The America Invents Act of 2011, which ushered in a new regime for post-grant patent challenges at the U.S. Patent and Trademark Office (PTO), provides that any patent challenger initiating an inter partes review (IPR) proceeding at the PTO “may not assert” an invalidity ground in a patent case in U.S. district court or in the U.S. International Trade Commission that it “raised or reasonably could have raised during that inter partes review.” 35 U.S.C. § 315(e)(2). Despite its seeming simplicity, however, the proper scope of this so-called “IPR-estoppel” provision has bedeviled the district courts since the new post-grant proceedings became effective in 2012. A recent decision of the U.S. District Court for the Northern District of Illinois –Oil Dri Corp. v. Nestle Purina Petcare Co., No. 1-15-cv-01067 (N.D. Ill., Aug. 2, 2017)—joins the seeming trend of decisions interpreting the estoppel provision more broadly, while at the same time doing a yeoman’s job of sorting through the case law thicket and of organizing and summarizing the rationales used to support the various holdings of other courts.
For example, a principal issue in IPR-estoppel disputes has involved the situation in which the challenger had petitioned the PTO for inter partes review on multiple grounds, but only some of those grounds were instituted by the PTO. In Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016), the Federal Circuit held that estoppel does not apply to non-instituted grounds, since those are not grounds that “could have been” raised “during” an IPR because an IPR does not begin until the proceeding is instituted. Despite this holding, some litigants convinced district courts that it was either limited to the specific type of non-instituted grounds at issue in Shaw (grounds that were “redundant” of other instituted grounds) or that Shaw’s holding did not apply to estoppel in civil litigation because the Shaw court was not addressing Section 315(e)(2) but rather its sister provision (Section 315(e)(1)) that provides for estoppel against the petitioner in subsequent IPR proceedings.
The Illinois court does away with these arguments. It gave no credence to the argument that estoppel only applies to invalidity grounds that were not instituted because of redundancy. And, it found “difficulty seeing how the relevant portion of Shaw is dicta” as to one statutory subsection when Shaw was construing the entire section as a whole. The Court described its conclusion as supported by “due process and fairness” concerns, noting that if estoppel applied to non-instituted grounds, “it would deprive the petitioner of a full opportunity to be heard on the estopped ground to no fault of the petitioner, who properly raised the invalidity contention with the PTAB.” The result was that the Court refused to estop the defendant from asserting obviousness based on two references individually even though the PTAB had instituted an IPR based on the same two references in combination. The Court reasoned that the PTAB had explicitly declined to institute on those references standing alone, and that the PTAB’s statement in its final decision that had it considered those references standing alone they would not render the challenged claims unpatentable was “dicta” that did not alter the conclusion that those grounds were not subject to estoppel. According to the Court, the PTAB’s “explicit exclusion” distinguished this case from two recent cases that found estoppel in similar circumstances: Advanced Micro Devices, Inc. v. LG Elecs., Inc., No. 14-cv-01012-SI, 2017 WL 2774339, at *6 (N.D. Cal. June 26, 2017) and Biscotti Inc. v. Microsoft Corp., No.13-CV-01015-JRG-RSP, 2017 WL 2526231, at *7–8 (E.D. Tex. May 11, 2017).
Next, the Illinois court addressed the thornier question of whether IPR-estoppel applies to grounds that “reasonably could have” been, but were not, included as challenged grounds in the IPR petition. In the case before it, the plaintiff had moved to exclude certain of defendant’s invalidity contentions as estopped on this basis. The Court noted that the district courts are split into two camps, with some courts holding that because an IPR does not begin until after institution, only invalidity grounds actually instituted by the PTAB can be estopped, while others have concluded that estoppel applies to grounds that could reasonably have been asserted in the IPR petition. The Illinois Court then placed itself firmly in the latter camp, concluding that the statutory language and the purpose of IPR to “provide an efficient alternative to litigation” supported this choice. The Court also noted that whereas estopping a party on “noninstituted (but petitioned-for) grounds—which the PTAB declines to fully consider—deprives a party of ‘a full and fair opportunity to be heard on the estopped ground’. . . [estopping] a party [who] fails to raise a claim that it reasonably could have raised . . . is both fair—as the party could only blame itself” and also “common” in civil litigation.
Finally, the Illinois court, citing precedent, held that the standard for determining whether non-petitioned art could reasonably have been raised in the IPR petition is whether a “skilled searcher conducting a diligent search reasonably could have been expected” to discover it. The Court found that the defendant had admitted that a patent search “may have identified” four of the seven references that plaintiff’s declarant (a registered patent agent with “significant experience” searching patents) contended would have been located by an experienced searcher. The defendant was therefore estopped under Section 315(e)(2) from asserting these four references in litigation. The court reserved the issue of the three remaining, disputed references until the next status hearing.