Tinnus Enterprises, LLC et al v. Telebrands Corporation et al
Filing
344
MEMORANDUM AND OPINION and ORDER granting in part and denying in part 329 Opposed MOTION PLAINTIFFS' STATUTORY ESTOPPEL AND ISSUE PRECLUSION MOTION filed by ZURU LLC, Tinnus Enterprises, LLC, ZURU Ltd., ZURU Inc., ZURU Pty Ltd., ZURU UK Ltd. Signed by Magistrate Judge John D. Love on 8/21/2018. (gsg)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
TINNUS ENTERPRISES, LLC, ZURU
LTD., ZURU INC., ZURU UK LTD.,
ZURU LLC, ZURU PTY LTD.,
Plaintiffs,
v.
TELEBRANDS
CORPORATION,
BULBHEAD.COM, LLC, BED BATH &
BEYOND INC.,
§
§
§
§
§
§
§
§
§
§
CIVIL ACTION NO. 6:17-CV-00170-RWS
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiffs Tinnus Enterprises, LLC, ZURU Ltd., ZURU Inc., ZURU
UK Ltd., ZURU LLC, and ZURU PTY Ltd.’s (collectively “Plaintiffs”) Motion for Statutory
Estoppel and Issue Preclusion. (Doc. No. 329.) Defendants Telebrands Corporation
(“Telebrands”), Bulbhead.com, LLC (“Bulbhead”), and Bed Bath & Beyond Inc. (“Bed Bath”)
have field a response (Doc. No. 337), to which Plaintiffs have filed a reply (Doc. No. 340), and
Defendants have filed a sur-reply (Doc. No. 343). Upon consideration, Plaintiffs’ Motion (Doc.
No. 329) is GRANTED-IN-PART and DENIED-IN-PART as set forth herein.
BACKGROUND
This case presents the third generation of disputes before this Court over alleged
infringing water balloon products. On March 20, 2017, Plaintiffs filed the instant action alleging
that Telebrands’s Easy Einstein Balloons infringe U.S. Patent Nos. 9,242,749 (“the ’749
1
Patent”), 9,315,282 (“the ’282 Patent”), 9,527,612 (“the ’612 Patent”), and 9,533,779 (“the ’779
Patent”). (Doc. No. 1.) Plaintiffs later filed an amended complaint, dropping the ’612 and ’779
Patents, leaving the ’749 and ’282 Patents as the only patents-in-suit. (Doc. No. 287.) The ’749
and ’282 Patents were also at issue in a prior litigation between the parties in Cause No. 6:16-cv33 (“Tinnus II”). The Court tried that action over the course of seven days and on November 21,
2017, the jury returned a verdict finding that Telebrands infringed the ’749 and ’282 Patents, that
the ’749 and ’282 Patents were valid, and that infringement was willful. (Case No. 6:16-cv-33,
Doc. No. 544.) Post-trial proceedings for that action are currently ongoing.
During the course of Tinnus II, the ’282 and ’749 Patents were also subject to Post-Grant
Review (“PGR”) petitions before the Patent Trial and Appeal Board (“PTAB”) filed by
Telebrands. On February 21, 2017, the PTAB instituted review on claim 1 of the ’749 Patent and
claims 1–3 of the ’282 Patent. (Tinnus II, Doc. Nos. 233-1, 234-1.) As to claim 1 of the ’749
Patent, Telebrands asserted the following grounds in its petition: 35 U.S.C. § 112(b) (“§
112(b)”); Cooper, Saggio, and Lee 35 U.S.C. § 103 (“§ 103”); Cooper, Saggio, and Donaldson §
103; Saggio § 103; Saggio and Donaldson or Lee § 103; and Air Force 4 Inflator and Donaldson
or Lee § 103. (Tinnus II, Doc. No. 233-1, at 6.) The PTAB instituted trial on obviousness as to
the combinations of: (1) Cooper, Saggio, and Donaldson; and (2) Saggio and Donaldson. Id. at
34. Thereafter, the PTAB issued a final written decision finding that Telebrands “has failed to
establish by a preponderance of the evidence that claim 1 is unpatentable as obvious under 35
U.S.C. § 103 over the combinations of Cooper, Saggio, and Donaldson, and Saggio and
Donaldson.” (Tinnus II, Doc. No. 626-1.)
