Xy, LLC v. Trans Ova Genetics, L.C. , 890 F.3d 1282 ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
XY, LLC,
Plaintiff-Cross-Appellant
v.
TRANS OVA GENETICS, L.C.,
Defendant-Appellant
______________________
2016-2054, 2016-2136
______________________
Appeals from the United States District Court for the
District of Colorado in No. 1:13-cv-00876-WJM-NYW,
Judge William J. Martinez.
______________________
Decided: May 23, 2018
______________________
PRATIK A. SHAH, Akin, Gump, Strauss, Hauer & Feld,
LLP, Washington, DC, argued for plaintiff-cross-
appellant. Also represented by ZE-WEN JULIUS CHEN;
DANIEL LYNN MOFFETT, KIRT S. O’NEILL, San Antonio, TX.
CHARLES DANIEL OSSOLA, Hunton & Williams LLP,
Washington, DC, argued for defendant-appellant. Also
represented by DAVID A. KELLY, Atlanta, GA; DONALD
EARL LAKE, III, GEORGE GUY MATAVA, SAMANTHA KAY
PICANS, Lewis Brisbois Bisgaard & Smith, Denver, CO.
______________________
2 XY, LLC v. TRANS OVA GENETICS, L.C.
Before NEWMAN, DYK and CHEN, Circuit Judges.
Opinion for the court filed by Circuit Judge CHEN.
Opinion concurring-in-part, dissenting-in-part filed by
Circuit Judge NEWMAN.
CHEN, Circuit Judge.
Plaintiff-Cross-Appellant XY, LLC (XY) sued Defend-
ant-Appellant Trans Ova Genetics, L.C. (Trans Ova) for
patent infringement and breach of contract. Trans Ova
counterclaimed, alleging patent invalidity, breach of
contract, and antitrust violations. The district court
granted summary judgment in favor of XY on Trans Ova’s
antitrust counterclaims. A jury found breaches of con-
tract by both parties and awarded damages. The jury also
found that (i) Trans Ova failed to prove that the asserted
patent claims were invalid, (ii) Trans Ova willfully in-
fringed the asserted claims, and (iii) XY was entitled to
damages for patent infringement. The parties filed vari-
ous post-trial motions. The district court denied all of
Trans Ova’s requested relief on the antitrust, breach of
contract, invalidity, and willfulness issues and granted
XY’s request for an ongoing royalty. Trans Ova appeals
the district court’s antitrust, breach of contract, invalidi-
ty, and willfulness rulings. XY appeals the ongoing
royalty rate adopted by the district court.
We affirm in part, vacate in part, and remand. Two
issues presented on appeal are moot. With respect to the
remaining issues, we affirm on all issues except the
district court’s ongoing royalty rate, which we vacate. We
remand for the district court to recalculate an ongoing
royalty rate in accordance with this opinion.
BACKGROUND
I. Technological Background
XY’s patents relate to the sorting of X- and Y-
chromosome-bearing sperm cells, which can be used for
XY, LLC v. TRANS OVA GENETICS, L.C. 3
selective breeding purposes. Some of the asserted patent
claims require the use of “flow cytometry,” a process by
which cells flow through a flow cytometer at a high rate of
speed in a fluid stream and “are evaluated at several
thousands of [cells] per second.” J.A. 8346–47.
Dr. Lawrence Johnson developed a technique for sort-
ing animal semen using flow cytometry in the 1980s as
part of research sponsored by the United States Depart-
ment of Agriculture (USDA). Dr. Johnson’s technique is
patented in U.S. Patent No. 5,135,759 (the Johnson
Patent), which issued in 1992. The Johnson Patent was
initially licensed to XY under a USDA partnership pro-
gram. The Johnson method involves staining DNA in
sperm cells with a dye; using a laser beam to activate the
fluorescence of the dye (with X-chromosome cells being
brighter because they contain more DNA than Y-
chromosome cells); detecting the amount of fluorescence
in the cells; and sorting the cells into separate containers
for X and Y cells.
Six of XY’s patents are at issue in this appeal. They
can be grouped into four categories: (1) the “Fluid Pa-
tents” (U.S. Patent Nos. 6,149,867 and 6,524,860); (2) the
“Freezing Patent” (U.S. Patent No. 7,820,425); (3) the “In-
Vitro Fertilization Patent” (U.S. Patent No. 8,569,053);
and (4) the “Reverse Sort Patents” 1 (U.S. Patent Nos.
7,713,687 and 7,771,921).
1 The Reverse Sort Patents involve a sorting pro-
cess that reverses the order of steps recited in the sorting
process described in the Freezing Patent. In the Freezing
Patent, sperm is first sorted and then frozen, while in the
Reverse Sort Patents, the sperm is first frozen, then
thawed and sorted.
4 XY, LLC v. TRANS OVA GENETICS, L.C.
The Fluid Patents claim flow cytometry devices and
methods that use “sheath fluids” to provide optimum pre-
and post-sorting fluid environments for the cells to
“achieve as unaffected a sorted result as possible.” ’867
patent, J.A. 13485 col. 4 ll. 40–55, J.A. 13493 col. 20 ll. 1–
4; ’860 patent, J.A. 13516 col. 18 ll. 47–50, J.A. 13509 col.
4 ll. 27–43. The claimed fluids are introduced in a “coor-
dinated” fashion such that the cells’ fluid environment
changes at various stages of the sorting process to mini-
mize stress on the cells and keep as many of the cells
alive as possible. See, e.g., ’867 patent, J.A. 13490 col. 13
ll. 1–65, J.A. 13493 col. 20 l. 1.
The Freezing Patent claims methods for “cryopreserv-
ing sperm that have been selected for a specific character-
istic.” J.A. 13300 col. 2 ll. 9–10, 16–17; J.A. 13315 col. 31
l. 64 – col. 32 l. 11. The claimed methods purport to
“facilitat[e] storage and/or shipment of selected sperm
samples to sites distant from the collection site.” J.A.
13300 col. 2 ll. 44–46. According to the patent, thawing
the samples “yields viable sperm that can be used in
procedures such as artificial insemination . . . and in vitro
fertilization.” Id. col. 2 ll. 46–48.
The Reverse Sort Patents claim methods of first freez-
ing, then thawing, and finally sorting sperm cells. See,
e.g., ’687 patent, J.A. 13434 col. 30 ll. 9–42. The parties
agree that a principal difference between the claimed
methods in the Reverse Sort Patents and prior art meth-
ods is the use of a relatively high concentration of dye for
staining the sperm cells in the Reverse Sort Patents—
greater than 40 micromolar. See, e.g., id. col. 30 ll. 15–17.
The In-Vitro Fertilization Patent claims methods of
in-vitro fertilization using sorted and reverse sorted
sperm. See generally J.A. 14930–31 col. 10 l. 14 – col. 12
l. 26.
XY, LLC v. TRANS OVA GENETICS, L.C. 5
II. Factual Background
Trans Ova provides services related to embryo trans-
fer and in-vitro fertilization for cattle. Before the events
giving rise to this lawsuit, Trans Ova purchased sorted
semen from Inguran, LLC (Inguran), which was a licensee
of XY’s patents. Trans Ova became dissatisfied with the
quality of Inguran’s product, however, and sought to
license XY’s technology to produce its own sorted semen.
XY and Trans Ova entered into a five-year licensing
agreement (the Agreement) in April 2004 under which
Trans Ova was authorized to use XY’s technology in
animal breeding. The Agreement was subject to automat-
ic renewal in April 2009, unless, inter alia, Trans Ova was
in material breach of the Agreement. XY retained the
right to terminate the Agreement in the event of certain
breaches by Trans Ova, upon written notice to Trans Ova.
