“The so-called ‘Fresenius / Simmons preclusion principle’ has received sharp criticism from academics and jurists. It is legally incorrect.” – Chrimar petition

Chrimar Systems, Inc. filed a petition for en banc rehearing with the Federal Circuit on October 21 asking the full Court to review the so-called Fresenius-Simmons preclusion principle. The petition has a high hurdle to meet, as the underlying Federal Circuit decision was nonprecedential, but the petitioners argue that the case qualifies as a rare exception warranting en banc review.

In Chrimar Systems, Inc. v. ALE USA, Inc. FKA Alcatel-Lucent Enterprise USA, Inc. , a jury initially found U.S. patent No. 8,942,107 for A Piece of ethernet terminal equipment valid and infringed by ALE in 2016, and the Federal Circuit affirmed that decision in May 2018. The case was remanded on a claim construction error relating to a different patent, but the CAFC said that the partial remand was “immaterial to damages because any damages that would result from the alleged infringement of the [remanded] ’012 patent also results from the infringement of the ’107 and ’760 patents.”

Separately, the Patent Trial and Appeal Board (PTAB) held in proceedings between Chrimar and a different company that the claims at issue in the case with ALE were unpatentable (Chrimar Systems, Inc. v. Juniper Networks, Inc.). Chrimar pointed out in its petition that the PTAB made this determination under a lighter burden of proof than did the Article III courts, but the Federal Circuit nonetheless affirmed the PTAB’s decision in September 2019 under Rule 36 and separately vacated the May 2018 judgment and remanded to the district court for dismissal.

In vacating the May 2018 (amended June 1) judgment, the Court explained:

Our affirmance of the Board’s decisions of un-patentability of the patent claims at issue in the present case has “an immediate issue-preclusive effect on any pending or copending actions involving the patent[s].” XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1294 (Fed. Cir. 2018). This is such a case under Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330 (Fed. Cir. 2013), and related cases. It does not involve the special circumstance of a “fully satisfied and unappealable final judgment” like the one in Western-Geco L.L.C. v. ION Geophysical Corp., 913 F.3d 1067, 1072 (Fed. Cir. 2019).

In their brief, Chrimar argued that “the so-called “Fresenius / Simmons preclusion principle” [deriving from John Simmons Co. v. Grier Bros. Co. and Fresenius USA, Inc. v. Baxter Int’l, Inc.] has received sharp criticism from academics and jurists. It is legally incorrect. And, this principle incentivizes unfairness for patentees, motivates gamesmanship by accused infringers, and leads to wasted judicial effort by trial and appeals courts.”

The petition for en banc rehearing makes six key points:

I. The Panel Decision Did Not Apply the Restatement (Second) of Judgments Because Fresenius Incorrectly Requires Ignoring the Restatement;

II. The Fresenius Panel Incorrectly Believed Itself Bound by Inapposite Supreme Court Authority;

III. The “Fresenius / Simmons Preclusion Principle” Violates Separation of Powers By Allowing Administrative Outcomes to Nullify Otherwise Final Article III Judgments;

IV. Expanding the “Fresenius / Simmons Preclusion Principle” Has Deepened the Circuit Split;

V. A Post-2014 Supreme Court Decision Undermines Freseniu; and

VI. Criticism of Fresenius Should Lead to En Banc Review.

With respect to point III, the petition notes that several judges of the Court have expressed concern over the constitutionality of allowing an administrative agency “to nullify a court judgment that has otherwise resolved the merits and damages of a patent infringement suit.” Judges O’Malley, Wallach, Rader and Newman have all made such statements in dissents or agreement with aspects of those dissents.

As to Chrimar’s argument for rehearing of a nonprecedential decision, the petition contends that this meets the standard set by the Federal Circuit’s Rule 35 Practice Note, which states that rehearing of nonprecedential decisions is “rarely appropriate”. Chrimar argues that this is that rare circumstance because members of the Court have “sharply criticized” the legal standard applied by the panel in the underlying case and because the Supreme Court reviews Federal Circuit decisions even when they aren’t precedential (citing cases such as Oil States and KSR v. Teleflex).

The petition concludes:

“As numerous Judges of this Court already recognize, the time has come to harmonize the Federal Circuit with Supreme Court precedent and the Restatement, unsplit the circuits, restore constitutional validity to our system of parallel track patentability litigation, and eliminate the waste and gamesmanship that current precedent incentivizes.”

Amicus briefs are due within 14 days (November 4). The request of even one judge would require a response from ALE USA, after which an internal vote on whether to go en banc will be held.

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