September/October 2013
IP Litigator
Authored by Sarah E. Craven, Ph.D. and Michael J. Flibbert
As an alternative to civil litigation, the Leahy-Smith America Invents Act (AIA) creates three new trial-like procedures for challenging U.S. patents at the U.S. Patent and Trademark Office (USPTO): (1) inter partes review (IPR), (2) post-grant review (PGR), and (3) a transitional PGR program for covered business method patents (CBM). To adjudicate these contested proceedings, the AIA establishes a new administrative body, the Patent Trial and Appeal Board (PTAB), composed of panels of three technically trained administrative law judges. The PTAB is already proving to be an attractive forum for patent challengers less than a year after its implementation.
Yet, rather than an absolute alternative to civil litigation, the AIA's new proceedings increase the likelihood of duplicative concurrent inter partes administrative and judicial adjudication of a patent's validity. The AIA addresses this likelihood by imposing limits on patent challengers initiating simultaneous civil litigation and contested USPTO review. For dueling patentee-initiated litigation and accused infringer-initiated USPTO review, the AIA places timing limits on when an accused infringer can petition for IPR and PGR. For CBM proceedings, which alone require ongoing litigation or the threat of litigation, Congress instead codified a four-factor test to compel a district court to stay a civil suit in favor of administrative review. Outside these statutory restraints, however, the AIA relies on the inherent power of district courts to decide whether to stay litigation or permit concurrent judicial and USPTO review.
Since implementation, several district courts have stayed infringement actions in favor of IPR and CBM proceedings. These decisions provide a glimpse into how courts likely will decide contested stay motions pending post-grant proceedings under the AIA. In addition to factors courts considered pre-AIA, these early decisions highlight the importance of:
1. The heightened standard for granting review, which some courts have relied on to grant a stay even before the USPTO acts on a petition;
2. The faster timeline for review, which courts have weighed both in favor of and against granting a stay, although without considering the delay for appellate review;
3. The proceedings' estoppel provisions, which courts largely have credited as favoring a stay, though often while overlooking limitations on the estoppel's scope; and
4. The CBM's statutory four-factor stay analysis and its legislative history, which courts have, when relevant, relied on as additional support for granting a stay.
These early decisions reveal that the AIA's statutory timing and estoppel provisions can provide potential support to parties on both sides of a contested stay motion. Overall, for the moment at least, once the USPTO has granted a petition, courts have granted contested motions to stay in a high percentage of cases.
The AIA's new post-grant proceedings provide certain advantages for patent challengers over litigating patent validity in federal district court. First, petitioners face a lower burden of proof. At the PTAB, petitioners must establish unpatentability by a preponderance of the evidence,1 a significantly lower standard than establishing invalidity by clear and convincing evidence in federal court.2 Also, unlike a district court, the USPTO gives claims their broadest reasonable interpretation in light of the specification,3 which frequently means a broader claim scope encompassing more potentially invalidating prior art.
Yet, patentees may derive a strategic advantage at the PTAB. Patentees get one opportunity to amend their patent claims in light of the petitioners' cited prior art and arguments.4 While possibly narrowing claim scope, amendments may nevertheless save the claims from a PTAB adjudication of unpatentability as well as a later district court adjudication of invalidity.
For both sides, these proceedings provide cost and time advantages. The AIA authorizes only limited discovery,5 and it requires that the USPTO complete its review within one year, extendible by not more than six months for good cause.6 District court proceedings, in contrast, can require broad discovery and extend for several years if the dispute is not amenable to early summary judgment or settlement.
Yet, for the patent challenger, the advantages of an administrative challenge must be weighed against the seemingly strict estoppel triggered by a final written PTAB decision. A petitioner, all real parties in interest, and any privy of the petitioner will be estopped from presenting before the USPTO, a district court, or the International Trade Commission any ground that "the petitioner raised or reasonably could have raised " during these post-grant proceedings.7 The estoppel provision for CBM proceedings is more lenient, estopping a petitioner or real party in interest from asserting in a civil action or before the ITC any ground actually raised during the proceeding.8
IPR, PGR, and CBM proceedings differ in other significant ways, applying to different patents at different times and permitting different patentability challenges. IPR applies to all patents nine months after issuance.9 But, similar to pre-AIA inter partes reexamination and to ex parte reexaminations, IPR petitions are limited to challenges under Sections 102 and 103 on the basis of patents and printed publications.10 The AIA did, however, heighten the standard for instituting review from the pre-AIA substantial new question of patentability to "a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition."11 According to USPTO statistics, as of the end of April 2013, parties have filed 216 petitions for IPR. Of these, the USPTO has initiated 49 IPR trials and rejected only six.12
PGR, in contrast, applies only to patents issued under the AIA's new first-inventor-to-file (FITF) system and only during the first nine months after issuance.13 Yet, unlike other post-grant proceedings both pre- and post-AIA, PGR permits a broad range of patent challenges. Petitioners may raise any ground of unpatentability, including Sections 101 and 112.14 The USPTO will initiate a PGR if it determines "that it is more likely than not that at least one of the claims challenged in the petition is unpatentable."15 Although PGR went into effect September 16, 2012, the FITF system went into effect March 16, 2013, and the USPTO has not yet reported receiving a PGR petition.
