Speedtrack, Inc. v. Office Depot, Inc. , 791 F.3d 1317 ( 2015 )

United States Court of Appeals
for the Federal Circuit
______________________
SPEEDTRACK, INC.,
Plaintiff-Appellant
v.
OFFICE DEPOT, INC., CDW CORPORATION,
NEWEGG, INC., PC CONNECTION, INC.,
Defendants-Appellees
CIRCUIT CITY STORES, INC., COMPUSA, INC.,
Defendants
______________________
2014-1475
______________________
Appeal from the United States District Court for the
Northern District of California in No. 4:07-cv-03602-PJH,
Judge Phyllis J. Hamilton.
______________________
Decided: June 30, 2015
______________________
DANIEL LUKE GEYSER, McKool Smith, P.C., Dallas,
TX, argued for plaintiff-appellant. Also represented by
ALAN PETER BLOCK, RODERICK GEORGE DORMAN, McKool
Smith Hennigan, P.C., Los Angeles, CA.
STEVEN M. BAUER, Proskauer Rose LLP, Boston, MA,
argued for defendants-appellees. Also represented by
JOHN E. ROBERTS; COLIN CABRAL, Los Angeles, CA.
2 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
Defendant-appellee CDW Corporation also represented by
BENJAMIN T. HORTON, THOMAS LEE DUSTON, Marshall,
Gerstein & Borun LLP, Chicago, IL for CDW Corporation
only.
______________________
Before PROST, Chief Judge, MAYER, and O’MALLEY,
Circuit Judges.
O’MALLEY, Circuit Judge.
SpeedTrack, Inc. (“SpeedTrack”) filed suit against Of-
fice Depot, Inc., CDW Corporation, Newegg Inc., and PC
Connection, Inc. (together, “Appellees”) alleging infringe-
ment of U.S. Patent No. 5,544,360 (“the ’360 Patent”),
which is directed to a computer filing system for accessing
files and data according to user-designated criteria.
Specifically, SpeedTrack alleged that Appellees’ online
retail websites infringe the ’360 Patent by using software
developed by Endeca Technologies, Inc. (“Endeca”): the
Endeca Information Access Platform (“IAP” or “IAP
software”).
Appellees moved for summary judgment on grounds
that SpeedTrack’s claims were precluded by a prior law-
suit where we affirmed the district court’s judgment that
the same IAP software did not infringe the ’360 Patent.
SpeedTrack, Inc. v. Endeca Techs., Inc., 524 F. App’x 651
(Fed. Cir. 2013) (“Walmart”). The district court granted
judgment as a matter of law in favor of Appellees, finding
that SpeedTrack’s claims are barred in part by res judica-
ta and in full under the Kessler doctrine as announced in
Kessler v. Eldred, 206 U.S. 285 (1907). SpeedTrack, Inc.
v. Office Depot, Inc., No. 4:07-cv-3602, 2014 WL 1813292
(N.D. Cal. May 6, 2014). Because we agree that the
Kessler doctrine precludes SpeedTrack’s infringement
claims in full, we affirm.
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 3
I. BACKGROUND
A. The ’360 Patent
SpeedTrack is the owner by assignment of the ’360
Patent, entitled “Method for Accessing Computer Files
and Data, Using Linked Categories Assigned to Each
Data File Record on Entry of the Data File Record.” The
’360 Patent describes methods for searching and accessing
files stored on a computer system. “The invention allows
a user to define categories for files stored in a computer
system, and to edit such categories as they are used, to
designate all applicable categories for each file, and to
link categories in user-definable ways.” ’360 Patent, col. 3
l. 66-col. 4 l. 2.
The claimed methods require use of: (1) “category de-
scriptions” that correspond to one or more of the stored
files, Walmart, 524 F. App’x at 655-56; (2) a “file infor-
mation directory” containing information linking the
“category descriptions” to specific files stored in the sys-
tem, ’360 Patent, col. 4 ll. 58-62; and (3) a “search filter”
which is used to search through the “file information
directory” to locate those files that have “category descrip-
tions” matching those in the search filter, id. at col. 10 ll.
54-60.
Representative claim 1 recites the following:
A method for accessing files in a data storage sys-
tem of a computer system having means for read-
ing and writing data from the data storage
system, displaying information, and accepting us-
er input, the method comprising the steps of:
(a) initially creating in the computer system a cat-
egory description table containing a plurality of
category descriptions, each category description
comprising a descriptive name, the category de-
scriptions having no predefined hierarchical rela-
tionship with such list or each other;
4 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
(b) thereafter creating in the computer system a
file information directory comprising at least one
entry corresponding to a file on the data storage
system, each entry comprising at least a unique
file identifier for the corresponding file, and a set
of category descriptions selected from the category
description table; and
(c) thereafter creating in the computer system a
search filter comprising a set of category descrip-
tions, wherein for each category description in the
search filter there is guaranteed to be at least one
entry in the file information directory having a set
of category descriptions matching the set of cate-
gory descriptions of the search filter.
