Soverain Software LLC v. Victoria’s Secret Direct Brand Management et al.

Docket No. 2012-1649, 2012-1650

February 12, 2015

Brief Summary: “[I]nvalidity of the asserted claims of the ‘314 and ‘492 patent [was] established by issue preclusion” based on an earlier invalidation of the claims in litigation with another party and the DC judgment of infringement reversed.

Summary: Victoria’s Secret appealed DC judgment that it infringed Soverain’s US 5,715,314 (claims 34 and 51) and 5,909,492 (claims 15, 17 and 39) relating to virtual shopping carts. After the DC judgment, the FC decided Soverain Software LLC v. Newegg LLC (2013) holding claims 34 and 51 of the ‘314 patent and claims 17, 41 and 61 of the ‘492 patent invalid as obvious. Here, the FC held “issue preclusion applies as a result of the Newegg case, and that the asserted claims here are therefore invalid.” The opinion first explained why issue preclusion applied to claims 34 and 51 (both previously invalidated) of the ‘314 patent and claims 15 (not previously invalidated but dependent claim 41 was invalidated (“A broader independent claims cannot be nonobvious where a dependent claim stemming from that independent claims is invalid for obviousness. Callaway Gold, FC 2009)) and 17 (previously invalidated) of the ‘492 patent. Issue preclusion requires “identity of the issues in a prior proceeding”, that “the issues were actually litigated” and the “determination…was necessary to the resulting judgment”, and “the party defending against preclusion had a full and fair opportunity to litigate the issues” (Jet, Inc. FC 2000). The opinion explained that “one the claims…are held invalid in a suit involving one alleged infringer, an unrelated party…may reap the benefit of the invalidity decision under the principles of collateral estoppel” (Mendenhall, FC 1994), even when the decision was rendered while the case was on appeal (Dana Corp., FC 1989). Soverain did not argue that “it was deprived of crucial evidence or witnesses in the first litigation or that it would present additional evidence at a new trial” (Blonder-Tongue, US 1971) or that it “did not have a full and fair opportunity to litigage the question of obviousness at the district court” but only “that it did not have the incentive to fully litigate the issue of non-obviousness on appeal” (its argument that it lacked the ability to appeal the Newegg judgment was dismissed as being inapplicable here). However, the FC panel concluded “[t]he fact that Soverain had arguments which it did not make does not mean that Soverain lacked the incentive to make them” and, therefore, the prior decision applied here. Soverain also argued that issued preclusion should not apply to ‘492 claim 39, which depends from invalidated claim 15, because it “was not previously found obvious and does not present identical issues.” However, the FC panel noted that “[c]omplete identity of claims is not required to satisfy the identity-of-issues requirement for claim preclusion” (Ohio Willow, FC 2013) and concluded “[t]he additional limitation [of claim 39]…does not materially alter the question of the validity of claim 39” (“the routine incorporation of Internet technology in claim 39 does not change the invalidity analysis”). Thus, “[t]he invalidity of the asserted claims of the ‘314 and ‘492 patent [was] established by issue preclusion” and the judgment reversed.

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