By Joshua R. Rich –

Usually, when an issue is actually considered and resolved after a full and fair opportunity to litigate, the doctrine of issue preclusion can bar the losing party from relitigating the issue in another case.  That is, judicial economy is best served by not allowing a losing party a second bite at the apple on questions it had every reason to fight over, but failed.  But as Inland Diamond Products shows, there can be an exception:  in certain circumstances when the earlier decision was made based on a lower standard of proof, courts will not honor that earlier decision by applying issue preclusion and will make later parties prove their case from whole cloth.

The Inland Diamond Products case was the second round of fighting over the two patents-in-suit (U.S. Patent Nos. 8,636,360 and 9,405,130).  In 2017, Inland brought a patent infringement lawsuit against Hoya Optical Labs of America in the U.S. District Court for the Eastern District of Texas alleging infringement of claims of the two patents.  Hoya responded by filing petitions for inter partes review against the two patents in late 2017 and early 2018.  The district court litigation and IPRs continued in parallel until August 2018, when the parties settled the litigation.  Importantly, however, the settlement expressly did not moot the IPRs.  Instead, they carried forward to resolution, with some of the claims (including the independent claims) being found invalid for obviousness in mid-2019.  But some of the claims survived.

With those surviving claims in hand, Inland sued Cherry Optical for patent infringement in the U.S. District Court for the Eastern District of Wisconsin.  After almost three years of hard-fought litigation, Cherry Optical moved for summary judgment of invalidity due to obviousness.  It based its motion in part on the earlier IPR decisions, reasoning that Inland should be bound to the earlier finding that the independent claims of the asserted patents were obvious and Inland should only be permitted to argue that the additional elements of the dependent claims rendered them nonobvious.  The District Court agreed, applying issue preclusion to narrow Inland’s possible arguments to only those additional elements.  But those differences were not enough to overcome the prior art references and arguments that Cherry Optical asserted and the District Court granted summary judgment of invalidity.

While the appeal from the District Court’s decision in the Inland Diamond Products case was pending, the Federal Circuit decided two cases that dictated its decision here.  In ParkerVision, Inc. v. Qualcomm Inc., 116 F.4th 1345 (Fed. Cir. 2024), the PTAB found apparatus claims invalid in an IPR; the patentee then asserted the method claims of the same patent in district court litigation.  The accused infringer cited the same invalidating art in the litigation and the District Court barred the patentee from providing expert witness testimony on the same factual issues that were resolved in the IPR.  Because the PTAB’s decision was made under the preponderance of the evidence standard, not clear and convincing evidence (the standard for invalidation in litigation), the Federal Circuit ruled that estoppel could not apply.  Similarly, in Kray IP Holdings, LLC v. Groupon, Inc., 127 F.4th 1376 (Fed. Cir. 2025), the Board held claims of the relevant patent invalid in an IPR.  When Kray sought to assert immaterially different claims in litigation, the District Court dismissed its complaint due to issue preclusion.  Again, the Federal Circuit refused to apply issue preclusion and reversed the dismissal based on the different burdens of proof on invalidity in the Patent Office and district court.

Given the precedent of the ParkerVision and Kray decisions, the Federal Circuit’s reversal of summary judgment in the Inland Diamond Products case was preordained.  But as the court noted, the earlier cases had to distinguish the decision in XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282 (Fed. Cir. 2018).  In that case, the Federal Circuit applied issue preclusion to bar relitigation of the validity of a claim that had been invalidated in an IPR when the appellate court concurrently decided the two appeals.  It held the appellate decision means “the claim no longer exists and cannot be asserted as a basis for infringement.”  But given the later precedent of ParkerVision and Kray, it seems to be a thin reed to distinguish between the two situations:  only if the Federal Circuit decides the two appeals on the same day (or invalidates the patent claims earlier) does the reasoning even apply?[1]

The Federal Circuit did provide some guidance for the District Court – and future litigants – after reaching its conclusion.  First, in a footnote, it indicated that there would be another reason to ignore issue preclusion in early IPRs.  Specifically, it said claim constructions rendered based on the “broadest reasonable interpretation” cannot preclude relitigation because the claim construction standards are different.  In this case, that would be another reason that applying issue preclusion was erroneous, beyond the distinction in standard of proof of invalidity and the asserted claims themselves not having been invalidated.  Furthermore, even if the same prior art was asserted as invalidating closely related claims, the District Court could not rely on the PTAB’s decision to shorten its analysis; the patent challenger would carry the burden of proof and the patentee must be allowed to mount a full challenge to the invalidity arguments.

The Inland Diamond Products case limits the value of a successful IPR.  Coming at almost exactly the same time as proposed rules that limit the availability of IPRs[2] and the Director’s decision to resolve all institution issues himself,[3] it is another blow to IPRs as an option for resolving validity issues.  The intent in creating IPRs was to avoid the need for fulsome litigation of validity issues if the Patent Office could resolve them more quickly and inexpensively.  The Inland Diamond Products case eliminates all of those efficiencies.

Inland Diamond Products v. Cherry Optical (Fed. Cir. 2025)
Panel: Circuit Judges Prost, Reyna, and Chen
Opinion by Circuit Judge Prost

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[1] Given the reasoning of these cases, it isn’t clear if the Federal Circuit would apply issue preclusion to allow a PTAB finding of invalidity to prevent assertion of infringement of the same claim in a district court or if the IPR appeal were still pending when an infringement appeal were decided.

[2] https://patentdocs.org/2025/10/19/uspto-proposed-new-rules-limiting-the-availability-of-inter-partes-review-but-are-they-legal/

[3] https://patentdocs.org/2025/10/19/new-director-overturns-ptab-procedural-precedents-part-i/