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XY, LLC v. Trans Ova Genetics, L.C.

Litigating Patent Owner Estopped on Validity Upon Affirmance of IPR Claim Cancelation Involving Different Adversary

XY, LLC v. Trans Ova Genetics, L.C., __ F.3d __, 2018 WL 2324460 (Fed. Cir. May 23, 2018) (Newman (CIP/DIP), Dyk, CHEN) (D. Colo.: Martinez) (3 of 5 stars)

Fed Cir generally affirms liability judgment while vacating computation of ongoing royalty rate. XY’s patents relate to the sorting of X- and Y-chromosome-bearing sperm cells, useful in selective breeding.

Antitrust: The district court did not err in granting summary judgment against Trans Ova’s antitrust counterclaims as time barred per § 15b of the Sherman Act. Trans Ova failed to demonstrate a triable issue as to whether XY was engaged in a “continuing conspiracy” to violate antitrust laws, which would have overcome the time bar. Per Kaw Valley, 872 F.2d 931 (10th Cir. 1989), Trans Ova had the burden to present material evidence of some new, independent act by XY within the limitations period. When it was unable to do so, the district court properly granted summary judgment to XY.

Breach of contract: The district court did not err in rejecting Trans Ova’s Rule 50 & 59 motions concerning its breach of contract with XY. The record supported a jury finding that Trans Ova had breached prior to XY, so XY’s breach did not necessarily excuse Trans Ova. The court declines to take up as waived an argument by Trans Ova of inconsistency in the jury’s verdicts (it found breach by both XY and Trans Ova). The district court did not abuse its discretion in approving XY’s proposed special verdict form; in view of the jury instructions that were presented the form was not clearly unreasonable, as per Lazare Kaplan, 714 F.3d 1289 (Fed. Cir. 2013).

Patent invalidity: The district court did not abuse its discretion in rejecting Trans Ova’s motion for a new trial on invalidity. As to certain claims, there was no need to address Trans Ova’s invalidity arguments because the Court had, in a separate opinion (XY, LLC v. ABS Global, Inc., __ F. App’x __, 2018 WL 2329813 (Fed. Cir. May 23, 2018) (R36 affirmance)), affirmed the PTAB’s determination of unpatentability following IPR. “That affirmance renders final a judgment on the invalidity of the [patent in question], and has an immediate preclusive effect on any pending or co-pending actions involving the patent.” Op. at 19. Addressing the dissent, the opinion emphasizes that it is the affirmance of the invalidity finding that leads to collateral estoppel, not the administrative agency’s determination on its own. There is no obstacle to applying collateral estoppel sua sponte because there is no indication that any party ever thought that estoppel would not apply in such circumstances, as discussed at oral argument. That Trans Ova was not the IPR petitioner is of no consequence, as per Pharmacia & Upjohn, 170 F.3d 1373 (Fed. Cir. 1999).

As to the remaining claims, the district court properly assigned credibility determinations necessary to the invalidity judgment to the jury, and the jury’s findings of no invalidity were supported by substantial evidence.

Willfulness: Trans Ova’s appeal of the jury’s willfulness finding was moot, as the district court declined to award enhanced damages.

Ongoing royalty: The district court erred in setting the ongoing royalty rate by failing to consider XY’s changed economic circumstances. Though XY had agreed to a 10% royalty in the pre-suit period, the jury’s setting of a 15% royalty for past infringement was indicative of changed circumstances. It was thus erroneous for the district court to use the 10% royalty to determine an ongoing royalty rate of 12.5% (i.e., the average of the pre-suit rate and the jury’s rate). On remand, the district court should recalculate the ongoing royalty rate without reliance on the pre-suit 10% rate.

Concurrence-in-part: Judge Newman would have found no estoppel as to validity because the PTAB ruling in question involved “non-mutual parties, and contravenes not only the America Invents Act’s estoppel provision, but also the general law of collateral estoppel.” CIP at 1. She also disagrees with the Court’s sua sponte application of estoppel without requesting additional briefing.

KEYWORDS: SHERMAN ACT; BREACH OF CONTRACT; INVALIDITY; COLLATERAL ESTOPPEL; ROYALTY RATE