Koss Corporation v. Bose Corporation

In this case, the Federal Circuit precedentially adopted a novel and expansive rule of collateral estoppel (or issue preclusion) that bypasses key requirements this Court has established. In a first case, a district court decided on a Rule12(b)(6) motion that certain patent claims were invalid as pleaded. The court allowed the plaintiff to amend its complaint, and the plaintiff did so. Not long after, the parties filed and the district court approved a with-prejudice dismissal stipulation. A second case involving the same patent claims but a different defendant was on appeal to the Federal Circuit when the first case was dismissed. The Federal Circuit held that, while the invalidity holding in the first case was, standing alone, without prejudice, it “merged” into the stipulated with-prejudice dismissal so that it could be afforded nonmutual collateralestoppel effect. The Court of Appeals concluded that the patent claims were accordingly invalid and the appeal before it was moot. The question presented is as follows: When a district court grants a Rule-12(b)(6) motion to dismiss but does so without prejudice and with leave to amend, may that non-merits determination be given collateral-estoppel effect on the theory that it merged into a later with-prejudice dismissal stipulation?