The transitional CBM program adopts the standards and procedures of PGR proceedings, but with some key differences. First, CBM is not limited to patents filed under the FITF system, and it is not limited to the patent's first nine months.16 It, however, is limited to covered business method patents that claim "a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service," though not "patents for technological inventions."17 Also, only parties that have been charged with or sued for infringement may initiate a CBM.18 Effective September 16, 2012, the CBM program sunsets after eight years.19 To date, 21 CBM petitions have been filed, with the USPTO initiating 12 trials and rejecting three.20
The AIA's new post-grant proceedings open the door for increased simultaneous inter partes adjudication of a patent's validity at the USPTO and in district court. The AIA provides certain statutory limits on concurrent proceedings, but outside these limits, the AIA leaves it to the district courts to police the occurrence of dueling patent challenges at the USPTO and in their courtrooms.
Pre-AIA, district courts exercised their inherent power to stay ongoing litigation in favor of inter partes reexaminations.21 Some courts even concluded that there is a liberal policy in favor of granting such motions.22 In deciding whether to stay a pending litigation, district courts typically considered three factors: (1) the stage of the litigation, including whether discovery was complete or a trial date set; (2) whether a stay would simplify the issues and streamline trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party.23 In general, courts concluded that litigation in the early stages weighed in favor of a stay, as the parties and the court had not yet invested significant efforts in the litigation. In contrast, courts weighed against a stay direct market competition between the patentee and the defendant as well as significant delays in USPTO review or in the defendant seeking USPTO review.
Going forward, the AIA becomes the first gatekeeper to potentially wasteful dual challenges to a patent's validity by forbidding certain post-grant challenges and requiring automatic stays of district court litigation in certain circumstances.
First, the AIA severely restricts a patent challenger from initiating concurrent administrative and judicial adjudication of patent validity. Pre-AIA, a party could petition for inter partes reexamination up until a final decision that the party had not proven invalidity of any patent claim in suit in a civil infringement action.24 The AIA, in contrast, prohibits the USPTO from instituting an IPR or PGR against a patent if the patent challenger has, before petitioning for USPTO review, filed a civil action challenging the validity of a claim of that patent.25 This does not, however, include a counterclaim of invalidity in a patentee-initiated infringement suit.26 Conversely, the AIA requires that a district court automatically stay litigation initiated by a party that already has initiated an IPR or PGR.27 The stay may, however, be lifted and the litigation proceed if the patent owner assents to the challenge in the second forum, either by moving the court to lift the stay or by filing a civil action or counterclaim accusing the petitioner of infringement.28
In the case of patentee-initiated litigation, the AIA places fewer restrictions on concurrent adjudication. Following a patentee-initiated infringement action, the AIA permits an accused infringer to petition for PGR, if otherwise permitted, or for IPR, if filed within a year of being served with an infringement complaint.29 In all other scenarios in which patentee-initiated litigation overlaps with an IPR or PGR, the AIA largely leaves it to the district court to decide whether to stay pending litigation until the completion of the administrative proceedings.30
For CBM proceedings, the AIA seeks to increase the likelihood that a district court will grant a stay in favor of administrative adjudication. Specifically, the AIA requires that if a party seeks a stay of an infringement action, the court must consider four factors.31 This codifies the three factors already considered by district courts in exercising their inherent discretion and adds a fourth: "[W]hether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court."32 During Congressional debate, Senator Charles Schumer, who with Senator Jon Kyl introduced the transitional CBM program to the AIA, stated that consideration of the four factors "places a very heavy thumb on the scale in favor of [a] stay."33 As Senator Schumer explained, "Since the entire purpose of the transitional program at the PTO is to reduce the burden of litigation, it is nearly impossible to imagine a scenario in which a district court would not issue a stay."34 To ensure consistent application of the CBM's stay provision, the AIA provides that a party may immediately appeal a district court's stay decision to the Federal Circuit, which may review the decision de novo.35
To date, district courts have decided contested motions to stay patentee-initiated litigations based on IPR and CBM proceedings in at least 15 cases. In nine, the court granted a stay and in seven of these, the court granted a stay even before the USPTO had acted on the petition. Further, in at least two cases with multiple defendants, the court stayed the entire action even though not all defendants had petitioned for USPTO review. Only one court has denied a stay following the USPTO's institution of a post-grant proceeding. Though still early, this may suggest an increased willingness of district courts to suspend pending litigation until the completion of the AIA's new post-grant proceedings.
