Transclean Corp. v. Jiffy Lube International, Inc. et al.

By Nicholas A. Keppel

As a general proposition the law holds that a patent owner need not sue all infringers at the same time, can pursue separate infringers successively in separate lawsuits, and can forego pursuing some infringers altogether. However, a Federal Circuit decision handed down this month underscores in certain situations, a patent owner is barred under the doctrine of "claim preclusion" from suing separate infringers successively where the separate infringers are asserted under the doctrine of "issue preclusion" to be in privity with a previously sued defendant.

The case is Transclean Corp. v. Jiffy Lube International, Inc. et al. (Decided January 18, 2007; Case Number 06-1077). There the Federal Circuit held that the plaintiff may not pursue litigation against users of an infringing product where the plaintiff had already won an infringement suit against the manufacturer of the allegedly infringing product, and had argued the manufacturer and users were in privity.

The decision turned on the question of whether the patentee’s suit was precluded under the doctrine of claim preclusion. The prior litigation was a patent infringement suit brought by Transclean Corporation ("Transclean"), the exclusive licensee of a patent directed to an automatic transmission fluid changing machine, against Bridgewood Services, Inc. ("Bridgewood"), which manufactured and sold infringing machines. In that litigation, the trial court granted Transclean’s motion for summary judgment after barring Bridgewood from asserting it did not infringe. The bar was a sanction for Bridgewood’s failure to respond to interrogatories. The decision was affirmed on appeal.

After this victory, Transclean decided to pursue infringement actions against Jiffy Lube International, Inc. and about 30 other fast lube businesses (collectively, "Jiffy Lube") that had bought infringing machines from Bridgewood.

During trial, Jiffy Lube filed a motion for summary judgment, asserting that Transclean was, under the doctrine of claim preclusion, precluded by the Bridgewood litigation from suing the defendants. Transclean filed its own motion for summary judgment, asserting that the defendants were precluded by the doctrine of issue preclusion from asserting a non-infringement defense against Transclean. The trial court (D. Minn.) granted Jiffy Lube’s motion, finding that the elements of claim preclusion were satisfied: (1) The Bridgewood litigation ended with a final decision on the merits, (2) The District Court had proper jurisdiction, (3) The litigation in both cases involved the same cause of action, and (4) Jiffy Lube was in privity with Bridgewood. Moreover, Transclean conceded that it was aware during the Bridgewood litigation that Jiffy Lube and the other defendants had bought and were using Bridgewood’s infringing machines. Transclean appealed to the Federal Circuit.

The Federal Circuit opinion focused on the last two elements of claim preclusion since the first two elements were not in dispute. As to the third element, Transclean argued that litigation against infringing users involves a different cause of action than litigation against an infringing manufacturer and seller. The Federal Circuit disagreed and held that the third element was met since both lawsuits involved the same patent and the same infringing machines.

As to the fourth element, Transclean argued that the users of the infringing machine were not in privity with the infringing manufacturer and seller. The Federal Circuit held that Transclean was estopped from making this argument by the doctrine of judicial estoppel. During trial, Transclean filed a summary judgment motion asserting that Jiffy Lube and the other defendants were precluded from re-litigating infringement by the doctrine of issue preclusion. In support of its motion, Transclean argued that Jiffy Lube and the other defendants were in privity with Bridgewood. The Federal Circuit stated that the strategic decision by Transclean at the trial stage to avoid re-litigating infringement estopped Transclean from arguing, on appeal, that Jiffy Lube was not in privity for purposes of claim preclusion.

Since all elements of claim preclusion were met, the Federal Circuit affirmed the trial court’s granting of summary judgment in favor of defendants.