Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_14-cv-03646/USCOURTS-cand-4_14-cv-03646-12/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1338 Patent Infringement

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United States District Court 

For the Northern District of California 

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IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

TECHNOLOGY PROPERTIES LIMITED LLC 

and MCM PORTFOLIO LLC, 

 

 Plaintiffs, 

 

 v. 

CANON, INC. et al., 

 Defendants. 

________________________________/

No. C 14-3640 CW 

ORDER DENYING 

MOTION FOR 

JUDGMENT ON THE 

PLEADINGS 

(Docket No. 302) 

TECHNOLOGY PROPERTIES LIMITED LLC 

and MCM PORTFOLIO LLC, 

 

 Plaintiffs, 

 

 v. 

HEWLETT-PACKARD COMPANY, 

 Defendant. 

________________________________/

No. C 14-3643 CW 

(Docket No. 88) 

TECHNOLOGY PROPERTIES LIMITED LLC

and MCM PORTFOLIO LLC, 

 

 Plaintiffs, 

 

 v. 

NEWEGG INC. et al., 

 Defendants. 

________________________________/

No. C 14-3645 CW 

(Docket No. 74) 

TECHNOLOGY PROPERTIES LIMITED LLC

and MCM PORTFOLIO LLC, 

 

 Plaintiffs, 

 

 v. 

SEIKO EPSON CORPORATION, et al., 

 Defendants. 

________________________________/

No. C 14-3646 CW 

(Docket No. 85) 

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These matters come before the Court on Defendants' Motion for 

Judgment on the Pleadings. Docket No. 302.1

 Defendants argue 

that their judgment of noninfringement from the International 

Trade Commission (ITC) bars Plaintiffs from proceeding with claims 

for infringement before this Court. There is no basis for a 

district court to be bound by a decision of the ITC; indeed, 

Congress explicitly stated that such decisions "cannot have 

preclusive effect" in subsequent district court litigation. 

Defendants' motion is DENIED. 

BACKGROUND 

On March 27, 2012, Plaintiff Technology Properties Limited 

LLC (TPL) filed a complaint in the ITC under section 337 of the 

Tariff Act of 1930, as amended, 19 U.S.C. § 1337, alleging in part 

that the memory card readers used in Defendants' products infringe 

the three patents-in-suit. Docket No. 12-1. The ITC instituted 

an investigation. Following discovery, a Markman2

 hearing and a 

four-day evidentiary hearing, the ITC's Administrative Law Judge 

issued an Initial Determination ruling that Defendants' products 

did not infringe the asserted patents. TPL petitioned the ITC for 

review; after briefing, the ITC affirmed the ALJ's determination 

 1 Docket numbers correspond to the docket for case number 

14-3640, unless otherwise noted. 

2 Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. 

Cir. 1995) (aff'd 517 U.S. 370 (1996)). 

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of noninfringement. TPL did not appeal the ITC opinion to the 

Federal Circuit. 

The day after TPL filed its complaint in the ITC, it also 

filed complaints against Defendants in the United States District 

Court for the Eastern District of Texas. Docket No. 1; Case No. 

14-3643, Docket No. 1; Case No. 14-3645, Docket No. 1; Case No. 

14-3646, Docket No. 1. TPL's allegations included the 

infringement claims from the ITC complaint. Pursuant to 28 U.S.C. 

§ 1659, the court granted mandatory stays of the cases before it 

pending the ITC investigation. Docket No. 13. Following issuance 

of the ITC opinion, TPL moved to lift the stays in the Eastern 

District of Texas. Docket No. 19. The court lifted the stays and 

consolidated the TPL cases for pretrial purposes. Docket No. 21. 

TPL then filed amended complaints, adding co-Plaintiff and patent 

owner MCM Portfolio LLC. Docket Nos. 97, 102, 87 and 101. The 

cases were transferred to this Court on August 8, 2014. Docket 

No. 163. On May 1, 2015, Defendants filed the instant motion for 

judgment on the pleadings. Docket No. 302. 

LEGAL STANDARD 

Rule 12(c) of the Federal Rules of Civil Procedure provides 

that "[a]fter the pleadings are closed--but early enough not to 

delay trial--a party may move for judgment on the pleadings." 