2
As to the ’282 Patent, Telebrands asserted the following grounds in its petition: 35 U.S.C.
§ 112(a) for lack of written description (“§ 112(a)”); § 112(b) for indefiniteness; Cooper, Saggio,
and Lee § 103(a); Cooper, Saggio, and Donaldson § 103(a); Weir and Lee or Donaldson §
103(a); Saggio § 103(a); Saggio and Donaldson or Lee § 103(a). (Tinnus II, Doc. No. 234-1, at
7.) The PTAB instituted trial as to claims 1–3 as obvious over the combination of Cooper,
Saggio, and Donaldson, and for indefiniteness (§ 112(b)). Id. at 39. Thereafter, the PTAB issued
a final written decision, finding that Telebrands has “not shown by a preponderance of the
evidence that claims 1–3 are indefinite under 35 U.S.C. § 112(b) or unpatentable as obvious
under 35 U.S.C. §103.” (Tinnus II, Doc. No. 626-2.)
Based on this background, Plaintiffs filed the instant motion contending that Defendants
are statutorily estopped from bringing the asserted invalidity grounds that could have been
presented before the PTAB during the PGR proceedings, and that Defendants are also precluded
from raising these defenses that were already litigated in Tinnus II. (Doc. No. 329.)
DISCUSSION
A. Statutory Estoppel
Plaintiffs argue that the PGR estoppel statute prevents Defendants from asserting
invalidity in this action. (Doc. No. 329, at 10.) Specifically, Plaintiffs argue that Defendants are
estopped from raising obviousness because twenty-two of the twenty-four prior art combinations
asserted by Defendants in this action rely on Saggio—a reference considered by the PTAB in its
final written decision. Id. at 11. Plaintiffs argue that the new prior art references are all
references that Telebrands reasonably could have raised in the PGR proceedings. Id. at 12.
Further, Plaintiffs argue that Defendants are barred from asserting invalidity based on
3
indefiniteness because these were arguments Telebrands could have raised. Id. at 13. Finally,
Plaintiffs argue that Bulbhead and Bed Bath are also estopped as real parties in interest and/or
privies of Telebrands. Id.
Defendants dispute that the new combinations could have reasonably been raised and
argue that Plaintiffs have not met their burden to show a skilled researcher conducting a diligent
search reasonably could have been expected to discover these new references. (Doc. No. 337, at
8.) Defendants further argue that they are not estopped from raising indefiniteness based on the
term “sufficiently limited” as found in claim 1 of the ’749 and ’282 Patents because statutory
estoppel does not apply to grounds in the petition that were not instituted. Id. at 9. Finally,
Defendants argue that Bed Bath is not estopped because it was not a petitioner, has never
claimed to be a real party in interest, and had no control over the PGR petitions or proceedings.
Id. at 10.
a. Telebrands
Turning first to the issues as they pertain to the PGR petitioner, Telebrands, the Court
looks to express language of the estoppel statute. 35 U.S.C. § 325(e)(2) provides that “[t]he
petitioner in a post-grant review of a claim in a patent under this chapter that results in a final
written decision… may not assert…in a civil action…that the claim is invalid on any ground that
the petitioner raised or reasonably could have raised during that post-grant review.” 35 U.S.C. §
325(e)(2). In this case, Defendants do not raise any of the same asserted grounds raised in the
PGR petition, and thus the sole question for estoppel is whether the invalidity grounds asserted in
this case “reasonably could have raised during that post-grant review.” Id. As the plain language
of the statute is clear in that estoppel applies to grounds that were not raised in the PGR petition,
4
but also to those grounds that reasonably could have been raised, the mere suggestion of new
prior art, or the existence of grounds for invalidity that varies from that which was presented
before the PTAB, does not mean a petitioner can necessarily proceed with those grounds in a
later civil action. See Oil-Dri Corp. of Am. v. Nestle Purina Petcare Co., No. 15-CV-1067, 2017
WL 3278915, at *8 (N.D. Ill. Aug. 2, 2017); Biscotti Inc. v. Microsoft Corp., No. 2:13-cv-01015JRG-RSP, 2017 WL 2526231, at *3 (E.D. Tex. May 11, 2017); Douglas Dynamics, LLC v.
