Case: 23-1359    Document: 43     Page: 1   Filed: 02/10/2025




   United States Court of Appeals
       for the Federal Circuit
                  ______________________

                KROY IP HOLDINGS, LLC,
                   Plaintiff-Appellant

                             v.

                    GROUPON, INC.,
                    Defendant-Appellee
                  ______________________

                        2023-1359
                  ______________________

     Appeal from the United States District Court for the
 District of Delaware in No. 1:17-cv-01405-MN, Judge
 Maryellen Noreika.
                 ______________________

                Decided: February 10, 2025
                 ______________________

    PAUL RICHTER, JR., Devlin Law Firm LLC, Wilmington,
 DE, argued for plaintiff-appellant. Also represented by
 TIMOTHY DEVLIN.

     THOMAS LEE DUSTON, Marshall, Gerstein & Borun
 LLP, Chicago, IL, argued for defendant-appellee. Also rep-
 resented by CHELSEA MURRAY, RAYMOND R. RICORDATI, III.
                  ______________________

    Before PROST, REYNA, and TARANTO, Circuit Judges.
 REYNA, Circuit Judge.
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 2                    KROY IP HOLDINGS, LLC v. GROUPON, INC.




      Kroy IP Holdings, LLC sued Groupon, Inc. in the
 United States District Court for the District of Delaware
 alleging patent infringement. Groupon moved to dismiss
 Kroy’s operative complaint, arguing that Kroy was collat-
 erally estopped from alleging infringement of the asserted
 claims based on two prior inter partes review decisions of
 the Patent Trial and Appeal Board. Both of the Board’s
 prior decisions involved the same patent, but claims other
 than the asserted claims. The district court granted
 Groupon’s motion to dismiss. Kroy timely appeals. For the
 following reasons, we reverse and remand.
                        BACKGROUND
      Kroy IP Holdings, LLC (“Kroy”) owns 

 (“’660 patent”), which relates to providing incen-
 tive programs over a computer network. ’660 patent, Ab-
 stract.    In October 2017, Kroy sued Groupon, Inc.
 (“Groupon”) in the United States District Court for the Dis-
 trict of Delaware, alleging that Groupon infringed 13 ex-
 emplary claims of the ’660 patent. J.A. 1014. In October
 2018, Groupon filed two inter partes review (“IPR”) peti-
 tions challenging 21 claims of the ’660 patent. Groupon,
 Inc. v. Kroy IP Holds., LLC, No. IPR2019-00044, 

 (P.T.A.B. Apr. 16, 2020) (“’044 IPR”); Groupon,
 Inc. v. Kroy IP Holds., LLC, No. IPR2019-00061, 

 (P.T.A.B. Apr. 16, 2020) (“’061 IPR”). After
 Groupon’s IPR filing deadline had passed, Kroy amended
 its complaint to allege infringement of additional claims,
 many of which were not included in Groupon’s IPR peti-
 tions. J.A. 1925–26. In April 2020, the Patent Trial and
 Appeal Board (“Board”) found all 21 of the challenged
 claims unpatentable (the “Unpatentable Claims”). ’044
 IPR, 

, at *1; ’061 IPR, 

,
 at *1. Kroy appealed the Board’s final written decisions,
 and in June 2021, this court affirmed via Federal Circuit
 Rule 36 (“Rule 36”). Kroy IP Holds., LLC, v. Groupon, Inc.,
 

 (Fed. Cir. 2021).
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 KROY IP HOLDINGS, LLC v. GROUPON, INC.                     3



     In March 2022, Kroy filed a second amended complaint
 alleging infringement of 14 claims of the ’660 patent (the
 “Newly Asserted Claims”), none of which were at issue in
 the IPR proceedings. J.A. 2457; J.A. 2472. In response,
 Groupon filed a motion to dismiss pursuant to Federal Rule
 of Civil Procedure 12(b)(6), arguing that the Board’s prior
 IPR rulings on the Unpatentable Claims collaterally es-
 topped Kroy from asserting the Newly Asserted Claims.
     The district court agreed with Groupon and granted its
 motion to dismiss with prejudice in December 2022. Kroy
 IP Holds., LLC v. Groupon, Inc., No. 17-1405-MN-CJB,
 

