Judgment With Prejudice is Res Judicata and not Vacated Even if Mooted by Later Reexamination

Judge Pauline Newman

Cardpool, Inc., v. Plastic Jungle, Inc., NKA Cardflo Inc. (Fed. Cir. Apr. 5, 2016) (Before Newman, Reyna, and Wallach, J.) (Opinion for the court, Newman, J.)(Federal Circuit held dismissal with prejudice operates as res judicata for the same cause of action even if a subsequent reexamination amends claims.). Click Here for a copy of the opinion.

Cardpool sued Plastic Jungle for infringing its patent entitled “System and Method for Brand Name Gift Card Exchange.” Plastic Jungle argued, inter alia, that the claimed subject matter was not eligible for patenting under 35 U.S.C. § 101. The district court agreed with Plastic Jungle and dismissed the case for failure to state a claim on which relief can be granted. Cardpool appealed.

Prior to that appeal, Cardpool filed a request for ex parte reexamination, and presented amended and unamended claims, plus additional claims. Before the reexamination was completed, the Federal Circuit affirmed the district court’s judgment as to § 101 ineligibility. The PTO issued an ex parte reexamination certificate a month later. Cardpool petitioned the Federal Circuit’s to vacate its affirmance of the district court’s decision, because the claims that were the subject of that decision were amended in the reexamination and no longer existed. Plastic Jungle argued that the “entire case is moot” because the reexamination “substantially changed” the claims at issue. The Federal Circuit instructed the district court to decide what actions are appropriate, but declined to vacate the invalidity judgment, because the losing party (Cardpool) had caused the change in circumstances.

[Troutman-Ad]

On remand, both parties moved to vacate the district court’s prior judgment so that the parties could move for a voluntary dismissal. Both parties stated that Plastic Jungle was no longer in the same business of online gift card exchange. Cardpool filed a separate brief stating that while the invalidity judgment was mooted due to the changed claims, the entire case was not moot because it may be necessary to enforce the reexamined patent against Plastic Jungle should infringement reoccur. Thus, Cardpool asked that the “with prejudice” judgment be vacated. However, the district court declined, because it was concerned with the old claims, while no court had reviewed the new post-reexamination claims. Just because a PTO examiner allowed the new claims did not mean that a reexamination certificate could “displace a district court judgment following a contested motion to dismiss.” Because the mootness was due to a voluntary action by Carpool, the losing party, vacating the “with prejudice” final judgment was not in the public interest, and was denied. Cardpool appealed.

Cardpool argued that the PTO’s issuance of the Reexamination Certificate was an application of federal law which must be given retroactive effect, because of the happenstance that the appeal was still pending, and that it was legal error to avoid giving full effect to the reexamined claims. Nevertheless, the Federal Circuit affirmed, noting that the Supreme Court counsels that “vacatur must be decreed for those judgments whose review is…’ presented through happenstance’—that is to say, where a controversy presented for review has ‘become moot due to circumstances unattributable to any of the parties.” U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 23 (1994) (internal citations omitted). Here, the case became moot because of Cardpool’s pursuit of reexamination.

The Federal Circuit found no error in the district court’s decision and declined to review the reexamined claims, because the grounds for dismissal was that Plastic Jungle was no longer infringing and the parties agreed to discontinue the litigation. The only issue was Cardpool’s concern that it not be estopped from enforcing its new claims. The Federal Circuit held that dismissal “with prejudice” operates as res judicata for the same cause of action.  The district court’s decision was final and had been affirmed before the PTO’s reexamination decision. The district court violated no legal right in preserving that decision, which is limited to the claims that existed. The district court correctly found it inappropriate to advise on the new claims in a case that the parties agreed was moot, and there was no abuse of discretion in denying the motion to vacate its judgment or its finality. For these reasons, the district court was affirmed.

Also contributing to this summary were Lindsay Henner, Parker Hancock, and Puja Dave.

[Troutman-About]