Meyer Prods. LLC, No. 14-cv-886-JDP, 2017 WL 1382556, at *4 (W.D. Wis. Apr. 18, 2017),
reconsideration granted in part on other grounds, No. 14-cv-886-JDP, 2017 WL 2116714 (W.D.
Wis. May 15, 2017); Parallel Networks Licensing, LLC v. IBM Corp., No. 13-2072, 2017 WL
1045912, at *11–12 (D. Del. Feb. 22, 2017); Clearlamp, LLC v. LKQ Corp., No. 12 C 2533,
2016 WL 4734389, at *7–8 (N.D. Ill. Mar. 18, 2016). Indeed, during the enactment of the
America Invents Act, then Director Kappos emphasized the importance of the estoppel
provisions, characterizing them broadly as an advantage to patentees who had successfully gone
through the post-grant system:
If I can say that in my own words also, that I believe there are significant
advantages for patentees who successfully go through the post-grant system …
because of those estoppel provisions. Those estoppel provisions mean that your
patent is largely unchallengeable by the same party.
America Invents Act: Hearing on H.R. 1249 Before the House Comm. on the Judiciary, 112th
Cong. 52–53 (2011) (statement of Director David Kappos).
i. Obviousness
In determining whether invalidity grounds reasonably could have been raised in a
petition, courts around the country have found that a petitioner is estopped from relying on any
5
ground that could have been raised based on prior art that a “skilled searcher conducting a
diligent search reasonably could have been expected to discover.” See, e.g., Clearlamp, 2016
WL 4734389, at *8; Douglas Dynamics, 2017 WL 1382556, at *4; Biscotti, 2017 WL 2526231,
at *7.
Here, Defendants intend to assert the following obviousness combinations:
’749 Patent
’282 Patent
Saggio & Harris
Saggio & Carlton
Saggio & Mead
Saggio & Atala
Saggio & Antoshkiw
Saggio & White
Saggio & Lemeland
Saggio & Pevsner
Saggio & Debrun
Saggio & Brister
Saggio & McCreary
Saggio & Meade
Saggio, Harris & Cooper
Saggio, Carlton, & Cooper
Saggio, Mead, & Cooper
Saggio, Atala , & Cooper
Saggio, Antoshkiw , & Cooper
Saggio, White, & Cooper
Saggio, Lemeland , & Cooper
Saggio, Pevsner , & Cooper
Saggio, Debrun , & Cooper
Saggio, Brister , & Cooper
Saggio, McCreary , & Cooper
Saggio, Meade , & Cooper
(Doc. No. 337, at 6–7.)
All of these combinations contain the Saggio reference. Yet Saggio, in combination with
other references, was fully considered and litigated before the PTAB. See Tinnus II, Doc. Nos.
626-1, 626-2. Defendants argue that they are not estopped from raising obviousness because,
although concededly their combinations include Saggio—a reference raised on obviousness
grounds before the PTAB—their asserted combinations also contain new prior art not raised in
the PGR proceedings. (Doc. No. 337, at 7.) Defendants further argue that Plaintiffs have not met
their burden to show why these grounds could have been reasonably raised. Id. at 8.
