SAS Expands Scope of IPR Petitioner Estoppel, but Leaves Some Uncertainty

The inter partes review (IPR) procedure includes an estoppel provision that prohibits an IPR petitioner from later raising before the Patent Office, a district court, or ITC any anticipation or obviousness defense based on instituted grounds that the petitioner “raised or reasonably could have raised” during the IPR. Accordingly, if a petitioner lost a patentability challenge using grounds instituted by the Patent Trial and Appeal Board (PTAB), the petitioner would then be precluded from using those grounds to challenge the same patent claims in those forums, although non-instituted grounds would still be available.

Earlier this year, however, the Supreme Court held in SAS Institute that the PTAB is statutorily prohibited from instituting an IPR on a subset of petitioned claims. So, if the PTAB institutes an IPR, it “cannot curate the claims at issue but must decide them all.” The rationale of the SAS decision—that the petition controls the scope of the proceeding—was read by the PTAB as requiring institution on all challenges raised in the petition, or nothing at all. And recently in BioDelivery Sciences, the Federal Circuit endorsed the PTAB’s interpretation of SAS by pronouncing that “SAS requires institution on all challenged claims and all challenged grounds.”

Thus, under SAS and BioDelivery, IPRs can no longer have non-instituted grounds; the PTAB has to institute on all claims and all grounds or deny institution altogether. So, if a PTAB trial is instituted, but one or more claims are later found not unpatentable, then the only prior-art invalidity defenses available in district court are based on: 1) prior art devices or systems and 2) prior art that reasonably could not have been raised in the IPR petition.

Indeed, the safest course for petitioner-defendant in district court is to rely on invalidity defenses based on prior use/sale of physical products or systems because IPR petitions can only be based on patents or printed publications. In Intellectual Ventures II v. Kemper (E. D. Tex), the district court explained that “defendants have considerable latitude in using prior art systems (for example, software) embodying the same patents or printed publications placed before the PTO in IPR proceedings.” Similarly, in Star Envirotech (C. D. Cal.), the district court suggested that physical machines/systems could be used alone, or in combination with prior art patents or printed publications asserted in an IPR, to create new grounds of invalidity that could not have been statutorily raised in the IPR. But petitioners need to be careful, as at least one district court—Biscotti v. Microsoft (E. D. Tex.)—has held that a prior art system that “relies on or is based on” patents and publications could also be estopped.

While the fate of unpatentability grounds “raised” in an IPR has been sealed by SAS, the Federal Circuit is yet to provide guidance on the meaning and scope of the “reasonably could have raised” phrase in the estoppel provision. Meanwhile, district courts are interpreting it in two divergent ways. Many district courts are following a more restrictive interpretation of “reasonably could have raised” and applying estoppel to grounds that petitioner reasonably could have included in its petition but did not do so. For example, in Biscotti v. Microsoft, petitioner was estopped from presenting patents and printed publications at trial that a “skilled searcher conducting a diligent search reasonably could have been expected to discover.” And as stated above, this could include prior art systems relying on patents and publications that could have been discovered.

In contrast, some district courts are interpreting this language narrowly and only estopping grounds that were actually raised in the IPR petition and instituted. For example, in Intellectual Ventures I v. Toshiba (D. Del), the defendant was not estopped from presenting new invalidity grounds in district court based on publicly available prior art that the defendant could have raised in its IPR petition but did not do so.

Critics of the latter interpretation of “reasonably could have raised” have argued, as the district court in Douglas Dynamic (W. D. Wis.) did, that exempting non-petitioned grounds from estoppel would “undermine[] the purported efficiency of IPR” because it would allow a defendant “to hold a second-string invalidity case in reserve in case the IPR does not go defendant’s way.” Even so, until the Federal Circuit resolves this inconsistency in district courts’ interpretation of “reasonably could have raised,” many litigants will continue to advocate that non-petitioned IPR grounds are fair game in district court regardless of whether those grounds reasonable could have raised in the IPR petition or not.