Such a motion, like one brought under Rule 12(b)(6), challenges 

"the legal sufficiency of the opposing party's pleadings." Qwest 

Communications Corp. v. City of Berkeley, 208 F.R.D. 288, 291 

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(N.D. Cal. 2002). Judgment on the pleadings may be granted when 

the moving party clearly establishes that no material issue of 

fact remains to be resolved and that the moving party is entitled 

to judgment as a matter of law. Hal Roach Studios, Inc. v. 

Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989). 

DISCUSSION 

Defendants' motion is founded on the so-called Kessler 

doctrine, which has its origins in a 1907 case from the United 

States Supreme Court, Kessler v. Eldred, 206 U.S. 285 (1907). In 

that case Eldred held a patent for an electric lamp lighter and 

brought a complaint in federal court in Indiana alleging 

infringement against Kessler, a manufacturer and retailer of 

electric cigar lighters. Id. at 285. The Indiana court found 

that Kessler's device did not infringe; this finding was affirmed 

on appeal. Id. at 286. Subsequently, Eldred brought an 

infringement lawsuit against a user of Kessler's lighters. Id. 

Kessler then sued Eldred in federal court in Illinois, seeking an 

injunction barring Eldred from prosecuting further infringement 

claims against Kessler or Kessler's customers. Id. at 287. 

Kessler appealed an adverse circuit court ruling to the United 

States Supreme Court, which held that the Indiana court's judgment 

"settled finally and everywhere . . . that Kessler had the right 

to manufacture, use, and sell the electric cigar lighter. . . ." 

Id. at 288. The Supreme Court further explained that Eldred had a 

duty "to recognize and yield to that right everywhere and always," 

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and that permitting Eldred to persist in his infringement suits 

would allow him to "destroy Kessler's judgment right." Id. at 

289. Thus the Kessler doctrine may be distilled as a rule 

allowing a party with a judgment of noninfringement to cite that 

judgment to bar subsequent claims of infringement. 

But for a few select applications3, the Kessler doctrine lay 

dormant until the Federal Circuit revived it last year in Brain 

Life, LLC v. Elekta, Inc., 746 F.3d 1045 (Fed. Cir. 2014). In 

that case, MIDCO sued Elekta alleging that Elekta's products 

infringed MIDCO's patent. Id. at 1048. The case proceeded to 

trial and the jury found infringement, but on appeal the Federal 

Circuit vacated the jury's finding of infringement and remanded to 

the district court with instructions to enter a judgment of 

noninfringement as a matter of law. Id. The district court 

entered final judgment in favor of Elekta. Id. MIDCO 

unsuccessfully appealed, rendering the trial court judgment final. 

Id. 

Subsequently, Brain Life acquired a license to MIDCO's patent 

and filed infringement suits against several parties, including 

Elekta. Id. at 1050-51. Brain Life moved to dismiss Elekta's 

claim preclusion and issue preclusion defenses and Elekta moved 

 3 See MGA, Inc. v. General Motors Corp., 827 F.2d 729 (Fed. 

Cir. 1987) (applying Kessler to affirm summary judgment against 

patentee where alleged infringer already had a judgment of 

noninfringement from prior state court litigation in which the 

infringement question was subsumed by a state law question about a 

licensing agreement). 

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for summary judgment on its claim preclusion defense. Id. at 

1051. The district court granted Elekta's motion for summary 

judgment, finding first that there was no material difference 

between the products already litigated in the current case and the 

products at issue in the MIDCO case, and also concluding that 

Elekta's judgment in its favor from the MIDCO litigation barred 

Brain Life's claims. Id. 

On appeal, the Federal Circuit engaged in a lengthy 

discussion of claim preclusion (also known as res judicata), issue 

preclusion (which encompasses collateral estoppel) and the Kessler 

doctrine. Id. at 1053-59. The court held that claim preclusion 

barred the assertion of acts of infringement that predated the 

MIDCO litigation, but that claim preclusion would not bar suit 

alleging infringing acts or products created after the MIDCO case. 

Id. at 1054. With regard to issue preclusion, the court held that 

only claims that were actually litigated were barred, so that 

doctrine's preclusive effect did not apply to products created 

after the MIDCO case. Id. at 1055. The court then turned to the 

Kessler doctrine, synthesizing the three principles as follows: 

As explained above, however, traditional notions of 

claim preclusion do not apply when a patentee accuses 

new acts of infringement, i.e., post-final judgment, in 

a second suit—even where the products are the same in 

both suits. Such claims are barred under general 

preclusion principles only to the extent they can be 

barred by issue preclusion, with its attendant 

limitations. The Kessler Doctrine fills the gap between 

these preclusion doctrines, however, allowing an 

adjudged non-infringer to avoid repeated harassment for 

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continuing its business as usual post-final judgment in 

a patent action where circumstances justify that result. 