6
Here, Plaintiffs’ patents have survived full post-grant review proceedings, including
consideration by the PTAB of the primary reference at issue—Saggio. As to the references
Defendants intend to now submit in combination with Saggio as “new” in this subsequent
litigation, Plaintiff has contended that these references were publicly available prior to the
submission of the PGR petition. Defendants do not contest this fact, and indeed do not argue that
references were unavailable or even difficult to find in response. Importantly, Defendants’ own
expert has touted the significance of Saggio, testifying that Saggio contained all but one minor
provision of the asserted claims, and minimizing the missing element to a known “rubber band
trick.” See Tinnus II 11/17/17 P.M. Trial Transcript at 41:10–44:3. Thus, there is no reason to
believe that a skilled searcher conducting a diligent search would not have found references
containing this element that were publicly known prior to Telebrands’s petition.
Rather, the reality of the situation appears to be that Defendants, who have continued to
rely on their expert’s opinions in formulating defenses in these cases, knew the very missing
piece of Saggio and chose to pursue that missing piece with presumably what they felt was the
strongest reference in combination. Defendants’ addition of twelve new prior art references in
combination with Saggio appears to be nothing more than an attempt to relitigate the issue of
invalidity under § 103, an issue fully litigated before the PTAB. See Douglas, 2017 WL
1382556, at *4 (“A patent infringement defendant does not have to take the IPR option; it can get
a full hearing of its validity challenge in district court. If the defendant pursues the IPR option, it
cannot expect to hold a second-string invalidity case in reserve in case the IPR does not go
defendant’s way.”). To allow Defendants to assert the identified grounds for invalidity in these
circumstances would entirely undermine the post-grant review process and defeat the purpose of
7
achieving streamlined, simplified, cost effective litigation that the America Invents Act (“AIA”)
was designed to provide. See NFC Tech. LLC v. HTC Am., Inc., No. 2:13-CV-1058-WCB, 2015
WL 1069111, at *4 (E.D. Tex. Mar. 11, 2015) (“Giving the agency the authority to consider the
validity of patents in the inter partes review process was designed in large measure to simplify
proceedings before the courts and to give the courts the benefit of the expert agency’s full and
focused consideration of the effect of prior art on patents being asserted in litigation.”). As such,
the Court finds Defendants are estopped from raising invalidity on all obviousness grounds
containing the Saggio reference.1
ii. Indefiniteness
The parties also dispute whether Defendants are estopped from asserting indefiniteness
on the term “sufficiently limited.”2 Plaintiffs argue that Telebrands reasonably could have raised
this argument because it was aware of this claim term prior to the filing of the PGRs. (Doc. No.
329, 13.) Defendants argue that statutory estoppel does not apply because the PTAB did not
institute on indefiniteness and statutory estoppel does not apply to grounds in the petition that
were not instituted. (Doc. No. 337, at 9.)
Here, Telebrands specifically raised this argument in its PGR petitions on the ’749 and
’282 Patents before the PTAB and the PTAB declined to institute review, finding that “Petitioner
has demonstrated that it would more likely than not prevail on the ground that the limitation … is
indefinite pursuant to 35 U.S.C. § 112(b).” (Tinnus II Doc. No. 233-1, at 15; Doc. No. 234-1, at
1
Based on the contentions identified in the briefing, the Court understands this ruling to have estopped all of
Defendants’ obviousness case as only combinations with Saggio are presently being pursued. The Court’s ruling, of
course, is not an invitation to revive other dropped references or defenses.
2
The parties agree that estoppel applies to asserting claims 1–3 of the ’282 Patent are indefinite under 35 U.S.C. §
112(b) as decided in the PTAB’s final written decision. (Doc. No. 329, at 13.)
