Doctrine of Res-Judicata Vis-à-vis IPR Infringement

Introduction:

The principle of Res judicata traces back its origin from the common law. Though its inner foundations come from Roman law, common law introduced it all across into the world of law. We find this principle in every pit and corner without actually finding its explicit validity. Be it a state with an elaborative bunch of written laws (like India) or the state having a bare minimum (like the US), the principle occupies a safe place everywhere.

Res judicata has been originally taken from the maxim- RES JUDICATA PRO VERITATE ACCIPITUR which means matter adjudged is taken as truth. The broad principle of Res judicata envisages public policy and societal interest. It is based on the policy of justice, equity, and good conscience. In the Indian context, the civil procedural code enshrines this doctrine under Section-11 of the code but mere words don’t confine its scope in any manner. It is deeply submerged in every other sphere. One of the areas that have an implicit effect includes Intellectual property rights (IPR).

The IPR law nowhere mentions the principle of Res judicata but it never seems to overlook it. Every issue about the preclusion of issues or claims is decided based on the bigger picture portrayed by this doctrine. The principle of Res judicata isn’t engraved on any wall or paper, therefore, there’s always some grey area where the court finds its power of judicial discretion. The present application of this doctrine and molded form of Res judicata is the outcome of rigorous judicial intervention.

Recently, the US Supreme court in the case of Lucky brand dungarees, Inc. vs Marcel fashions group, Inc.[1]regarding trademark infringement, explained the concept of Res judicata in the IPR domain and further gave rise to an alternate contention. Hence, this article aims to analyze the present position of Res judicata in the realm of IPR and further look upon the controversy in the aforementioned case.

Evolution of Res Judicata

The need for finality of judgments has been recognized for hundreds of years[2]. Before the introduction of Res judicata in IPR, the doctrine of estoppel handled the upheavals of litigation. Under the doctrine of collateral estoppel, the successive course of action is upon a different cause and the judgment in the prior suit precludes re-litigation of issues litigated and necessary to the outcome of the first action[3]. It prevented overburdening and repeated litigations and limit unnecessary and counterproductive litigation costs[4]. But IPR estoppel lacked the pillars of traditional res judicata[5]. The judicial system was hit by four great inconveniences[6].

Firstly, there would be an infinite number of verdicts, recoveries, and judgments in the same case. Secondly, because of the infinite verdicts and judgments, some of them would inevitably stand in contradiction. Thirdly, suits would continue for decades, until the parties are completely impoverished. Lastly, it would tend to degrade the law which abhors delaying of suits in pursuance of justice delayed is justice denied.

Hence, a thoughtful analysis was warranted to identify an equitable solution to the problems at hand. Therefore, to promote judicial efficiency the traditional notions of Res judicata were taken into picture[7]. The policies supporting these doctrines included the society’s desires to promote fairness, prevent inconsistent judgments, and hence, achieve uniformity and certainty to finalize disputes among the parties while conserving judicial resources[8].

Res judicata, just by coming into existence, answered the unavoidable question of the impact of precedents on the subsequent disputes. Res judicata mandated the preclusion of issues as well as subsequent claims. Under the doctrine, a final adjudication on the merits in a prior suit barred a subsequent suit involving the same parties having the same cause of action. But it may have both offensive and defensive components. Issues arisen from the same cause of action get barred but the claims are, sometimes, broad enough to include different harms, evidence, legal theories, rights, and remedies. So they are seen valid and hence, justified to be raised in a subsequent suit without really getting under the ambit of Res judicata. The recent judgment on Lucky brand dungarees, Inc. vs Marcel fashions group, Inc.[9] points out the disputation of claims by the defendant in a subsequent suit.

The Controversial Discourse

The principle assertion in the case before the apex court was if the same plaintiff in separate actions raises two different claims that arose from separate transactions, then whether the defendant can be precluded to raise defenses in the second action that it opted not to raise in the first action?              

The defendant argued that the lower court fundamentally misconstrued one of the foundational principles of Res judicata. They contended that preventing to raise a rightful defense neither fits into an issue or claim categories and thus is a novel invention without finding a place in the jurisprudence of Res judicata.