Id. at 1056. Thus, by operation of the Kessler doctrine, Brain 

Life was barred from asserting that the accused products from the 

MIDCO litigation infringed its patent, even for acts of 

infringement occurring post-judgment. Id. at 1058. Further, 

Brain Life was barred from alleging infringement for subsequent 

versions of the previously-accused Elekta products where those 

subsequent versions are "essentially the same" as the previouslyaccused products. Id. at 1057-58 (quoting Foster v. Hallco Mfg. 

Co., 947 F.2d 469, 479-80 (Fed. Cir. 1991)). The court only 

permitted claims involving a product created after the MIDCO 

litigation to proceed to trial, holding that none of the 

preclusion doctrines discussed above applied. Id. at 1058. 

In their motion, Defendants argue that, like the defendants 

in Kessler and Brain Life, they have a prior judgment of 

noninfringement, albeit from the ITC, and that the Kessler 

doctrine bars relitigation of TPL's infringement claims. While 

only a few of this suit's accused products were at issue before 

the ITC, both parties agree that the newly accused products 

included in this suit are "essentially the same" as those under 

consideration before the ITC, so if the Kessler doctrine applies, 

then Defendants are entitled to judgment on the pleadings. Motion 

Brief at 6; Response at 4. The obvious impediment to the 

application of the Kessler doctrine in this case, forming the 

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basis of Plaintiffs' response, is that Defendants' judgment came 

from the ITC and not a state or federal court. Defendants offer 

several arguments in support of treating an ITC decision as a 

court decision and the Court now addresses each in turn. 

First, Defendants argue that the Supreme Court recognized 

that the identity of the first court does not matter and quote the 

following language from Kessler: "If rights between litigants are 

once established by the final judgment of a court of competent 

jurisdiction those rights must be recognized in every way, and 

wherever the judgment is entitled to respect, by those who are 

bound by it." Motion Brief at 9, Reply Brief (Docket No. 313) at 

3 (quoting Kessler, 206 U.S. at 289). There being no dispute that 

the ITC had jurisdiction over the investigation, Defendants argue 

that the ITC's judgment is "entitled to respect." There are a few 

problems with this argument. First, there is no possibility that 

the Supreme Court had ITC judgments in mind when it decided 

Kessler because the ITC's predecessor agency, the United States 

Tariff Commission, was not created until nine years after Kessler 

in 1916. Frischer & Co. v. Bakelite Corp., 39 F.2d 247, 254 

(C.C.P.A. 1930). Second, when a court is considering the binding 

nature of an administrative agency's decision given pursuant to a 

statutory grant of authority4, the relevant inquiry is not whether 

 4 In this case, the ITC acted pursuant to its authority under 

section 337 of the Tariff Act of 1930, as amended by the Trade 

Reform Act of 1974. 

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the court believes the decision ought to be binding, but whether 

Congress did not intend to grant the agency authority to provide 

binding decisions. Texas Instruments, Inc. v. Cypress 

Semiconductor Corp., 90 F.3d 1558, 1568 (Fed. Cir. 1996) ("an 

administrative agency decision, issued pursuant to a statute, 

cannot have preclusive effect when Congress, either expressly or 

impliedly, indicated that it intended otherwise.") Congress has 

expressly indicated that ITC decisions are not entitled to have 

preclusive effect, explaining that: 

[I]n patent-based cases, the Commission considers, for 

its own purposes under section 337, the status of 

imports with respect to the claims of U.S. patents. The 

Commission's findings neither purport to be, nor can 

they be, regarded as binding interpretations of the U.S. 

patent laws in particular factual contexts. Therefore, 

it seems clear that any disposition of a Commission 

action by a Federal Court should not have res judicata 

or collateral estoppel effect in cases before such 

courts. 

Id. (quoting S.Rep. No. 1298, 93d Cong., 2d Sess. 196 (1974), 

reprinted in 1974 U.S.C.C.A.N. 7186, 7329). In their Reply Brief, 

Defendants make much of the fact that this quote came from a 

Senate Report and not from "'Congress' and 'statutory authority.'" 

Reply Brief at 5. However, the Federal Circuit has consistently 

interpreted this legislative history to mean that "Congress did 

not intend decisions of the ITC on patent issues to have 

preclusive effect." Id.; accord Bio–Tech. Gen. Corp. v. 

