. . . this case presented the distinct question of whether a Board determination that certain claims are unpatentable can collaterally estop a patentee from asserting different but related claims. . . .
Introduction
In Kroy IP Holdings, LLC v. Groupon, Inc., No. 23-1359 (Fed. Cir. Feb. 10, 2025) (“Decision”), the Federal Circuit considered whether a final written decision of the Patent Trial and Appeal Board (“Board”) finding certain claims unpatentable could collaterally estop a patentee from asserting different, unadjudicated claims from the same patent in district court. The panel reversed the district court’s ruling that collateral estoppel applied, holding that the Board’s ruling—rendered under a preponderance of the evidence standard—did not preclude litigation of related claims under the district court’s higher clear and convincing evidence standard for invalidity. This decision demonstrates the effect of differing burden of proofs in a collateral estoppel analysis and thereby limits the circumstances in which prior administrative determinations will bar later judicial proceedings.
Background
Kroy IP Holdings, LLC (“Kroy”) owns U.S. Patent No. 6,061,660 (“the ’660 patent”), which relates to administering incentive programs over a computer network. In 2017, Kroy sued Groupon, Inc. (“Groupon”) in the U.S. District Court for the District of Delaware, alleging that Groupon infringed 13 claims of the ’660 patent. In 2018, Groupon filed two inter partes review (“IPR”) petitions, challenging the validity of 21 claims of the ’660 patent. The Board ultimately found all challenged claims unpatentable in its 2020 final written decisions. The Federal Circuit summarily affirmed these decisions in 2021 under Rule 36.
Kroy subsequently amended its district court complaint in 2022 to assert 14 additional claims from the ’660 patent that were not previously adjudicated in the IPRs. Groupon moved to dismiss under Rule 12(b)(6), arguing that collateral estoppel barred Kroy from litigating the newly asserted claims, which were not materially different from the claims previously invalidated by the Board. The district court granted the motion, finding that Kroy was precluded from asserting the new claims.
The district court justified its dismissal of Kroy’s Amended Complaint on Federal Circuit precedent holding that “an affirmance of an invalidity finding, whether from a district court or the Board, has a collateral estoppel effect on all pending or co-pending actions.” XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282, 1294 (Fed. Cir. 2018). The district court further determined that Federal Circuit precedent permits application of collateral estoppel where the differences between the adjudicated claims and the unadjudicated claims “do not materially alter the question of invalidity.” Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333 (Fed. Cir. 2013). Satisfied that that the newly asserted unadjudicated claims are sufficiently similar in substance to the adjudicated claims, the district court ruled that the Board’s final determination of unpatentability in the IPR required dismissal of Kroy’s Amended Complaint.
On appeal, Kroy contended that the district court’s dismissal of its Amended Complaint should be reversed, arguing that collateral estoppel is inapplicable due to the lower preponderance of the evidence burden of proof required in an IPR compared to district court proceedings, where Groupon must prove invalidity by clear and convincing evidence. According to Kroy, the district court’s application of collateral estoppel unfairly deprived it of the opportunity to litigate its claims in the district court where Groupon faces a more stringent evidentiary standard in demonstrating the obviousness of the claims.
The Federal Circuit’s Analysis
Collateral estoppel, or issue preclusion, applies when: “(1) the identical issue was previously adjudicated; (2) the issue was actually litigated; (3) the previous determination was necessary to the decision; and (4) the party being precluded was fully represented in the prior action.” Jean Alexander Cosmetics, Inc. v. L’Oreal USA, Inc., 458 F.3d 244, 249 (3d Cir. 2006). However, courts have recognized exceptions where the legal standards differ between the prior and subsequent proceedings. See Grogan v. Garner, 498 U.S. 279, 284–85 (1991).
The Federal Circuit thus examined whether the Board’s application of a preponderance of the evidence standard for unpatentability precluded Kroy from litigating related claims under the clear and convincing evidence standard required for invalidity in district court. Specifically, this case presented the distinct question of whether a Board determination that certain claims are unpatentable can collaterally estop a patentee from asserting different but related claims in district court under a higher evidentiary standard.