In November 2007, Inguran acquired XY and, in the
same month, XY sent a letter purporting to terminate the
Agreement (Termination Letter) because of alleged
breaches by Trans Ova. Trans Ova disagreed with XY’s
allegations of breach and argued that the Agreement had
not been terminated. Over the course of several years,
the parties negotiated but failed to resolve their disputes.
Trans Ova continued to make royalty payments to XY
pursuant to the Agreement, in accordance with its posi-
tion that the Agreement had not been terminated, but XY
declined all payments except one (which XY alleges it
accepted in error). During the period of negotiations, XY
alleges that it became aware of further breaches by Trans
Ova (in addition to those alleged in the Termination
Letter), including underpayment of royalties and devel-
opment of improvements to XY’s technology without
disclosure of such improvements to XY.
6 XY, LLC v. TRANS OVA GENETICS, L.C.
III. Procedural History
In March 2012, XY sued Trans Ova for patent in-
fringement in the United States District Court for the
Western District of Texas. Trans Ova moved to dismiss or
transfer for improper venue. On March 28, 2013, the
district judge granted Trans Ova’s motion and transferred
the case to the District of Colorado. XY filed an amended
complaint, adding claims for breach of contract and unjust
enrichment. Trans Ova, in turn, asserted (1) patent
invalidity, (2) monopolization and attempted monopoliza-
tion under the Sherman Act, and (3) breach of contract by
XY and Inguran. 2
A. Summary Judgment
XY moved for summary judgment that Trans Ova’s
antitrust claims were barred by the applicable four-year
statute of limitations. Trans Ova argued in response that
the “continuing conspiracy” exception, per Tenth Circuit
case law, effectively restarted the limitations period with
each “new and independent act” that inflicted “new and
accumulating injury” on Trans Ova after XY sent the
Termination Letter. J.A. 41 (quoting Champagne Metals
v. Ken-Mac Metals, Inc., 458 F.3d 1073, 1088 (10th Cir.
2006)). The district court determined that Trans Ova had
not identified any new injury resulting from XY’s post-
termination actions in its brief in opposition to XY’s
motion. Therefore, the district court held that the contin-
uing conspiracy exception did not apply and Trans Ova’s
2 Inguran was previously a party to this suit. After
dismissing Trans Ova’s antitrust counterclaims, the
district court granted Inguran’s motion for judgment on
the pleadings as to the remaining claims against Inguran
and removed Inguran from the suit. See J.A. 55–63.
XY, LLC v. TRANS OVA GENETICS, L.C. 7
antitrust claims were barred by the statute of limitations.
Id. at 43–44.
Trans Ova filed a motion for reconsideration, which
the district court denied. The district court reaffirmed its
ruling that Trans Ova had failed to show a triable issue of
new and accumulating injury resulting from any of XY’s
post-termination actions. The district court clarified that,
in granting summary judgment, it had assumed that the
Termination Letter was not a “final act” that permanently
excluded Trans Ova from the market, but “nevertheless
found that Trans Ova did not meet the threshold re-
quirement to show that any subsequent acts caused new
injuries.” J.A. 50. “It was Trans Ova’s burden, in oppos-
ing summary judgment, to present evidence that the
continuing conspiracy exception applied” and “Trans
Ova’s failure to address the new injury prong of the
analysis fell short of meeting that burden.” Id. (citing
Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). Trans
Ova’s identification of two allegedly new categories of
injuries in its briefing on the motion for reconsideration
“should have been included in its prior briefing” and thus
came too late. J.A. 51.
B. Jury Trial
The case proceeded to a jury trial. The jury found
that both parties had breached the Agreement. Specifi-
cally, the jury found that Trans Ova materially breached
and failed to cure prior to the April 2009 renewal date set
out in the Agreement. As a result, under the jury’s find-
ing, the Agreement terminated in April 2009, and Trans
Ova’s post-termination use of XY’s patented technology
was unlicensed and infringing. The jury also found,
however, that XY violated the Agreement and its duty of
good faith and fair dealing by attempting to terminate the
license in November 2007. As compensation for the
respective breaches, the jury awarded XY $1,481,000 and
Trans Ova $528,000 in damages.
8 XY, LLC v. TRANS OVA GENETICS, L.C.
The jury also found that none of the asserted patent
claims were invalid and that Trans Ova willfully in-
fringed. The jury awarded XY $4,585,000 for Trans Ova’s
patent infringement. In addition, the jury found that XY
had unclean hands from its purported termination of the
Agreement in November 2007.
C. Post-Trial
After trial, Trans Ova filed motions on the breach of
contract, willfulness, and invalidity issues. XY filed
motions seeking an award of an ongoing royalty and
enhanced damages.
Regarding the breach of contract issues, Trans Ova
moved for judgment as a matter of law under Rule 50(b)
or, in the alternative, a new trial under Rule 59(a) or an
amended judgment under Rule 59(e). Trans Ova argued
that XY’s attempt to terminate the Agreement was a
material breach that excused Trans Ova’s obligations
under the Agreement and that the jury’s findings that
both parties breached and were entitled to damages were
irreconcilable. Trans Ova also argued that the jury
verdict form was structured in such a way that the jury
was not able to determine whether Trans Ova’s obliga-
tions under the Agreement had been suspended due to
XY’s breach. At trial, the district court overruled an
objection by Trans Ova to the verdict form that was based
on similar arguments. The district court denied Trans
Ova’s motion, inferring that the jury found a material
breach by Trans Ova before XY sent the Termination
Letter. The district court also determined that a reasona-
ble jury could have reached the conclusions reflected in
the verdict form based on the evidence presented at trial.
With respect to willfulness, Trans Ova moved under
Rule 59(e) for a ruling of no willful infringement. XY
opposed the motion, arguing, inter alia, that Trans Ova
could not seek its requested relief because Trans Ova had
not challenged the sufficiency of XY’s evidence on willful-
XY, LLC v. TRANS OVA GENETICS, L.C. 9
ness by moving under Rule 50(a) at trial. The district
court rejected this argument, stating that “Trans Ova’s
argument is not a challenge to the sufficiency of XY’s
evidence at trial, but rather an argument that the jury’s
willful infringement finding was clearly erroneous as a
matter of law.” J.A. 11. More particularly, the district
court understood Trans Ova to be arguing that certain of
its invalidity defenses were objectively reasonable under
the test for willfulness set out in In re Seagate Technolo-
gy, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc). The
district court determined that the invalidity defenses
were objectively reasonable and granted Trans Ova’s
motion, finding no willful infringement as a matter of law.
However, as explained, infra, the district court later
revisited this decision after the Supreme Court issued its
opinion in Halo Electronics, Inc. v. Pulse Electronics, Inc.,
136 S. Ct. 1923 (2016).
On invalidity, Trans Ova moved under Rule 59(a) for
a new trial. The district court denied the motion, holding
that Trans Ova’s arguments in support of the motion were
merely a critique of XY’s expert’s opinions and amounted
to nothing more than a rehash of arguments presented to
the jury at trial. Trans Ova had stipulated to the qualifi-
cation of XY’s expert to testify regarding “the subject
matter of the asserted patents” under Federal Rule of
Evidence 702. The district court held that Trans Ova was
not entitled to a new trial because “Trans Ova’s argu-
ments point to a classic battle of the experts . . . rather
than an indication that the overwhelming weight of the
evidence leans but one way.” J.A. 16–17.
XY filed a motion requesting that the district court set
an ongoing royalty as an equitable remedy for Trans
Ova’s future infringement. The district court noted Trans
Ova’s admission that it intended to continue to practice
XY’s patents and determined that an ongoing royalty
would be appropriate. The district court then observed
that the jury effectively adopted the 15% royalty rate on
10 XY, LLC v. TRANS OVA GENETICS, L.C.
gross sales and the 4% royalty rate for reverse sorting
services proposed by XY’s damages expert at trial. The
district court also noted that “every one of XY’s prior
licenses include[d] a 10% royalty rate, which tend[ed] to
prove that 10% [was] XY’s established royalty.” J.A. 28.
