Patent Claims Not Materially Different than Previously Invalidated Are Invalid under Collateral Estoppel

The Court of Appeals for the Federal Circuit ruled that Dr. Arunachalam was collaterally estopped from relitigating the validity of the patent because the patent claims before the PTAB (the “Board”) were not materially different from certain claims of the ’500 Patent that were previously invalidated by a district court. Further, these claims were not materially different from other patent claims of Dr. Arunachalam’s in which the Federal Circuit specifically applied collateral estoppel to bar her from challenging a prior Board unpatentability decision. Collateral estoppel bars Dr. Arunachalam from challenging the Board’s decision in this case. In re Arunachalam, Case No. 2016-1607 (Fed. Cir., Oct. 3, 2017) (Available Here).

Arunachalam’s ’556 Patent and ’500 Patent are generally directed to systems and methods that allow a user to engage in real-time, two-way transactions over networks, such as the Internet. the patent recite a “value-added network” (VAN) switch.

Earlier, Dr. Arunachalam, through her company, Pi-Net International, Inc. (Pi-Net), previously asserted certain claims of the ‘500 Patent in the United States District Court for the District of Delaware (district court), but the district court eventually declared the asserted claims invalid. See generally Pi-Net Int’l Inc. v. JPMorgan Chase & Co., 42 F. Supp. 3d 579, 588–94 (D. Del. 2014). The district court deeming the claims invalid as indefinite, for lack of enablement, and for lack of written description.

Specifically, the district court held that the claim terms “VAN switch,” “switching,” and “value-added network system,” which were used across the asserted claims, were indefinite. Id. at 590. The district court also held that the asserted claims were not enabled. The specification does not explain what a ‘VAN switch’ is and how it accomplishes ‘object routing’ or real-time transactions. Instead, the specification presents an abstract concept of real-time transactions, in which a merchant and a user interact.

Also, the district court found that the asserted claims did not have sufficient written description and stated “The crux of the invention is ‘real-time’ transactions for the user; there is no disclosure of how these occur. The [district] court concludes that the [asserted claims of the ’500 Patent] . . . are invalid for lack of written description.”

In its 2016 decision, the Federal Circuit stated: “Where a patent has been declared invalid in a proceeding in which the ‘patentee has had a full and fair chance to litigate the validity of his patent,’ the patentee is collaterally estopped from relitigating the validity of the patent.” . . . [C]ollateral estoppel is not limited “to patent claims that are identical. Rather, it is the identity of the issues that were litigated that determines whether collateral estoppel should apply.” Arunachalam v. SAP America, Inc., No. 15-1424, slip order at 4 (Fed. Cir. Sept. 23, 2016), (citing Pi-Net Int’l, Inc. v. JPMorgan Chase & Co., 600 F. App’x 774 (Fed. Cir. 2015);(first quoting Miss. Chem. Corp. v. Swift Agric. Chems. Corp., 717 F.2d 1374, 1376 (Fed. Cir. 1983); and then quoting Ohio Willow Wood Co. v. Alps South, LLC, 735 F.3d 1333, 1342 (Fed. Cir. 2013)).

“Of particular relevance to our collateral estoppel decision, we noted that claim 17 contained the VAN switch limitation, which the district court previously held was not enabled in the other asserted claims of the ‘500 Patent. It was of no import that the claims of the ‘500 Patent were adjudicated in different fora. (first citing In re Freeman, 30 F.3d 1459, 1468–69 (Fed. Cir. 1994); and then citing B & B Hardware, Inc. v. Hargis Indus., Inc., __ U.S. __, 135 S. Ct. 1293, 1303 (2015)).”

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