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Intellectual Ventures I LLC v. Capital One Financial Corp.

Withdrawal of Cross-Appeal From Dismissal of Antitrust Counterclaims Leads to Issue Preclusion In Subsequent Case

Intellectual Ventures I LLC v. Capital One Financial Corp., __ F.3d __, 2019 WL ___ (Fed. Cir. Sept. 10, 2019) (Prost, BRYSON, Reyna) (D. Md.: Grimm) (2 of 5 stars)

Fed Cir affirms summary judgment for Intellectual Ventures (“IV”) on antitrust counterclaims filed by Capital One under section 2 of the Sherman Act (monopolization and attempted monopolization) and section 7 of the Clayton Act (unlawful acquisition of assets), in D. Md. (“the Maryland case”). Collateral estoppel (a.k.a. issue preclusion) bars the counterclaims due to Capital One’s filing of antitrust counterclaims against Intellectual Ventures in prior litigation in D. Va. (“the Virginia case”). In the Virginia case, the court ultimately dismissed Capital One’s antitrust counterclaims for failure to state a claim on which relief could be granted. Specifically, the court held that Capital One “failed to plausibly allege a proper relevant antitrust market and failed to plausibly allege that IV wields monopoly power within that market.” Op. at 21. Capital One initially sought appellate review (on a cross-appeal following judgment of no liability on IV’s infringement claims), but dismissed the cross-appeal after successfully adding antitrust counterclaims to the Maryland case.

Applying Fourth Circuit law, the opinion rejects Capital One’s argument that the Virginia dismissal order could not lead to issue preclusion because it was not possible to identify in that order an issue or fact “critical and necessary to the judgment,” as required by Microsoft, 355 F.3d 322 (4th Cir. 2004). The issues of identifying a relevant market, and possession of monopoly power within that market, “are not independent and alternative grounds of decision, but are integrally related.” Op. at 20–21 (discussing Restatement (Second) of Judgments § 27 cmt. i (1982)). The Virginia order “necessarily adjudicated the issue of the appropriate relevant market,” and so the determination in the Maryland case that the prior order was conclusive on that point was appropriate. Op. at 22.

Even if the issues of relevant market and monopoly power were independent and alternative grounds, collateral estoppel would still apply. The opinion analyzes in detail Microsoft and surrounding authority from the Fourth Circuit and other regional circuits, and concludes that even if the issues were considered alternative to one another, “the Fourth Circuit would hold collateral estoppel applicable to both of two alternative grounds, when both grounds would be dispositive in the second case and when the two cases were co-pending at the time the plaintiff decided to proceed with the second case after an adverse decision in the first.” Op. at 30. The opinion then analyzes the Virginia order and approves collateral estoppel based on it. It rejects Capital One’s contention that there were various errors in the Virginia order. First, the Virginia order “was based on the position taken by Capital One in the proceedings before [the D. Va. Court],” and second, “[if] Capital One had wanted to dispute [the Virginia] characterization of the relevant antitrust market, it could have done so by challenging that characterization on appeal from the judgment in that case.”

The opinion then finds collateral estoppel similarly applicable to Capital One’s Clayton Act counterclaim, for similar reasons. It is unnecessary to reach other disputed aspects of the appeal (i.e., a dispute as to whether the Noerr-Pennington doctrine barred the counterclaims altogether, and a dispute as to the counterclaims’ merits).

KEYWORDS: COLLATERAL ESTOPPEL; ISSUE PRECLUSION; ANTITRUST; SHERMAN ACT; CLAYTON ACT; MONOPOLIZATION