After considering the relevant evidence and the parties’
various arguments under certain of the factors set out in
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp.
1116, 1120 (S.D.N.Y. 1970), the district court calculated
an ongoing royalty rate for gross sales by averaging the
jury’s 15% rate with the 10% rate in XY’s prior licenses to
arrive at a rate of 12.5%. For reverse sorting services, the
district court awarded an ongoing royalty rate of 2%, half
of the jury’s rate for those services.
XY also moved for an award of enhanced damages,
which the district court denied.
Based on the jury’s unclean hands finding, the district
court denied XY’s unjust enrichment claim and XY’s
request for injunctive relief.
D. Post-Judgment
After the Supreme Court issued its decision in Halo,
XY moved under Rule 59(e) to alter or amend the judg-
ment with respect to the ongoing royalty rate and under
Rule 60(b)(6) to reconsider the district court’s finding of
no willful infringement and denial of enhanced damages.
The district court denied XY’s motion with respect to the
ongoing royalty rate. Regarding willfulness, the district
court granted XY’s motion in part by reinstating the jury’s
finding of willfulness—in view of Halo’s abrogation of the
objective prong of Seagate’s test for willfulness, under
which the district court had granted judgment as a matter
of law of no willful infringement—but denied XY’s motion
for reconsideration of the district court’s denial of en-
hanced damages.
XY, LLC v. TRANS OVA GENETICS, L.C. 11
Trans Ova appeals the district court’s rulings on the
antitrust, breach of contract, invalidity, and willfulness
issues. XY appeals the district court’s calculation of the
ongoing royalty rate. We have jurisdiction pursuant to
28 U.S.C. § 1295(a)(1).
STANDARDS OF REVIEW
We review a district court’s methodology for calculat-
ing an ongoing royalty under the abuse of discretion
standard. See ActiveVideo Networks, Inc. v. Verizon
Commc’ns, Inc., 694 F.3d 1312, 1332 (Fed. Cir. 2012).
We review each of the other disputed issues in this
appeal under the law of the regional circuit, the Tenth
Circuit. Classen Immunotherapies, Inc. v. Elan Pharm.,
Inc., 786 F.3d 892, 896 (Fed. Cir. 2015) (grant of summary
judgment); Lincoln Nat’l Life Ins. Co. v. Transamerica
Life Ins. Co., 609 F.3d 1364, 1367 (Fed. Cir. 2010) (denial
of judgment as a matter of law); Voda v. Cordis Corp., 536
F.3d 1311, 1328 (Fed. Cir. 2008) (challenge to jury in-
structions); Lummus Indus., Inc. v. D.M. & E. Corp., 862
F.2d 267, 273 (Fed. Cir. 1988) (challenge to special verdict
form); Golden Bridge Tech., Inc. v. Apple Inc., 758 F.3d
1362, 1367 (Fed. Cir. 2014) (denial of motion for reconsid-
eration); Promega Corp. v. Life Techs. Corp., 875 F.3d 651,
659 (Fed. Cir. 2017) (denial of new trial).
The Tenth Circuit reviews de novo a district court’s
grant of summary judgment, Timmons v. White, 314 F.3d
1229, 1232 (10th Cir. 2003), and denial of a motion for
judgment as a matter of law, Jones v. United Parcel Serv.,
Inc., 674 F.3d 1187, 1195 (10th Cir. 2012).
The Tenth Circuit reviews whether a district court
erred in refusing to give a particular jury instruction
under the abuse of discretion standard. Morrison Knud-
sen Corp. v. Fireman’s Fund Ins. Co., 175 F.3d 1221, 1231
(10th Cir. 1999). However, the Tenth Circuit also “re-
view[s] all the instructions de novo to determine whether
12 XY, LLC v. TRANS OVA GENETICS, L.C.
the absence of the requested instruction resulted in a
misstatement of the applicable law to the jury.” Powers v.
MJB Acquisition Corp., 184 F.3d 1147, 1152 (10th Cir.
1999). The Tenth Circuit then determines whether the
instructions, taken as a whole, convey the proper law and
focus the jury on the relevant inquiry. Id.
The Tenth Circuit also uses an abuse of discretion
standard when it reviews (1) a district court’s decision to
deny a motion for reconsideration, Wright ex rel. Tr. Co. of
Kan. v. Abbott Labs., Inc., 259 F.3d 1226, 1235 (10th Cir.
2001); (2) a district court’s decision on a motion for a new
trial, United States v. Lamy, 521 F.3d 1257, 1265–66
(10th Cir. 2008); and (3) a challenge to the language and
structure of a special verdict form, Webb v. ABF Freight
Sys., Inc., 155 F.3d 1230, 1249 (10th Cir. 1998).
DISCUSSION
I. Trans Ova’s Antitrust Counterclaims
Trans Ova asserted counterclaims under § 2 of the
Sherman Act alleging monopolization and attempted
monopolization of the market for sorting nonhuman,
mammalian semen by sex. The Sherman Act’s statute of
limitations bars recovery if a cause of action is asserted
more than four years after it accrues. 15 U.S.C. § 15b. It
is undisputed that Trans Ova’s antitrust causes of action
first accrued in November 2007 when XY sent the Termi-
nation Letter. The instant litigation began in 2012.
Therefore, Trans Ova’s antitrust counterclaims are barred
by the statute of limitations unless an exception applies.
The only potential exception identified by Trans Ova is
the continuing conspiracy exception. The parties agree
that Tenth Circuit case law governs our determination of
whether the continuing conspiracy exception should apply
in this case. See In re Indep. Serv. Orgs. Antitrust Litig.,
203 F.3d 1322, 1325 (Fed. Cir. 2000) (“As a general propo-
sition, when reviewing a district court’s judgment involv-
XY, LLC v. TRANS OVA GENETICS, L.C. 13
ing federal antitrust law, we are guided by the law of the
regional circuit in which that district court sits.”).
The Supreme Court recognized the continuing con-
spiracy exception in Zenith Radio Corp. v. Hazeltine
Research, Inc., 401 U.S. 321, 338 (1971) (“In the context of
a continuing conspiracy to violate the antitrust laws, . . .
each time a plaintiff is injured by an act of the defend-
ants[,] a cause of action accrues . . . to recover the damag-
es caused by that act and . . . , as to those damages, the
statute of limitations runs from the commission of the
act.”). The Tenth Circuit elaborated on the exception in
Kaw Valley Electric Cooperative Co. v. Kansas Electric
Power Cooperative, Inc. by holding that an act may trigger
the exception only if it satisfies a two-part test: “(1) It
must be a new and independent act that is not merely a
reaffirmation of a previous act; and (2) it must inflict new
and accumulating injury on the plaintiff.” 872 F.2d 931,
933 (10th Cir. 1989) (quoting Pace Indus., Inc. v. Three
Phoenix Co., 813 F.2d 234, 238 (9th Cir. 1987)); see also
Champagne Metals, 458 F.3d at 1088 (applying the Kaw
Valley test).
