The Federal Circuit recently held that petitioners will not be estopped from raising in subsequent proceedings any noninstituted grounds deemed “redundant” by the Board or otherwise denied without meritorious consideration.

On March 23, the US Court of Appeals for the Federal Circuit found that a petitioner in an inter partes review (IPR) would not be estopped from raising in future proceedings a noninstituted ground that the Patent Trial and Appeal Board (the Board) rejected as “redundant” even though the Board had instituted other grounds for rejecting the same claims. Instead, the Federal Circuit held that the estoppel provisions would not apply because the noninstituted ground never became part of the IPR proceeding. So long as the noninstituted grounds were properly asserted in the petition, the court’s decision affords petitioners a second bite at the apple by allowing district court consideration of any noninstituted grounds deemed “redundant” by the Board or otherwise denied without meritorious consideration.

THE DECISION

In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., petitioner Shaw filed a petition for IPR proposing 15 grounds for rejecting Automated Creel System’s patent, which relates to “creels” for supplying yarn and other stranded materials.[1] Although the Board instituted IPR on all but one of the challenged claims, it refused to institute IPR on all 15 grounds argued by Shaw. Rather, the Board explained that one of these grounds—alleging that the “interposing claims”[2] were anticipated by a prior art patent issued to Payne (the Payne-based ground)—was “denied as redundant in light of our determination that there is a reasonable likelihood that the challenged claims are unpatentable based on the grounds of unpatentability on which we institute an inter partes review.”[3] In so holding, the Board made no substantive determinations of the Payne-based ground other than finding that the ground was “redundant” of the other two grounds of unpatentability for the interposing claims.

After the Board issued a final written decision concluding that only the noninterposing claims were unpatentable based on the instituted grounds,[4] Shaw appealed the Board’s decision not to institute the Payne-Based ground. In relevant part, Shaw petitioned for a writ of mandamus instructing the US Patent and Trademark Office (PTO) to reevaluate its redundancy decision and to institute IPR based on the Payne-based ground. The PTO also submitted a brief and presented oral argument on this issue as an intervener.[5]

On appeal, the Federal Circuit found that “Shaw’s argument is predicated on its concern that the statutory estoppel provisions would prevent it from raising the Payne-based ground in future proceedings.”[6] Section 315(e) of Title 35 provides

  1. Proceedings before the Office.—The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a) . . . may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.
  2. Civil actions and other proceedings.—The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a) . . . may not assert in either a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.[7]

The PTO, however, argued that Shaw’s interpretation of the estoppel provision was incorrect because the denied ground never became part of the IPR proceeding. According to the PTO, section 315(e) would not estop Shaw from bringing its Payne-based arguments in subsequent proceedings because Shaw did not raise those arguments “during” the IPR proceeding. Although Shaw raised its Payne-based ground in its petition for IPR, the Board did not institute IPR on that ground. And, because an IPR does not begin until it is instituted,[8] Shaw’s Payne-based argument never became part of the proceeding. Adopting the PTO’s reasoning, the Federal Circuit found that the estoppel provisions would not apply under these circumstances because “Shaw did not raise—nor could it have reasonably raised—the Payne-based ground during the IPR.”[9] So long as the petitioner properly raised the noninstituted ground in its initial petition, it will not be estopped from asserting that ground in future proceedings.

FUTURE IMPLICATIONS

The Federal Circuit’s decision in Shaw emphasizes the difficulty in striking the right balance between preserving the efficiency of IPR proceedings and protecting a petitioner’s right to have a reasonable number of grounds considered by the PTO. As the Shaw court recognized, “[w]e can see the benefit in the PTO having the ability to institute IPR on only some of the claims and on only some of the grounds, particularly given the Board’s statutory obligation to complete proceedings in a timely and efficient manner.”[10] But the Board also owes petitioners, like Shaw, a duty to consider properly pleaded grounds, especially where the estoppel rules would preclude meritorious consideration of any noninstituted grounds. The Shaw court relaxed the tension between these two competing interests by adopting a transitive reading of section 315(e)—one that removes the estoppel effect from any grounds raised in the petition but ultimately denied by the Board without making any substantive determinations. To hold otherwise would have empowered the PTO to forever bar properly asserted grounds—disclosure of which is required by statute—from meritorious consideration simply by deeming them redundant.

Ultimately, the Shaw decision underscores the importance of including all potential grounds of rejection in the petition. Because petitioners will be estopped from asserting in a subsequent proceeding any grounds omitted from their petition, petitioners should—without compromising their strongest arguments for unpatentability—raise all potential grounds of rejection in their initial petition. Where the Board, without making a substantive determination, denies institution on any ground properly asserted in the petition, petitioners will be free to raise those noninstituted grounds in future proceedings.