Transclean Corporation v. Jiffy Lube International

United States Court of Appeals for the Federal Circuit
06-1077

TRANSCLEAN CORPORATION, JAMES P. VIKEN, JON A. LANG,
and DONALD E. JOHNSON,

Plaintiffs-Appellants,
v.

JIFFY LUBE INTERNATIONAL, INC.,

Defendant-Appellee,
and

REGIONAL CAR WASH DISTRIBUTORS, INC., WALT GISLASON (doing business as
Walt’s Soft Car Wash), and MIKE’S IN AND OUT 10 MINUTE OIL CHANGE,

Defendants-Appellees,
and

INDY LUBE, INC.,

Defendant-Appellee,
and

FRESH START, INC., LUBRICATION TECHNOLOGIES, INC., LAYNE R. BASE (doing
business as Heartland Express Lube), and PERFECT “10” QUICK LUBE, INC.,

Defendants-Appellees,
and

ULTRA LUBE, INC.,

Defendant,
and

BOB CLEMONS (doing business as Wonder Lube), BILL CLARK OIL CO., INC., ROYAL
LUBE SERVICE, INC., 13 NORTH EXPRESS LUBE, INC.,
SPOT’S QUICK LUBE, INC., and WHITE BEAR TIRE & AUTO, INC.,

Defendants.
 Alan M. Anderson, Fulbright & Jaworski L.L.P, of Minneapolis, Minnesota, argued for
plaintiffs-appellants Transclean Corporation, et al. With him on the brief was Christopher A.
Young.

James W. Poradek, Faegre & Benson LLP, of Minneapolis, Minnesota, argued for
defendant-appellee Jiffy Lube International, Inc. With him on the brief were David J.F.
Gross and Timothy E. Grimsrud.

Gregory R. Anderson, Anderson Larson Hanson & Saunders, P.L.L.P, of Willmar,
Minnesota, for defendants-appellees Regional Car Wash Distributors, Inc., et al.

Robert W. Gutenkauf, Gray, Plant, Mooty, Mooty & Bennett, of Minneapolis,
Minnesota, for defendant-appellee Indy Lube, Inc..

David Jon Hoiland, Law Office of David Jon Hoiland, of Minneapolis, Minnesota, for
defendants-appellees Fresh Start Inc., et al.

Appealed from: United States District Court for the District of Minnesota

Senior Judge Paul A. Magnuson
United States Court of Appeals for the Federal Circuit

06-1077

TRANSCLEAN CORPORATION, JAMES P. VIKEN, JON A. LANG,
and DONALD E. JOHNSON,

Plaintiffs-Appellants,
v.

JIFFY LUBE INTERNATIONAL, INC.,

Defendant-Appellee,
and

REGIONAL CAR WASH DISTRIBUTORS, INC., WALT GISLASON (doing business as
Walt’s Soft Car Wash), and MIKE’S IN AND OUT 10 MINUTE OIL CHANGE,

Defendants-Appellees,
and

INDY LUBE, INC.,

Defendant-Appellee,
and

FRESH START, INC., LUBRICATION TECHNOLOGIES, INC., LAYNE R. BASE (doing
business as Heartland Express Lube), and PERFECT “10” QUICK LUBE, INC.,

Defendants-Appellees,
and

ULTRA LUBE, INC.,

Defendant,
and

BOB CLEMONS (doing business as Wonder Lube), BILL CLARK OIL CO., INC.,
ROYAL LUBE SERVICE, INC., 13 NORTH EXPRESS LUBE, INC.,
SPOT’S QUICK LUBE, INC., and WHITE BEAR TIRE & AUTO, INC.,

Defendants.
 __________________________

DECIDED: January 18, 2007
__________________________

Before MICHEL, Chief Judge, PLAGER, Senior Circuit Judge, and BRYSON, Circuit
Judge.

PLAGER, Senior Circuit Judge.

Transclean Corporation, James P. Viken, Jon A. Lang, and Donald E. Johnson

(collectively “Transclean”) brought suit against Bridgewood Services, Inc.

(“Bridgewood”), alleging that the automatic transmission fluid changing machine

manufactured and sold by Bridgewood, the “T-Tech machine,” infringed Transclean’s

patent. Transclean obtained a judgment in its favor, including a damages award of

$1,874,500. The judgment and award were affirmed on appeal. Transclean Corp. v.