As an initial matter, the parties dispute whether the
movants (XY and Inguran) or Trans Ova bore the burden
of proof on the applicability of the continuing conspiracy
exception. Trans Ova argues that it was the movants’
obligation to present sufficient undisputed evidence to
establish that the Termination Letter was “a final act
that caused all of the injuries.” Trans Ova Open. Br. at
13 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323–24
(1986)). According to Trans Ova, the district court erred
when it placed the burden on Trans Ova to show a new
and independent act that inflicted new and accumulating
injury. XY counters that Trans Ova bore the burden to
show a triable issue as to the applicability of the continu-
ing conspiracy exception, because “the party who seeks to
recover, upon the ground of his being within some excep-
tion of the statute of limitations, is bound to establish
14 XY, LLC v. TRANS OVA GENETICS, L.C.
such exception by proof” and the “plain language of Rule
56(c) mandates the entry of summary judg-
ment . . . against a party who fails to make a showing
sufficient to establish the existence of an element essen-
tial to that party’s case, and on which that party will bear
the burden of proof at trial.” XY Resp. Br. at 24–25
(quoting Somerville’s Ex’rs v. Hamilton, 17 U.S. (4
Wheat.) 230, 234 (1819); Celotex, 477 U.S. at 322).
We agree with XY that Trans Ova bore the burden to
present evidence that the continuing conspiracy exception
applied. See Akron Presform Mold Co. v. McNeil Corp.,
496 F.2d 230, 233 (6th Cir. 1974) (noting that, when a
party invokes the continuing conspiracy exception, that
party bears the burden of proof to establish it). In Kaw
Valley, the Tenth Circuit stated that, to come within the
continuing conspiracy exception, “a plaintiff must show
that it has been injured by ‘continued, separate antitrust
violations within the limitations period.’” 872 F.2d at 933
(emphasis added) (quoting Hennegan v. Pacifico Creative
Serv., Inc., 787 F.2d 1299, 1301 (9th Cir. 1986)); see also
Piatt v. Vattier, 34 U.S. (9 Pet.) 405, 413 (1835) (“In a
court of common law a party defendant pleads the statute
of limitations; the plaintiff replies an exception, and he
must raise a prima facie case by evidence.”).
The Supreme Court made clear in Celotex that, at
summary judgment, a party is entitled to judgment as a
matter of law when “the nonmoving party has failed to
make a sufficient showing on an essential element of her
case with respect to which she has the burden of proof.”
477 U.S. at 323. Under Kaw Valley, the “new and accu-
mulating injury” is an essential element of proving ap-
plicability of the continuing conspiracy exception and an
issue on which Trans Ova bore the burden of proof at
trial. See Kaw Valley, 872 F.2d at 934–35 (finding that
the continuing conspiracy exception did not apply because
there was no accumulating injury). Because Trans Ova
bore the burden of proof, and because Trans Ova failed to
XY, LLC v. TRANS OVA GENETICS, L.C. 15
identify any “new and accumulating injury” resulting
from any of XY’s post-termination acts in its brief oppos-
ing XY’s motion for summary judgment, 3 the district court
did not err in granting summary judgment in XY’s favor. 4
For the foregoing reasons, we affirm the district
court’s grant of XY’s motion for summary judgment on
Trans Ova’s antitrust counterclaims. 5
3 See generally Trans Ova’s Br. in Opp’n to XY’s
Mot. for Summ. J., XY, LLC v. Trans Ova Genetics, LC,
No. 13-CV-876 (D. Colo. Aug. 22, 2014), ECF No. 247.
Trans Ova’s brief alleged only a single injury that result-
ed from XY’s conduct: exclusion from the relevant market
covered by XY’s patents. See id.
4 The district court did not abuse its discretion in
disregarding arguments about new and accumulating
harm that Trans Ova raised for the first time in its mo-
tion for reconsideration. See Servants of Paraclete v.
Does, 204 F.3d 1005, 1012 (10th Cir. 2000) (affirming
district court’s decision to disregard arguments and
evidence presented for the first time in a motion for
reconsideration).
5 Trans Ova argues that the district court’s decision
turned on its erroneous interpretation of Trans Ova’s
expert’s testimony. In particular, Trans Ova argues that
the district court incorrectly read Trans Ova’s expert
testimony characterizing the antitrust damages as over-
lapping with the contract damages to mean that there
was only a single antitrust injury. However, the district
court expressly stated that it “did not rely on [Trans Ova’s
expert’s] testimony as evidence that no new injury had
been inflicted.” J.A. 52. The district court’s decision
rested on Trans Ova’s failure to raise arguments identify-
ing a new and accumulating injury, not on any considera-
tion of expert testimony on damages.
16 XY, LLC v. TRANS OVA GENETICS, L.C.
II. Breach of Contract
Trans Ova presses three arguments on the breach of
contract issues: (1) Trans Ova’s breaches were excused by
XY’s prior material breach and continuing breaches,
(2) the jury’s findings that both parties breached were
irreconcilably inconsistent, and (3) the district court
abused its discretion by adopting a confusing and improp-
erly structured special verdict form.
First, Trans Ova argues that its obligations under the
Agreement were excused because XY materially breached
the Agreement before Trans Ova breached. Under Colo-
rado contract law, “it is a condition of each party’s re-
maining duties to render performances . . . that there be
no uncured material failure by the other party to render
any such performance due at an earlier time.” Colo.
Interstate Gas Co. v. Chemco, Inc., 854 P.2d 1232, 1239
(Colo. 1993). 6 The district court rejected this argument
and held that a reasonable jury could have found that
Trans Ova materially breached before XY by underpaying
royalties and developing improvements to XY’s technology
without disclosing such improvements to XY. J.A. 7–10
(citing trial evidence). We agree with the district court
that a reasonable jury could have found that Trans Ova’s
breaches occurred before XY’s breach based on the trial
evidence. Therefore, like the district court, we reject
Trans Ova’s argument that its breaches were excused by
XY’s later breach.
Second, Trans Ova argues that the jury’s findings are
inconsistent because, if Trans Ova materially breached
before XY, XY’s breach must have been excused. Howev-
er, Trans Ova never presented this argument to the
6 The parties agree that Colorado contract law ap-
plies here.
XY, LLC v. TRANS OVA GENETICS, L.C. 17
district court in its briefing in support of its post-trial
motion. Trans Ova only argued before the district court
that there was insufficient evidence for a reasonable jury
to conclude that Trans Ova breached before XY. Moreo-
ver, XY has not appealed the jury’s finding that it was
liable for breach of contract, nor did XY argue in its
briefing on Trans Ova’s post-trial motion that its breach
should be excused by Trans Ova’s prior breach. Because
Trans Ova did not present this argument to the district
court, we decline to consider it in the first instance on
appeal. Singleton v. Wulff, 428 U.S. 106, 120 (1976) (“[I]t
is the general rule . . . that a federal appellate court does
not consider an issue not passed upon below.”).
Finally, Trans Ova argues that the district court
abused its discretion by adopting XY’s proposed special
verdict form. In particular, Trans Ova argues that the
district court erred by not including a question about
whether XY’s breach was material in the verdict form.
Significantly, Trans Ova does not argue that the jury was
improperly instructed as to what constitutes a material
breach, because the parties stipulated to the proposed
jury instruction on this issue. As a general matter, “it
must be left to the sound discretion of the trial court what
form of verdict to request of a jury.” See Structural Rub-
ber Prods. Co. v. Park Rubber Co., 749 F.2d 707, 720 (Fed.
Cir. 1984); ClearOne Commc'ns, Inc. v. Bowers, 643 F.3d
735, 765 (10th Cir. 2011). We see no reason to deviate
from this general rule in this case and find no abuse of
discretion by the district court in adopting XY’s proposed
verdict form. Because the jury was properly instructed on
materiality, the jury was adequately equipped to deter-
mine how a material breach by one party affected later
breaches by the opposing party. In view of the jury in-
structions, the verdict form was not “clearly unreasona-
ble.” Lazare Kaplan Int’l, Inc. v. Photoscribe Techs., Inc.,
714 F.3d 1289, 1293 (Fed. Cir. 2013).
18 XY, LLC v. TRANS OVA GENETICS, L.C.
For the foregoing reasons, we affirm the district
court’s denial of Trans Ova’s motion on the breach of
contract issues.