’360 Patent, col. 16 l. 54-col. 17 l. 11.
B. The Prior Walmart Litigation
In November 2006, SpeedTrack filed suit against
Walmart, alleging that Walmart’s online retail website
infringed the ’360 Patent. Specifically, SpeedTrack al-
leged that Walmart’s use and maintenance of its website
infringed the ’360 Patent by permitting visitors to search
for products available for sale by selecting pre-defined
categories descriptive of the products. SpeedTrack, Inc. v.
Wal-Mart Stores, Inc., No. 06-cv-7336, 2012 WL 581338,
at *1 (N.D. Cal. Feb. 22, 2012). Walmart licensed and
used Endeca’s IAP software to achieve this search func-
tionality.
Because SpeedTrack’s allegations were based on
Walmart’s use of the IAP software, Endeca sought and
obtained permission to intervene. In its complaint in
intervention, Endeca sought: (1) declaratory judgment
that its IAP software does not infringe the ’360 Patent,
either literally or under the doctrine of equivalents; and
(2) declaratory judgment that the ’360 Patent is invalid.
Endeca Techs., Inc. Compl. in Intervention at 4, Speed-
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 5
Track, Inc. v. Wal-Mart Stores, Inc., No. 06-cv-7336 (N.D.
Cal. Apr. 13, 2007), ECF No. 64.
The district court conducted claim construction pro-
ceedings and issued its claim construction order in June
2008. In relevant part, the court construed the term
“category description” as “information that includes a
name that is descriptive of something about a stored file.”
Walmart, 524 F. App’x at 655-56. After claim construc-
tion, Endeca filed a petition for reexamination of the ’360
Patent with the Patent and Trademark Office (“PTO”).
Id. at 654. The district court stayed proceedings pending
the outcome of the reexamination. In March 2011, the
PTO issued its decision confirming the patentability of the
’360 Patent and allowing an additional independent
claim. Id. at 654-55.
The parties subsequently filed cross-motions for
summary judgment. As part of their motion, Walmart
and Endeca presented a new argument on the term
“category description,” arguing that the accused product
did not infringe because it did not include a “name that is
descriptive of something about a stored file,” but instead
included a number. SpeedTrack, 2014 WL 1813292, at *1
(emphasis in original). The district court ordered addi-
tional briefing on that issue, and, in December 2011,
SpeedTrack moved to amend its final infringement con-
tentions to add an allegation that Walmart and Endeca
infringed the “category description” limitation under the
doctrine of equivalents. Id. The district court denied the
motion for leave to amend, “finding that SpeedTrack had
actually been on notice of defendants’ non-infringement
argument since June 23, 2011, when defendants served a
supplemental interrogatory response indicating that their
software used numbers, rather than names, and thus did
not meet the patent’s ‘category description’ limitation.”
Id.
6 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
In February 2012, the district court granted summary
judgment of noninfringement in favor of Walmart and
Endeca. The court found that, because the accused IAP
software uses numerical identifiers instead of descriptive
words, IAP users did not use “category descriptions” as
required by the ’360 Patent. SpeedTrack, 2012 WL
581338, at *10. Specifically, the court stated that:
As the court construes the “category description”
limitation . . . plaintiff must demonstrate that the
“walmart-sgmt0.records.binary” file in Wal-Mart’s
system contains entries that are comprised of al-
phabetic descriptive names, if it is to prove that
defendants’ accused system infringes. And since
it is undisputed that plaintiff has not come for-
ward with evidence that “walmart-
sgmt0.records.binary” includes alphabetic descrip-
tive names, plaintiff cannot demonstrate that the
accused system infringes.
Id.
The district court entered final judgment of nonin-
fringement on March 30, 2012, awarding Walmart a
declaration that it “has not infringed and does not in-
fringe” the asserted patent claims. Final Judgment at 3,
SpeedTrack, Inc. v. Wal-Mart Stores, Inc., No. 06-cv-7336
(N.D. Cal. Mar. 30, 2012), ECF No. 369. As to Endeca’s
complaint in intervention, the court awarded final judg-
ment that: (1) Endeca does not directly infringe the as-
serted patent claims “by making, using, offering to sell or
selling the Endeca Information Access Platform”; and
(2) “Walmart’s use of the Endeca Information Access
Platform does not infringe, directly or indirectly,” those
same claims. Id.
SpeedTrack appealed the court’s final judgment to
this court. On appeal, we affirmed the district court’s
construction of “category description” and held that “the
district court did not err in granting Endeca’s motion for
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 7
summary judgment of noninfringement.” Walmart, 524
F. App’x at 657. We reiterated that it was SpeedTrack’s
burden to show that the “walmart-sgmt0.records.binary”
file in the accused system “contains entries that are
comprised of alphabetic descriptive names” to show
infringement. Id. Because it was undisputed that the
entries consisted only of numerical identifiers, we con-
cluded that Endeca was entitled to summary judgment of
noninfringement as a matter of law. Id.