In the first detailed stay order for a post-AIA IPR, the U.S. District Court for the Central District of California granted a stay although the IPR stood at the petition stage.36 Patentee SEL had filed suit in early 2012 against six different companies, alleging infringement of six patents directed to components of active matrix display devices. Between October 19, 2012, and November 30, 2012, defendant CMI had filed two IPR petitions against each of the asserted patents. CMI and four of the five other defendants then filed a motion to stay SEL's infringement action pending the outcome of the administrative proceedings.
The court granted the stay motion under the pre-AIA three-factor standard. The court noted that the AIA replaced inter partes reexamination with IPR but saw "no reason why the three factor assessment would not still be relevant."37 Under this standard, the court concluded that all three factors weighed in favor of granting a stay. First, the court concluded that the case, though not in its infancy, stood at an early stage with more work ahead of the parties and the court than behind, which favored a stay. The court also concluded that a stay would not unduly prejudice SEL for a number of reasons, including that the future delay would be significantly less than the many-year delay under the old reexamination procedure.
Finally, in analyzing the final factor—whether the IPR would simplify the issues—the court relied heavily on the AIA's estoppel provisions. On the one hand, the court weighed as favoring a stay that SEL had asserted only claims of patent infringement and that defendant CMI had challenged all six asserted patents at the USPTO. Weighing against a stay, however, was the fact that the defendants had also raised Section 112 defenses that could not be adjudicated in IPR. Yet, the court concluded that the IPR was guaranteed to finally resolve at least some validity issues because a petitioner is estopped from relying on any grounds that it could have raised in the IPR. And, because all the defendants, not just the petitioner for USPTO review, agreed to be bound by the estoppel provisions, the court gave full weight to the IPR's estoppel effect. Finally, the court relied on the heightened standard for granting IPR compared to pre-AIA reexaminations, concluding it increased the likelihood that the proceedings would simplify the issues in the action. But, the court noted, if the USPTO rejects the petitions, the stay will be relatively short, an apparent justification for granting a stay before the USPTO acted.
A number of later stay opinions at the petition stage have similarly emphasized the greater potential for IPR to simplify the issues because of the heightened standard versus the short duration of the stay should the USPTO decline review. In fact, in Capriola Corp. v. LaRose Industries, LLC, the court granted a stay largely on this ground: "[I]f the PTO declines inter partes review, little time is lost, but if the USPTO grants inter partes review, the promise is greater for an important contribution by the PTO to resolution of the governing issues in the litigation."38 At least one other court has emphasized the heightened standard, though in combination with IPR's estoppel effect and faster timeline compared to the old procedures.39
More recent decisions, however, have denied a stay at the IPR petition stage, concluding a stay is premature.40 Rather than being reassured by a short stay should the USPTO deny review, the court in One Stockduq Holdings, Inc. v. Becton, Dickson & Co. concluded that staying the case at the petition stage could result in an unnecessary delay of six months if the USPTO did not grant review.41 In Automatic Manufacturing Systems, Inc. v. Primera Technology Inc.,42 the court also found unduly prejudicial a six-month "limbo" between the petition and the USPTO's review decision, with the patentee unable to prosecute its claim and the case "languishing" on the court's docket. The court further observed that, because the USPTO may choose to review only some of the grounds of unpatentability asserted for each claim in the petition, the scope of USPTO review is indeterminate until instituted and thus does not shed much light on the potential simplification of the issues.43
Several courts also have concluded that the early stage of the litigation, rather than weighing in favor of a stay, in fact points the other way in light of the expedited schedule for IPR. In Everlight Electronics Co. v. Nichia Corp., the court determined that "because this case is in its infancy and the USPTO decision will issue no later than February 2014, the Court can incorporate the PTO's decision into the Court's judgment in this case."44 Similarly, in One Stockduq, the court observed that because of the early stage of the case, there was little risk of overlap between the litigation and the USPTO's review process.45
To date, Everlight is the only district court decision to deny a stay after the USPTO's grant of an IPR. Yet, in that case both parties asserted patents, and the defendants sought not just a stay of the patent claims against them pending the IPR, but also a severance of their counterclaims. The court denied severance and a stay, concluding that it would provide the defendants a prejudicial tactical advantage to litigate their infringement claims before a jury ignorant of the fact that they faced similar accusations of infringement.
To date, three district courts have decided motions to stay pending the outcome of a CBM. Of these, two have denied as premature motions filed before the USPTO instituted any post-grant proceeding.46
In the third case, the U.S. District Court for the District of Delaware granted a stay under the CBM's statutory stay provisions at the petition stage.47 In June 2012, Market-Alerts had brought suit against multiple defendants, alleging infringement of a patent directed to methods of disseminating real-time stock information. On October 15, 2012, several defendants had filed a petition under the CBM transitional program. The petitioning defendants then moved, together with some of the nonpetitioning defendants, to stay the litigation.