III. Invalidity
Trans Ova argues that the district court abused its
discretion in denying Trans Ova’s motion for a new trial
on the invalidity issues. XY counters that the district
court did not abuse its discretion, because Trans Ova’s
motion improperly requested that the district court re-
weigh the evidence and reevaluate the credibility of XY’s
expert, Dr. James Wood. XY notes that Trans Ova stipu-
lated as to Dr. Wood’s expertise and competency to testify
before the jury in the areas of flow cytometry and the
subject matter of the asserted patents.
A. Collateral Estoppel
As a threshold matter, we need not address Trans
Ova’s invalidity arguments as to the Freezing Patent
claims in view of our affirmance today in a separate
appeal invalidating these same claims, which collaterally
estops XY from asserting the patent in any further pro-
ceedings. In this separate case appealed to us and argued
on the same day as the instant appeal, the Patent Trial
and Appeal Board of the U.S. Patent and Trademark
Office (Board) held that these claims are unpatentable in
a final written decision from an inter partes review pro-
ceeding. See generally XY, LLC v. ABS Glob., Inc., Appeal
No. 16-2228. In a separate order issued today, we affirm
the Board’s decision. 7
7 On remand, the district court should consider the
impact, if any, of our affirmance of the Board’s decision
that held claims unpatentable on the damages award and
whether a new trial on damages is warranted.
XY, LLC v. TRANS OVA GENETICS, L.C. 19
That affirmance renders final a judgment on the inva-
lidity of the Freezing Patent, and has an immediate issue-
preclusive effect on any pending or co-pending actions
involving the patent. This court has previously applied
collateral estoppel to such co-pending cases because “a
patentee, having been afforded the opportunity to exhaust
his remedy of appeal from a holding of invalidity, has had
his ‘day in court,’” and a defendant should not have to
continue “defend[ing] a suit for infringement of [an]
adjudged invalid patent.” U.S. Ethernet Innovations, LLC
v. Tex. Instruments Inc., 645 F. App’x 1026, 1028–30 (Fed.
Cir. 2016) (citing Blonder-Tongue Labs., Inc. v. Univ. of
Ill. Found., 402 U.S. 313 (1971)); Translogic Tech., Inc. v.
Hitachi, Ltd., 250 F. App’x 988 (Fed. Cir. 2007). 8
We do not find, as the Dissent states, that “in the
event of conflict the administrative agency’s decision
‘moots’ the district court’s decision.” Dissent at 6. Ra-
ther, we find that an affirmance of an invalidity finding,
whether from a district court or the Board, has a collat-
eral estoppel effect on all pending or co-pending actions.
This court has long applied the Supreme Court’s holding
in Blonder-Tongue to apply collateral estoppel in mooting
pending district court findings of no invalidity based on
intervening final decisions of patent invalidity. See, e.g.,
Mendenhall v. Barber-Greene Co., 26 F.3d 1573, 1576
(Fed. Cir. 1994); Dana Corp. v. NOK, Inc., 882 F.2d 505,
507–08 (Fed. Cir. 1989). This court also recently applied
the Supreme Court’s holding in B&B Hardware, Inc. v.
Hargis Industries, Inc., 135 S. Ct. 1293, 1303 (2015), to
apply such estoppel to Board decisions. See MaxLinear,
Inc. v. CF CRESPE LLC, 880 F.3d 1373 (Fed. Cir. 2018).
8 These decisions are non-precedential, but lay out
the reasoning for co-pending appellate decisions having a
preclusive effect on each other.
20 XY, LLC v. TRANS OVA GENETICS, L.C.
The instant case is a straightforward application of this
court’s and Supreme Court precedent.
As to the Dissent’s concern of applying estoppel with-
out briefing, both precedent and the parties’ positions
allow application of collateral estoppel sua sponte here. A
remand for briefing is not a requirement to applying
estoppel when there is no indication from the Patent
Owner that “it did not have a full and fair opportunity to
litigate the validity” of its patent in the parallel case.
Dana Corp., 882 F.2d at 508. Here, in oral argument,
both parties assumed that an affirmance of the Board’s
decision would result in estoppel and thus simply disput-
ed the result of such estoppel. Trans Ova argued that an
affirmance would call for a remand of this case to re-
assess damages in light of the Freezing Patent’s invalidi-
ty, while XY argued that an affirmance would not require
a remand because the asserted patents were grouped in a
way where the invalidation of one patent would not affect
the damages award. Oral Arg. at 1:30–46, 18:10–19:20.
There is no indication that either party thought estoppel
would not apply. Thus, this court, in circumstances such
as this one, applies estoppel sua sponte to avoid “unneces-
sary judicial waste” from remanding an issue that has a
clear estoppel effect. Arizona v. California, 530 U.S. 392,
412 (2000).
Further, the fact that the Defendant in this case and
the Petitioners in an inter partes review at the Board
were different parties is of no consequence. “An unrelated
accused infringer may . . . take advantage of an unen-
forceability decision under the collateral estoppel doc-
trine.” Pharmacia & Upjohn Co. v. Mylan Pharm., Inc.,
170 F.3d 1373, 1379 (Fed. Cir. 1999) (affirming district
court application of collateral estoppel).
Thus, in view of this court’s concurrent affirmance of
the Board’s decisions in XY, LLC v. ABS Global, Inc.,
Appeal No. 16-2228, we do not address Trans Ova’s inva-
XY, LLC v. TRANS OVA GENETICS, L.C. 21
lidity arguments as to the Freezing Patent claims in this
appeal, and dismiss Trans Ova’s appeal of the district
court’s decision on this issue as moot.
B. Abuse of Discretion
For the remaining patents-at-issue, we agree with XY
that the district court did not abuse its discretion in
denying Trans Ova’s motion for a new trial on the issue of
patent invalidity. First, “[t]he jury holds ‘the exclusive
function of appraising credibility . . . [and] determining
the weight to be given to the testimony.’” J.A. 17 (quoting
United Int’l Holdings, Inc. v. Wharf (Holdings) Ltd., 210
F.3d 1207, 1227 (10th Cir. 2000)). Second, the jury’s
findings of no invalidity for these patents is supported by
substantial evidence, as discussed infra.
For the In-Vitro Fertilization Patent, asserted claim 9
requires “produc[ing] sex-selected embryos capable of
blastocyst formation.” XY Principal Br. at 42. Dr. Wood
testified that the primary reference asserted against
claim 9, the Merton reference, disclosed only a “failed
experiment” that did not show producing sex-selected
embryos capable of blastocyst formation. J.A. 11324.
Although 1.5% of inseminated oocytes (i.e., eggs) reached
blastocyst stage in Merton’s experiment, Dr. Wood testi-
fied that this was a statistically insignificant result and
that the blastocyst formation could have been caused by
external stimuli via parthenogenesis. See J.A. 11323 ll.
15–22 (“[C]leavage is the first stage of [embryo] develop-
ment. . . . [T]he cleavage process can be stimulated by
either a sperm entering the oocyte or it can be stimulated
by [a] change in environment” that “stimulate[s]” the
embryo “to go through what’s called parthenogene-
sis . . . .”). The jury reasonably credited Dr. Wood’s testi-
mony and determined that claim 9 of the In-Vitro
Fertilization Patent was not invalid because the Merton
reference did not disclose the limitation reciting
22 XY, LLC v. TRANS OVA GENETICS, L.C.
“produc[ing] sex-selected embryos capable of blastocyst
formation.”
The asserted claims of the Fluid Patents (claims 12
and 13 of the ’867 patent and claims 1 and 32 of the ’860
patent) require chemical coordination between pre- and
post-sort fluids that are added to sperm cells to help them
survive the sorting process. XY Principal Br. at 45. Dr.