 (D. Del. Dec. 2, 2022). In so ruling, the
 district court first determined that the Board’s final judg-
 ments on the unpatentability of a patent claim have pre-
 clusive effect on any pending or co-pending district court
 actions involving the same claim. 

 at *4 (citing XY, LLC
 v. Trans Ova Genetics, L.C., 

 (Fed. Cir. 2018)). The district court next determined that
 collateral estoppel may apply to patent claims that were
 not previously adjudicated if the differences between the
 unadjudicated claims and the adjudicated claims “do not
 materially alter the question of invalidity.” 

 (emphasis
 removed) (quoting Ohio Willow Wood Co. v. Alps S., LLC,
 

 (Fed. Cir. 2013)). Taking these two
 principles together, the district court concluded that if the
 Board issues a final judgment ruling that a patent claim is
 unpatentable, and that claim is immaterially different for
 purposes of invalidity from another claim, collateral estop-
 pel precludes the patentee from asserting the immaterially
 different claim. 

 With this legal principle in mind, the
 district court turned to the merits of Groupon’s estoppel ar-
 guments.
     The district court started its collateral estoppel analy-
 sis by observing that four requirements must be met for
 collateral estoppel to apply in the Third Circuit: “(1) the
 identical issue was previously adjudicated; (2) the issue
 was actually litigated; (3) the previous determination was
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 4                     KROY IP HOLDINGS, LLC v. GROUPON, INC.




 necessary to the decision; and (4) the party being precluded
 from relitigating the issue was fully represented in the
 prior action.” 

 (quoting Jean Alexander Cosmetics, Inc.
 v. L’Oreal USA, Inc., 

 (3d Cir. 2006)). The
 district court focused its analysis on the first requirement:
 prior adjudication of the identical issue. In doing so, the
 district court compared specific Unpatentable Claims to
 their corresponding Newly Asserted Claims and deter-
 mined that each Newly Asserted Claim was immaterially
 different from one or more Unpatentable Claims for pur-
 poses of invalidity. 

 at *6–14. Next, the district court
 noted that the parties did not dispute that the second and
 fourth collateral estoppel requirements were met. 

 at *5
 n.7. Finally, the district court rejected Kroy’s argument
 that the third collateral estoppel requirement was not met
 because this court’s Rule 36 affirmance was “silent” as to
 which theories underlying the Board’s decision it approved
 of. 

 Having ruled that all four collateral estoppel re-
 quirements were met, the district court granted Groupon’s
 motion to dismiss with prejudice. Id. at *15.
     Kroy appeals. We have jurisdiction under 

(a)(1).
                    STANDARD OF REVIEW
      We review a district court’s dismissal for failure to
 state a claim under the law of the regional circuit. Content
 Extraction & Transmission LLC v. Wells Fargo Bank, Nat’l
 Ass’n, 

 (Fed. Cir. 2014). The Third Cir-
 cuit reviews de novo a district court’s grant of a motion to
 dismiss for failure to state a claim. 

 A district court
 should grant a motion to dismiss for failure to state a claim
 if the complaint does not “contain sufficient factual matter,
 accepted as true, to state a claim to relief that is plausible
 on its face.” Ashcroft v. Iqbal, 

 (2009) (in-
 ternal quotation marks and citations omitted).
     We also review a district court’s application of general
 collateral estoppel principles de novo under the law of the
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 KROY IP HOLDINGS, LLC v. GROUPON, INC.                      5



 regional circuit. Aspex Eyewear, Inc. v. Zenni Optical Inc.,
 

 (Fed. Cir. 2013); Shell Petroleum, Inc.
 v. United States, 

 (Fed. Cir. 2003). Fed-
 eral Circuit law applies to collateral estoppel issues that
 implicate substantive patent law issues. Soverain Soft-
 ware LLC v. Victoria’s Secret Direct Brand Mgmt., LLC,
 

