks and the financial processors who provide software and services to the banks. Not sure any case has yet been decided. Independent of privity, the issue we see possibly arising is where the patent owner or assignee works out confidential license agreements with both the bank entity and the processor entity on a per transaction basis and essentially double dips for each transaction. Looking for ideas here.