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Recent Decisions Clarify Reach of IPR Petitioner Estoppel

October 24, 2016

McCurdy, Barbara Clarke, Bhattacharyya Ph.D., Arpita


Authored by Arpita Bhattacharyya, Ph.D. and Barbara Clarke McCurdy

When the inter partes review procedure first came into force, many would-be petitioners were wary of its seemingly broad estoppel provision. Petitioners were concerned about the risk of losing a patent validity challenge in an IPR, and being estopped from challenging the same patent claims in district court. But as some recent decisions from the Federal Circuit, a few district courts and the Patent Trial and Appeal Board have shown, it is not all doom and gloom for a petitioner who fails to invalidate some or all challenged claims in an IPR. These recent decisions have provided much-needed clarity on certain aspects of the estoppel provision, and have alleviated some of the concerns of IPR petitioners by limiting the reach of estoppel in successive IPRs and in district court validity challenges.

One such aspect of estoppel that is now well settled is its application under 35 U.S.C §§ 315(e)(1) and (2) to non-instituted claims. Last year, in Westlake Services LLC v. Credit Acceptance Corp., CBM2014-00176 (May 14, 2015) (designated as precedential), the PTAB held that §315(e) (1) (and similarly § 325(e)(1) for covered business method review) operates as an estoppel only for those claims that are addressed in a final written decision of an IPR/covered business method review. Because a final written decision only addresses those claims on which trial has been instituted, estoppel under §315(e)(1) would not apply to non-instituted claims. Thus, the application of estoppel is limited by the PTAB’s practice of addressing only the instituted claims in the final written decision. The propriety of this practice was challenged in Synopsys Inc. v. Mentor Graphics Corporation, 814 F.3d 1309 (Fed. Cir. 2016). The Federal Circuit, however, supported this PTAB practice and held that there is no statutory requirement that the final written decision address every claim raised in a petition. Synopsys, 814 F.3d at 1315-17. Moreover, the Federal Circuit noted that "validity of claims for which the Board did not institute inter partes review can still be litigated in district court." Id. at 1316.

If there was any lingering doubt on the application of §§ 315(e)(1) and (2) to non-instituted claims following the Synopsys decision, the Federal Circuit’s decision in Shaw Industries Group Inc. v. Automated Creel Systems Inc., 817 F.3d 1293 (Fed. Cir. 2016) removed any such uncertainty. There, the Federal Circuit explained that an IPR proceeding begins with the institution, and that "[b]oth parts of § 315(e) create estoppel for arguments 'on any ground that the petitioner raised or reasonably could have raised during that inter partes review.'" Shaw Industries, 817 F.3d at 1300. Because the PTAB did not institute IPR on a purported "redundant" ground, the Federal Circuit found that the IPR petitioner (i.e., Shaw Industries) "did not raise—nor could it have reasonably raised" the non-instituted ground during the IPR. Id. Accordingly, § 315(e) would not estop Shaw Industries from bringing invalidity arguments based on the non-instituted grounds in either the Patent Office or the district courts. Id. Using the rationale applied by the Federal Circuit in Shaw Industries, one might conclude that § 315(e) would not preclude an IPR petitioner from filing subsequent IPRs on non-instituted claims, or challenging the validity of non-instituted claims in a district court, because the non-instituted claims were not reviewed or addressed during the IPR.

As to the timing of petitioner estoppel, the language of both §§ 315(e)(1) and (2) refers only to a "final written decision under section 318(a)." In contrast, 35 U.S.C. § 318(b) states that a certificate confirming any claim, canceling any claim, or incorporating any new or amended claim in an IPR proceeding shall be issued and published after "the time for appeal has expired or any appeal has terminated." There is no such language regarding the exhaustion of appeal in §§ 315(e) (1) and (2), indicating that petitioner estoppel under those sections may be applied when the final written decision is issued. Indeed, the PTAB has been precluding petitioners from participating in subsequent IPR proceedings involving the same patent claims if a petitioner receives an unfavorable final written decision in an earlier trial. For example, in Dell Inc. v. Electronics & Telecommunications Research Institute, IPR2015-00549, paper 10 (PTAB March 26, 2015), the PTAB determined that challenges to certain claims of a patent were precluded under § 315(e)(1) because of a final written decision in a previous IPR by the same petitioner (IPR2014-00635, paper 39 (PTAB Feb. 27, 2015)) where the PTAB had found the same claims not unpatentable based on the same prior references relied on in the subsequent IPR.

In particular, the PTAB explained that:

Under 35 U.S.C. § 315(e)(1), once a Petitioner has obtained a final written decision, that Petitioner may not request or maintain subsequent proceedings on a ground that it 'could have raised' during the prior proceeding.

IPR2015-00549, paper 10, at 4. It should be noted, moreover, that the PTAB applied the estoppel in the second IPR before the time for appeal in the first IPR had expired.

Thus far, there has been no direct guidance from district courts on the issue of when petitioner estoppel attaches. This is likely because many concurrent district court litigations are stayed pending IPR, and the parties either settle following the final written decision in the IPR, or they decide among themselves to continue the stay through the appeal process. As a result, district courts have not yet had the opportunity to consider when estoppel attaches.

As to the metes and bounds of what "reasonably could have been raised" in an IPR, a few recent decisions provide valuable guidance. As discussed above, in Shaw Industries, the Federal Circuit determined that § 315(e) would not estop a petitioner from making invalidity arguments based on prior art grounds that were denied as redundant in a previous IPR. Shaw Industries, 817 F.3d at 1300. According to the court, redundant grounds are neither raised, nor they could have been raised, during an IPR, which begins with the decision to institute. Id.

