In an opinion that potentially "undermines the utility of Rule 36" affirmances, a divided panel held that a patentee could reargue claim construction even though the Court had previously affirmed the district court's summary judgment of no infringement in a related case. See TecSec, Inc. v. Int'l Business Machines Corp., Case No. 2012-1415 (Fed. Cir. Oct. 2, 2013). The majority's opinion also addressed several claim construction issues pertinent to the computer arts.
TecSec filed suit against IBM and several other companies, alleging infringement of three related patents directed to methods and systems that secure computer data. Early in the case, the district court severed TecSec's claims against IBM and stayed the proceedings against the other defendants. TecSec and IBM brought cross-motions relating to infringement. The district court granted summary judgment in favor of IBM, finding that there was no infringement as a matter of law. In its summary judgment opinion, the district court held that TecSec failed to produce any evidence that IBM itself performed every step of the asserted method because the claims required both hardware and software, but IBM was only selling software. The district court also found insufficient evidence of indirect infringement as a matter of law. In the same opinion, the district court also construed the claims and concluded as a matter of law that TecSec failed to show that IBM's software met the relevant limitations of the claims as construed.
TecSec appealed, challenging the district court's claim construction as well as its conclusion that TecSec failed to prove infringement by IBM. The Federal Circuit affirmed the district court's judgment without opinion pursuant to Federal Circuit Rule 36 ("the IBM appeal"). On remand, the district court lifted the stay as to the other defendants. TecSec stipulated that it could not prove infringement by those defendants under the claim construction adopted by the district court during the proceedings with IBM. Based on TecSec's stipulation, the district court entered judgment of noninfringement as to the defendants. TecSec appealed, again challenging the claim construction rulings that the district court had made in its order relating to IBM.
The defendants argued that the mandate rule and the doctrine of collateral estoppel precluded TecSec from raising its claim construction arguments again. TecSec responded that because the Court's earlier Rule 36 judgment did not specifically address the claim construction issues, neither the mandate rule nor the doctrine of collateral estoppel applied.
The panel majority agreed with TecSec that TecSec was not barred from challenging the district court's claim construction rulings. The majority explained that the mandate rule forecloses reconsideration of issues implicitly or explicitly decided on appeal; and that in order for an issue to be implicitly decided, it must be decided by "necessary implication." The majority reasoned that the IBM appeal had not decided any claim construction issues, because one ground for the district court's judgment was that TecSec had failed to come forward with any evidence that IBM itself performed any steps of the claimed method, or even made, used, sold, offered to sell, or imported an entire claimed system. In the majority's view, the district court therefore did not rely on its claim interpretations in reaching that conclusion. IBM seemingly agreed, because its counsel argued at oral argument that the district court's judgment could be affirmed solely based on TecSec's complete failure of proof, without any "need to get to claim construction."
Under the circumstances, the majority found that the Rule 36 affirmance in the IBM appeal could have been based on issues completely unrelated to claim construction. They also noted that "when the Supreme Court by summary disposition affirms a decision that rested on multiple grounds, the affirmance is generally not binding precedent for either ground." Therefore, the claim construction issues were not decided by "necessary implication" and the mandate rule did not apply.
The majority then considered the doctrine of collateral estoppel. In order for collateral estoppel to apply, the litigated issue must have been "actually determined in the prior proceeding," and must have been a "critical and necessary part" of the prior decision. The majority again cited authority for the principle that "where the court in the prior suit has determined two issues, either of which could independently support the result, then neither determination is considered essential to the judgment." As with the mandate rule, the majority found that collateral estoppel did not apply because one possible basis for the district court's judgment did not rely on claim construction.
Having found that TecSec was not precluded from arguing claim construction issues, the majority then ruled on the proper construction of several claim terms. The majority upheld the district court's ruling that "multi-level multimedia security" required multiple layers of encryption. However, the majority reversed several of the district court's claim construction rulings, holding that 1) "multi-level multimedia security" did not require that the secured data be multimedia data; and 2) "system memory means," "digital memory means," and "digital logic means" recited sufficient structure that they were not means-plus-function terms under § 112, ¶ 6. The majority also reversed the district court's ruling that fourteen computer-implemented means-plus-function terms—for example, the term "means for selecting an object to encrypt"—were indefinite for insufficient disclosure of corresponding structure in the specification.
Dissenting Judge Reyna was "troubled by" the majority's decision to reach the claim construction issues. Judge Reyna cited a series of cases explaining that a determination of patent infringement, even on summary judgment, required a two-step analysis, the first of which is claim construction. In Judge Reyna's view, therefore, claim construction and sufficiency of the evidence were not alternative grounds for finding noninfringement. Instead, they were both "part of a singular analysis." Judge Reyna noted that the district court had followed the proper infringement analysis, and had first construed the patent claims. Only after construing the claims did the district court determine whether TecSec's infringement evidence raised a triable issue of material fact. Consequently, Judge Reyna concluded that the district court's claim construction rulings were critical and necessary to the Rule 36 affirmance in the IBM appeal, and that further consideration of those rulings was precluded by both the mandate rule and the doctrine of collateral estoppel.
Judge Reyna concluded with a personal observation that during his time as a practitioner, he once bore distaste for Rule 36 affirmances. Not being able to know the court's reasons for granting an affirmance bothered him. But as a judge, he had come to fully understand and appreciate the role of Rule 36 judgments in imparting finality on issues underlying the judgment, while at the same time allowing appellate courts to better manage their workload and devote more time to preparing precedential opinions in cases that merit such effort. Judge Reyna was concerned that allowing a party to relitigate an issue it had previously lost on a Rule 36 affirmance would "erode the confidence that underpins Rule 36" and lead practitioners to suspect that Rule 36 cases were not as carefully decided as cases in which the court issues full opinions.
Judge Reyna believed that the majority's decision gave TecSec "two bites at the claim construction apple." That certainly seems to be the case. After TecSec, it should be easier to challenge issues that were previously the subject of Rule 36 affirmances, especially if the district court offered more than one basis for its ruling