8
19.) The Federal Circuit in Shaw has held that estoppel does not apply in circumstances where
institution has not occurred. Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293,
1300 (Fed. Cir.), cert. denied, 137 S. Ct. 374, 196 L. Ed. 2d 292 (2016). While there may be
persuasive argument for a different conclusion after the Supreme Court’s decision in SAS,3 the
Federal Circuit’s decision in Shaw has not yet been abrogated. Regardless, here, the Court has
already determined as a matter of law that claim 1 of the ’749 Patent and claim 1 of the ’282
Patent were not indefinite due to the inclusion of the term “sufficiently limited.” See Tinnus II
Doc. No. 201, at 7–9; Doc. No. 226. The Court has no reason to alter its judgment here and the
parties have not requested to re-open this dispute. As the parties are aware, the Court determines
the issue of indefiniteness at the time of claim construction. The Court has already addressed this
issue with the parties at a status conference and Defendants filed a brief requesting the Court
construe several additional terms, but “sufficiently limited” was not one of them. (Doc. No. 203.)
Therefore, the Court intends to incorporate its prior record as the record of this case. As such,
whether statutory estoppel applies to this argument is moot. For the reasons previously stated, the
claim term “sufficiently limited” as found in claim 1 of the ’749 and ’282 Patents is not
indefinite. See Tinnus II Doc. No. 201, at 7–9; Doc. No. 226.
b. Bulbhead and Bed Bath
3
See SAS Institute Inc. v. Iancu, ––– U.S. ––––, 138 S.Ct. 1348, 200 L.Ed.2d 695 (2018); see also PGS
Geophysical AS v. Iancu, 891 F.3d 1354, 1360 (Fed. Cir. 2018) (“Equal treatment of claims and grounds for
institution purposes has pervasive support in SAS.”). As Defendants are presently appealing the PTAB’s final written
decisions to the Federal Circuit, it is incumbent upon Defendants to request a remand on these grounds to the extent
they seek resolution of this issue. See Adidas AG v. Nike, Inc., 894 F.3d 1256, 1258 (Fed. Cir. 2018).
9
Plaintiffs argue that Bulbhead and Bed Bath are also estopped as real parties in interest or
as a privy of Telebrands. (Doc. No. 329, at 13.) Specifically, as to Bulbhead, Plaintiffs argue that
the Court has already found that Bulbhead is an alter ego of Telebrands and that therefore it is
either a real party in interest or privy of Telebrands. Id. Plaintiffs also argue that Bed Bath is a
privy of Telebrands. Id. Defendants do not dispute that Bulbhead is estopped and instead argue
only that Bed Bath is not estopped because it never claimed to be a real party in interest and it
had no control over the PGR petitions or proceedings. (Doc. No. 337, at 10–11.)
35 U.S.C. § 325(e)(2) provides that estoppel also applies to “the real party in interest or
privy of the petitioner…”. 35 U.S.C. § 325(e)(2). In the context of IPR estoppel, the Federal
Circuit has concluded that “Congress intended that the term ‘real party in interest’ have its
expansive common-law meaning.” Applications in Internet Time, LLC v. RPX Corp., No. 20171698, 2018 WL 3625165, at *11 (Fed. Cir. July 9, 2018). The Federal Circuit also considered the
term “privy” in this context to be consistent with its common law meaning, confined by the
bounds of due process. WesternGeco LLC v. ION Geophysical Corp., 889 F.3d 1308, 1319 (Fed.
Cir. 2018) citing Taylor v. Sturgell, 553 U.S. 880, 894–95 (2008) (listing as relevant
considerations for privity: (1) an agreement between the parties to be bound; (2) pre-existing
substantive legal relationships between the parties; (3) adequate representation by the named
party; (4) the non-party’s control of the prior litigation; (5) where the non-party acts as a proxy
for the named party to relitigate the same issues; and (6) where special statutory schemes
foreclose successive litigation by the non-party (e.g., bankruptcy and probate)).
As an initial matter, Defendants do not dispute that Bulbhead is estopped. And indeed,
this Court has found that Bulbhead is an alter ego of Telebrands—the petitioner. (Tinnus II, Doc.
10
No. 259, at 10–11.) Thus, the Court also finds that Bulbhead is estopped on the same bases as
Telebrands is estopped.
