Federal Circuit Expands Kessler Doctrine to Include Dismissals With Prejudice in Patent Litigation

Last week, the United States Court of Appeals for the Federal Circuit issued a significant ruling in In Re PersonalWeb Technologies, Inc., expanding the scope of the Kessler doctrine in patent litigation. The court held that a stipulated dismissal with prejudice of a patent infringement suit functions as an adjudication of non-liability for purposes of the Kessler doctrine. This decision bars the patent holder, PersonalWeb Technologies, from bringing subsequent infringement suits against Amazon and its customers involving the same technology.

The Kessler doctrine originates from the Supreme Court’s 1907 decision in Kessler v. Eldred, 206 U.S. 285, and serves to fill gaps left by traditional claim and issue preclusion doctrines. Typically, claim preclusion does not apply to alleged infringement acts occurring after a final judgment, and issue preclusion requires a final judgment on the merits, privity of parties, and identity of issues. When these conditions are unmet, the Kessler doctrine protects an adjudged non-infringer from repeated harassment for continuing its business post-final judgment, as explained in Brain Life, LLC v. Elekta Inc., 746 F.3d 1045 (Fed. Cir. 2014).

The case arose from PersonalWeb’s 2011 patent infringement lawsuit against Amazon and one of its customers, Dropbox, Inc., filed in the United States District Court for the Eastern District of Texas. After the district court issued a claim construction order, PersonalWeb stipulated to dismiss all claims against Amazon with prejudice. Despite this, starting in January 2018, PersonalWeb initiated dozens of new patent infringement lawsuits in various jurisdictions against website operators, many of whom were Amazon customers. These new suits targeted the same accused technology at issue in the earlier Texas case.

Amazon intervened in these customer lawsuits and moved for summary judgment, arguing that the prior dismissal with prejudice barred PersonalWeb from suing Amazon or its customers under the Kessler doctrine. Amazon emphasized that the same technology was implicated in both the original Texas case and the subsequent customer suits.

PersonalWeb opposed the motion, contending that the Kessler doctrine did not apply because the 2011 case was dismissed with prejudice before any adjudication on the merits regarding infringement or invalidity. PersonalWeb argued that the doctrine is rooted in collateral estoppel principles and requires that the issues be "actually litigated" in the prior case. The district court granted Amazon’s motion, prompting PersonalWeb to appeal.

On appeal, the Federal Circuit acknowledged that its prior decisions had focused on whether the Kessler doctrine precludes relitigation of issues actually litigated. However, the court clarified that none of its earlier rulings mandated that issues of non-infringement or invalidity be actually litigated before invoking the doctrine.

The Federal Circuit concluded that the stipulated dismissal with prejudice constituted an abandonment of PersonalWeb’s claims without reservation, effectively serving as an adjudication that Amazon was not liable for the alleged infringement. The court emphasized that the Kessler doctrine grants a "limited trade right" attached to the product itself, protecting any products for which the manufacturer has established a right not to be sued for infringement.

The court further reasoned that requiring actual litigation of infringement or validity issues would undermine the Kessler doctrine’s purpose by allowing patentees to continue harassment through repeated lawsuits. Such a requirement would "practically destroy Kessler’s judgment rights," the court stated.