Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, KABUSHIKI-KAISH

• Decision Date: 26 June 1995
• Docket Number: KABUSHIKI-KAISH,D,Nos. 94-1414,94-1425,s. 94-1414
• Citation: 58 F.3d 616,35 USPQ2d 1311
• Parties: MARS INCORPORATED, Plaintiff-Appellant, v. NIPPON CONLUXefendant/Cross-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 616

58 F.3d 616

35 U.S.P.Q.2d 1311

MARS INCORPORATED, Plaintiff-Appellant, v. NIPPON CONLUX KABUSHIKI-KAISHA, Defendant/Cross-Appellant.

Nos. 94-1414, 94-1425.

United States Court of Appeals, Federal Circuit.

June 26, 1995.

John B. Pegram, Davis, Hoxie, Faithfull & Hapgood, New York City, argued for plaintiff-appellant. With him on the brief were Peter H. Priest, Wayne S. Breyer and Jeffrey M. Weinick.

David M. Simon, Spensley, Horn, Jubas & Lubitz, Los Angeles, CA, argued for defendant/cross-appellant. With him on the brief were Richard H. Zaitlen and Steven C. Sereboff.

Before MAYER, LOURIE and BRYSON, Circuit Judges.

BRYSON, Circuit Judge.

Appellant Mars, Incorporated, sued Conlux USA Corporation for patent infringement and obtained a judgment in its favor. Following the verdict in the case against Conlux USA, Mars brought a separate action for patent infringement against appellee Nippon Conlux Kabushiki-Kaisha (Nippon Conlux), which is Conlux USA's Japanese parent corporation. The district court granted summary judgment in favor of Nippon Conlux, holding that the judgment against Conlux USA barred Mars from bringing a separate infringement action against Nippon Conlux. Mars, Inc. v. Nippon Conlux Kabushiki-Kaisha, 855 F.Supp. 673 (D.Del.1994). We agree with the district court that under the doctrine of claim preclusion Mars may not obtain relief on its complaint against Nippon Conlux. We therefore affirm the judgment of the district court.

I

Mars is the owner of United States Patent No. 3,918,565 (the '565 patent). The patent, which is entitled "Method and Apparatus for Coin Selection Utilizing a Programmable Memory," claims an electronic "coin discriminator," a device that can be used in vending machines to distinguish genuine from counterfeit coins and to distinguish among coins of different value.

Beginning in 1988, Nippon Conlux manufactured coin changers for vending machines and shipped them to Conlux USA, its wholly owned subsidiary. Conlux USA then sold the coin changers in the United States.

In 1990, Mars brought an action against Conlux USA, alleging that Conlux USA had infringed the '565 patent and induced others to infringe the patent by using and selling Nippon Conlux Premier series coin changers in the United States. Mars did not join Nippon Conlux as a defendant in that action. The case went to trial before a judge and jury, and the trial resulted in a finding of liability; the jury subsequently returned a verdict in Mars's favor in the amount of $545,562 but did not find Conlux USA's infringement to be willful.

During the period between the liability and the damages phases of the trial against Conlux USA, Mars instituted the present action against Nippon Conlux in the same district where the action against Conlux USA was pending. Among other allegations not pertinent here, the complaint charged that Nippon Conlux had induced Conlux USA and others to infringe the '565 patent, in violation of 35 U.S.C. Sec. 271(b), and that it had infringed the '565 patent by importing the Premier series coin changers, in violation of 35 U.S.C. Sec. 271(g). Mars did not move to consolidate the case against Nippon Conlux with the pending action against Conlux USA.

The district court granted Nippon Conlux's motion for summary judgment on claim preclusion grounds. Although noting that Conlux USA and Nippon Conlux were not the same party, the court held that "there is a sufficiently close relationship between the two defendants to bar Mars from asserting claims against Nippon Conlux that it already litigated against Conlux USA." 855 F.Supp. at 677. The court also found that the two lawsuits were based on the same underlying cause of action. The court explained that the

allegedly infringing devices in [the Nippon Conlux] case are the exact same machines that were the subject of the Conlux USA litigation. In both cases, Mars alleges infringement of the same patent, and Conlux USA was found to be infringing the same patent claims that Mars alleges Nippon Conlux infringed.

Id. at 678.

Based on the close relationship of the facts alleged in the two complaints, the district court concluded that the complaints alleged the same cause of action. The court then held that Mars could not seek additional relief from Nippon Conlux for the same cause of action that it had litigated to final judgment in its action against Conlux USA.

II

On appeal, Mars argues that the principles of claim preclusion do not bar its action against Nippon Conlux, for two reasons: first, it contends that Nippon Conlux is a separate entity from Conlux USA and therefore may not invoke claim preclusion based on the prior action against Conlux USA; second, it contends that claim preclusion is inapplicable because the suit against Nippon Conlux is based on an entirely separate cause of action from the suit against Conlux USA. We reject both contentions.

A

At the outset, the parties raise a choice of law question. The question is whether the claim preclusion issue in this case is a matter of patent law that should be decided under the precedents of this court, or a more general issue of the law of judgments that should be decided under the law of the regional circuit from which this case comes.

This case turns on general principles of claim preclusion, not on any rule of law having special application to patent cases. For that reason, we look to the law of the regional circuit--in this case the Third Circuit--for guidance in deciding the claim preclusion questions presented here. See Epic Metals Corp. v. H.H. Robertson Co., 870 F.2d 1574, 1576, 10 USPQ2d 1296, 1298-99 (Fed.Cir.), cert. denied, 493 U.S. 855, 110 S.Ct. 160, 107 L.Ed.2d 117 (1989); Hartley v. Mentor Corp., 869 F.2d 1469, 1471 n. 1, 10 USPQ2d 1138, 1139 n. 1 (Fed.Cir.1989). Contrary to the appellant's contention, this case is not governed by Foster v. Hallco Manufacturing Co., 947 F.2d 469, 475, 20 USPQ2d 1241, 1245 (Fed.Cir.1991). In Foster, this court had to determine whether the public policy against restricting challenges to patent validity overrode general principles of res judicata. The court held that because that question was in substance a question of patent law calling for a uniform national rule, the case should be governed by Federal Circuit law, not the law of each regional circuit. 947 F.2d at 475, 20 USPQ2d at 1245. This case, by contrast, involves a pure question of the law of judgments--whether claim preclusion may be invoked by a corporate parent following a final judgment against its wholly owned subsidiary. The setting in which the question arises is a patent case, but the issue is not one peculiar to patent law.

B

In resisting the application of claim preclusion in this case, Mars places great weight on the fact that Conlux USA and Nippon Conlux are separate parties. The principles of claim preclusion, however, are not limited to cases involving identical parties. It is well settled, for example, that claim preclusion may be invoked by and against those in privity with parties. See Nevada v. United States, 463 U.S. 110, 130, 103 S.Ct. 2906, 2918, 77 L.Ed.2d 509 (1983); Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979).

To be sure, the term "privity" has been criticized as not aiding analysis, but simply stating a conclusion that a particular nonparty should be treated the same as a party for claim preclusion purposes. For that reason, courts have sometimes avoided the use of the term "privity" and instead have focused directly on the question whether the relationship between the parties is such that one party should enjoy the benefit, or suffer the burden, of a judgment for or against another. The Third Circuit, in particular, has used that approach in determining whether a defendant may invoke claim preclusion after the plaintiff's action against a closely related defendant has become final. See Gambocz v. Yelencsics, 468 F.2d 837, 841 (3d Cir.1972) ("res judicata may be invoked against a plaintiff who has previously asserted essentially the same claim against different defendants where there is a close or significant relationship between...