C. Procedural History
SpeedTrack filed its initial complaint in this case in
July 2007, while the Walmart action was pending.
SpeedTrack alleged that Appellees infringed the ’360
Patent based on their use of the same IAP software at
issue in Walmart. Given the overlap in issues, the district
court stayed proceedings in this case pending the outcome
of the Walmart litigation. While the present case was
stayed, Oracle Corporation (“Oracle”) acquired Endeca in
2011.
After this court issued its decision in Walmart, the
district court lifted the stay. At that point, SpeedTrack
informed the district court that it would limit its claims to
infringement under the doctrine of equivalents. Appellees
moved to dismiss SpeedTrack’s complaint on grounds that
the asserted infringement claims were barred by: (1) res
judicata or claim preclusion; (2) collateral estoppel or
issue preclusion; and (3) the Supreme Court’s Kessler
doctrine, which bars suits against customers for use of a
product previously found not to infringe in a suit against
the supplier of that product. SpeedTrack, 2014 WL
1813292, at *2.
The district court denied the motion to dismiss, find-
ing that the issues raised required consideration of mate-
rials outside of the pleadings, and thus were more
appropriately raised in a motion for summary judgment.
The court also granted SpeedTrack’s request for time to
8 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
conduct discovery from Appellees regarding their indem-
nification agreements with Endeca. After the parties
conducted discovery, Appellees moved for summary
judgment, arguing that the district court already found in
the Walmart case that the accused Endeca IAP software
does not infringe the ’360 Patent, and that they use the
software in the same way. Id.
On May 6, 2014, the district court granted Appellees’
motion for summary judgment based on res judicata (in
part) and the Kessler doctrine (in full), but held that
collateral estoppel did not apply. First, the court found
that SpeedTrack’s infringement claims were barred by res
judicata to the extent they related to acts occurring on or
before March 30, 2012—the date of the final judgment in
Walmart. Id. at *7. In reaching this conclusion, the court
found that Appellees presented evidence to show that
they use the Endeca IAP software in “essentially the
same” way as Walmart—using numbers rather than
names as a category descriptor. Id. at *4-5. Although
SpeedTrack argued that, even if its literal infringement
claims were barred, it could still assert claims of in-
fringement under the doctrine of equivalents because
those claims were not asserted in Walmart, the district
court found that res judicata “bars both claims that were
brought as well as those that could have been brought.”
Id. at *5 (quoting Brain Life, LLC v. Elekta, Inc., 746 F.3d
1045, 1053 (Fed. Cir. 2014) (emphasis in original)). The
court further found that Appellees were in privity with
Endeca by virtue of their indemnification agreements. Id.
at *6.
Next, the district court held that the Kessler doctrine
precluded “the entirety of SpeedTrack’s suit.” Id. at *9.
The court cited our decision in Brain Life as evidence that
“Kessler is still in force,” and can preclude some claims
“that are not otherwise barred by claim or issue preclu-
sion.” Id. at *8 (quoting Brain Life, 746 F.3d at 1055-56).
Applying Kessler, the court found that, “[b]y virtue of the
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 9
Wal-Mart decision, the accused Endeca technology ac-
quired the status of a non-infringing product.” Id. at *9.
In reaching this conclusion, the court explained that:
(1) Appellees “have shown that their implementation of
the Endeca software is ‘essentially the same’ as the im-
plementation adjudged to be non-infringing in Wal-Mart;”
and (2) SpeedTrack “has been unable to identify any
material differences between [Appellees’] use of the soft-
ware and Wal-Mart’s non-infringing use of the same
software.” Id. Although SpeedTrack argued that it had
not yet litigated the issue of whether Appellees’ use of the
IAP software infringes under the doctrine of equivalents,
the court cited Brain Life for the proposition that “the
Kessler doctrine bars all subsequent assertions of the
same patent.” Id. (citing Brain Life, 746 F.3d at 1059)
(emphasis in original). The court reasoned that, “if the
Kessler doctrine bars the assertion of new claims, it must
also bar the assertion of new theories involving the same,
already-asserted claims.” Id. (emphases in original). The
court concluded that, “by failing to prevail in its infringe-
ment suit against Wal-Mart, SpeedTrack lost the right to
assert any claims of the ’360 patent against any custom-
ers of Endeca who use the accused software in ‘essentially
the same’ manner as did Wal-Mart.” Id.