Turning to the AIA's CBM-specific stay provisions, the court first determined that these provisions applied to CBM proceedings at the petition stage. The court then determined that, compared to the pre-AIA stay analysis, the inclusion of the fourth factor—"whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court"—was the only substantial difference in the analysis and that, based on the legislative history, Congress intended this factor to "ease the movant's task of demonstrating the need for a stay."48
Starting with the traditional factors, the court found that all three favored a stay. First, the litigation stood at the earliest possible stage. Also favoring a stay was the lack of any undue prejudice to Market-Alerts, which did not compete with defendants. Regarding delay, the court weighed favorably the timeliness of the defendants' CBM petition and stay motion. In contrast, the court weighed unfavorably, though not as unduly prejudicial, the early stage of the CBM proceedings and the delay for administrative review, with a PTAB decision not likely before April 2014.
In considering simplification of the issues, the court analyzed the likelihood of both the petition being granted and the administrative challenge succeeding. Finding both likely, the court concluded that "there is at least a reasonable chance that the PTAB will ultimately invalidate or cause Market-Alerts to amend some or all of the claims of the [asserted] Patent," simplifying the litigation despite the limited scope of CBM review to Sections 102 or 103 based on printed publication.49
Turning to the statutory fourth factor, the court relied on the legislative history that the purpose of "this provision was to ensure that district courts would grant stays pending CBM review proceedings at a higher rate than they have allowed stays pending ex parte reexaminations."50 Market-Alerts argued that the burden on the parties and the court would not be lightened because not all the defendants had moved to stay their own cases. Acknowledging the power of this argument, the court addressed it by ordering a stay of all the nonmoving defendants' actions. The court did so, not under the statutory authority conferred by the AIA, but as an exercise of its discretion and in the interests of judicial and litigant economy.
While this decision suggests that obtaining stays for CBMs may, as Congress intended, prove easier than for other post-grant proceedings, the Market-Alerts court did not address several estoppel-related issues that would seem to weigh against a stay. First, unlike in Semiconductor Energy, the non-petitioning defendants in Market-Alerts did not agree to be bound by the CBM estoppel provisions. Accordingly, these defendants remain free to reassert during any later litigation the very same arguments raised by petitioners in the CBM proceedings. The court also did not analyze the CBM's estoppel provisions, which are limited to arguments actually raised. This allows a petitioner to raise certain grounds during CBM while preserving others for the litigation should the post-grant challenge fail. As a result, CBM estoppel may provide little simplification of the issues should the USPTO confirm the claims and the litigation resume.
The next court to issue a stay pending CBM viewed the expedited USPTO timeline more favorably for granting a stay but similarly failed to fully consider the limits of the CBM estoppel provisions. In Progressive Casualty Insurance Co. v. Safeco Insurance Co. of Illinois, the court first denied a stay, but then reversed course following the USPTO's institution of CBM, finding three of the four statutory factors favored a stay.51 While undue prejudice pointed moderately against a stay for industry competitors, the court found as favoring a stay the one year to eighteen month "ceiling for the duration of CBM review," making it likely that the PTAB would decide the issues well before the court rendered any decision.52
Under the simplification-of-the-issues prong, the court concluded that "it appears virtually certain that the landscape of the litigation will be significantly different following the PTAB proceedings."53 The court based this on:
The court found this sufficient although other defenses, for example, Section 112 and equitable defenses, would remain, and, more importantly, although the estoppel would not apply to non-petitioning defendant State Farm, which had not agreed to be bound. The court also did not address the limited scope of the estoppel to grounds actually raised, potentially leaving Sections 102 and 103 defenses in the litigation.
Instead, the court embraced the opportunity to let the experts at the USPTO take the first crack, a common but not universal attitude. The court repeatedly expressed a preference to defer to a "panel of three experienced judges with specialized technical training,"55 who would "inform, assist, and expedite any subsequent litigation in this Court."56 Another court expressed less deference. In Universal Electronics, Inc. v. Universal Remote Control, Inc., the court weighed against a stay the court's duty to control its docket to manage cases in the interest of justice rather than letting it be "hijacked" by the status of proceedings elsewhere.57
Finally, the court in Progressive Casualty relied on the CBM's statutory fourth factor and its legislative history as further justification for granting a stay. The court concluded that a stay would relieve: (1) the petitioning parties the burden of litigating in multiple fora; (2) the non-petitioning parties the burden of unnecessary litigation; and (3) the court of having to expend judicial resources on deciding claim construction, infringement, and validity issues before the claims are cancelled, narrowed, or refined through CBM review.
These first stay opinions outline how district courts will likely analyze motions to stay pending IPRs and PGRs, and thus the likelihood a patentee and petitioner will engage in concurrent district court and USPTO proceedings. Overall, the AIA's statutory timing and estoppel provisions, as well as the statutory stay factors for CBM proceedings, appear likely to increase the chances a district court will grant a stay, at least after the USPTO institutes review. As some courts have recognized, these factors can, however, cut the other way giving potential support to both sides of a contested stay motion.
