One of the early-recognized pitfalls of inter partes review (IPR) proceedings was the statutory estoppel of 35 U.S.C. § 315(e)(2) barring petitioners from challenging the validity of a patent in court “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” In January, Judge Casper of the District of Massachusetts joined the District of Delaware in holding that this estoppel does not apply to grounds that a petitioner failed to raise in its petition.1 This decision adds to a growing district court split over the scope of IPR estoppel before district courts. 35 U.S.C. § 315(e)(2) states:

“The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision . . . may not assert [] in a civil action . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” (emphasis added).

The Federal Circuit indicated that IPR estoppel should be applied narrowly in Shaw Industries v. Automated Creel Systems and HP v. MPHJ Technology Investments,2 but district courts interpreting these cases are split on the scope of such estoppel, making it difficult to predict how a given court will apply IPR estoppel. This article explores the different applications of the Federal Circuit’s interpretation of § 315(e) and considers the implications of the Supreme Court’s recent decision in SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018) on this issue.

Terminology

This article refers to several district court decisions that apply either a narrow or a broad application of estoppel under 35 U.S.C. § 315(e). For clarity, “narrow estoppel” is used to refer to the view that estoppel applies only to grounds that were both raised in the IPR petition and instituted in the IPR proceeding. In contrast, “broad estoppel” is used to refer to the countervailing opinion that estoppel also applies to grounds that could have been raised in petition, but were not raised. Thus, the “broad estoppel” approach bars a greater universe of prior art references from use in subsequent district court proceedings under § 315(e)(2) than does the “narrow estoppel” approach. Under either approach, grounds raised but not instituted are not barred by estoppel.

Background – The Federal Circuit Indicates IPR Estoppel Might Be Narrow

The Federal Circuit strictly interpreted § 315(e) in Shaw Indus. Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293, 1299-1300 (Fed. Cir. 2016), arguably holding that IPR estoppel under this section is narrow. However, it is unclear exactly how narrow the Federal Circuit intended IPR estoppel to be – hence the different application at the district courts, as detailed below. In Shaw, the PTAB had instituted IPR on some, but not all, grounds and prior art references raised in the IPR petition.3 The Federal Circuit indicated that in such cases, estoppel does not bar challenges based on prior art raised in non-instituted grounds.4 The Court reasoned that an IPR does not begin until instituted, and therefore any grounds that were not instituted were neither raised, nor could have reasonably been raised, “during” the IPR.5

The Federal Circuit applied this same reasoning in HP v. MPHJ Technology Investments, holding that “the non-instituted grounds do not become a part of the IPR. Accordingly, the non-instituted grounds were not raised and, as review was denied, could not be raised in the IPR. Therefore, the estoppel provisions of § 315(e)(1) do not apply.”6 That is, the Federal Circuit took a literal interpretation of the statute, which refers to grounds that the petitioner “raised or reasonably could have raised during that inter partes review” (as opposed to those that were raised or could have been raised in a petition for inter partes review).

In both Shaw and HP, the Federal Circuit analyzed the language of 35 U.S.C. § 315(e)(1), which relates to IPR estoppel before the PTAB, e.g., estoppel in subsequent IPR proceedings.7 35 U.S.C. § 315(e)(2), on the other hand, relates to IPR estoppel before district courts, e.g., in co-pending or subsequent infringement actions. The scope of IPR estoppel between the two, however, should be the same under the present statute. Both provisions use the same language, applying estoppel with respect to “any ground that the petitioner raised or reasonably could have raised during that inter partes review.”8

Decisions Applying Narrow Estoppel

A number of courts have strictly applied Shaw’s narrow interpretation of 35 U.S.C. § 315(e), including the District of Delaware, the Northern District of California, and the District of Massachusetts.

Interpreting Shaw, the District of Delaware concluded in Intellectual Ventures I v. Toshiba, that Section 315(e)(2) does not apply to grounds the petitioner failed to raise in its petition for inter partes review.9 Accordingly, the court found that defendant was not estopped from asserting an obvious combination of prior art in a subsequent district court litigation where the combination was never raised in the IPR, even though it reasonably could have been raised.10

In Verinata Health v. Ariosa, the Northern District of California held that the defendant was not estopped from alleging invalidity grounds it raised in the previous IPR but for which the PTAB declined to institute.11 In that case, however, the court determined that estoppel does apply to bar a subset of an instituted obvious combination.12 For example, if a previous IPR petition included an obviousness theory based on references A, B, and C, and the PTAB issued a Final Written Decision on that ground, the former petitioner cannot later allege invalidity in a district court based on the combination of references A and B.