Though the district court granted summary judgment
in favor of Appellees, it found that Appellees could not
invoke collateral estoppel. Id. at *7. The court explained
that SpeedTrack could have raised its theory of infringe-
ment under the doctrine of equivalents in Walmart, but
failed to do so. Because that issue was not “actually
litigated” in the Walmart case, the court concluded that
collateral estoppel cannot bar SpeedTrack’s claims that
Appellees infringed the ’360 Patent under the doctrine of
equivalents. Id.
SpeedTrack timely appealed the district court’s final
judgment to this court. We have jurisdiction under 28
U.S.C. § 1295(a)(1) (2012).
10 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
II. STANDARD OF REVIEW
We review a grant or denial of summary judgment
under the law of the regional circuit, here the Ninth
Circuit. SkinMedica, Inc. v. Histogen Inc., 727 F.3d 1187,
1194 (Fed. Cir. 2013). The Ninth Circuit reviews the
district court’s grant of summary judgment without
deference. S. Cal. Darts Ass’n v. Zaffina, 762 F.3d 921,
925 (9th Cir. 2014). Summary judgment is appropriate if
“the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). “Viewing the
facts in the light most favorable to the nonmoving party,
we must determine whether a genuine issue of material
fact exists, and whether the district court applied the law
correctly.” S. Cal. Darts, 762 F.3d at 925.
III. DISCUSSION
On appeal, SpeedTrack argues that the district court
“misapplied the settled rules of res judicata, and it wrong-
ly invoked the Kessler doctrine.” Appellant Br. 15. Spe-
cifically, SpeedTrack submits that Appellees failed to
satisfy the elements of the controlling res judicata test
and that Kessler is both obsolete and distinguishable on
its facts.
In response, Appellees argue that: (1) the Kessler doc-
trine bars SpeedTrack from suing Oracle’s customers
based on their use of the same IAP software that was
already found to be noninfringing in Walmart; and
(2) claim preclusion prohibits SpeedTrack from relitigat-
ing its infringement claims against Appellees who, by
virtue of their indemnification agreements, are in privity
with Endeca. We agree with Appellees on their first
point, and find that the Kessler doctrine precludes Speed-
Track’s infringement claims in their entirety. Because
this conclusion is dispositive, we need not reach Speed-
Track’s additional arguments on appeal.
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 11
A. The Kessler Doctrine
The Kessler doctrine “bars a patent infringement ac-
tion against a customer of a seller who has previously
prevailed against the patentee because of invalidity or
noninfringement of the patent.” MGA, Inc. v. Gen. Motors
Corp., 827 F.2d 729, 734 (Fed. Cir. 1987). As noted, this
doctrine originated in the Supreme Court’s decision in
Kessler v. Eldred, 206 U.S. 285 (1907). There, Eldred held
a patent for an electric lighter and brought a claim of
infringement against Kessler, a manufacturer and retail-
er of electric cigar lighters. Id. at 285. The district court
found that Kessler’s product did not infringe, and the
Seventh Circuit affirmed on appeal. Id. at 286. Six years
later, Eldred filed suit alleging that one of Kessler’s
customers infringed the same patent. Kessler intervened
to indemnify its customer, and also filed a separate suit
against Eldred, seeking to enjoin him from filing in-
fringement suits against Kessler’s customers for use of
the same lighter that had already been found to be non-
infringing in the prior action. See id. at 286-87.
On appeal, the Supreme Court agreed with Kessler,
finding that the final decision in the first suit against
Kessler had “settled finally and everywhere . . . that
Kessler has the right to manufacture, use and sell” the
product in question. Id. at 288. The Court further found
that the prior suit “conclusively decreed the right of
Kessler to manufacture and sell his manufactures free
from all interference from Eldred . . . and the correspond-
ing duty of Eldred to recognize and yield to that right
everywhere and always.” Id. In reaching this conclusion,
the Supreme Court indicated that it “need not stop to
consider whether the judgment in the case of Eldred v.
Kessler had any other effect than to fix unalterably the
rights and duties of the immediate parties to it, for the
reason that only the rights and duties of those parties are
necessarily in question here.” Id. The Court further
stated that “[i]t may be that the judgment in Kessler v.
12 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
Eldred will not afford Breitwieser, a customer of Kessler,
a defense to Eldred’s suit against him. Upon that ques-
tion we express no opinion.” Id. Instead, the relevant
inquiry was “whether, by bringing a suit against one of
Kessler’s customers, Eldred has violated the right of
Kessler.” Id. at 289. The Court concluded that, “[l]eaving
entirely out of view any rights which Kessler’s customers
have or may have, it is Kessler’s right that those custom-
ers should, in respect of the articles before the court in the
previous judgment, be let alone by Eldred, and it is El-
dred’s duty to let them alone.” Id.