Bridgewood Servs., Inc., 290 F.3d 1364 (Fed. Cir. 2002) (“Transclean I”).

Transclean then filed a separate patent infringement suit against Jiffy Lube

International, Inc. (“Jiffy Lube”) and more than thirty other fast lube businesses, each of

which had purchased one or more T-Tech machines from Bridgewood. That case is the

subject of the present appeal.

In this case, the district court granted summary judgment in favor of Jiffy Lube

and eight other defendants (“Participating Defendants”), holding that under the doctrine

of claim preclusion, the judgment against Bridgewood bars Transclean from bringing a

separate infringement action against Bridgewood’s customers. The district court

previously had entered default judgment in favor of Transclean against several other

defendants (“Defaulting Defendants”), none of whom had answered the complaint.

Because we agree with the district court that under the doctrine of claim preclusion

06-1077 2
Transclean may not obtain relief against the Participating Defendants, we affirm that

portion of the district court’s judgment. In light of that affirmance, we conclude that the

claims against the Defaulting Defendants should be disposed of in the same manner;

accordingly, the judgment in favor of Transclean and against the Defaulting Defendants

is reversed.

BACKGROUND

Viken, Lang, and Johnson are the owners of U.S. Patent No. 5,318,080 (“the

’080 patent”); Transclean is their exclusive licensee. The patent is directed to an

apparatus for changing automatic transmission fluid. In October 1997, Transclean filed

a patent infringement suit in the United States District Court for the District of Minnesota

against Bridgewood, a manufacturer and distributor of transmission service equipment.

Soon thereafter, Bridgewood sold its assets to Century Manufacturing Company, which

took a license from Transclean under the ’080 patent for T-Tech machines sold on or

after May 1, 1998. Any T-Tech machines manufactured before that date remained the

subject of litigation between Transclean and Bridgewood.

This court’s opinion in Transclean I discusses the Bridgewood litigation in detail;

here we provide only the facts of that case that are relevant to the present appeal. With

regard to liability issues, the trial court in the Bridgewood litigation granted Transclean’s

motion for summary judgment that Bridgewood infringed claims 1-4 and 12 of the ’080

patent, after barring Bridgewood from asserting it did not infringe as a sanction for

Bridgewood’s failure to answer an interrogatory seeking the bases for its non-

infringement position. When the case proceeded to trial, a jury found that Bridgewood

infringed claim 13. On appeal we affirmed the judgment of infringement of claims 1-4

06-1077 3
and 12, but after correcting the claim construction we vacated the judgment of

infringement of claim 13. Transclean I, 290 F.3d at 1373-75.

With regard to damages, the jury in the Bridgewood case awarded Transclean

three types of damages totaling $5.5 million. Id. at 1375. The trial court granted

Bridgewood’s motion for a new trial or remittitur in the amount of $1,874,500, the

highest amount of reasonable royalty damages that the jury could have awarded based

on the evidence. Id. at 1375. Transclean apparently accepted the remittitur, and

neither party appealed that portion of the damages award. Id. Transclean alleges it has

not collected on the judgment against Bridgewood.

Soon after this court affirmed the judgment against Bridgewood, Transclean filed

the current infringement suit in the District of Minnesota, this time against Jiffy Lube and

more than thirty other fast lube businesses, including many small, independently owned

shops that use a single T-Tech machine. In this case, the subject of the present appeal,

Transclean alleges that the defendants infringe the ’080 patent by using T-Tech

machines purchased from Bridgewood prior to May 1, 1998. Thus the accused devices

in this case were also the subject of the suit against Bridgewood. Transclean seeks a

“reasonable royalty” of $10,000 for the use of each allegedly infringing device.