They further went on to acknowledge that courts have recognized a different kind of defense preclusion in the past, where a losing defendant attempts to use an unraised, available defense from a prior action to subsequently attack the plaintiff in a later action. The plaintiff countered by pointing that the core values of res judicata are not confined and they would include the claim by the defense as they differ only in form and not in substance. They contended that it relies on the element of Res judicata that emphasizes that it would apply if a party has had an actual opportunity to have raised an argument in a previous suit. Under Res judicata, what matters most is that a second suit does not come forward to challenge the correctness of the first if the defendant could have raised that challenge during the first action. Re-litigation of the same claim would weaken the finality and result of the first decision.

But ironically, the court acted on different grounds. The dominant part of the judgment stated that the Courts define the same claim as the claims arisen from the same transaction or having involved a common nucleus of operative facts but the two suits in question were grounded on different conduct, involving different marks, occurring at different times. Hence, they do not share a common nucleus of operative facts and claim preclusion cannot apply.

It pointed out four major issues:

• Uncertainty for defendants whether they are required to raise certain defenses
• Creates more litigation because defendants will be compelled to raise additional defenses
• Incentivize plaintiffs into gaming litigation by bringing smaller cases first to trigger preclusion
• And lastly, it creates an unfair situation where plaintiffs can raise new claims but defendants could be prohibited from bringing defenses against those new claims.

The Supreme Court in this case observed that the subsequent lawsuit in the case appeared to involve new claims, portraying the second case as stemming from the same cause of action and sharing a common nucleus of operative fact. The reason that a second suit is into existence is that it had to be a different transaction or occurrence[10]. It rebuffed the lower court’s attempt to expand the scope of res judicata to include the so-called concept of “defense preclusion”, a new doctrine that could bar defendants from raising defenses not asserted in previously adjudicated disputes regardless of whether the disputes share a common nucleus of operative fact[11].

Contrarily, it was noted that the doctrine applies only to issues that have been conclusively and definitively decided in a final judgment, and issues that are collaterally and incidentally in issue holds an exception. But it does not cover the claims of the same kind. If we follow the lower court’s approach to the case then it’ll render no choice but coerce the defendant to fully litigate every plausible defense, lest the defendant is precluded from raising an ignored defense in a subsequent action, creating a rigid doctrine of Res judicata. Though ironically it protects the certainty, finality, and repose that completed lawsuits offer to parties. Lest it not, the defendants might continue to act wrongfully after a first lawsuit if they know that they can advocate novel defenses to protect themselves in a subsequent suit.

This furthermore, widens the scope of the doctrine. Otherwise, the litigation would get caught in a loop where plaintiffs would continue to raise new grounds for liability, and defendants would continue to raise new defenses in response, all to the detriment of an overburdened court system.

Conclusion

Res judicata has been thriving ever since its inception. However, the fact remains that allowing defendants more than one opportunity to claim is a strict violation of the principles of Res judicata. Concerning the situation aforementioned, the doctrine is interpreted by the court in such a way that it gave an edge to the defendant to keep the claims at bay and raise them later in another. The Supreme Court’s current precedent acknowledges that a defendant’s interests will shift over time. But these concerns under the trademark infringement actions are exaggerated. The principle of Res judicata applies the same in the IPR context just as they do in any other type of civil litigation. 

Furthermore, in a changed circumstance where it would appear to be unfair might be a red herring because the courts can exercise discretion when circumstances have truly changed between the parties. Hence, the doctrine of Res judicata though has an amicable end but the means could sometimes wither away the whole aspect of equity and hence, justice.

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References:

[1] 590 US_(2020)

[2] Modderman, “Matthew, Inter Partes Review Estoppel: Restoring The Principles Of Res Judicata”(February 3, 2020) (https://ssrn.com/abstract=3531340)

[3] Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979)

[4] Id at 3

[5] Id.

[6] Ferrer v. Arden (1598) 77 Eng. Rep. 263, 266

[7] Id. At 3

[8] Carlisle, Jay C., “Second Circuit 2005 Res Judicata Developments” (2006). Quinnipiac Law Review, Vol. 24, 2006 (https://ssrn.com/abstract=1301144)

[9] Supra note 1

[10] Id.

[11] Jones, L Jennifer, “Supreme Court Narrowly Rejects Second Circuit’s Sweeping “Defense Preclusion” Doctrine”, August 4, 2020, Volume X, Number 217, the National Law Review.