On July 5, in Inguran, LLC v. ABS Global, Inc, the Federal Circuit issued an opinion clarifying the preclusive effect of a direct infringement claim on subsequent inducement claims. The court held that an earlier direct infringement judgement did not preclude Inguran from bringing a later induced infringement claim. Claim preclusion is important for plaintiffs in considering whether to bring causes of action in a single concurrent suit. It is also important for defendants in avoiding serial lawsuits based on claims that were raised or could have been raised in an earlier suit.
This case emerged from ongoing litigation between Inguran (dba STGenetics) and ABS. ABS is a “bull stud” that sells semen drawn from bulls packaged in straws for use in artificial insemination. ST provides bull studs like ABS with sexed semen straws that predominantly include sperm cells of one sex. ST is the patent holder of U.S. Patent No. 8,206,987, which claims a method of sorting bull sperm cells.
In ABS I, ABS alleged that ST was maintaining a monopoly for sexed specimen processing. ST brought a counterclaim that alleged ABS’s competing GSS System directly infringed the ’987 patent. In ABS III, ST brought another infringement claim that alleged that ABS’s selling or licensing of its GSS Systems to third parties induced infringement of the ’987 patent. ABS moved to dismiss on the ground that the induced infringement claims were precluded by the direct infringement judgment in ABS I. The district court held that the induced infringement claims were precluded. ST appealed.
The elements of claim preclusion, or res judicata, are as follows:
- An identity of the parties or their privies in the first and second lawsuits;
- An identity of the cause of action; and
- A final judgment on the merits in the first suit.
On appeal, the Federal Circuit addressed the second element—whether ABS I and ABS III had the same cause of action. The Federal Circuit has interpreted the same cause of action to mean that the second claim is based on the same set of transactional facts as the first. Accordingly, whether the induced infringement claims are precluded based on prior direct infringement claims hinges on whether the same set of transactional facts are at issue. In a patent suit, transactional facts include the asserted patents and the accused activity.
ST argued that direct and induced infringement claims are distinct and involve different infringing acts. For example, proof of direct and indirect infringement involves different elements and statutes—35 U.S.C. § 271(a) versus § 271(b), respectively. Additionally, during ABS I, an inducement claim would have been premature because ABS had not yet begun selling or licensing the GSS technology to third parties. ABS argued that the licensing program was part of the accused conduct for both claims and the transactional facts were essentially the same.
The Federal Circuit agreed with ST. First addressing whether ST asserted inducement in ABS I, the court determined that it had not. The court then looked to whether ST could have supported an inducement claim from the transactional facts in ABS I. The court found that ST could not have. The direct infringement claims in ABS I centered on ABS’s activity. The induced infringement claims in ABS III centered on third parties’ activities. An induced infringement claim would involve elements and evidence beyond those required to prove direct infringement. On this basis, the court held that ST’s induced infringement claims in ABS III were not precluded by the direct infringement judgement in ABS I.
This decision will help guide plaintiffs and defendants in determining the applicability of claim preclusion in future patent infringement litigation. Notably, depending on the facts, plaintiffs may not be required to join direct and induced infringement claims in a single suit. Further, defendants may not be able to avoid later induced infringement claims where there has been an earlier direct infringement judgment.
