Non-Infringement Need Not Be “Actually Litigated” to Shield Accused Products From Infringement Liability in Subsequent Actions

| Ari FeinsteinChristie Matthaei

In Re Personal Web Technologies LLC

Before Wallach, Bryson, and Taranto. Appeal from the United States District Court for the Northern District of California.

Summary: The Kessler doctrine is not limited to cases involving a finding of non-infringement; it applies to cases that are dismissed with prejudice.

PersonalWeb Technologies LLC (“PersonalWeb”) sued dozens of Amazon’s customers alleging infringement of several related patents. Amazon intervened and sought declaratory judgment that PersonalWeb’s lawsuits against Amazon’s customers were precluded as a result of a prior lawsuit PersonalWeb brought against Amazon, which was dismissed with prejudice. The district court agreed with Amazon that PersonalWeb’s infringement actions against Amazon’s customers were barred as a result of the dismissal of the prior action. PersonalWeb appealed to the Federal Circuit.

On appeal, PersonalWeb challenged the district court’s decision on two grounds. First, PersonalWeb argued that claim preclusion does not apply to the actions against Amazon’s customers because the prior action involved a different feature of Amazon’s S3 system and, thus, constituted a different cause of action. The Federal Circuit noted, however, that the particular feature of Amazon’s S3 system in the customer cases was identified in the infringement contentions in the prior action. Further, every alleged act of infringement in the customer cases was based on the use of the same Amazon S3 product that was accused of infringement in the prior action. The Federal Circuit therefore rejected this argument.

Second, PersonalWeb argued that the with-prejudice dismissal of the prior action against Amazon did not constitute an adjudication of noninfringement and therefore is not sufficient to trigger the Kessler doctrine. The Federal Circuit explained that the Kessler doctrine “‘fills the gap’ left by claim and issue preclusion, by ‘allowing an adjudged non-infringer to avoid repeated harassment for continuing its business as usual post-final judgment in a patent action where circumstances justify that result.’” PersonalWeb argued that since the prior action was dismissed before there was any adjudication “no issues” were actually litigated and the Kessler doctrine does not apply. Since “no issues” were actually litigated in the prior action, PersonalWeb argued, Amazon is not an “adjudged non-infringer.” The Federal Circuit rejected PersonalWeb’s characterization of the Kessler doctrine and explained that issues of non-infringement or invalidity do not need to have been litigated in order for the Kessler doctrine to be properly invoked.

Having rejected PersonalWeb’s arguments on appeal, the Federal Circuit affirmed the district court’s dismissal of the customer cases.

Editor: Paul Stewart