The first courts to decide contested stay motions for IPR proceedings established an early trend of granting stays based solely on a defendant's petition for USPTO review. This trend has reversed more recently, and courts deciding stay motions for both IPRs and CBMs have favored staying the litigation only after the USPTO has granted review.
Of the first five IPR stay decisions post-AIA, courts granted four at the petition stage. The courts viewed as favoring a stay the heightened standard for initiating review as well as the estoppel provisions. The degree to which the heightened standard for granting IPR increased the likelihood that the proceedings would simplify the issues justified to these courts what would be a short stay should the USPTO decline review.
The next five stay decisions pending IPRs saw this trend reverse. Of these five, defendants in four sought and lost stay motions at the petition stage. This tracks the early numbers for stay motions pending CBMs: With three courts deciding such motions, two denied stays until after the USPTO granted review. Overall, these courts viewed a six-month stay before the USPTO acted as unnecessary and unduly prejudicial to the patentee. According to these courts, the USPTO could decline to institute an IPR at all, making the delay entirely wasteful. But even if the USPTO did institute review, the scope of the review, and thus the degree to which the IPR could simplify the issues for the court, remained indeterminate until the USPTO acted.
Success in opposing a stay at the petition stage may, therefore, depend in part on framing the delay as wasteful in light of the uncertain scope of USPTO review. Framing it as short compared to the high likelihood of a broadly granted USPTO review, however, can still win the day.58
Pre-AIA, considering the stage of the litigation largely amounted to assessing where the litigation stood at the time of the motion to stay. The earlier in the litigation, the more likely a court would consider this factor as favoring a stay; the more time the parties and the court had invested in the litigation, including setting a trial date, the more likely this factor would weigh against a stay. This appears generally true again in the IPR and CBM stay decisions to date. Because an accused infringer must petition for IPR before or within a year of receiving a complaint alleging infringement, motions to stay should, on average, come earlier on in litigation than pre-AIA, favoring stays.
Two courts, however, as described above, have denied stays in part by weighing the early stage of the litigation against a stay in light of the expedited statutory timing for IPRs. Thus, when a USPTO decision would issue before the court's schedule for claim construction or summary judgment, for example, a party opposing a stay may persuade a court that concurrent USPTO adjudication will complement, rather than duplicate, the litigation. Yet, neither district court factored in the additional year to year and a half necessary for an appeal of the PTAB's decision to the Federal Circuit. Nor did the district courts consider the possible extra delay and effect on the litigation of a potential reversal by the appellate court.
Furthermore, both courts also weighed other significant factors against a stay, including a motion at the petition stage59 and a counterclaim for infringement of a patent not involved in USPTO review.60 Accordingly, it remains uncertain how much weight such arguments will receive without other factors weighing against a stay.
As pre-AIA, undue prejudice includes an assessment of delay, including delay in petitioning the USPTO for review and the delay for USPTO review. The more delay at either stage, the more likely a court will conclude that the delay is unduly prejudicial and thus weighs against a stay. Delay at both stages has decreased under the AIA's new post-grant proceedings, favoring a party seeking a stay.
First, the AIA limits the delay in petitioning for review. The AIA restricts tactical delay by accused infringers by limiting how long they can wait before filing an IPR (before or within a year of being served with an infringement complaint) or PGR (nine months after patent issuance). Only CBM petitions may entail a significant delay. Pre-AIA, in contrast, an accused infringer could seek inter partes reexamination up until an unfavorable final decision on invalidity in a civil infringement action.61
The AIA also limits delay for USPTO review. Once instituted, an inter partes proceeding must be completed within a year to 18 months. In contrast, pre-AIA reexamination proceedings could grind on for years. According to USPTO historical data, the average pendency of inter partes reexaminations was approximately three years.62
Despite these limits on delay, courts largely have failed to factor in the delay for appellate review of a PTAB decision or any further delay of a potential reversal. Delays in the time needed to reach a final decision could become even greater if the Federal Circuit's caseload increases significantly due to a large number of appeals from PTAB decisions. Such delays may counter the weight courts have so far given the expedited timing for IPR and PGR when deciding whether to grant a stay.
In assessing simplification of the issues, as pre-AIA, courts assess the presence of non-patent claims and counterclaims (e.g., unfair competition), administratively unreviewable defenses (e.g., inequitable conduct, laches), and administratively unchallenged patents, all of which weigh against a stay. Overall, the greater the scope of the USPTO's review compared to that of the pending litigation, the more likely USPTO review will eliminate or simplify the issues, and the more likely the court will weigh this factor as favoring a stay.
