Federal Circuit says Rule 36 Judgments can have Preclusive Effect

Phil-Insul Corp. v. Airlite Plastics Co., (Fed. Cir. Apr. 17, 2017) (Before O’Malley, Bryson, and Wallach, J.) (Opinion for the court, O’Malley, J.).

Appellant Phil-Insul Corp. d/b/a IntegraSpec (“IntegraSpec”) appeals from the district court’s grant of summary judgment of no infringement.  The district court held IntegraSpec’s claims were barred by collateral estoppel, due to a Federal Circuit Rule 36 affirmance in a prior action.  The district court held that: (1) IntegraSpec’s infringement claims were the same as asserted earlier and (2) the accused products of Airlite Plastics Co. and Formtech, LLC (“Airlite”) have the same design as the noninfringing products in the earlier litigation.

The IntegraSpec patent is directed to a hollow foam block used as a mold to cast concrete walls.  The foam blocks are designed to interlock when the blocks are stacked.

In the prior action (“Reward Wall” litigation), IntegraSpec asserted claims from the same patent against different defendants with similar products.  After claim construction, the defendants separately moved for summary judgment of noninfringement.  The district court decided that the Reward Wall products did not infringe the IntegraSpec patent, either literally or under the doctrine of equivalents, based on its construction of certain claim terms.

IntegraSpec appealed the district court’s final judgment to the Federal Circuit, challenging the court’s construction of two claim terms, and no other aspects of the judgment.  The Federal Circuit summarily affirmed the district court’s judgment pursuant to Federal Circuit Rule 36.

Due to the similarities in accused products, Airlite initially filed a motion to stay this case pending resolution of the Reward Wall litigation.  Following the stay, Airlite moved for summary judgment based on collateral estoppel.  Airlite argued that IntegraSpec’s infringement claims were indistinguishable from the claims asserted in Reward Wall.  Airlite also argued that there are no material differences between the noninfringing Reward Wall products and the accused products in this case.  Further, the Federal Circuit’s affirmance of the district court’s claim constructions in Reward Wall is binding upon IntegraSpec for collateral estoppel purposes.

The Federal Circuit reviews a grant of summary judgment under regional circuit law, in this case, Eighth Circuit. Grober v. Mako Prods., Inc., 686 F.3d 13335, 1344 (Fed. Cir. 2012).  The Eighth Circuit reviews a grant of summary judgment de novo.  Wilson v. Spain, 209 F.3d 713, 716 (8^th Cir. 2000).  Additionally, in the Eighth Circuit, collateral estoppels is a question of law requiring five elements: “(1) the party sought to be precluded in the second suit must have been a party, or in privity with a party, to the original lawsuit; (2) the issue sought to be precluded must be the same as the issue in­volved in the prior action; (3) the issue sought to be precluded must have been actually litigated in the prior action; (4) the issue sought to be pre­cluded must have been determined by a valid and final judgment; and (5) the determination in the prior action must have been essential to the prior judgment.”

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Robinette v. Jones, 476 F.3d 585, 588 (8^th Cir. 2007). However, Federal Circuit precedent applies to aspects of the collateral estoppels analysis that are particular to patent law. Aspex Eyewear, Inc. v. Zenni Optical Inc., 713 F.3d 1377, 1380 (Fed. Cir. 2013). Specifically, “an infringement claim in a second suit is the ‘same claim’ as in an earlier infringement suit if the accused products in the two suits are ‘essentially the same.’” Roche Palo Alto LLC v. Apotex, Inc., 531 F.3d 1372 (Fed. Cir. 2008). Accused products are ‘essentially the same’ where the differences are merely colorable or unrelated to the limitations in the claim. Id.

On appeal, IntegraSpec argues that the district court erred when it gave collateral estoppel effect to a Rule 36 judgment. It disputed two of the collateral estoppels requirements: (4) whether there was a valid final judgment and (5) whether the determination in the prior action was “essential” to the prior judgment.

A Rule 36 summary affirmance is a valid and final judgment of the Federal Circuit.  See Taylor v. McKeithen, 407 U.S. 191, 194 n.4 (1972).  While there is no opinion, “a Rule 36 judgment simply confirms that the trial court entered the correct judgment.”  Rates Tech., Inc. v. Mediatrix Telecom, Inc., 688 F.3d 742, 750 (Fed. Cir. 2012). The Court has also recognized that Rule 36 judgments can be used “in support of a claim of ‘claim preclusion, issue preclusion, judicial estoppels, law of the case, and the like.’” Id. (quoting Fed. Cir. R. 32.1(c)).

IntegraSpec argued that TecSec, Inc. v. International Business Machines Corp., 731 F.3d 1336 (Fed. Cir. 2013) held that a Rule 36 summary affirmance cannot have preclusive effect.  In response, the Federal Circuit clarified that TecSec stands for “the proposition that collateral estoppel cannot apply where the appellate court affirmed, without explanation, the judgment of a trial court that ‘determined two issues, either of which could independently support the result,’ because it is not known which issues was ‘necessary’ to the final appellate judgment.” The Court did acknowledge a circuit split regarding the preclusive effect that alternative holdings may have when each are independently sufficient to support a judgment. However, because the Reward Wall proceedings did not involve independent alternative holdings, either below or on appeal, the Court did not need to address the split in authority.

Neither of the claim constructions in the Reward Wall appeal could have independently supported both noninfringement judgments.  Therefore the Rule 36 affirmance in Reward Wall necessarily meant that the Court found no error in either of the district court’s claim constructions.  Accordingly, the noninfringement determinations in Reward Wall are final for collateral estoppels purposes by virtue of IntegraSpec’s failure to appeal them.

Therefore, the Court affirmed the district court’s judgment of noninfringement.

A Federal Circuit Rule 36 judgment can be a valid and final judgment for purposes of preclusive effects.  Additionally, district court findings affirmed by a Rule 36 judgment can have preclusive effect as long as each is “necessary” to the final appellate judgment.  The Federal Circuit did not address the Circuit split regarding the preclusive effect of independent, alternative holdings.

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