In Advanced Micro v. LG, the same court held that estoppel does not extend to new obviousness combinations that include a reference previously raised in an IPR.13 Again, by way of example, the court held that if a petitioner alleged obviousness based on references X and Y, the petitioner is not barred from presenting an obviousness theory based on references X and Z in a subsequent district court proceeding.14 The court determined that “IPR estoppel does not effect a bar to [previous petitioner’s] assertion of all combinations including [a reference previously considered by the PTAB], rather, [previous petitioner] may not assert invalidity on grounds raised, or that reasonable could have been raised during the IPR.”15

Finally, just this past January, the District of Massachusetts held that cases applying a broad estoppel approach were decided inconsistently with Shaw: “Shaw held that the phrase ‘during inter partes review’ applies only to the period of time after the PTAB has instituted review, and . . . that holding was not limited to Section 315(e)(1) nor was it mere dicta.”16 Therefore, the court held that the defendant was not estopped from arguing invalidity on a ground that it did not raise in its IPR petition.17 The court noted that “[t]here is much appeal in a broader reading of the estoppel provision . . . [but that] reading of the estoppel provision is foreclosed by Shaw.”18 Thus, the court found that the policy arguments cautioning against a second bite at the apple could not overcome the Federal Circuit’s interpretation of Section 315(e).

Decisions Applying Broad Estoppel

But several other courts, including the Eastern District of Texas, the Eastern District of Virginia, and the Western District of Wisconsin have found that IPR estoppel extends beyond grounds that were included in an IPR petition. These courts determined that if a ground was not raised in the petition, estoppel applied even though the ground could not have been raised after institution of the IPR. These decisions expressed concern that a narrower estoppel provision would encourage gamesmanship, such that a petitioner might reserve a “second-string” invalidity defense in case the IPR challenge was unsuccessful.

The Eastern District of Virginia has warned that “the broad reading [of] Shaw renders the IPR estoppel provisions essentially meaningless because parties may pursue two rounds of invalidity arguments as long as they carefully craft their IPR petition.”19 Similarly, the Western District of Wisconsin applied a broad view of estoppel because “Shaw’s narrow view of § 315(e) estoppel undermines the purported efficiencies of IPR.”20 To this end, the court determined that estoppel under § 315(e)(2) applies to “grounds not asserted in the IPR petition, so long as they are based on prior art that could have been found by a skilled searcher's diligent search.”21 Citing the Western District of Wisconsin, the Eastern District of Texas explained that “the Court reads Shaw and HP to exempt an IPR petitioner from § 315(e)'s estoppel provision only if the PTAB precludes the petitioner from raising a ground during the IPR proceeding for purely procedural reasons, such as redundancy.”22

In Network-1 Technologies v. Alcatel-Lucent USA, the Eastern District of Texas held that Shaw provides only a very narrow exception to IPR estoppel for non-instituted grounds, and thus estoppel still applies generally to other grounds that could have been raised.23 First, the court found that IPR estoppel applies to non-petitioned grounds, i.e., grounds that a party failed to raise in an IPR, but reasonably could have raised.24 Going even further, the court determined that estoppel bars the use of any prior art references, not just specific combinations of prior art references, that could have been raised in a previous petition but were not raised.25 According to this interpretation of Shaw, the only exception to estoppel, and thus the only art not barred in subsequent district court proceedings, is for art that was actually raised but rejected by the PTAB.

Implications of SAS v. Iancu

In April, the Supreme Court held that “[w]hen the Patent Office institutes an inter partes review, it must decide the patentability of all of the claims the petitioner has challenged."26This decision should simplify the petition institution decisions, as the question at that stage should simply be whether there is at least one challenged claim for which the petitioner has presented a “reasonable likelihood” of prevailing on the merits.27 This decision will also impact district court litigation in a number of ways, including with respect to estoppel resulting from a previous IPR.

In the context of IPR estoppel, SAS should help resolve the inconsistent application of Shaw and HP, as there will be no longer be instituted and non-instituted grounds from the same petition.28 Accordingly, if all grounds are instituted, all prior art in those grounds will be subject to the same estoppel. For IPR petitions filed after SAS, courts should not have to evaluate whether different estoppel is appropriate for instituted and non-instituted grounds, as was the case in Shaw.

Conclusion

Even in light of SAS v. Iancu, the question will remain whether estoppel bars the use of prior art that could have been but was not raised in a petition, an issue on which there is a split amongst district courts.

It seems likely that the Federal Circuit will need to resolve this split in the district court’s interpretation of § 315(e)(2) to provide clarity to courts struggling with the ambiguities in the language of the statute.