Nearly four years after the AIA became effective, the estoppel provisions of 35 U.S.C. § 325 are only now being explored by the Courts in any detail. Thus far, they may be less onerous than originally speculated (or feared), but still uncertain in several respects. The statute estops “any ground that the petitioner raised or could have raised.” Decisions appear to have taken the “could have raised” out of the statute. The Federal Circuit has held that grounds that were raised but not instituted in an IPR are not subject to estoppel, but has not ruled on whether grounds that were not presented in the IPR petition have no estoppel effect or whether references used in a combination for a ground instituted are not estopped for use in a different combination. Two district courts have held that references known, but not included in an IPR petition, are not estopped; the correctness of this interpretation of the Federal Circuit’s decisions is being challenged in a recent petition for a writ of mandamus. Particularly if the scope of estoppel remains narrow, these decisions may reduce the availability of district court stays, since far fewer validity issues are less likely to be resolved in an IPR.
Estoppel can apply to prevent the reuse of prior art references in a second IPR petition or in litigation over the same patent. In relevant part, 35 U.S.C. § 325 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), or the real party in interest or privy of the petitioner, 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), or the real party in interest or privy of the petitioner, may not assert either in 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.
When the AIA was enacted, many practitioners feared that these provisions would mean that once any IPR petition was filed, the invalidity of a patent based on any known (or reasonably knowable) patent or printed publication would be tested solely before the PTAB. That is, except for prior art that could not form the basis of an IPR petition, such as products sold more than one year prior to the patent’s effective filing date, prior art had to be used or lost. Patent challengers were wary of the effect of filing a petition on their remaining potential invalidity challenges created by the tight limits on the length of an IPR petition, the PTAB’s unwillingness to re-examine a patent based on a lengthy list of references with little explanation, and the Board’s practice of instituting trial on some but not all of the prior art cited.
Those concerns have been eased, at least in part, by recent Federal Circuit decisions and by subsequent District Court decisions.
In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016) (Moore, J.), the Federal Circuit vacated the Board’s decision that Shaw, the petitioner, had not shown that the claims art issue were obvious on one of the grounds raised in the petition, and remanded the case to the Board to reevaluate one of its findings of fact. In addition, the Federal Circuit denied Shaw’s petition for a writ of mandamus to instruct the Board to reevaluate its decision not to institute on another proposed ground of invalidity – anticipation by the Payne reference – after deeming it redundant. The Federal Circuit agreed with the Patent Office and construed § 315(e)’s phrase “during that inter partes review” to mean after trial had been instituted. Because anticipation based on Payne was not an instituted ground, it could not have been raised during the IPR, and no estoppel under § 315(e) could be raised. As a result, Shaw had other adequate means to attain the desired relief, by litigating the anticipation issue in the District Court; Shaw’s mandamus petition was therefore denied.
Less than two weeks after the Shaw decision, the Federal Circuit decided HP Inc. v. MPHJ Technology Inv., LLC, 817 F.3d 1339 (Fed. Cir. 2016) (Lourie, J.). HP had appealed both the Board’s determination that one of the claims in HP’s petition was not anticipated and its determination not to institute on other proposed grounds of invalidity as redundant. The court affirmed the Board’s no-anticipation decision. In dicta, the Federal Circuit addressed HP’s concerns that it would be estopped from contesting the validity of the surviving claim if it were not allowed to appeal the redundancy determination, reiterating that since the redundant grounds never became a part of the IPR, HP would not be estopped from asserting those grounds in the District Court.
After the Federal Circuit’s decisions in Shaw and HP, many (but not all) of the District Courts have relied on these decisions in limiting the estoppel effect of redundant or otherwise non-instituted grounds of alleged invalidity.
In Illumina Inc. v Qiagen NV, ___ F.Supp.3d ___, 2016 WL 4719269, *6-7 (N.D. Cal. September 9, 2016), Illumina moved for a preliminary injunction. The court rejected Illumina’s arguments that grounds raised but not instituted as redundant in a prior IPR estopped Qiagen from arguing that certain prior art references negated Illumina’s likelihood of success on the merits. Nevertheless, this art was not sufficient to avoid the entry of an injunction.
