FWD Statutory Estoppel vs. Collateral Estoppel

In designing the America Invents Act (AIA), statutory estoppel of 35 U.S.C. § 315(e)(2) was set to by legislators to attach at the time of the PTAB’s Final Written Decision (FWD). This is despite the fact that further appeals are routine. This statutory design was responsive to the previous criticism of inter partes reexamination estoppel, which attached only after all appeals were exhausted.

Yet, this statutory design often puts district courts in the unenviable position of treating an otherwise non-final decision, as final……at least with respect to petitioner estoppel. As to claims that may be cancelled in the same FWD, courts are free to await further appeals.

This unbalanced scenario can be exploited by Patent Owners.

Recently, a district court order issued that addressed a motion in limine to preclude Defendant from referencing prior art references based on (petitioner) estoppel under §315(e)(2). Trustid, Inc. v. Next Caller Inc., C.A. No. 18-172 (MN) (D. Del. July 2, 2021). But, the same order considered whether trial should continue on claims that were cancelled in the same FWD (on appeal to the Federal Circuit) based on collateral estoppel. (here)

The Court explained that 315(e)(2) estoppel is broad, and applies when the reference “could reasonably have been discovered by ‘a skilled researcher conducting a diligent search.’” Parallel Networks Licensing, LLC v. Int’l Bus. Machs. Corp., No. 13-cv-2072 (KAJ), 2017 WL 1045912, at *11 (D. Del. Feb. 22, 2017). Collateral estoppel, on the other hand, applies ‘[w]hen the issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.’” Papst Licensing GMBH & Co. KG & Samsung Elecs. Am. Inc., 924 F.3d 1243, 1250 (Fed. Cir. 2019).

First, the Court granted Plaintiff’s motion-in-limine with respect to the prior art reference. The Court concluded that a reasonably diligent searcher would have found the prior art reference because similar terms appear in the patent as within the USPC class and subclass of the reference. Moreover, Defendant asserted the reference in the invalidity contentions filed only a few months after filing the IPR petition.

Next, the Court denied Defendant’s motion-in-limine with respect to collateral estoppel. The Court concluded that the issues in the district court case and the IPR were not identical and, further, an IPR decision is not “final” for purposes of issue preclusion until the decision is either affirmed or the parties waive their appeal rights. While the Court acknowledged that a stay of the trial relative to the asserted claims might otherwise be in order, due to the long pendency of the case, the Court decide to move forward.

Given the affirmance rate at the Federal Circuit, it would seem that this decision may be more of an outlier. Nevertheless, it does highlight the imbalance in estoppel results of a FWD.