Several defendants failed to answer the complaint, and Transclean filed a motion

for default judgment against them. The trial court granted the motion in part, ordering

entry of default judgment and a permanent injunction against those defendants but

06-1077 4
finding that it was premature to enter a default damages award at that time. Transclean

Corp. v. Bill Clark Oil Co., No. 02-1138 (D. Minn. Nov. 5, 2003) (order).1

Transclean, Jiffy Lube, and some of the other Participating Defendants2 filed

various motions for summary judgment, most of which alleged that the judgment in the

Bridgewood litigation had some preclusive effect. Transclean filed a motion for

summary judgment in which it argued that the defendants in this case should be

precluded from asserting a non-infringement defense because the Bridgewood litigation

concluded with a judgment of infringement by the same T-Tech machines. As part of its

argument that issue preclusion applied, Transclean asserted that the defendants were

in privity with Bridgewood. The trial court denied Transclean’s motion on the ground

that the issue of infringement was not actually litigated in the Bridgewood litigation

because the infringement determination in that case was in large part a sanction for

abuse of discovery. Transclean Corp. v. Reg’l Car Wash Distribs., Inc., No. 02-1138,

2004 WL 1453509, at *7-8 (D. Minn. June 18, 2004).

In the same opinion, the trial court granted Jiffy Lube’s motion for summary

judgment that Transclean was precluded from bringing infringement claims against Jiffy

Lube. The trial court concluded that the elements of claim preclusion were satisfied.

First, there was no dispute that the Bridgewood litigation ended in a final judgment on

1
In that order, the trial court entered default judgment against Defendants
13 North Express Lube, Inc.; Bill Clark Oil Co., Inc.; Royal Lube and Service, Inc.; Spots
Quik Lube, Inc.; White Bear Tire & Auto, Inc.; and two others that were later dismissed
from the case. In subsequent orders, the trial court entered default judgment against
Ultra Lube and Bob Clemons (doing business as Wonder Lube).
2
In addition to Jiffy Lube, the Participating Defendants are Regional Car
Wash Distributors, Inc.; Walt Gislason (doing business as Walt’s Soft Car Wash); Mike’s
In and Out 10 Minute Oil Change; Indy Lube, Inc.; Fresh Start, Inc.; Lubrication
Technologies, Inc.; Layne R. Base (doing business as Heartland Express Lube); and
Perfect “10” Quick Lube, Inc.

06-1077 5
the merits or that the court properly exercised jurisdiction in that matter. Nor did

Transclean dispute that Jiffy Lube was in privity with Bridgewood, the defendant in the

prior litigation. Finally, Transclean did not dispute that during the first litigation it was

aware of Jiffy Lube’s use of T-Tech machines and could have brought claims against

Jiffy Lube. Id. at *2. The trial court noted, however, that summary judgment based on

claim preclusion was not appropriate as to other defendants until they came forward

with evidence that Transclean knew or should have known about them during the

Bridgewood litigation. Id. at *3.

Transclean later conceded it was aware that each of the Participating Defendants

had purchased and used at least one T-Tech machine while the Bridgewood litigation

was pending. In response thereto, the trial court granted summary judgment in favor of

the Participating Defendants. Transclean Corp. v. Bill Clark Oil Co., No. 02-1138, 2004

WL 2730101, at *2 (D. Minn. Nov. 18, 2004).

When Transclean moved for a determination of damages against the Defaulting

Defendants—the trial court having earlier rendered judgment against them—the trial

court sua sponte raised the defense of issue preclusion on their behalf. Transclean

Corp. v. Bill Clark Oil Co., Inc., No. 02-1138, 2005 WL 2406036, at *2 (D. Minn. Sept.

29, 2005) (“Damages Opinion”). The trial court held that Transclean was precluded

from seeking a $10,000 royalty for the use of each infringing machine because that

theory was not presented in the Bridgewood litigation. Accordingly, the court limited the

damages award to $550 per infringing T-Tech machine, the amount awarded in the

06-1077 6
Bridgewood litigation.3 Id. at *3. The trial court then awarded Transclean treble

damages under 35 U.S.C. § 284 because the Defaulting Defendants did not respond to

Transclean’s allegations of willful infringement. This resulted in a damages award of

$1,650 against each of the Defaulting Defendants. Id. at *3.

The trial court entered judgment in accordance with its various decisions.

Transclean appeals from that judgment, challenging the trial court’s rulings that claim

preclusion bars Transclean’s suit against the Participating Defendants and that issue

preclusion limits the amount of damages recoverable from the Defaulting Defendants.