Genentech, Inc., 80 F.3d 1553, 1564 (Fed. Cir. 1996) ("[W]e hold 

that the ITC's prior decision cannot have claim preclusive effect 

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in the district court."). Defendants cite no contrary statements 

showing that Congress intended the opposite, despite the fact that 

this interpretation has been on the books for decades. 

 Defendants also include a footnote citing a recent Supreme 

Court case, B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 

1293, 1299 (2015), for the notion that administrative agency 

findings can have a preclusive effect in subsequent federal court 

proceedings. Motion Brief at 9 n.5. This case actually 

undermines Defendants' position because the opinion emphasized 

that courts must defer to Congress's view that an agency's action 

should not be preclusive. Id. at 1305. Where, as here, there is 

an explicit indication that Congress did not intend the ITC's 

decision to have preclusive effect, the Court cannot grant the 

decision such an effect. 

Indeed, Defendants concede that ITC decisions are not binding 

on district courts as a matter of claim preclusion or issue 

preclusion. Motion Brief at 10. This is particularly salient to 

the question before the Court today, considering the Kessler 

doctrine's raison d'être. As the Federal Circuit articulated in 

Brain Life, the Kessler doctrine "fills the gap" between these 

preclusion doctrines. Brain Life, 746 F.3d at 1056. Plaintiffs 

argue, and the Court agrees, that because these preclusion 

doctrines do not apply in the context of ITC decisions and 

subsequent district court litigation, there is no gap for the 

Kessler doctrine to fill. 

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Finally, Defendants argue that TPL5 cannot evade the binding 

effect of the ITC's finding of noninfringement by simply not 

appealing to the Federal Circuit. Motion Brief at 11, Reply Brief 

at 7. In response, Plaintiffs explain the practical reasons for 

TPL's decision not to appeal. Plaintiffs state that they are 

claiming monetary damages and, of course, the ITC is not empowered 

to award such damages. Response at 4. Additionally, Plaintiffs 

assert their right to a jury trial on the infringement issues and 

note that the only way for them to exercise that right is to 

pursue litigation in a district court. Response at 3-4. The 

Federal Circuit has previously noted that granting ITC decisions 

preclusive effect could run afoul of the Constitution. Texas 

Instruments, 90 F.3d at 1569 n.10 ("Moreover, allowing prior ITC 

decisions on patent infringement questions to have preclusive 

effect would potentially deprive the parties of their Seventh 

Amendment right to a jury trial on the issue of infringement."). 

Defendants offer no response to this persuasive Constitutional 

argument in their Reply Brief. 

It is true that TPL could have appealed the ITC decision but 

chose not to. Nonetheless, no authority establishes that the 

Court can hold that decision against Plaintiffs in this context. 

The cases Defendants cite in support of their contention that 

 5 Defendants do not address how or whether this argument 

applies to Plaintiff MCM Portfolio LLC, which was not a party at 

the ITC. 

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failure to appeal bars relitigation of the decided issue all 

transpired in distinguishable procedural circumstances.6 The fact 

remains that legal precedents regarding the preclusionary effect 

of an ITC decision were established long before the parties' 

dispute began. Application of this longstanding rule to the facts 

of this case yields another chance for TPL to raise its 

infringement claims. Though the other side of the coin is that 

Defendants have to defend against the same claims again, the Court 

is not bound by the ITC decision and will not employ the Kessler 

doctrine to bar Plaintiffs' claims of infringement from this 

forum. Accordingly, Defendants' motion is DENIED. 

IT IS SO ORDERED. 

Dated: 06/24/2015 

CLAUDIA WILKEN 

United States District Judge 

 6 Notably, the only case Defendants cite that proceeded in an 

administrative law context, a district court order in McLellan v. 

Perry, considered a state administrative tribunal and a subsequent 

federal case brought under 28 U.S.C. § 1983. It is well 

established that "[a]s a matter of federal common law, federal 

courts give preclusive effect to the findings of state 

administrative tribunals in subsequent actions under § 1983." 

McLellan v. Perry, 2014 WL 1309291 at *2 (D. Nev.) (quoting Miller 

v. County of Santa Cruz, 39 F.3d 1030, 1032 (9th Cir. 1994)). 

That the district court was bound by the administrative agency's 

determinations in that case sheds little light on the issue 

currently before the Court where there is no such rule. 

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