The PTAB applied the same rationale in Apotex Inc. v. Wyeth LLC to find that a petitioner was not estopped from asserting prior art grounds that had been denied as redundant in an earlier IPR. Apotex Inc. v. Wyeth LLC, IPR2015-00873, Paper 8 (PTAB Sept. 16, 2015). In Apotex, one of the asserted grounds relied on prior art that was used by the same petitioner in an earlier IPR for the same patent (IPR2014-00115). In the earlier IPR, the PTAB had denied that ground as redundant of other instituted grounds. In the institution decision for the second IPR, the PTAB noted that an IPR "does not begin until the Office decides to institute review; prior to that point, [the PTAB] Rules refer to a 'preliminary proceeding' that begins with the filing of a petition and ends with a decision whether to institute trial." IPR2015-00873, Paper 8, at 8 (citing 37 C.F.R. § 42.2.). The PTAB then determined that "grounds raised during the preliminary proceeding, but not made part of the instituted trial, are not raised 'during' an inter partes review and cannot be the basis for estoppel under 35 U.S.C. § 315(e) (1)." Id. at 89. Thus, the PTAB found no estoppel for the ground that was denied institution on the basis of redundancy.

The PTAB’s Apotex decision is relevant for an additional reason. The petitioner in Apotex had asserted another ground in the later IPR that relied on prior art that was cited as a teaching reference by the petitioner in the earlier IPR petition. The PTAB found that the petitioner was estopped under 35 U.S.C. § 315(e)(1) from asserting that ground in the later IPR because it was "aware of" all the prior art when filing the earlier IPR, and it "reasonably could have raised [that ground] during" the earlier IPR. Id. at 8. The PTAB also noted that estoppel under § 315 (e)(1) was triggered by the final written decision in the earlier IPR. Id. at 6.

The common theme between the Federal Circuit’s Shaw Industries decision and the PTAB’s Apotex decision is that grounds that were not addressed during the IPR, i.e., post-institution, cannot create estoppel in a subsequent IPR or in a district court action. Although the Federal Circuit and the PTAB have thus far applied this rationale only to grounds that were denied institution on the basis of redundancy, it remains to be seen if the PTAB, the district courts, or the Federal Circuit will apply the same rationale to limit estoppel as to grounds that were denied institution on the merits. After all, a ground that is denied institution on any basis is not raised, and it could not have been raised, during the IPR. Such an extension of the current case law would be a real boon for petitioners. Indeed, it appears that the current practice would reward petitioners for including several grounds in the petition (provided they fit within the word count limit) and counting on non-institution on some of those grounds, resulting in no estoppel as to the non-instituted grounds.

Another aspect of estoppel that has now received some clarity is what "reasonably" could have been raised in an earlier IPR. In Clearlamp LLC v. LKQ Corporation, 1-12-cv-02533 (N.D.Ill. March 18, 2016), the defendant/IPR petitioner was not estopped under 35 U.S.C. § 315(e)(2) from bringing invalidity arguments in the district court using prior art that was not reasonably available during the IPR, even if it is cumulative of other prior art that was available during the IPR. The court concluded that "[t]he relevant inquiry … is not whether the ground is redundant of a ground that was asserted but, rather, whether the ground reasonably could have been raised." Clearlamp, slip. op. at 16-17. The court further explained that "[m]erely being redundant to a ground that could have been asserted during inter partes review does not estop the alleged infringer [i.e., IPR petitioner] from relying upon a ground based upon prior art that was not reasonably available during inter partes review." Id. On the question of what is "reasonably available," the court clarified that a prior art reference "can be used in civil litigation only if it could not have been found by a skilled searcher performing a diligent search," and that the proponent of an estoppel argument, i.e., the plaintiff/patent owner, bore the burden of showing that a skilled searcher would have found the prior art reference in question with a diligent search. Id., slip. op. at 16-17. The court also provided some guidance on how a plaintiff can meet this burden. Id., slip. op. at 18. Because the plaintiff in Clearlamp failed to show that a skilled searcher’s diligent search would have identified the prior art reference at issue, the court found that the defendant was not estopped under 35 U.S.C. § 315(e)(2) from raising invalidity arguments based on that reference.
Id., slip. op. at 18-19.

In contrast, in Praxair Distribution Inc. v. INO Therapeutics LLC., IPR2016-00781, Paper 10 (Aug. 25, 2016), the PTAB put the burden on the petitioner to show that two prior art references were not reasonably available before the filing of an earlier set of IPRs (one of which was not instituted). There, the petitioner asserted that it did not cite the prior art references in question in the earlier IPRs because it did not discover them prior to filing the earlier IPRs despite conducting diligent searches. IPR2016-00781, Paper 10, at 8. As evidence, the petitioner provided an exemplary list of search results from a prior art search vendor. Id. at 9. The PTAB applied the same standard as the district court in Clearlamp—i.e., whether "a skilled searcher conducting a diligent search reasonably could have been expected to discover" the prior art in question. Id. at 7 (citing 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011) (statement of Sen. Kyl)).

The PTAB provided various reasons why the single search report provided by petitioner was insufficient to show that a diligent search by a skilled searcher was conducted, and concluded that the petitioner "reasonably could have raised" the prior art grounds in question in the earlier IPR that was instituted. Therefore, the petitioner was estopped under 35 U.S.C. § 315(e)(1) from requesting or maintaining those grounds in the later IPR. Id.

More guidance from the Federal Circuit, the district courts and the PTAB is required to fully understand the breadth of "reasonably could have raised" estoppel. However, the growing body of precedent described here holds many lessons regarding estoppel for both IPR petitioners and patent owners.

Originally printed in Law360 ( Reprinted with permission. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.