We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

I. Participating Defendants

Transclean’s primary argument against the application of claim preclusion as a

bar to its infringement claims against the Participating Defendants is that the law

generally allows a patentee to sue manufacturers or sellers and users of an infringing

device as joint tortfeasors, and that the law permits multiple suits, just not multiple (i.e.,

double) recoveries. This rule has its genesis in Birdsell v. Shaliol, 112 U.S. 485 (1884),

in which the Supreme Court held that a patentee who had recovered only nominal

damages against the manufacturer of an infringing product could subsequently sue

users of the infringing product. The Court indicated that a patentee may not sue users

of an infringing product for damages if he has collected actual damages from a

manufacturer or seller, and those damages fully compensate the patentee for

3
The trial court arrived at this figure by dividing $1,874,500, the total
damages award in the Bridgewood litigation, by 3400, the number of T-Tech machines
sold by Bridgewood.

06-1077 7
infringement by users. Id. at 488-89; see also Glenayre Elecs., Inc. v. Jackson, 443

F.3d 851, 864 (Fed. Cir. 2006) (citing Birdsell and holding that a patentee could not sue

users for damages because actual damages covering the use of the product had

already been recovered from the manufacturer); Shockley v. Arcan, Inc., 248 F.3d 1349,

1364 (Fed. Cir. 2001) (“Each joint tort-feasor is liable for the full amount of damages (up

to a full single recovery) suffered by the patentee.” (citing Birdsell, 112 U.S. at 488-89)).

In light of Birdsell and its progeny, Transclean contends it is free to sue users of

the T-Tech machine because it has not collected on the judgment against Bridgewood.

That is true as far as it goes, but Transclean’s argument fails to take into account the

separate issue of claim preclusion, under which such a second suit, otherwise available,

may be barred. As the trial court correctly noted, the issue in this case is not whether

Transclean may sue both the manufacturer and users of the T-Tech machine. The

issue is whether, having failed to bring infringement claims against the users in the first

litigation, Transclean should be barred under the doctrine of claim preclusion from

bringing those claims in a second suit. “[A] plaintiff who chooses to bring two separate

actions against two tortfeasors who are jointly responsible for the same injury runs the

risk that the court will find the parties sufficiently related that the second action is barred

by claim preclusion.” Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, 58 F.3d 616, 620

(Fed. Cir. 1995). Despite Transclean’s protestations to the contrary, Birdsell and the

other cases relied on by Transclean involve only the doctrine of full compensation. See

Glenayre, 443 F.3d at 862-64; 7 Donald S. Chisum, Chisum on Patents § 20.03[7][b][iii]

(2002). They do not address the added question of when and how claim preclusion

may arise in such second suits.

06-1077 8
 We now turn to that question—whether claim preclusion principles bar

Transclean’s claims against the Participating Defendants in this case. As an initial

matter, the parties disagree about whether the claim preclusion issues in this case

should be decided under the law of the Federal Circuit or the applicable regional circuit,

here the Eighth Circuit. Transclean argues that the question before us is specific to

patent law—whether a patentee may sue the users of an infringing device when it

cannot recover on a judgment awarded against the manufacturer of the same infringing

device. As discussed, that question and the cases relied on by Transclean do not relate

to claim preclusion but instead involve the doctrine of full compensation.

Rather, as we shall explain, the key question before us is whether Transclean

should be bound by its repeated statements that the defendants were in privity with

Bridgewood, against whom Transclean obtained a judgment in an earlier litigation. This

question is not one peculiar to patent law, and therefore we will look to Eighth Circuit

law for guidance in deciding the issue. See Mars, 58 F.3d at 618 (looking to regional

circuit law to determine whether claim preclusion may be invoked by corporate parent

following patent infringement judgment against wholly owned subsidiary).

Under the doctrine of claim preclusion in the Eighth Circuit, an earlier suit bars a

party from asserting a claim in a later suit if (1) the first suit resulted in a final judgment

on the merits; (2) the prior judgment was rendered by a court of competent jurisdiction;

(3) both suits involve the same cause of action; and (4) both suits involve the same

parties or their privies. Banks v. Int’l Union Elec., Elec., Technical, Salaried & Mach.

Workers, 390 F.3d 1049, 1052 (8th Cir. 2004). Two suits are based on the same cause

06-1077 9
of action if they arise out of the same nucleus of operative facts. Id. The parties do not

dispute that the first two elements are satisfied.