Wood testified that, although the prior art reference (the
Johnson Patent) disclosed the fluids, it did not contem-
plate any coordination in introducing the fluids so as to
aid the sperm in adapting at each transition between
sorting stages. Id. at 46. The Karabinus reference,
another reference asserted against the Fluid Patents, also
did not disclose coordination according to Dr. Wood. Id. at
47. Dr. Wood testified that coordination requires more
than the mere introduction of fluid into the sorting pro-
cess, which was all that the asserted prior art references
taught. The jury reasonably relied on Dr. Wood’s testi-
mony to reject Trans Ova’s invalidity arguments on the
Fluid Patents.
The asserted claims of the Reverse Sort Patents
(claims 1, 2, and 13 of the ’687 patent and claims 1, 2, 5,
and 18 of the ’921 patent) were also found to be not inva-
lid by the jury. The parties disputed whether the common
claim step of dyeing the sperm cells with “Hoechst 33342
stain” at a concentration of greater than 40 micromolar
would have been obvious over prior art references that
disclosed using a concentration of approximately 9 mi-
cromolar. Dr. Wood testified that a person of ordinary
skill would not have increased the staining amount from 9
to 40 because skilled artisans (1) were already satisfied
with the staining capabilities at 9 and (2) would have
been concerned about the toxicity to the sperm cells
caused by the increase to 40. The jury reasonably relied
on this testimony from Dr. Wood to find that a person of
ordinary skill in the art would not have found the in-
XY, LLC v. TRANS OVA GENETICS, L.C. 23
crease to 40 to be obvious and, therefore, that the asserted
claims of the Reverse Sort Patents were not invalid.
For the foregoing reasons, we affirm the district
court’s denial of Trans Ova’s motion for a new trial on the
invalidity issues.
IV. Willfulness
As noted, supra, the district court declined to award
enhanced damages, even after it reinstated the jury’s
willfulness finding. Because no enhanced damages were
awarded, which XY does not appeal, we dismiss as moot
Trans Ova’s appeal of the district court’s decision to
reinstate the jury’s finding that Trans Ova’s infringement
was willful. See Odetics, Inc. v. Storage Tech. Corp., 185
F.3d 1259, 1274–75 (Fed. Cir. 1999) (holding that a dis-
pute about the district court’s limitation of the time
period during which the jury could find willful infringe-
ment was moot in view of the court’s determination that
the district court did not abuse its discretion in declining
to award enhanced damages).
V. Ongoing Royalty
The parties do not dispute the district court’s decision
to award an ongoing royalty. The only dispute relates to
the appropriateness of the district court’s mandated rates.
In particular, XY appeals the district court’s 12.5% rate
for gross sales of products practicing the patents and 2%
rate for reverse sorting services. XY argues that these
ongoing royalty rates are too low in view of the jury’s
decision to award backward-looking damages based on a
15% rate on gross sales and a 4% rate on reverse sorting
services. 9 XY argues that the district court misapplied
9 Trans Ova does not contest that the jury relied on
these rates to arrive at its damages award.
24 XY, LLC v. TRANS OVA GENETICS, L.C.
our precedent by neglecting to focus on the post-verdict
economic circumstances of the parties when calculating
the ongoing royalty rates. Trans Ova argues in response
that the district court “had broad discretion to assess a
reasonable ongoing royalty rate” and that “XY seeks to
strip . . . all district courts . . . of that discretion by requir-
ing that they set an ongoing royalty rate no lower than
the amount awarded for infringement absent exceptional
circumstances.” Trans Ova Resp. Br. at 48.
In Amado v. Microsoft Corp., we held that there is a
“fundamental difference” between “a reasonable royalty
for pre-verdict infringement and damages for post-verdict
infringement.” 517 F.3d 1353, 1360 (Fed. Cir. 2008). For
example, when calculating an ongoing royalty rate, the
district court should consider the “change in the parties’
bargaining positions, and the resulting change in econom-
ic circumstances, resulting from the determination of
liability.” Id. at 1362. When patent claims are held to be
not invalid and infringed, this amounts to a “substantial
shift in the bargaining position of the parties.” ActiveVi-
deo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d
1312, 1342 (Fed. Cir. 2012). We have also instructed
district courts to consider changed economic circumstanc-
es, such as changes related to the market for the patented
products. Paice LLC v. Toyota Motor Corp., 504 F.3d
1293, 1315 n.15 (Fed. Cir. 2007); ActiveVideo, 694 F.3d at
1343 (noting that district courts may consider “additional
evidence” of “economic circumstances that may be of value
in determining an appropriate ongoing royalty”).
The requirement to focus on changed circumstances is
particularly important when, as in this case, an ongoing
royalty effectively serves as a replacement for whatever
reasonable royalty a later jury would have calculated in a
suit to compensate the patentee for future infringement.
See Paice, 504 F.3d at 1315 n.15 (“This process
will . . . allow the parties the opportunity to present
evidence regarding an appropriate [ongoing] royalty rate
XY, LLC v. TRANS OVA GENETICS, L.C. 25
to compensate [the patentee] . . . .” (emphasis added)).
The later jury would necessarily be focused on what a
hypothetical negotiation would look like after the prior
infringement verdict. Therefore, post-verdict factors
should drive the ongoing royalty rate calculation in de-
termining whether such a rate should be different from
the jury’s rate. See Arctic Cat Inc. v. Bombardier Recrea-
tional Prods. Inc., 876 F.3d 1350, 1370 (Fed. Cir. 2017)
(“Ongoing royalties may be based on a post-judgment
hypothetical negotiation using the Georgia–Pacific fac-
tors.”).
The district court focused on pre-verdict factors that
were either irrelevant or less relevant than post-verdict
factors. In particular, the district court awarded an
ongoing royalty based on an average between the jury’s
reasonable royalty for past infringement (15%) and the
rate established in the parties’ pre-suit license Agreement
(10%). There are several problems with the district
court’s usage of the 10% license rate in determining the
ongoing royalty rate. First, that license rate had already
been considered by the jury when it found that a higher
rate of 15% was warranted for assessing damages, and
that determination has not been appealed. To incorporate
the license rate a second time in the context of the ongo-
ing rate essentially amounts to undoing a jury finding.
Second, the license rate was arrived at in the context of
the parties’ pre-suit bargaining positions. It therefore is
not relevant to assessing any changed circumstances that
could alter a hypothetical negotiation between the date of
first infringement and the date of the jury’s verdict. The
district court also appeared to consider XY’s past behavior
in engaging in “failed negotiations to enter into an
amended license agreement with Trans Ova” in calculat-
ing the ongoing royalty. J.A. 26–27. However, the dis-
trict court cited no evidence that the parties’ past actions
would carry forward during future infringement or why
they would be relevant for calculating a royalty rate for
26 XY, LLC v. TRANS OVA GENETICS, L.C.
future patent infringement. The district court thus
provided no reasoned basis for lowering the royalty XY
could recover for future infringement from the rate the
jury provided for past infringement. The focus should
have been on XY’s improved bargaining position and any
other changed economic factors (as articulated in Amado,
ActiveVideo, and Paice) rather than XY’s past acts.
XY points out that, if we were to affirm the result in
this case, it would result in the “absurd practical re-
sult . . . that XY would have been better off forgoing the
12.5% ongoing royalty and suing Trans Ova repeatedly for
future infringement at the jury’s 15% reasonable royalty
rate.” XY Reply Br. at 13. Assuming no changed circum-
stances exist (either good or bad for XY) between the date
of first infringement and the date of the jury’s verdict, we
agree with XY that allowing the district court’s ongoing
rates to stand in this case would create an odd situation.