One of the patents (the ‘819 patent) asserted in Intellectual Ventures I LLC v. Toshiba Corporation, ___ F.Supp.3d ___, 2016 WL 7341713, *12-13 (D. Del. December 19, 2016), had been the subject of an IPR proceeding which ended in a final written decision that the asserted claims were invalid. IV’s appeal to the Federal Circuit was pending; as a result, invalidity remained a live issue before the District Court. The court held that Toshiba was estopped to raise at trial the art that was the basis for the IPR decision, but was not estopped to raised additional references that it could have included in the IPR petition, but did not. The court was not entirely happy with this result:
Although extending the above logic [of Shaw] to prior art references that were never presented to the PTAB at all (despite their public nature) confounds the very purpose of this parallel administrative proceeding, the court cannot divine a reasoned way around the Federal Circuit’s interpretation in Shaw.
On reconsideration, the court expanded on the issues. Intellectual Ventures I LLC v Toshiba Corporation, 2017 WL 107980, *1-2 (D. Del. January 11, 2017). The court recognized both the potential unfairness of requiring a defendant to present all possible grounds for invalidity in a petition of restricted length or risk losing them entirely and the possible gamesmanship of reserving invalidity defenses for trial by not addressing them in a petition. Ultimately, the court declined to make a policy choice between these alternatives and left its rulings unchanged.
Shaw and HP were also applied in Verinata Health Inc v Ariosa Diagnostics Inc., 2017 WL 235048 (N.D. Cal. January 19, 2017). The court denied (in part) the patentee’s motion to strike defendants’ invalidity contentions for the ‘430 and ‘794 patents based on both IPR estoppel and judicial estoppel. For the ‘430 patent, Ariosa (acquired by Roche after the litigation began) conceded that estoppel barred its contentions based on the ground actually decided in the IPR. Ariosa was not estopped as to non-instituted grounds, but was estopped to argue invalidity on a combination of (only) two of the three references that formed one of the instituted grounds. The court noted that Ariosa could still assert grounds based on any of the three pieces of prior art on which IPR was instituted in combination with art that was not presented in the IPR. (Id. at *4, n. 4.) Ariosa argued that it should not be estopped as to any of the references raised in the IPR of the ‘730 patent, because there had been no final written decision regarding the anticipation by the Fan reference. The PTAB had found that Ariosa had not proven that Fan was prior art, and thus did not address Fan on the merits. The court held Ariosa estopped to raise Fan; the correctness of the Board’s decision was a matter for the Federal Circuit to decide in the appeal of the IPR. But, as with the ‘430 patent, Ariosa was not estopped as to the grounds raised in its IPR petition but not instituted.
Verinata’s judicial estoppel arguments were based on Ariosa’s contentions, in support of its motions to stay the district court proceedings, that the litigation would be simplified by either invalidation or estoppel (or both). The court refused to judicially estop Ariosa because these contentions were not clearly inconsistent with its desire to maintain its invalidity arguments in the litigation, particularly since the Federal Circuit had clarified the scope of estoppel after Ariosa made its arguments in support of the stay.
On the other hand, the court in Precision Fabrics Group Inc v Tietex International Ltd, 2016 WL 6839394, *9 (M.D. N.C. November 21, 2016), concluded, without citing either Shaw or HP, that IPR estoppel precluded the accused infringer from contesting invalidity in those proceedings, despite the Board’s failure to consider some of the petition’s references during the IPR proceedings.
These developments in IPR estoppel may provide some sense of relief to accused infringers that they may not have to risk burning some of their best prior art defenses without any action by the Board. However, if the Federal Circuit’s narrow view of estoppel is broadly accepted, and especially if the narrow interpretation of the Federal Circuit’s rulings ultimately prevails, likelihood of obtaining stays of District Court litigation pending IPR proceedings will likely decrease or disappear. The number of issues in the litigation that could be simplified or eliminated by the IPR would be reduced, weakening the argument that IPR estoppel would largely eliminate the number of invalidity issues that would remain if the IPR result did not resolve the litigation entirely. The same developments may also provide opportunities to strategically omit certain prior art defenses from an IPR petition (especially those that may fare better before a jury); such omissions may prompt courts to extend estoppel to defenses that were known but omitted from the petition.
On January 27, 2017, Verinata petitioned the Federal Circuit for a writ of mandamus to direct the district court to apply estoppel as to all grounds of invalidity, at least if they were or reasonably could have been included in the IPR petition. The Federal Circuits decision on this petition may add clarity to the scope of § 315(e)(2).