 (Fed. Cir. 2015).
                         DISCUSSION
     This case presents a distinct question of Federal Cir-
 cuit collateral estoppel law: whether a prior final written
 decision of the Board that certain patent claims are un-
 patentable precludes a patentee from asserting other
 claims from the same patent, even assuming the asserted
 claims are immaterially different from the unpatentable
 claims for purposes of invalidity. Kroy argues that collat-
 eral estoppel should not apply because an IPR proceeding
 requires a lower burden of proof to prove unpatentability
 than the burden of proof in district court for invalidity. Ap-
 pellant Br. 19–20. Groupon responds that under this
 court’s decisions in XY and Ohio Willow Wood, collateral
 estoppel applies. Appellee Br. 16–17 (citing XY, 

, and quoting Ohio Willow Wood, 

).
 We agree with Kroy and hold that collateral estoppel does
 not apply.
     Collateral estoppel applies when “(1) the identical issue
 was previously adjudicated; (2) the issue was actually liti-
 gated; (3) the previous determination was necessary to the
 decision; and (4) the party being precluded from relitigat-
 ing the issue was fully represented in the prior action.”
 Jean Alexander Cosmetics, 

 (internal quo-
 tation marks and citations omitted); see also Soverain Soft-
 ware, 

. That said, collateral estoppel is
 “subject to certain well-known exceptions.” B & B Hard-
 ware, Inc. v. Hargis Indus., Inc., 

, 148 (2015).
 One such exception is when “the second action involves ap-
 plication of a different legal standard,” such as a different
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 6                     KROY IP HOLDINGS, LLC v. GROUPON, INC.




 burden of proof. Id. at 154; Grogan v. Garner, 

,
 284–85 (1991) (explaining that a prior judgment rendered
 under a preponderance of the evidence standard cannot be
 given collateral estoppel effect in a subsequent matter liti-
 gated under a clear and convincing evidence standard);
 18 Charles Alan Wright, Arthur R. Miller & Edward H.
 Cooper, Federal Practice & Procedure § 4422 (3d ed. 2016)
 (“[A] party who has carried the burden of establishing an
 issue by a preponderance of the evidence is not entitled to
 assert preclusion in a later action that requires proof of the
 same issue by a higher standard.”).
      This court recently examined the doctrine of collateral
 estoppel and assessed the effect that prior final written de-
 cisions of the Board may have on subsequent district court
 litigation. In ParkerVision, Inc. v. Qualcomm Inc., we re-
 viewed a district court decision that collateral estoppel
 barred ParkerVision’s expert from offering testimony to
 support the validity of certain method claims of a patent.
 

, 1360–61 (Fed. Cir. 2024). The Board de-
 termined that apparatus claims of the same patent were
 unpatentable as obvious. 

 The district court ruled that
 collateral estoppel barred ParkerVision from asking it or a
 jury to reach factual conclusions regarding the validity of
 the method claims that would conflict with the Board’s fact
 findings for the apparatus claims. 

 at 1353–54, 1361.
 We reversed. We recognized that in an IPR proceeding, the
 petitioner has a burden to prove unpatentability by a pre-
 ponderance of the evidence, whereas the district court re-
 quires the higher burden of clear and convincing evidence
 for invalidity. 