The Supreme Court subsequently explained that, un-
der Kessler, a party who obtains a final adjudication in its
favor obtains “the right to have that which it lawfully
produces freely bought and sold without restraint or
interference.” Rubber Tire Wheel Co. v. Goodyear Tire &
Rubber Co., 232 U.S. 413, 418 (1914). The Court specified
that this right “attaches to its product—to a particular
thing—as an article of lawful commerce . . . .” Id. We
have likewise recognized that Kessler granted a “limited
trade right” that attaches to the product itself. MGA, 827
F.2d at 734-35 (“Since the accused machines here are
admittedly the same in both suits, it is LaSalle Tool’s
right that the accused machines be freely traded without
interference from MGA.”).
More recently, we reaffirmed the continued vitality of
the Kessler doctrine, holding that it “precludes some
claims that are not otherwise barred by claim or issue
preclusion.” Brain Life, 746 F.3d at 1055-56. In Brain
Life, we explained that, in an action against a manufac-
turer or supplier of an allegedly infringing device, “when
[the] alleged infringer prevails in demonstrating nonin-
fringement, the specific accused device(s) acquires the
‘status’ of a noninfringing device vis-à-vis the asserted
patent claims.” Id. at 1057 (citation omitted). There, the
plaintiff’s predecessor in interest—MIDCO—accused
defendant Elekta of infringing its patent. Although
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 13
MIDCO accused Elekta of infringing both the patent’s
apparatus and method claims, it ultimately abandoned
the method claims prior to trial. Id. at 1058. At trial, the
jury found that Elekta infringed the apparatus claims,
but on appeal, we reversed the infringement finding, and
remanded the case to the district court to enter judgment
of noninfringement as a matter of law in favor of Elekta.
Id. at 1050. On remand, MIDCO attempted to revive the
method claims, but the district court refused to reopen the
case, and instead entered final judgment in favor of
Elekta. MIDCO appealed that judgment and we summar-
ily affirmed the district court’s decision not to reopen the
case. Id.
MIDCO subsequently licensed the patent at issue to
another company which, in turn, licensed it to Brain Life.
Id. Brain Life filed suit against Elekta, seeking to assert
the method claims that were dismissed prior to trial in
the previous MIDCO case. Although the district court
granted summary judgment in Elekta’s favor on res
judicata grounds, we found that only those claims predat-
ing the final judgment in the MIDCO litigation were
barred on those grounds. We went on to find, however,
that, though not barred by res judicata, Brain Life’s
claims were barred by the Kessler doctrine. Specifically,
we found that, “once the accused devices in the MIDCO
Litigation were adjudged to be noninfringing with respect
to the asserted claims and judgment was entered as to all
claims, Elekta was free to continue engaging in the ac-
cused commercial activity as a non-infringer.” Id. at
1058. We concluded that, “by virtue of gaining a final
judgment of noninfringement in the first suit—where all
of the claims were or could have been asserted against
Elekta—the accused devices acquired a status as nonin-
fringing devices, and Brain Life is barred from asserting
that they infringe the same patent claims a second time.”
Id.
14 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
The district court here found that “the Kessler doc-
trine, as applied by the Brain Life court, is directly appli-
cable to this case,” and that the IAP software acquired the
status of a noninfringing product in Walmart. Speed-
Track, 2014 WL 1813292, at *9. There is no doubt that if
Oracle were a party to this action, the facts here would
fall squarely within Kessler. SpeedTrack alleged in a
prior suit that Walmart’s use of the IAP software in-
fringed the ’360 Patent. Walmart, 524 F. App’x at 653-54.
Oracle’s predecessor, Endeca, intervened in that suit and
sought declaratory judgment that its technology does not
infringe. Both the district court and this court agreed,
finding that the IAP software, and Walmart’s use of that
software, does not infringe the ’360 Patent. Id. at 657.
SpeedTrack is now pursuing the same infringement
claims against other Oracle customers for allegedly in-
fringing the same patent using the same IAP software
found not to infringe in Walmart. As the district court
found, Appellees in this case demonstrated that their use
of the IAP software is “‘essentially the same’ as the im-
plementation adjudged to be non-infringing in Wal-
Mart—specifically, [Appellees] have shown that they use
numbers, rather than names, as category descriptors.”
SpeedTrack, 2014 WL 1813292, at *9. 1 And, the district
court found that, despite discovery, SpeedTrack “has been
unable to identify any material differences between
1 Likewise, at oral argument, counsel for Speed-
Track conceded that Appellees’ use of the IAP software is
“essentially the same” as that at issue in Walmart. See
Oral Argument at 3:08-3:20, available at http://www.cafc.
uscourts.gov/oral-argument-recordings/14-1475/all (“Their
other use of the software is essentially the same as the
use of the software in Walmart—we concede that—but
that is not dispositive for claim preclusion and it is cer-
tainly not dispositive for issue preclusion.”).
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 15
[Appellees’] use of the software and Wal-Mart’s non-
infringing use of the same software.” Id. Given these
circumstances, the judgment in the Walmart case “settled
finally and everywhere” that the IAP software does not
infringe the ’360 Patent. Kessler, 206 U.S. at 288.