Although district courts may award a lower ongoing
royalty rate if economic factors have changed in the
infringer’s favor post-verdict—for example, if a newly-
developed non-infringing alternative takes market share
from the patented products—the district court identified
no economic factors that would justify the imposition of
rates that were lower than the jury’s. 10
For these reasons, we vacate the district court’s ongo-
ing royalty rate and remand with instructions to recalcu-
late the rate in accordance with this opinion.
10 To the contrary, the district court stated: “The ev-
idence at trial showed that the use of sorted semen via
XY’s technology has spread rapidly in recent years, and
the success and popularity of XY’s methods suggests that
a higher rate than that in the Agreement may be appro-
priate.” J.A. 27.
XY, LLC v. TRANS OVA GENETICS, L.C. 27
CONCLUSION
We have considered all of the parties’ remaining ar-
guments. They do not affect our decisions on any of the
disputed issues. For the foregoing reasons, the district
court’s judgment is
AFFIRMED IN PART, DISMISSED IN PART,
VACATED IN PART AND REMANDED
United States Court of Appeals
for the Federal Circuit
______________________
XY, LLC,
Plaintiff-Cross-Appellant
v.
TRANS OVA GENETICS, L.C.,
Defendant-Appellant
______________________
2016-2054, 2016-2136
______________________
Appeals from the United States District Court for the
District of Colorado in No. 1:13-cv-00876-WJM-NYW,
Judge William J. Martinez.
______________________
NEWMAN, Circuit Judge, concurring-in-part, dissenting-
in-part.
I concur in the court’s judgment on the contract and
antitrust issues. My concern is with the holding that the
district court’s judgment of validity of the Freezing Patent
is “moot” on the ground of collateral estoppel. This hold-
ing of estoppel is based on a PTAB ruling in a separate
case involving non-mutual parties, and contravenes not
only the America Invents Act’s estoppel provision, but
also the general law of collateral estoppel. Of further
concern, this holding that judicial authority is estopped by
an administrative agency ruling between non-mutual
parties warrants attention to the constitutional balance
among the branches of government. In addition, due
2 XY, LLC v. TRANS OVA GENETICS, L.C.
process is not served by my colleagues’ sua sponte creation
of this estoppel on this appeal, without notice to the
parties, without briefing, and without opportunity to
respond.
I respectfully dissent from the panel majority’s hold-
ing of collateral estoppel and ensuing invalidity as to the
Freezing Patent. I concur as to validity and infringement
of the two Fluid Patents, the In-Vitro Fertilization Patent,
and the two Reverse Sort Patents. I also would affirm the
jury’s damages verdict.
DISCUSSION
The America Invents Act contains the following spe-
cial estoppel provision applied to a civil action involving
an alleged infringer who obtained inter partes review in
the PTO:
35 U.S.C. § 315(e)(2). Civil actions and other pro-
ceedings. – The petitioner in an inter partes re-
view of a claim in a patent under this chapter that
results in a final written decision under section
318(a), or the real party in interest or privy of the
petitioner, may not assert either in a civil action
arising in whole or in part under section 1338 of
title 28 or in a proceeding before the International
Trade Commission under section 337 of the Tariff
Act of 1930 that the claim is invalid on any
ground that the petitioner raised or reasonably
could have raised during that inter partes review.
Thus section 315(e)(2) estops the PTAB petitioner from
asserting designated grounds of invalidity in a civil ac-
tion. However, that is not the situation here. This appeal
is from a district court civil action to which the PTAB
petitioner (or its privy) is not a party.
In the district court decision here on appeal, validity
of the Freezing Patent was first found by a jury and
sustained by the district judge. The jury’s finding of no
XY, LLC v. TRANS OVA GENETICS, L.C. 3
invalidity is supported by substantial evidence. The jury
verdict and the district court’s judgment of validity of the
Freezing Patent are not “mooted” by the PTAB’s invalidi-
ty decision between non-mutual parties. The PTAB's
decision may indeed be sustainable on the “substantial
evidence” standard of the Administrative Procedure Act
(APA), but the agency decision does not automatically
override and estop the district court’s earlier validity
judgment, and remove that judgment from our appellate
cognizance. Contrary to the majority’s position, the
district court’s judgment that is here on appeal requires
our appellate response, not discard.
Nor can the PTAB’s decision be somehow validated by
our concurrent separate affirmance of that agency deci-
sion on the APA standard of review. That separate action
cannot ratify our concurrent refusal to apply the Article
III standard of review to the district court decision here
on appeal; that separate action cannot justify our discard
of the district court’s judgment as “mooted” by the agency
decision. The law of collateral estoppel does not contem-
plate that result.
In United States v. Mendoza, 464 U.S. 154 (1984), the
Court explained the principle of collateral estoppel:
[L]ike the related doctrine of res judicata, [collat-
eral estoppel] serves to “relieve parties of the cost
and vexation of multiple lawsuits, conserve judi-
cial resources, and, by preventing inconsistent de-
cisions, encourage reliance on adjudication.
Id. at 158 (quoting Allen v. McCurry, 449 U.S. 90, 94
(1980)) (footnote omitted). However, the Court has recog-
nized the constitutional concerns raised by collateral
estoppel: “The issue of collateral estoppel is a question
that clouds the underlying issue of constitutionality.”
Mackey v. Mendoza-Martinez, 362 U.S. 384, 387 (1960).
In Mackey, the Court remanded to the district court “to
put in issue the question of collateral estoppel and to
4 XY, LLC v. TRANS OVA GENETICS, L.C.
obtain an adjudication upon it.” Id. Here, however, this
court sua sponte finds collateral estoppel, discarding the
district court judgment without consideration of the
merits.
The Court teaches that estoppel is not routinely au-
tomatic. In Blonder-Tongue Laboratories, Inc. v. Univer-
sity of Illinois Foundation, 402 U.S. 313 (1971), for
example, the Court rejected the position “that a plea of
estoppel by an infringement or royalty suit defendant
must automatically be accepted once the defendant in
support of his plea identified the issue in suit as the
identical question finally decided against the patentee or
one of his privies in previous litigation.” Id. at 332–33.
In Montana v. United States, 440 U.S. 147, 162
(1979), the Court further guided that collateral estoppel is
subject to a variety of exceptions. The Federal Circuit so
acknowledged in Bingaman v. Department of Treasury,
127 F.3d 1431, 1437 (Fed. Cir. 1997) (“Collateral estoppel
is subject to exceptions when the circumstances dictate.”).
Yet today no opportunity is provided to raise possible
exceptions and objections.
The Restatement (Second) of Judgments §§ 28–29 col-
lects the many “Exceptions to the General Rule of Issue
Preclusion.” Section 28 recites circumstances in which
relitigation of an issue has been held not to be precluded
in a subsequent action between the same parties. Section
29 records additional circumstances negating issue pre-
clusion when there is non-mutuality of parties:
(1) Treating the issue as conclusively deter-
mined would be incompatible with an applicable
scheme of administering the remedies in the ac-
tions involved;
(2) The forum in the second action affords the
party against whom preclusion is asserted proce-
dural opportunities in the presentation and de-
XY, LLC v. TRANS OVA GENETICS, L.C. 5
termination of the issue that were not available in
the first action and could likely result in the issue
being differently determined;
(3) The person seeking to invoke favorable
preclusion, or to avoid unfavorable preclusion,
could have effected joinder in the first action be-
tween himself and his present adversary;
(4) The determination relied on as preclusive
was itself inconsistent with another determina-
tion of the same issue;
(5) The prior determination may have been af-
fected by relationships among the parties to the
first action that are not present in the subsequent
action, or apparently was based on a compromise
verdict or finding;
(6) Treating the issue as conclusively deter-
mined may complicate determination of issues in
the subsequent action or prejudice the interests of
another party thereto;
(7) The issue is one of law and treating it as
conclusively determined would inappropriately
foreclose opportunity for obtaining reconsideration
of the legal rule upon which it was based;
(8) Other compelling circumstances make it
appropriate that the party be permitted to reliti-
gate the issue.