The Federal Circuit ultimately agreed with Kroy and ruled that collateral estoppel did not apply due to the differing burdens of proof between IPR proceedings and district court litigation.
Guided by the Supreme Court’s decision in B & B Hardware, Inc. v. Hargis Indus., Inc., 575 U.S. 138 (2015), the court began its analysis with the observation that issue preclusion is inappropriate where the burdens of proof materially differ. The court noted that it had previously addressed a similar issue in ParkerVision, Inc. v. Qualcomm Inc., 116 F.4th 1345 (Fed. Cir. 2024), where the defendant argued that the Board’s obviousness finding in an IPR estopped the patentee from contesting the obviousness of separate, related patent claims in a subsequent district court action.
In ParkerVision, the Federal Circuit rejected this argument, emphasizing that because the Board’s obviousness determination was reached under a preponderance of the evidence standard, the patentee was not precluded from contesting obviousness under the clear and convincing evidence standard required in district court. See116 F.4th at 1362. The court emphasized that “we are dealing with claims that have not been found unpatentable [and] those claims remain presumptively valid and can only be found invalid in district court litigation by clear and convincing evidence.” Id. (emphasis in original).
The panel in the Kroy appeal thus concluded that “[o]ur reasoning in ParkerVision holds true in this appeal” and that “[c]ollateral estoppel generally does not apply when the second action involves application of a different legal standard, such as a burden of proof.” Decision at 6. The panel stressed, “To hold otherwise would deprive patent owners of their property right without first requiring proof of patent invalidity that satisfies the statutorily-prescribed clear and convincing evidence standard.” Id. at 7.
The panel likewise explained that although its earlier decision in XY applied collateral estoppel based on a final IPR determination of unpatentability by the Board, XY “established a limited exception to the general principle that collateral estoppel does not apply when there are different burdens of proof.” Id. The panel clarified that “XY stands for the more limited proposition that once this court affirms the Board’s decision that a patent claim is unpatentable, the same claim cannot be asserted in district court.” Id. In other words, “[t]he premise invoked for collateral estoppel in XY does not rely on the Board’s fact findings, but rather the retroactive cancellation of certain claims as a matter of law.” Id. The district court therefore erred in dismissing Kroy’s Amended Complaint because its collateral estoppel ruling necessarily relied on the Board’s fact findings rather than an affirmance of invalidity finding by an appellate court as a matter of law. Accordingly, the panel held that Kroy’s newly asserted claims “have not been found unpatentable and thus continue to exist until this court affirms a Board or district court decision that determines otherwise.” Id. at 8.
For similar reasons, the panel found that the district court misapprehended the court’s Ohio Willow Wood decision. That case does stand for the proposition that collateral estoppel applies when “the differences between the unadjudicated claims and the adjudicated claims ‘do not materially alter the question of invalidity.’”Id. (quoting Ohio Willow Wood, 735 F.3d at 1342). However, the previously adjudicated claims in that case were ruled invalid by a district court, not the Board. The panel therefore found that the district court erroneously relied on that case because “the district-court-to-district-court scenario presented in Ohio Willow Wood does not present the same burden of proof concern as the Board-to-district-court case before us.” Decision at 8. The panel therefore ruled that the district court’s dismissal of Kroy’s Amended Complaint was in error.
Conclusion
The Federal Circuit’s decision in Kroy v. Groupon reaffirmed the general principle that collateral estoppel does not apply where the burdens of proof differ between administrative and judicial proceedings. The court recognized a limited exception in cases where an appellate court affirms an IPR’s preponderance-based invalidity determination, precluding subsequent district court litigation based on the same invalidated claims. This ruling clarifies the circumstances under which prior administrative rulings have preclusive effect in later litigation. And so Kroy will now have the chance to proceed with its lawsuit where Groupon faces a higher clear and convincing burden of proof in demonstrating that the related claims are obvious.