Applying Kessler, it is Oracle’s right that its “custom-
ers should, in respect of the [IAP software], be let alone
by” SpeedTrack, and it is SpeedTrack’s “duty to let them
alone.” Id. at 289. Because Kessler creates a limited
trade right that attaches to the IAP software itself, Oracle
would have the right to an order prohibiting SpeedTrack
from asserting that Oracle’s customers infringe the ’360
Patent by their use of the same software litigated in the
Walmart case. See Rubber Tire, 232 U.S. at 418; MGA,
827 F.2d at 734-35. SpeedTrack does not seriously dis-
pute this conclusion on appeal. Instead, it argues that:
(1) the right recognized in Kessler is one assertable, if at
all, only by the product manufacturer or supplier, not by
its customers; (2) Kessler does not apply where the manu-
facturer supplies only a component which is combined
with other components and it is the combined configura-
tion that infringes; and (3) Kessler is a doctrine which has
been rendered obsolete by later developments in the law.
We address each of these arguments in turn.
B. Customer Invocation of Kessler
SpeedTrack submits that, if Kessler is still good law, it
should be limited to its “original footprint.” Appellant Br.
52. SpeedTrack asserts that Kessler does not apply to the
facts presented here because the Supreme Court explicitly
reserved the question of whether a customer is entitled to
invoke Kessler and we should conclude that a customer
may not do so. We decline to limit Kessler as SpeedTrack
urges.
The question of whether a customer can invoke the
Kessler doctrine has divided circuits, and we have not
specifically addressed it. See Tech. Licensing Corp. v.
16 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
Thomson, Inc., 738 F. Supp. 2d 1096, 1101 (E.D. Cal.
2010) (“The Supreme Court, Federal Circuit, and Ninth
Circuit[] . . . have declined to address the issue of whether
the customer has the right to invoke the Kessler doctrine
as a defense to patent infringement suits.”).
For its part, the Fourth Circuit has said that a cus-
tomer can raise the Kessler doctrine as a defense to suit.
Gen. Chem. Co. v. Standard Wholesale Phosphate & Acid
Works, Inc., 101 F.2d 178, 179-80 (4th Cir. 1939). In that
case, the court recognized that, after Kessler, a manufac-
turer, successful in an infringement suit, could intervene
in a suit “by the patentee against one of the manufactur-
er’s customers and have the suit dismissed on the sole
ground of the prior adjudication.” Id. at 180 (citation
omitted). The court reasoned that, “if the suit against the
customer may be dismissed upon the intervention and at
the request of the manufacturer, there is no valid reason
why it may not be dismissed upon the motion of the
customer himself.” Id. (“Since the customer can hold the
manufacturer from whom he has purchased for any
damage which he may be required to pay because the
article infringes the patent, he should be held to be subro-
gated to the right of the manufacturer under the judg-
ment against the patentee adjudging that there is no
infringement with respect to such article.”); see also
Molinaro v. Am. Tel. & Tel. Co., 460 F. Supp. 673, 675-76
(E.D. Pa. 1978) (citing General Chemical for the proposi-
tion that “[c]ourts soon recognized that the rationale
underlying the Kessler doctrine would support the asser-
tion not only by a manufacturer, but also by a customer,
of the preclusive effect of a prior judgment in favor of the
manufacturer-supplier and against the patentee”).
The Sixth Circuit has reached the opposite conclusion,
noting that the “cause of action against the manufacturer
for injunction and damages and accounting is, in general,
a distinct cause of action from that against the purchasing
user for an injunction against him and for damages and
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 17
profits coming from his infringement.” Wenborne-Karpen
Dryer Co. v. Dort Motor Car Co., 14 F.2d 378, 379 (6th
Cir. 1926). The court found that, “[a]lthough plaintiff had
a suit pending against the manufacturer in another
circuit, it had the (initial) right to sue a user in this circuit
and get the judgment of different courts as to the patent.”
Id. at 379-80. In dissent, however, Judge Donahue noted
that the manufacturer, the Cutler Company, alleged in its
intervening petition that it “entered into a contract with
its customer, the Dort Company, to defend that company
against any action brought for infringement against it,
and to save the Dort Company harmless from the pay-
ment of any damages that may be assessed against it in
such suit.” Id. at 381 (Donahue, J., dissenting). Accord-
ing to Judge Donahue, once judgment was entered in the
first suit in favor of the manufacturer, “it was equally the
duty of plaintiff to dismiss any suits then pending against
the customers . . . as it was its duty to refrain from bring-
ing other suits.” Id. (“Any other course would permit the
plaintiff to trifle with courts and by subterfuge evade the
effect of a final decree against it.”).