Restatement § 29 (citing cases). Applying these principles
to this appeal, we need understand no more than the
different standards of validity in the PTAB and the dis-
trict court, the different burdens of proof, and the differ-
ent standards of appellate review in this court, to
appreciate that inconsistent decisions can be reached in
6 XY, LLC v. TRANS OVA GENETICS, L.C.
the PTAB and the district court, all weighing heavily
against estoppel. 1 My colleagues’ holding that in the
event of conflict the administrative agency’s decision
“moots” the district court’s decision, raises critical issues
of constitutional balance.
The imposition of estoppel by my colleagues contra-
venes the America Invents Act, § 315(e)(2), as well as the
Supreme Court’s rulings. My colleagues rely on Dana
Corp. v. NOK, Inc., 882 F.2d 505 (Fed. Cir. 1989), to
support depriving XY of the opportunity to contest the
appellate application of collateral estoppel. Maj. Op. at
20. Yet in Dana Corp. the parties had opportunity to
debate the issue; it was not an appellate surprise, as we
explained:
NOK first raised estoppel in its reply brief. The
parties addressed the issue at oral argument, dur-
ing which Dana’s counsel asserted that collateral
estoppel should not be applied against Dana to de-
1 My colleagues rely on this panel’s concurrent af-
firmance of the PTAB’s invalidation of the Freezing
Patent in a non-mutual proceeding, XY, LLC v. ABS
Global, Inc., Appeal No. 16-2228. On the standard of
“substantial evidence,” the PTAB decision is supportable.
However, on the district court’s standard of “clear and
convincing evidence,” or even applying the standard of
“preponderant evidence,” the Freezing Patent retains
validity. This discrepancy and the ensuing uncertainty of
outcome illuminate a major flaw in the America Invents
Act. Although it is now confirmed that Congress has
authority to authorize the PTAB to invalidate issued
patents, see Oil States Energy Services, LLC v. Greene’s
Energy Group, LLC, No. 16-712, 2018 WL 1914662 (U.S.
Apr. 24, 2018), it cannot be inferred that Congress also
authorized the PTAB to override the judgments of Article
III courts.
XY, LLC v. TRANS OVA GENETICS, L.C. 7
feat its infringement claim against NOK based on
invalidity of the ’621 patent. After oral argument,
this court ordered the parties to file supplemental
briefs on that issue. Dana was required to ad-
dress “its position that collateral estoppel should
not be applied to this case and the related ques-
tion of the propriety of this court, in the first in-
stance, making that determination.”
882 F.2d at 508 (quoting Order). In contrast, estoppel
was not raised on this appeal, was not briefed, not argued
at the hearing, 2 not briefed post-hearing.
The court in Dana Corp. held that a remand was un-
necessary because the patentee did not seek to supple-
ment the record. My colleagues deny XY this opportunity,
despite no party raising the question of whether estoppel
negates or moots this district court judgment. “The
indispensable ingredients of due process are notice and an
opportunity to be heard by a disinterested decision-
maker.” Abbott Labs. v. Cordis Corp., 710 F.3d 1318,
1328 (Fed. Cir. 2013) (citing Caperton v. A.T. Massey Coal
Co., 556 U.S. 868, 876–81 (2009); LaChance v. Erickson,
522 U.S. 262, 266 (1998); Memphis Light, Gas & Water
Div. v. Craft, 436 U.S. 1, 13 (1978); Mathews v. Eldridge,
424 U.S. 319, 333 (1976)). Dana Corp. afforded procedur-
al safeguards that my colleagues deny.
2 The panel majority proposes that “[t]here is no in-
dication that either party thought estoppel would not
apply.” Maj. Op. at 20. However, neither is there any
indication that either party thought estoppel would
apply—it was never discussed. “The fallacy of the argu-
ment consists in assuming the very ground in controver-
sy.” Trs. of Dartmouth Coll. v. Woodward, 17 U.S. 518,
697 (1819) (Story, J., concurring).
8 XY, LLC v. TRANS OVA GENETICS, L.C.
My colleagues argue that their imposition of sua
sponte estoppel avoids “unnecessary judicial waste.” Maj.
Op. at 20. However, the conclusion of estoppel is reached
without receiving the argument of the parties. Due
process is not “unnecessary judicial waste.”
The majority’s imposition of collateral estoppel is in-
consistent with precedent. In B&B Hardware, Inc. v.
Hargis Industries, Inc., 135 S. Ct. 1293, 1303 (2015), the
Court applied issue preclusion arising from agency and
Eighth Circuit trademark rulings, explaining why the
“well-known exceptions” in § 28 of the Restatement were
not applicable on the facts that existed. Collateral estop-
pel is not subject to automatic imposition without afford-
ing any opportunity for party discussion.
The opportunity to rebut a charge of collateral estop-
pel is a consistent theme in this court’s jurisprudence,
including the cases cited by the panel majority. In
Mendenhall v. Barber-Greene Co., 26 F.3d 1573, 1580
(Fed. Cir. 1994), this court observed that “[e]ach appellant
raised the issue [of collateral estoppel] during pending
litigation at virtually the earliest possible date.” In
Pharmacia & Upjohn Co. v. Mylan Pharmaceuticals, Inc.,
170 F.3d 1373 (Fed. Cir. 1999), the district court imposed
collateral estoppel on the patentee, and on appeal the
patentee had the opportunity to argue against preclusion.
Id. at 1379–80. Conflicting views of the PTAB and the
district court as to the Freezing Patent’s validity does not
lead to automatic eradication of the district court’s judg-
ment of validity. In Arizona v. California, 530 U.S. 392,
412–13 (2000), relied upon by the majority, the Court
declined to sua sponte accept a preclusion defense.
Our non-precedential opinions are in accord with this
established jurisprudence. In U.S. Ethernet Innovations,
LLC v. Texas Instruments Inc., 645 F. App’x 1026 (Fed.
Cir. 2016), the district court afforded the patentee the
opportunity to rebut application of collateral estoppel, and
XY, LLC v. TRANS OVA GENETICS, L.C. 9
the ruling of failure to rebut was a subject of the appeal.
Id. at 1028–29. Similarly, in Translogic Technology, Inc.
v. Hitachi, Ltd, et al., 250 F. App’x 988 (Fed. Cir. 2007),
the patentee argued against the application of collateral
estoppel.
The panel majority seeks support in this court’s re-
cent decision in MaxLinear, Inc. v. CF Crespe LLC, 880
F.3d 1373 (Fed. Cir. 2018). Maj. Op. at 19–20. However,
MaxLinear was not a case of collateral estoppel; MaxLin-
ear related to inconsistent PTAB decisions, whereby this
court remanded to the PTAB instructing that: “On re-
mand, the Board must consider whether the dependent
claims 4, 6–9, and 21 can survive the unpatentability of
claims 1 and 17 from which they depend in view of the
prior art cited in the ’728 IPR.” Id. at 1377–78. This was
not an application of collateral estoppel on appellate
review.
Here, collateral estoppel was not pleaded and was not
argued, yet is imposed on appeal without opportunity for
response—contrary to precedent requiring that the pre-
cluded party “had a full and fair opportunity to present its
arguments” concerning estoppel. Transclean Corp. v.
Jiffy Lube International, Inc., 474 F.3d 1298, 1308 (Fed.
Cir. 2007). The cases cited by the panel majority do not
support their position; they support the contrary position.
These departures from statute, precedent, practice,
and due process add to the uncertainty of the patent
grant, and thus add disincentive to patent-supported
innovation. I discern no benefit to the public. I respect-
fully dissent.