Transclean argues in its briefs that its cause of action against the Participating

Defendants is different from its cause of action in the Bridgewood litigation. In the

earlier case, according to Transclean, Bridgewood was accused of infringing the ’080

patent by making and selling T-Tech machines. Here, in contrast, Transclean alleges

that the defendants infringe by using T-Tech machines. However, this case concerns

the same patent and the exact same devices that were the subject of the Bridgewood

litigation. There is little doubt that a second suit against Bridgewood itself for using the

same T-Tech machines that were the subject of the earlier infringement judgment would

involve the same cause of action as the prior litigation under the doctrine of claim

preclusion. Indeed, Transclean’s attorney conceded this point at oral argument.

In our view, the real question is whether the relationship between the defendants

and Bridgewood was so close that they were in privity for claim preclusion purposes. If

the answer is yes, it would follow that the case before us involves the same cause of

action as the Bridgewood litigation, and Transclean would be precluded from

maintaining the claims in this suit. Thus, in the context of this case, we need not decide

whether infringement by making and selling a patented invention and infringement by

using the patented invention generally involve the same cause of action; the privity

issue answers the question for us.

The issue of privity was not in dispute before the trial court because Transclean

admitted several times that the defendants in this case were in privity with Bridgewood.

In its amended complaint, Transclean alleged that the defendants were bound by the

06-1077 10
infringement judgment in the Bridgewood litigation. To support this claim, Transclean

took the position that issue preclusion principles barred the defendants from relitigating

the infringement issue. Accordingly, Transclean asserted in an interrogatory answer

that Jiffy Lube and Bridgewood were in privity because Jiffy Lube purchased infringing

T-Tech machines manufactured by Bridgewood. Transclean continued to press its

issue preclusion theory in a summary judgment motion, alleging again that the

defendants were in privity with Bridgewood. As Transclean put it, Bridgewood and the

defendants in this case are “closely related” and have an “identical interest in defeating

Transclean’s infringement allegations and invalidating the ’080 Patent.” J.A. at 895.

Having already alleged that the defendants and Bridgewood were in privity when

it argued that issue preclusion barred the defendants from raising a non-infringement

defense, Transclean apparently felt compelled to admit that the parties were also in

privity for claim preclusion purposes. Significantly, in its opposition to Jiffy Lube’s

motion for summary judgment, Transclean admitted that for purposes of claim

preclusion Jiffy Lube and Bridgewood “are in privity because Bridgewood was a

manufacturer of the infringing product and Jiffy Lube is a user of the same infringing

product.” J.A. at 670. And in its appeal brief to this court, Transclean expressly stated

that the “first [i.e., privity] element [of claim preclusion] is met. As the District Court

noted, and as they admitted themselves, the Participating [Defendants] have a

‘special . . . relationship’ of privity with Bridgewood.” Appellant’s Br. at 25. Only in its

reply brief and at oral argument did Transclean begin to retreat from its position that

privity exists between Bridgewood and the Participating Defendants, at least insofar as

it would bar through claim preclusion Transclean’s infringement claims.

06-1077 11
 The term ‘privity’ is a label that expresses the conclusion that a particular

nonparty in earlier litigation should be treated the same as a party to that litigation for

claim preclusion purposes. Mars, 58 F.3d at 619. In the Eighth Circuit, privity exists

when the parties are “so closely related” and their interests are “so nearly identical” that

“it is fair to treat them as the same parties for purposes of determining the preclusive

effect” of the first judgment. Ruple v. City of Vermillion, 714 F.2d 860, 862 (8th Cir.

1983).

It is important to recognize that under this standard, a manufacturer or seller of a

product who is sued for patent infringement typically is not in privity with a party,

otherwise unrelated, who does no more than purchase and use the product. Cf. Mars,

58 F.3d at 619 (concluding that corporate parent and its wholly owned subsidiary,

defendants in separate patent infringement suits, were in privity for claim preclusion

purposes). In other words, ordinarily such parties are not so closely related and their

litigation interests are not so nearly identical that a patentee’s suit against one would bar

a second action against the other under the doctrine of claim preclusion.

