Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 (1971) involves a case where the patentee (University of Illinois) had first asserted its patent against Winegard and lost a bench trial on obviousness grounds. Later, the University sued Blonder, but the Supreme Court found the University's case barred by collateral estoppel (AKA issue preclusion). Prior to this case the general rule was that collateral estoppel did not apply non-mutually – i.e., where the defendant in the second case was not part of the first case.
What should happen in the following situation?:
1. Assume that a patentee believes its rights are being infringed by a number of companies.
2. Patentee sues D1 for infringement; D1 raises prior art and challenges the patent as obvious; but Patentee wins, including a holding that confirms patent validity.
3. Patentee sues D2 for infringement; D2 raises the same prior art and obviousness argument; but Patentee wins, including a holding that confirms patent validity.
4. Patentee sues D3 for infringement; D3 raises the same prior art and obviousness argument; but Patentee wins, including a holding that confirms patent validity.
5. Next, Patentee sues D4 for infringement; D4 raises the same prior art and obviousness argument; However this time the patentee loses and the court holds the patent invalid as obvious.
6. Finally, Patentee sues D5 for infringement.
Question – Does D5 have the right to win the case on collateral estoppel grounds?
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I started thinking about this issue when reading the Restatement of the Law 2d – Judgments. Section 29 considers non-mutual issue preclusion and indicates that "other circumstances [may] justify affording [a would-be precluded party] an opportunity to relitigate the issue. The circumstances to which considerations should be given include those enumerated in § 28 and also whether . . . (4) The determination relied on as preclusive was itself inconsistent with another determination of the same issue." The notes following §29 suggest two prior inconsistent outcomes "may have been based on equally reasonable resolutions of doubt as to the probative strength of the evidence or the appropriate application of a legal rule to the evidence. That such a doubtful determination has been given effect in the action in which it was reached does not require that it be given effect against the party in litigation against another adversary."
Don Chisum emailed with two particular patent cases on point from his treatise. Mississippi Chem. Corp. v. Swift Agricultural Chem. Corp., 717 F.2d 1374 (Fed. Cir. 1983) and Stevenson v. Sears, Roebuck & Co., 713 F.2d 705 (Fed. Cir. 1983). In Mississippi Chem, the Federal Circuit held that prior inconsistent judgments serve as a "red flag warning" for the court to more carefully consider whether the patentee had a full and fair opportunity to litigate the issue in the case that resulted a finding of invalidity. The idea of this red-flag warning comes from a pre-Federal Circuit decision by the Fifth Circuit. Blumcraft of Pittsburgh v. Kawneer Co., 482 F.2d 542 (5th Cir.1973). In Blumcraft, the court wrote (in dicta) that "under our ruling today it would be technically possible to apply collateral estoppel where a prior finding of invalidity was preceded by several rather than by just one finding of validity."
In such instances there would be a red flag warning a court to apply the full and fair criteria very carefully to determine if the court finding the patent invalid had adequately comprehended and applied the appropriate substantive standards.
In Blumcraft, the court described the Blonder-Tongue ruling as follows: "Blonder-Tongue did not throw merely a jab at the multiplicity of patent litigation; rather, it intended a knockout blow through the doctrine of collateral estoppel so that any time a patent was found invalid in a fair fight with a knowledgeable referee, the courts could count ten and the patent holder could no longer maintain that he was champion." As it did in Mississippi Chem., the Federal Circuit followed this same approach in Stevenson.