In a closely watched appeal from the Patent Office in an inter partes review (IPR)–Shaw v. Automated Creel–the Federal Circuit (Judges Moore, Reyna, and Wallach) gave a nod to parties who receive favorable institution decisions from the Patent Office, but gave an ultimate victory to IPR petitioners that are granted institution on some grounds but denied on others on the rationale that the extra grounds are redundant. The court first held that it could not review the redundancy decision by the Patent Office, whether on ordinary appeal or by mandamus, and noted that it could “see benefit in the PTO having the ability to institute IPR on only some of the claims and on only some of the proposed grounds.” Slip Op. at 7. But the basis for denying mandamus gave ultimate victory to petitioners—i.e., the court reasoned that the extraordinary remedy of mandamus should not be available because the Patent Office’s redundancy finding left the Petitioner open to re-raise the grounds in later IPR filings or in litigation. The court ruled that Shaw would not be estopped under 35 USC 315(e) because such estoppel applies only to issues that were raised or could have been raised “during” the IPR, which the court reasoned was only the instituted IPR and not the petitions stage. Thus, because the Board blocked Shaw’s additional grounds, Shaw neither raised those grounds nor could it have raised them “during” the IPR, and it thus was not estopped.
This holding is notable because we had no prior indication from the court about the scope of the Section 315(e) estoppel—indeed, almost no district courts had even addressed it. This holding will affect how district court litigation plays out in many cases in the future as IPRs are completed. Defendants will then have the ability to raise the redundant art in trial—in addition to on-sale and public use prior art that could not have been used in IPRs—though an astute observer may question whether parties will frequently raise prior art that was, perhaps, not as good as its other art. The other big issue—not explicitly addressed by the Federal Circuit because the facts did not raise it—is whether estoppel applies to prior art that the Patent Board found to fail on the merits and thus refused to institute, and prior art that the petitioner/defendant did not even put in its IPR petition—since none of that art would show up “during” the IPR. Is it possible that a party could be estopped for art it never mentioned, but not estopped for art the Patent Office shot down and refused to institute an IPR on?
Finally, on the merits of the instituted grounds, the patent related to handling of stranded material (e.g., yarn or string) and techniques for transitioning from one “creel” of stranded material to another creel when the first creel runs out, so that the process can run without interruption. The Patent Office had found that tangling would have resulted in the combination of prior art Shaw proposed, but the Federal Circuit agreed with Shaw that the Board’s understanding of the combined structure was “indisputably erroneous.” Slip Op. at 12. It therefore remanded for those grounds to be reconsidered.
ACS had cross-appealed a separate institution decision by the Board, where the Board held that it could institute on a petition filed after the one-year deadline because ACS had dismissed its district court claim without prejudice in the meantime. The Federal Circuit held that it was bound by its own precedent to avoid questioning any such decision by the Board. Slip Op. at 13-14. Also, the Board’s rejection of the relevant claims was supported by substantial evidence.
In concurring, Judge Reyna noted that he was “deeply concerned” by the “conclusory statements” from the Board in declining to address the issues it identified as being redundant, “without any reasoned basis why or how the denied grounds are redundant.” Slip Op. at 2-3 (Reyna, J., concurring). Judge Reyna noted: “The PTO’s claim to unchecked discretionary authority is unprecedented,” and “the Board cannot create a black box decision-making process.” Id. Judge Reyna also chided the Patent Office for denying that a Redundancy Doctrine exists, when he found it in various decisions by the Board. Finally, he noted that the estoppel effect of Section 315(e) is not for the Patent Office to decide, and was not ripe to be considered in the appeal.