As previously discussed, Kessler provides a party who
has prevailed in a patent litigation the right to manufac-
ture, use, or sell the product that has been deemed not to
infringe without fear of continued challenges to that right
based on the same patent. This court recognized in MGA
that the “Kessler doctrine bars a patent infringement
action against a customer of a seller who has previously
prevailed against the patentee because of invalidity or
noninfringement of the patent; otherwise, the effect of the
prior judgment would be virtually destroyed.” 827 F.2d at
734. Kessler emphasized the right of the adjudged nonin-
fringing manufacturer to “sell his wares freely,” and the
patent owner’s corresponding duty to leave that manufac-
turer’s customers alone. Kessler, 206 U.S. at 289. Accord-
ingly, Kessler sought to prevent patent owners from
undermining adverse final judgments by relitigating
18 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
infringement claims against customers who use the
product at issue.
We conclude that the rationale underlying the Kessler
doctrine supports permitting customers to assert it as a
defense to infringement claims. Although the Supreme
Court in Kessler focused exclusively on the manufacturer’s
rights, and expressed no opinion on whether a customer
could assert the defense, it recognized the fact that the
manufacturer and customer’s interests are intertwined,
remarking that “[n]o one wishes to buy anything if with it
he must buy a law suit.” See id. Allowing customers to
assert a Kessler defense is consistent with the Court’s goal
of protecting the manufacturer’s right to sell an exonerat-
ed product free from interference or restraint. A manu-
facturer cannot sell freely if it has no customers who can
buy freely. Indeed, the Court subsequently explained that
the Kessler doctrine grants a limited trade right that
attaches to the “product—to a particular thing—as an
article of lawful commerce.” Rubber Tire, 232 U.S. at 418;
MGA, 827 F.2d at 734. Because it is a right that attaches
to the noninfringing product, and it is a right designed to
protect the unencumbered sale of that product, Speed-
Track’s argument that the Kessler doctrine can only be
invoked by a manufacturer must fail. 2
2 Oracle filed a motion to intervene in this appeal,
seeking to protect its interests in the IAP software at
issue and to prevent SpeedTrack from asserting infringe-
ment claims against Oracle’s customers. A motions panel
of this court denied Oracle’s request on grounds that
Oracle was not a party in the underlying case and did not
move to intervene in the district court proceedings.
Order, SpeedTrack, Inc. v. Office Depot, Inc., No. 14-1475
(Fed. Cir. June 30, 2014), ECF No. 16. Oracle maintains
that the case below never progressed to a stage where it
should have intervened because it was stayed pending the
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 19
C. This Case Does Not Fall Within the Rubber Tire
Exception to Kessler
SpeedTrack next argues that the Kessler doctrine does
not apply to cases where the manufacturer is selling a
component that is later combined with other objects and
that combined product infringes. SpeedTrack cites Rub-
ber Tire for the proposition that the trade right set forth
in Kessler attaches to the product and “continues only so
long as the commodity to which the right applies retains
its separate identity.” Rubber Tire, 232 U.S. at 418-19.
In Rubber Tire, Goodyear successfully defended its new
tire design from an infringement claim brought by Rubber
Tire. Id. at 414. Goodyear subsequently sold rubber to a
customer, who manufactured its own version of the Good-
year tire found not to infringe. Id. at 416. Rubber Tire
then sued that customer for infringement. Goodyear
argued that, under the Kessler doctrine, “by virtue of the
decree in its favor in the infringement suit,” it has the
right to restrain suits “not only against those who buy
from it the structure which is the subject of the patent but
also against those who buy its rubber and themselves
make the patented tire.” Id. at 416-17.
Walmart case and terminated at an early stage, before
any of the defendants had even filed answers to Speed-
Track’s complaint. Notably, however, in opposing inter-
vention in this court, SpeedTrack argued that Oracle’s
interests “are adequately represented by the existing
parties.” Opp. for Plaintiff-Appellant SpeedTrack, Inc. to
Oracle America, Inc.’s Motion to Intervene at 10, Speed-
Track, Inc. v. Office Depot, Inc., No. 14-1475 (Fed. Cir.
June 19, 2014), ECF No. 15. That statement seems to
suggest that “the existing parties”—Appellees (who are
Oracle’s customers)—would be able to assert the same
defenses as Oracle, which would include the Kessler
doctrine.
20 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
The Supreme Court disagreed, holding that Kessler
only protects an adjudged noninfringer’s right to make
and sell its noninfringing article. Id. at 417-18. The
Court explained that, although Goodyear was entitled to
make and sell both the tire and its rubber without threat
of suit, that “trade right” attaches to the particular prod-
uct “as an article of lawful commerce.” Id. at 418. “If that
commodity is combined with other things in the process of
the manufacture of a new commodity, the trade right in
the original part as an article of commerce is necessarily
gone.” Id. at 419. Accordingly, although Goodyear could
“demand protection for its trade rights in the commodities
it produced,” it could not insist that customers who pur-
chase its rubber are allowed to make and sell the patent-
ed structure. Id.