Courts have found persuasive the historical high rate of claim cancellation and amendment in inter partes rexamination. This is, however, counterbalanced by the fact that the majority of patents have survived inter partes reexamination with at least some claims.63
The AIA's estoppel provisions also come into play here. Even if USPTO review does not cancel a single challenged claim, it will nevertheless simplify the issues by foreclosing the petitioner from reasserting during any subsequent adjudication any unpatentability grounds that the petitioner raised or reasonably could have been raised during IPR or PGR. USPTO review is thus certain to simplify the issues. The question is, by how much? Post-AIA, courts have relied heavily on the AIA's estoppel provisions. They have, however, overlooked limits on estoppel that in some cases could diminish it favoring a stay.
First, IPR limits patentability challenges to Sections 102 and 103 based on printed publications and patents, leaving Section 102 public use, Section 101 patent eligibility, and Section 112 invalidity defenses, for example, for the court. PGR permits such challenges, yet neither procedure can address equitable defenses, such as inequitable conduct or laches. Overall, however, courts have given less weight to these possible remaining defenses than they have to USPTO adjudication of potentially outcome determinative Sections 102 and 103 grounds.
Second, the estoppel provisions apply only to the petitioner, real parties in interest, or those in privy with the petitioner.64 While the USPTO has provided little guidance on interpreting real parties in interest or privy beyond the ability to exercise control over the post-grant proceeding, the interpretation does not extend to otherwise unrelated codefendants in a patent infringement suit.65 Accordingly, for multi-defendant suits, unless all the non-petitioning defendants agree to be bound by the estoppel provisions, as did the defendants in Semiconductor Energy, the full panoply of invalidity arguments may still play out before a court at a later date.
Also limiting the estoppel provisions is that estoppel applies on a claim-by-claim basis.66 Thus, if a petition does not challenge all of the claims, the patentee cannot stop a duplicative invalidity attack against the unchallenged claims following the lifting of the stay. Only one court has relied on the petition placing all claims, rather than just all patents, into USPTO review.67
The estoppel also applies only to grounds in a postgrant proceeding that "result[] in a final written decision."68 Accordingly, estoppel will not apply if the parties to the post-grant proceeding settle before the Office decides the merits of the proceeding,69 making the settlement rate going forward another important consideration. This also raises the question of whether estoppel will apply to unpatentability grounds for which the USPTO does not grant review. In the context of inter partes reexamination, the Federal Circuit has suggested that when the USPTO does not grant review, there is no "final" decision for estoppel purposes.70 Furthermore, the USPTO has generally declined to apply estoppel to an issue raised in a request for inter partes reexamination for which the USPTO did not grant review. Courts will likely take the same approach post-AIA, though an unsuccessful petitioner may still face practical difficulties in district court. If, for example, the USPTO rejects a petition for failing to meet the statutory standard for instituting IPR or PGR, rather than for administrative reasons,71 patentees may be encouraged to move for summary judgment that the claims are not invalid based on the rejected grounds given the higher burden of proving invalidity in federal court. The Federal Circuit has, however, disapproved such reasoning in other contexts.72
Another question is how courts will interpret the scope of "reasonably could have raised." Will it cover all available patentability grounds regardless of whether a petitioner sought USPTO review under all available grounds, that is, will it cover Sections 102 and 103 based on printed publications and patents for IPR and all statutory grounds for PGR regardless of the grounds raised in the petition? Will it cover all grounds available under the statutory section raised, for example, all anticipation arguments based on printed publications and patents under Section 102 regardless of the arguments actually made in the petition?
The legislative history appears to support a broad estoppel scope. During senate debate on the AIA, Senator Jon Kyl commented that adding the modifier "reasonably” to the IPR estoppel provision ensures that could-have-raised estoppel extends, not to prior art "only a scorched-earth search" would have uncovered, but “to that prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover."73 Furthermore, in commenting on extending estoppel to real parties in interest and the petitioner's privy, the Senator stated that this "will help ensure that if an inter partes review is instituted while litigation is pending, that review will completely substitute for at least the patents-and-printed-publications portion of the civil litigation."74 This suggests that courts will apply the estoppel, at least for IPR, based on all known and reasonably-could-have-known printed publications and patents, even if not the basis for a petition for USPTO review. Courts may even extend the estoppel to prior art uncovered during a later litigation if a diligent search reasonably could have discovered the art before the IPR. For PGR, this interpretation may extend the estoppel to all statutory grounds of unpatentability. Thus, a patent challenger with a strong Section 112 argument, for example, may hesitate to bring a PGR without also including all available Sections 101, 102, and 103 grounds. Such an interpretation, while significantly simplifying a later litigation, also would significantly burden the USPTO, which would have to decide petitions and adjudicate unpatentability on all statutory grounds, even when a more targeted challenge would do.
