Terminal Disclaimer is a Strong Clue, But Not Conclusive Proof That Continuation Claims Are Not Patentably Distinct

In Simpleair, Inc. v. Google LLC, [2016-2738] (March 12, 2018), the Federal Circuit vacated the district court’s dismissal under FRCP 12(b)(6) because the district court erred by presuming that terminally disclaimed
continuation patents are patentably indistinct variations of their parent patents without analyzing the scope of the patent claims.

This case is SimpleAir’s fourth complaint asserting infringement by Google Cloud Messaging services, this one involving U.S. Patent Nos. 8,639,838 and 8,656,048.  The district court dismissed both complaints under Rule 12(b)(6) as barred by claim preclusion and the Kessler doctrine, reasoning that patents shared the same title and specification with previously adjudicated continuation patents, and the filing of a terminal disclaimer
to overcome the PTO’s obviousness-type double patenting rejections indicated that the PTO believed the content of the patents in suit to be patentably indistinct from the earlier patents.

The Federal Circuit agree that agreed that claim preclusion was not foreclosed because SimpleAir asserted patents in this case that were not before the district court in the prior actions.  However, the Federal Circuit found that the record before it record before us wis not sufficient to sustain
the district court’s holding of claim preclusion.

The Federal Circuit said that it is the claims of the patent which define the invention, and that the district court concluded that the underlying inventions were the same without ever analyzing the claims of any patent in making that conclusion.  The Federal Circuit distinguished the situation of reexamined patents, where the claims in the reissued patent cannot be broader than the claims in the original patent.  In a continuation, even a continuation with a terminal disclaimer, the claims can be broader.

The Federal Circuit held that where different patents are asserted in a first
and second suit, a judgment in the first suit will trigger claim preclusion only if the scope of the asserted patent claims in the two suits is essentially the same.  However Federal Circuit case law forecloses the
inference that filing a terminal disclaimer functions as an admission regarding the patentability of the resulting claims.

The Federal Circuit said that the filing of a terminal disclaimer is a strong indicator that the claims are not patentably distinct, but something more is still required:

Thus, a terminal disclaimer is a strong clue that a patent examiner and, by concession, the applicant, thought the claims in the continuation lacked a patentable distinction over the parent. But as our precedent indicates, that strong clue does not give rise to a presumption that a patent subject to a terminal disclaimer is patentably
indistinct from its parent patents. It follows that a court may not presume that assertions of a parent patent and a terminally-disclaimed continuation patent against the
same product constitute the same cause of action. Rather, the claim preclusion analysis requires comparing the patents’ claims along with other relevant transactional facts.

Claim preclusion implicates both the weighty policies
of judicial economy and fairness to parties.   It “encourages reliance on judicial decisions, bars vexatious litigation, and frees the courts to resolve other disputes.  However, because claim preclusion shields the fraud and the cheat as well as the honest person, it is to be invoked only
after careful inquiry.

The Federal Circuit also found that the Kessler Doctrine does not unless (and until) the claims have been found to be patentably distinct.