SpeedTrack cites Rubber Tire and argues that its pa-
tent claims are method claims that “target [Appellees’]
use of Oracle’s software combined with their own hard-
ware, software, and data.” Appellant’s Reply Br. 16
(emphasis in original). According to SpeedTrack, “[a]ny
protection for Oracle’s product cannot shield acts combin-
ing Oracle’s product with other components to practice a
claimed method.” Id. But the allegations in SpeedTrack’s
complaint were directed specifically to Appellees’ use of
the IAP software to provide search functionality for their
respective websites, not to any other components or any
other activities. And, Appellees are invoking Kessler with
respect to the same IAP software that acquired nonin-
fringing status in Walmart, not as to other aspects of their
computer systems.
In the Walmart case, Oracle’s predecessor was award-
ed judgment that it does not infringe the ’360 Patent by
making, using, or selling the IAP software, and that its
customer’s use of that software does not infringe. The
district court here found that SpeedTrack was unable to
identify any material differences between Appellees’ use
of the IAP software and Walmart’s noninfringing use of
SPEEDTRACK, INC. v. OFFICE DEPOT, INC. 21
that same software. SpeedTrack, 2014 WL 1813292, at
*9. Given these circumstances, Rubber Tire’s discussion
of combining components to create the patented device is
inapplicable. SpeedTrack’s attempt to distinguish Kessler
on these grounds is without merit.
D. Kessler Remains Binding Precedent
Finally, SpeedTrack argues that “the Kessler doctrine
has been effectively displaced by modern preclusion
principles.” Appellant Br. 40. SpeedTrack concedes, as it
must, that Kessler has not been overturned. It argues,
however, that Kessler became unnecessary when the
Supreme Court authorized non-mutual collateral estoppel
in Blonder-Tongue Laboratories, Inc. v. University of
Illinois Foundation, 402 U.S. 313, 349 (1971). The Court
in Blonder-Tongue did not cite Kessler, however, and
there is no indication that the Court sought to overrule it.
See Shalala v. Ill. Council on Long Term Care, Inc., 529
U.S. 1, 18 (2000) (“This Court does not normally overturn,
or so dramatically limit, earlier authority sub silentio.”).
We recognized in MGA that Kessler was issued “in the
heyday of the federal mutuality of estoppel rule,” when
preclusion was limited to parties or privies in earlier
litigation. MGA, 827 F.2d at 733 (citing Blonder-Tongue,
402 U.S. at 320-27). According to SpeedTrack, Kessler
carved a narrow exception to this mutuality principle by
permitting a manufacturer to enjoin suits against its
customers. SpeedTrack maintains that, after Blonder-
Tongue, issue preclusion is sufficient to prevent a patent
owner from filing suit against an adjudged non-infringer’s
customers. As the facts of this case demonstrate, howev-
er, the Kessler doctrine is a necessary supplement to issue
and claim preclusion: without it, a patent owner could sue
a manufacturer for literal infringement and, if unsuccess-
ful, file suit against the manufacturer’s customers under
the doctrine of equivalents. Or, a patent owner could file
suit against the manufacturer’s customers under any
22 SPEEDTRACK, INC. v. OFFICE DEPOT, INC.
claim or theory not actually litigated against the manu-
facturer as long as it challenged only those acts of in-
fringement that post-dated the judgment in the first
action. That result would authorize the type of harass-
ment the Supreme Court sought to prevent in Kessler
when it recognized that follow-on suits against customers
could destroy the manufacturer’s judgment right. Kessler,
206 U.S. at 289 (“The effect which may reasonably be
anticipated of harassing the purchasers of Kessler’s
manufactures by claims for damages on account of the use
of them, would be to diminish Kessler’s opportunities for
sale.”); see Brain Life, 746 F.3d at 1056 (“The Kessler
Doctrine fills the gap between these preclusion doctrines,
however, allowing an adjudged non-infringer to avoid
repeated harassment for continuing its business as usual
post-final judgment in a patent action where circumstanc-
es justify that result.” (emphasis in original)).
As we noted in MGA and stated in Brain Life, regard-
less of whether the Kessler doctrine was created as an
exception to the mutuality of estoppel rule that existed at
the time or as a matter of substantive patent law, we
must apply the law as it exists. See MGA, 827 F.2d at
733-34; Brain Life, 746 F.3d at 1058. Because we must
follow Kessler unless and until the Supreme Court over-
rules it, and because this appeal fits within its bounds, we
agree with the district court that the entirety of Speed-
Track’s suit against Appellees is barred.
IV. CONCLUSION
For the foregoing reasons, we conclude that the Kess-
ler doctrine precludes SpeedTrack from asserting any
claims of the ’360 Patent against Appellees. Accordingly,
the district court’s judgment is affirmed.
AFFIRMED