Unlike IPR and PGR, CBM includes a more limited estoppel for only those grounds actually raised. This permits petitioners to raise certain unpatentability grounds at the USPTO while not foreclosing alternative grounds for a second attack in civil litigation. To date, courts have not considered this limitation on the CBM estoppel provision before granting a stay. Courts have, however, relied on the CBM's statutory fourth stay factor and its legislative history as strongly favoring a stay. Thus, courts appear likely to view the CBM's fourth stay factor as outweighing any limits on the estoppel and as tipping the analysis as a whole towards a stay.
The potential speed and clarity provided by the AIA's new post-grant proceedings has persuaded the majority of courts faced with contested stay motions to stay litigation pending USPTO review. Yet, the promises of speed and clarity face real risks from USPTO backlogs, delays for appellate review, and limits on the AIA's estoppel provisions. Parties thus may find that they spend far more than one year to 18 months in administrative review, only to have a stay lifted for additional years of judicial re-review of the same invalidity claims.
Parties may, therefore, consider asking courts to use their case management authority and skills to coordinate concurrent district court and USPTO proceedings. Allowing discovery to proceed, but postponing any potentially outcome-determinative decisions, such as claim construction, summary judgment, or trial, could align the court and USPTO proceedings. This would allow the case to continue rather than languish on a court's docket, but with a more modest burden on the parties and the court. The scope of the continued discovery could be restricted to grounds that complement rather than duplicate the limited discovery available in IPR and PGR proceedings, and the court could then immediately use any USPTO decision for claim construction or summary judgment decisions. A middle-ground approach may limit the delay for both parties should the USPTO proceedings confirm some or all of the claims. It may reduce the overall burden of a patent challenge by coordinating concurrent proceedings rather than unduly delaying a subsequent litigation.
The popularity of the AIA's new inter partes proceedings and their high grant rates means district courts will increasingly face motions to stay litigation in favor of USPTO adjudication. While the first stay decisions provide a sketch of courts' considerations post-AIA, the contours could shift as reality replaces theory. The promise of fast-paced adjudication may wilt before growing USPTO and Federal Circuit delays. Also, the glow of issue-simplifying estoppel may fade if courts routinely face re-adjudication of either unchallenged claims by petitioning defendants or challenged claims by non-petitioning defendants. Finally, new data from IPR and CBM, and eventually PGR, could result in a greater or lesser percentage of claim cancellation or amendments compared to prior USPTO practice, resetting courts' views on inter partes USPTO review. As always, stay tuned.
Endnotes
1 35 U.S.C. §§ 316(e), 326(e) (2012).
2 Microsoft Corp. v. i4i Ltd. P'ship, 131 S. Ct. 2238 (2011).
3 Manual of Patent Examining Procedure § 2111 (2012).
4 35 U.S.C. §§ 316(d), 326(d) (2012).
5 Id. §§ 316(5), 326(5).
6 Id. §§ 316(11), 326(11).
7 Id. §§ 315(e), 325(e) (emphasis added).
8 AIA § 18(a)(1)(D).
9 35 U.S.C. § 311(c) (2012).
10 Id. § 311(b).
11 Id. § 314(a).
12 USPTO Process Production Report FY 2013, available at http://www.uspto.gov/ip/boards/bpai/stats/process/fy2013_apr_b.jsp.
13 35 U.S.C. § 321(c) (2012).
14 Id. § 321(b).
15 Id. § 324(a).
16 AIA §§ 18(a)(1)(A), 18(a)(2).
17 Id. § 18(d)(1).
18 Id. § 18(a)(1)(B).
19 Id. §§ 18(a)(2), 18(a)(3).
20 USPTO Process Production Report FY 2013, available at http://www.uspto.gov/ip/boards/bpai/stats/process/fy2013_apr_b.jsp.
21 See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426–1427 (Fed. Cir. 1988).
22 ASCII Corp. v. STD Entm't USA, Inc., 844 F. Supp. 1378, 1381 (N.D. Cal. 1994).
23 Telemac Corp. v. Teledigital, Inc., 450 F. Supp. 2d 1107, 1111 (N.D. Cal. 2006).
24 35 U.S.C. § 317(b) (2006); 37 C.F.R. § 1.907(b).
25 35 U.S.C. §§ 315(a)(1), 325(a)(1) (2012).
26 Id. §§ 315(a)(3), 325(a)(3).
27 Id. §§ 315(a)(2), 325(a)(2).
28 Id.
29 Id. § 315(b).
30 For a patentee's infringement action filed within three months after the patent's grant date, however, the court may not stay its consideration of the patentee's motion for a preliminary injunction on the basis of a PGR. Id. § 325(b).
31 AIA § 18(b)(1).
32 Id. § 18(b)(1)(D).
33 157 Cong. Rec. S1053 (daily ed. Mar. 1, 2011) (statement of Sen. Charles Schumer).
