IP Law Daily, PATENT—Fed. Cir.: Full court declines to rehear case on preclusive effect of IPRs, (Aug 1, 2025)

By Thomas Long, J.D.

Dissenters argued that the case presented the important question of whether collateral estoppel barred district court litigation over validity of claims not “materially different” from claims invalidated by the PTAB.

A case raising questions about the preclusive effect of Patent Trial and Appeal Board decisions in inter partes reviews (IPRs) will not be revisited by the full U.S. Court of Appeals for the Federal Circuit. In a patent infringement suit between a non-practicing entity and ecommerce marketplace Groupon, the Federal Circuit has denied Groupon’s combined petition for panel re-hearing and rehearing en banc of a three-judge panel’s decision holding that a district court improperly applied collateral estoppel in dismissing the case. The panel held that a prior IPR decision invalidating some claims of the asserted patent did not automatically bar the non-practicing entity from asserting other claims, due to the differing burdens of proof between IPR proceedings and district court litigation. Two circuit judges dissented from the denial of en banc rehearing, opining that the case presented the important question of whether Board decisions determining that particular claims are unpatentable have collateral estoppel effect in district court infringement litigation so that patentably indistinct claims are barred. The dissenters argued that the panel’s decision contradicted Federal Circuit precedent regarding the preclusive effect of IPR decisions that had been affirmed by the court, as well as guidance by the Supreme Court (Kroy IP Holdings, LLC v. Groupon, Inc., No. 23-1359 (Fed. Cir. Aug. 1, 2025)).

Patent-in-suit. Kroy IP Holdings, LLC, a non-practicing entity, owned U.S. Patent No. 6,061,660 (“the '660 patent”), which describes a method and system for providing incentive programs over a computer network. The '660 patent discloses an incentive builder program with an award fulfillment system that permits multiple sponsors to customize and market incentive programs through a central marketplace using an interface.

Infringement suit; IPR. Kroy filed suit against Groupon, Inc., asserting infringement of 13 claims of the ’660 patent. Groupon then filed two IPR petitions challenging those 13 claims plus eight more. A few months later, Kroy filed an amended complaint that added 22 claims not included in the original complaint (and not included in the IPR petition). The Board instituted review on the 21 challenged claims. The Board invalidated all of those claims on grounds of anticipation or obviousness. Kroy appealed to the Federal Circuit, which summarily affirmed the Board’s decisions, pursuant to Federal Circuit Rule 36.

District court’s decision. Groupon moved to dismiss the case, asserting the defense of collateral estoppel, and the district court granted the motion. Groupon had contended that the claims at issue were not materially different from those challenged before the Board, for purposes of invalidity, and the district court agreed. “This is one of those (perhaps somewhat rare) circumstances where, even at the motion to dismiss stage, a defendant has demonstrated that a plaintiff is collaterally estopped from asserting certain patent claims in light of the PTAB’s decision that other (slightly-differently-worded) claims of the same patent were invalid,” the district court said. “Defendant here made fulsome arguments as to why any differences in the Newly Asserted Claims and Invalidated Claims did not materially alter the question of invalidity.”

Appellate panel’s decision. The Federal Circuit reversed and remanded the district court’s decision, holding that the lower court had improperly applied collateral estoppel. In the court’s view, precedent on the preclusive effect of IPR decisions applied only when the exact same claims had already been adjudicated. In this case, Kroy's newly asserted claims were not subject to the prior IPR rulings. The court also emphasized that collateral estoppel generally does not apply when the second proceeding involves a different legal standard. In IPR proceedings, unpatentability is established under a preponderance of the evidence standard, whereas in district court invalidity must be shown by clear and convincing evidence. This distinction was determinative, in the appellate court’s view. Groupon subsequently moved for rehearing by the panel or, alternatively, en banc rehearing. The combined motion was denied summarily in an unsigned order.

Concurring opinion. Chief Judge Kimberly Moore, joined by Circuit Judge Kara Fernandez Stoll, took the position that collateral estoppel did not apply because the differing standard of proof—preponderance of the evidence before the Board versus clear and convincing evidence in district court—materially altered the question of invalidity. “The Supreme Court has repeatedly reprimanded us for creating patent-specific departures from well-established principles,” the Chief Judge wrote. “Policy implications cannot override the desire for uniformity in the application of law across different subject matters.” According to Chief Judge Moore, it would also be more efficient and cost-effective for litigants to file a second petition for IPR to cover any claims omitted from the first petition.

Dissenting opinion. Circuit Judge Timothy Dyk, joined by Circuit Judge Todd Hughes, would have granted the motion for en banc rehearing. Judge Dyk argued that the panel’s decision contradicted the Federal Circuit’s decision in XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282, 1294 (Fed. Cir. 2018), in which the court held that IPR unpatentability decisions have “immediate issue-preclusive effect” when affirmed by the Federal Circuit. The dissenting opinion criticized the panel’s reasoning regarding differences in standards of proof, and it contended that denying the collateral estoppel effect in a case such as this one would be incompatible with the statutory structure and purpose of the America Invents Act (AIA). “Other circuits have recognized that the burden-of-proof rule is not absolute and that ‘the value of collateral estoppel in fostering judicial economy and avoiding inconsistent results would be severely compromised if every shift in the burden of proof would make collateral estoppel unavailable,’” Judge Dyk said (citation omitted).

Judge Dyk also opined that the panel “fail[ed] to recognize that Supreme Court precedent makes the application of collateral estoppel dependent on Congressional intent, and undermines the central purpose of the AIA—to make Board decisions a substitute for district court invalidity litigation.” He argued that, in the patent context, Supreme Court guidance made it clear that common-law rules of collateral estoppel must be “adjusted” to serve the AIA’s purpose of avoiding duplicative litigation over patent invalidity. According to Judge Dyk, congressional purposes in enacting the AIA supported the application of collateral estoppel in this case. “IPRs have proven to be both popular and effective,” Judge Dyk wrote. “But the Congressional objectives in creating these proceedings cannot be achieved if, as under the panel decision, IPR final decisions affirmed by this court are not given the same effect as district court proceedings.”

The case is No. 23-1359.

Judge: Per curiam.

Attorneys: Timothy Devlin (Devlin Law Firm LLC) for Kroy IP Holdings, LLC. Thomas Lee Duston (Marshall, Gerstein & Borun LLP) for Groupon, Inc.

Companies: Kroy IP Holdings, LLC; Groupon, Inc.

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