. Thus we held that, under the
 Supreme Court’s guidance in B & B Hardware and Grogan,
 collateral estoppel did not apply due to the differing bur-
 dens of proof. 

 at 1361–62.
     Our reasoning in ParkerVision holds true in this ap-
 peal. Collateral estoppel generally does not apply when the
 second action involves application of a different legal
 standard, such as a different burden of proof. B & B
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 KROY IP HOLDINGS, LLC v. GROUPON, INC.                      7



 Hardware, 575 U.S. at 148, 154; Grogan, 498 U.S.
 at 284–85; 18 Charles Alan Wright, Arthur R. Miller & Ed-
 ward H. Cooper, Federal Practice & Procedure § 4422
 (3d ed. 2016). Before the Board, Groupon proved the un-
 patentability of the Unpatentable Claims by a preponder-
 ance of the evidence. Before the district court, however,
 Groupon’s burden to prove that the Newly Asserted Claims
 are invalid is clear and convincing evidence. As such, col-
 lateral estoppel should not apply. To hold otherwise would
 deprive patent owners of their property right without first
 requiring proof of patent invalidity that satisfies the stat-
 utorily-prescribed clear and convincing evidence standard.
 See Microsoft Corp. v. i4i Ltd. P’ship, 

 (2011).
      Groupon argues that our decision in XY provides that,
 notwithstanding differing burdens of proof, a final written
 decision by the Board may give rise to collateral estoppel
 in district court. We addressed and rejected a similar ar-
 gument in ParkerVision. In XY, we established a limited
 exception to the general principle that collateral estoppel
 does not apply when there are different burdens of proof.
 ParkerVision, 

. Specifically, we explained
 that XY stands for the more limited proposition that once
 this court affirms the Board’s decision that a patent claim
 is unpatentable, the same claim cannot be asserted in dis-
 trict court. 

 We explained that once the claim is ruled
 unpatentable, it no longer exists, whereas when a claim
 has “not been found unpatentable[,] . . . those claims re-
 main presumptively valid.” 

 This is so because once a
 claim is already and finally held unpatentable as a result
 of an IPR, the claim is subject to a wholly ministerial, in-
 evitable, unreversible cancellation. The premise invoked
 for collateral estoppel in XY does not rely on the Board’s
 fact findings, but rather the retroactive cancellation of cer-
 tain claims as a matter of law. Yet when a district court
 would necessarily rely on the Board’s fact findings, and
 those facts have only been proven in a prior proceeding
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 8                     KROY IP HOLDINGS, LLC v. GROUPON, INC.




 under a lower burden of proof than what is required in dis-
 trict court, collateral estoppel does not apply. 

 The rea-
 soning of ParkerVision applies equally here. The Newly
 Asserted Claims have not been found unpatentable and
 thus continue to exist until this court affirms a Board or
 district court decision that determines otherwise.
      Contrary to Groupon’s assertion, Ohio Willow Wood
 does not compel a different result. Groupon is correct that,
 under Ohio Willow Wood, collateral estoppel may apply to
 patent claims that were not previously adjudicated if the
 differences between the unadjudicated claims and the ad-
 judicated claims “do not materially alter the question of in-
 validity.” Ohio Willow Wood, 

. What
 Groupon omits, however, is that Ohio Willow Wood ad-
 dresses whether a prior district court invalidity ruling es-
 topped the patentee from asserting claims in district court
 that are immaterially different for purposes of invalidity.
 

 at 1341–43. Put another way, the district-court-to-dis-
 trict-court scenario presented in Ohio Willow Wood does
 not present the same burden of proof concern as the Board-
 to-district-court case before us. The district court’s reliance
 on Ohio Willow Wood to establish that a prior Board un-
 patentability ruling estopped Kroy from asserting the un-
 adjudicated, Newly Asserted Claims in district court
 ignores B & B Hardware and Grogan and thus was legal
 error.
     We hold that a prior final written decision of the Board
 of unpatentability on separate patent claims reached under
 a preponderance of the evidence standard cannot collater-
 ally estop a patentee from asserting other, unadjudicated
 patent claims in district court litigation. As such, dismis-
 sal was inappropriate.
                         CONCLUSION
    We have considered the parties’ remaining arguments
 and find them unpersuasive. For the reasons stated, we
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 KROY IP HOLDINGS, LLC v. GROUPON, INC.                      9



 reverse the district court’s grant of Groupon’s motion to dis-
 miss and remand for further proceedings.
             REVERSED AND REMANDED
                            COSTS
 Costs against Groupon.