No Collateral Estoppel As To A Reasonable Royalty Rate

In Applied Medical Resources Corp. v. United States Surgical Corp. (No. 05-1149; January 24, 2006), the Federal Circuit affirms the district court's ruling that the reasonable royalty rate determined in a prior litigation does not have collateral estoppel effects in a subsequent litigation. Applied Medical obtained a patent covering a trocar device which serves as an access port into the abdomen during laparoscopic surgery. It sued U.S. Surgical in a prior litigation alleging that the latter's Versaport I product infringes the patent. In that litigation, the district court found that U.S. Surgical had infringed, and awarded damages including a reasonable royalty at a 7 percent rate.

Subsequently, U.S. Surgical redesigned its product and came out with the Versaport II. Applied Medical again sued U.S. Surgical in the same litigation alleging that its Versaport II product also infringes the same patent. The district court found liability on the part of U.S. Surgical and awarded damages including reasonable royalty. U.S. Surgical argued that the royalty rate of 7 percent determined in the prior litigation applies to the instant litigation under collateral estoppel. The district court disagreed.

Affirming the lower court's ruling, the Federal Circuit specifies that collateral estoppel is appropriate only if (1) the issue to be decided is identical to one decided in the first action; (2) the issue was actually litigated in the first action; (3) resolution of the issue was essential to a final judgment in the first action; and (4) the parties had a full and fair opportunity to litigate the issue in the first action. The first requirement was found not to be met because the reasonable royalty rate in the instant litigation is not identical to the one decided in the first litigation. Moreover, a reasonable royalty determination must relate to the time infringement occurred. Since the infringement of the instant litigation occurred at a later time than the infringement of the prior litigation, the prior reasonable royalty rate is not applicable.