As to Bed Bath, Bed Bath is being indemnified by Telebrands in this litigation and was
being indemnified by Telebrands in related litigations prior to the filing of the PGR petitions.
See, e.g., Case No. 6:15-cv-551 (“Tinnus I”). Indeed, Bed Bath and Telebrands are represented
by the same counsel in this matter, as well as the related matters, share the same experts, and
have raised the same defenses—including those of invalidity. Undoubtedly then, Telebrands and
Bed Bath had a pre-existing substantive legal relationship as they had the same legal
representation and indemnification agreement in Tinnus I and Tinnus II prior to the filing of PGR
petitions. Moreover, whenever there was activity on the PGRs before the PTAB, Bed Bath would
join Telebrands in notifying this Court of the progress of those proceedings. See, e.g., Tinnus II
Doc. Nos. 233-1, 234-1 (notices filed by Bed Bath and Telebrands regarding decision by the
PTAB to institute post-grant review on the patents-in-suit). Indeed, Bed Bath also filed a motion
in Tinnus II requesting the court stay the case pending completion of the PGR proceedings.
(Tinnus II Doc. No. 239.) Given this relationship and these actions taken by Bed Bath, estopping
Bed Bath in this case would not offend notions of due process.
The fact that a written agreement to be bound does not exist in the record before the
Court is not dispositive. See, e.g., Applications in Internet Time, 2018 WL 3625165, at *14 (“a
nonparty to an IPR can be a real party in interest even without entering into an express or implied
agreement with the petitioner to file an IPR petition.”). Allowing Bed Bath to proceed with the
same asserted grounds for invalidity raised by Telebrands before the PTAB would serve to
effectively relitigate those issues before this Court and undermine the statutory purpose to
11
“ensure that third parties who have sufficiently close relationships with [] petitioners would be
bound by the outcome of instituted [petitions].” Applications in Internet Time, 2018 WL
3625165, at *11. For these reasons, the Court finds that Bed Bath is estopped on the same bases
that Telebrands is estopped.
B. Issue Preclusion
Plaintiffs also move for issue preclusion on invalidity based on the jury’s verdict in
Tinnus II. (Doc. No. 329, at 5–8.) However, that matter has not yet been fully resolved as posttrial motions are still pending before Judge Schroeder. Plaintiffs cite to Fifth Circuit authority
that a final judgment is not needed for issue preclusion to apply. (Doc. No. 329, at 14.) While the
Court does not disagree with this authority with respect to issue preclusion,4 in this instance, the
jury’s verdict on the subject of invalidity is subject to motions for judgment as a matter of law.
See Tinnus II, Doc. No. 582. As such, the Court simply finds it would be a more prudent course
to consider these issues upon resolution of those motions to the extent it is necessary. Therefore,
the Court DENIES Plaintiffs’ motion as to issue preclusion without prejudice to re-urging upon
resolution of the post-trial motions in Tinnus II.
CONCLUSION
As stated herein, Plaintiff’s Motion for Estoppel (Doc. No. 329) is GRANTED as to the
asserted theories of invalidity of the patents-in-suit as obvious or indefinite as to all Defendants.
4
Under Fifth Circuit law, issue preclusion, or collateral estoppel, precludes a party from litigating an issue already
raised in an earlier action between the same parties only if: (1) the issue at stake is identical to the one involved in
the earlier action; (2) the issue was actually litigated in the prior action; and (3) the determination of the issue in the
prior action was a necessary part of the judgment in that action. Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d
559, 572 (5th Cir. 2005); Pace v. Bogalusa City Sch. Bd., 403 F.3d 272, 290 (5th Cir. 2005).
12
Plaintiff’s Motion (Doc. No. 329) is DENIED on the matter of issue preclusion without
prejudice to re-urging upon resolution of the post-trial motions in Tinnus II.
So ORDERED and SIGNED this 21st day of August, 2018.
13
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?