34 Id.
35 AIA § 18(b)(2).
36 Semiconductor Energy Lab. Co. v. Chimei Innolux Corp., No. 8:12-cv-00021 (C.D. Cal. Dec. 19, 2012).
37 Id. at 2 n.1.
38 Capriola Corp. v. LaRose Indus., LLC, No. 12-cv-2346, at 4 (M.D. Fl. Mar. 11, 2013).
39 Star Envirotech, Inc. v. Redline Detection LLC, No. 12-cv-01861 (C.D. Cal. Apr. 3, 2013).
40 One Stockduq Holdings, Inc. v. Becton, Dickson & Co., No. 12-cv-03037 (W.D. Tenn. May 6, 2013); Automatic Mfg. Sys., Inc. v. Primera Tech. Inc., No. 12-cv-01727 (M.D. Fla. May 13, 2013).
41 The six months is based on three months after the petition for the patentee to file a preliminary response, 35 U.S.C. § 313; 37 C.F.R. § 42.107(b), and another three months for the USPTO to issue a decision, 35 U.S.C. § 314(b)(1).
42 2013 U.S. Dist. LEXIS 67790 (M.D. Fla. May 13, 2013).
43 See also Universal Elecs., Inc. v. Universal Remote Control, Inc., No. 12-cv-00329 (C.D. Cal. May 2, 2013) (concluding that "the undecided status of the petitions clouds the simplification inquiry").
44 Everlight Electronics Co. v. Nichia Corp., No. 12-cv-11758, at 17 (E.D. Mich. Apr. 30, 2013).
45 One Stockduq, No. 12-cv-03037.
46 Frontline Techs., Inc. v. CRS, Inc., No. 12-cv-02457 (E.D. Pa. Dec. 26, 2012) (order denying a stay, citing the late stage of the litigation, but stating that the court would reconsider the appropriateness of a stay should the USPTO grant the petition); Progressive Cas. Ins. Co. v. Safeco Ins. Co. of Ill., Nos.10-cv-01370; 11-cv-00082; 12-cv-01068; 12-cv-01070 (N.D. Ill. Dec. 18, 2012) (order denying stay with instructions that the defendants may move the court to revisit the stay issue should the USPTO institute review).
47 Market-Alerts Pty. Ltd. v. Bloomberg Fin. L.P., No. 1:12-cv-00780 (D. Del. Feb. 5, 2013).
48 Id. at 7, 8 n.6.
49 Id. at 12.
50 Id. at 16.
51 Progressive Cas. Ins. Co. v. Safeco Ins. Co. of Ill., Nos. 10-cv-01370; 11-cv-00082; 12-cv-01068; 12-cv-01070 (N.D. Ill. Apr. 17, 2013).
52 Id. at 19.
53 Id. at 12.
54 Id. at 9.
55 Id. at 18.
56 Id. at 20.
57 Universal Electronics, Inc. v. Universal Remote Control, Inc., No. 12-cv-00329 (C.D. Cal. May 2, 2013).
58 See Autoalert, Inc. v. Dominion Dealer Solutions, LLC., No. 12-cv-01661 (C.D. Cal. May 22, 2013).
59 One Stockduq, No. 12-cv-03037.
60 Everlight Elecs., No. 12-cv-11758, at 17.
61 35 U.S.C. § 317(b) (2006); 37 C.F.R. § 1.907(b).
62 USPTO Inter Partes Reexamination Historical Statistics.
63 Id.
64 35 U.S.C. §§ 315(e), 325(e) (2012).
65 37 C.F.R. Part 42, Office Patent Trial Practice Guide; Rule (77 Fed. Reg.48759-60 (August 14, 2012)); see also Chi Mei Innolux Corp. v. SEL, IPR2013-00028 (PTAB Mar. 21, 2013) (rejecting SEL's argument that CMI had failed to identify other defendants in the infringement suit as real parties in interest).
66 See 35 U.S.C. §§ 315(e), 325(e) (2012).
67 Progressive Cas., Nos. 10-cv-01370; 11-cv-00082; 12-cv-01068; 12-cv-01070.
68 35 U.S.C. §§ 315(e), 325(e) (2012).
69 Id. §§ 317(a), 327(a).
70 Belkin Int'l, Inc. v. Kappos, 696 F.3d 1379, 1385 (Fed. Cir. 2012).
71 The USPTO can limit the number of IPRs and PGRs during the programs' first four years. 35 U.S.C. §§ 319(c)(2)(B), 329(f)(2)(B) (2012).
72 In re Etter, 756 F.2d 852, 857 n.5 (Fed. Cir. 1985) ("A refusal of reexamination leaves untouched the Section 282 presumption to which the patent is entitled in the courtroom."); see also Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 848 (Fed. Cir. 2008) ("As this court has observed, a requestor's burden to show that a reexamination order should issue from the PTO is unrelated to a defendant's burden to prove invalidity by clear and convincing evidence at trial.").
73 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011) (statement of Sen. Jon Kyl).
74 Id. at S1376.
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