The question facing us, therefore, is how to treat Transclean’s representations

that Bridgewood, the manufacturer and seller of the T-Tech machine, was in privity with

its customers when the actual circumstances do not necessarily support that

conclusion. Transclean made a tactical decision to admit that such a “special

relationship” existed, first in connection with its issue preclusion argument and then for

purposes of claim preclusion as well. Should Transclean be bound by its litigation

strategy—its concession that Bridgewood and its customers were in privity?

06-1077 12
 The Participating Defendants argue that Transclean’s admission is binding

because privity is a question of fact that can be admitted. While there is a split of

authority as to whether privity is a question of law or fact, see L & S Indus., Inc. v.

Williams, 989 F.2d 929, 932 (7th Cir. 1993) (citing cases from different circuits), the

Eighth Circuit has treated privity as a factual question, see Kolb v. Scherer Bros. Fin.

Servs. Co., 6 F.3d 542, 544 (8th Cir. 1993). As previously explained, privity was not

disputed before the trial court—Transclean agreed with the defendants that they were in

privity with Bridgewood for purposes of claim preclusion. Because there were no

disputed issues of material fact with respect to privity or any other elements of claim

preclusion, the trial judge correctly granted summary judgment on the claim preclusion

issue in view of the record before him, including Transclean’s repeated admissions that

Bridgewood and the defendants in this case were in privity. See Fed. R. Civ. P. 56(c);

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

Transclean, relying on its argument that under Birdsell it could sue Bridgewood’s

customers since it had not collected on the judgment against Bridgewood, initially

believed it could avoid the application of claim preclusion even though it conceded the

existence of privity between Bridgewood and its customers. Apparently recognizing the

problem with that position, Transclean now contends in its reply brief that privity cannot

be admitted because it is a question of law and that we are free to determine that

Bridgewood and the Participating Defendants were not in privity if that conclusion is

supported by the actual facts. However, even if Transclean is correct that the issue

should be characterized as a legal conclusion, we think Transclean should be bound by

its concession under the doctrine of judicial estoppel.

06-1077 13
 “The doctrine of judicial estoppel prohibits a party from taking inconsistent

positions in the same or related litigation. The underlying purpose of the doctrine is ‘to

protect the integrity of the judicial process.’” Hossaini v. W. Mo. Med. Ctr., 140 F.3d

1140, 1142-43 (8th Cir. 1998) (citations omitted); see also Key Pharms. v. Hercon Labs.

Corp., 161 F.3d 709, 715 n.1 (Fed. Cir. 1998) (collecting cases and other relevant

authority). Judicial estoppel is an equitable doctrine that may be invoked by a court at

its discretion. New Hampshire v. Maine, 532 U.S. 742, 750 (2001). The Supreme Court

recently acknowledged the viability of the doctrine and identified several non-exclusive

factors that guide a court’s decision whether to apply judicial estoppel: (1) the party’s

later position must be “clearly inconsistent” with its earlier position; (2) the party must

have succeeded in persuading a court to adopt the earlier position, thereby posing a

“risk of inconsistent court determinations”; and (3) “the party seeking to assert an

inconsistent position would derive an unfair advantage or impose an unfair detriment on

the opposing party if not estopped.” Id. at 750-51.

While some circuits have limited application of judicial estoppel to inconsistent

factual assertions, others have applied the doctrine to legal conclusions as well. See 18

James Wm. Moore et al., Moore’s Federal Practice § 134.30 (3d ed. 2006). The Eighth

Circuit has not specifically addressed whether judicial estoppel extends to legal

positions, but the majority of circuits that have spoken on the issue have either squarely

held that the doctrine may be applied to inconsistent legal positions or indicated that the

doctrine would apply to questions of law, or at least the application of law to fact. See

Kira A. Davis, Note, Judicial Estoppel and Inconsistent Positions of Law Applied to Fact

and Pure Law, 89 Cornell L. Rev. 191, 202-08 (2003). In particular, the Federal Circuit

06-1077 14
has stated that a party may be judicially estopped from asserting clearly inconsistent

positions on claim construction, which is a question of law. See Interactive Gift

Express, Inc. v. Compuserve Inc., 256 F.3d 1323, 1346 (Fed. Cir. 2001); Key Pharms.,

161 F.3d at 715. In the absence of Eighth Circuit law to the contrary, we conclude that

judicial estoppel may be applied to the question of privity, whether considered a legal

conclusion or a question of fact.

In this case, we find it appropriate to invoke judicial estoppel to hold Transclean

to its concession that Bridgewood and its customers were in privity for claim preclusion

purposes. The determination Transclean asks us to make—that Bridgewood and the

defendants were not in privity for claim preclusion purposes—is clearly inconsistent with

the position it advocated before the trial court and in its opening brief on appeal. The

trial court accepted Transclean’s admission of privity, and the defendants relied on that

admission during both the trial and appellate phases of this litigation. As part of its

litigation strategy, Transclean made the choice to concede privity between Bridgewood

and its customers after choosing not to join the customers in the first litigation. Under

the circumstances presented by this case, we believe Transclean should be held to the

consequences of its choices. Transclean should not be permitted to reverse course this

late in the proceedings simply because it now realizes its litigation strategy was

unsuccessful. Accordingly, we affirm the trial court’s grant of summary judgment in

favor of the Participating Defendants.

06-1077 15
 II. Defaulting Defendants

The trial court granted judgment in favor of Transclean and against the Defaulting

Defendants at a time before the merits of the suit had been aired, and before the claim

preclusion issues had been fully litigated. The trial court subsequently applied issue

preclusion to limit the award of damages against the Defaulting Defendants, awarding

an amount lower than Transclean believed it was entitled to. That issue is before us on

appeal. We need not decide the measure of damages issue, however, because we

believe that Transclean’s claims against the Defaulting Defendants should be barred by

claim preclusion just as Transclean’s claims against the Participating Defendants were

barred.

Although the Defaulting Defendants did not plead claim preclusion as an

affirmative defense, preclusion issues may be raised by a court sua sponte. This is

precisely what the trial court in this case did when it raised the defense of issue

preclusion on behalf of the Defaulting Defendants in determining the damages award

against them. Although the general rule is that claim preclusion and issue preclusion

must be pleaded, an exception exists where all relevant data and legal records are

before the court and the demands of “comity, continuity in the law, and essential justice”

mandate invocation of preclusion principles. Damages Opinion, 2005 WL 2406036, at

*2 (citing Warnock v. Pecos County, Tex., 116 F.3d 776, 778 (5th Cir. 1997)). The trial

court found that these interests weighed in favor of applying issue preclusion to the

Defaulting Defendants.4

4
We note that Transclean’s appeal on issue preclusion addresses only the
merits; it does not challenge the trial court’s decision to invoke issue preclusion in the
first place.

06-1077 16
 We conclude that claim preclusion should be invoked in favor of the Defaulting

Defendants for essentially the same reasons the trial court invoked issue preclusion on

their behalf. See Columbia Steel Fabricators, Inc. v. Ahlstrom Recovery, 44 F.3d 800,

802-03 (9th Cir. 1995) (applying claim preclusion sua sponte to non-appearing

defendant). Transclean admitted that all the defendants in this case were in privity with

Bridgewood because they purchased T-Tech machines from Bridgewood. Transclean

never distinguished between the Participating Defendants and the Defaulting

Defendants when it conceded privity; its later statements about privity focused on the

Participating Defendants only because the trial court had already entered default

judgment against the Defaulting Defendants. Transclean had a full and fair opportunity

to present its arguments on privity and claim preclusion, and those arguments would not

be any different with respect to the Defaulting Defendants than they are with respect to

the Participating Defendants. It would be anomalous to preclude Transclean’s claims

against one group of defendants while allowing recovery from a second group of

defendants when, as a result of Transclean’s admission regarding privity, the elements

of claim preclusion are satisfied for both groups. Under these circumstances, we

believe that as a matter of law and fairness claim preclusion should bar Transclean’s

infringement claims against the Defaulting Defendants as well as those against the

Participating Defendants.5 Accordingly, the judgment against the Defaulting Defendants

is reversed.

5
When applying claim preclusion to the Participating Defendants, the trial
court was concerned with whether Transclean was or should have been aware of each
defendant’s use of the T-Tech machine during the pendency of the Bridgewood
litigation. We think it unnecessary to make that determination for each of the Defaulting
Defendants because the inquiry is subsumed in the privity issue.

06-1077 17
 COSTS

Each party shall bear its own costs.

AFFIRMED-IN-PART and REVERSED-IN-PART

06-1077 18