Law360, New York (June 7, 2017, 11:42 AM EDT) -- When a patent is challenged in inter partes review, the petitioner may be estopped from asserting certain invalidity defenses in district court. The scope of this estoppel has been evolving and district courts have arrived at different — and arguably inconsistent — conclusions as to the breadth of preclusion in litigation. This article reviews recent, germane case law and provides strategy considerations looking forward.

Federal Circuit Application of the Estoppel Provision of Section 315(e)

The America Invents Act of 2011 provides that once the Patent Trial and Appeal Board issues a final written decision on a patent claim, the petitioner may not challenge the validity of that claim in a civil action “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”[1] While an initial reading of the statutory estoppel provision may appear to preclude a petitioner from alleging invalidity of a claim on the basis of any prior art in district court,[2] the Federal Circuit seems to have endorsed a more permissive interpretation of the statute.

Indeed, in Shaw Industries Group Inc. v. Automated Creel Systems Inc., the Federal Circuit stated that estoppel does not apply to petitioned grounds on which the PTAB declined to institute.[3] Noting that estoppel is limited to grounds the petitioner raised or reasonably could have raised “during the IPR,” the court reasoned that noninstituted grounds cannot be raised “during the IPR” because they do not become part of the IPR in the first instance.[4] Thus a petitioner is not precluded from raising petitioned-for but noninstituted grounds in district court.[5]

Split District Court Decisions on the Scope of Estoppel After Shaw

While Shaw appeared to suggest that estoppel does not apply to petitioned-for grounds on which the PTAB expressly declined to institute, district courts have inconsistently analyzed the related question of whether grounds never brought to the attention of the PTAB by the petitioner in the first instance could give rise to estoppel. In fact, district courts have arrived at different conclusions as to the scope and application of estoppel after Shaw with respect to this issue.

No Estoppel on Basis of Grounds Not Raised in IPR Petition

In Intellectual Ventures I LLC v. Toshiba Corp., Judge Sue Robinson extended the reasoning from Shaw to find no estoppel on the basis of prior art not included in the IPR petition.[6] The petitioner (Toshiba) challenged certain claims in the IPR, but raised an additional, prior art defense, inter alia, in district court that it had not included in its IPR petition. The patent owner (IV) argued that Toshiba should be precluded from relying on that prior art defense in district court because it was “based on publicly available patents and printed publications and could have been raised” during the IPR.[7] The court held that, under the Federal Circuit’s holding in Shaw, noninstituted grounds were not raised “during the IPR” and thus were not subject to estoppel in district court.[8] The court, however, appeared to imply that it would not necessarily have reached that decision in the absence of Shaw.[9]

The holding from IV suggests that a petitioner is estopped only from litigating the precise issues substantively decided on the merits by the PTAB (i.e., any other grounds of invalidity — including grounds not instituted by the PTAB as well as grounds not raised by the petitioner in its petition — could be revisited by the district court).

Estoppel Found on Basis of Grounds Not Included in IPR Petition

Other districts have taken a different reading of Shaw, seemingly adopting a broader general rule of estoppel with a carve-out for grounds raised but ultimately not instituted in the petition. In Douglas Dynamics LLC v. Meyer Prods. LLC, Meyer petitioned the PTAB to institute IPR on multiple grounds, only some of which were instituted.[10] In a parallel district court litigation, Meyer sought to raise a ground it had asserted in its IPR petition but on which the PTAB declined to review (“noninstituted ground”), as well as new, prior art grounds Meyer had not asserted in its petition (“nonpetitioned grounds”).[11] The question to be decided in Douglas was whether petitioner Meyer could still assert invalidity of the patent claims substantively reviewed by the PTAB during IPR, and on what grounds. Judge James Peterson in the Western District of Wisconsin held that petitioners are estopped from asserting nonpetitioned grounds in district court, so long as those grounds were “based on prior art that could have been found by a skilled searcher’s diligent search.”[12]

The court reasoned that petitioners should not be allowed to use the IPR to gain an unfair advantage in the litigation:

A patent infringement defendant does not have to take the IPR option; it can get a full hearing of its validity challenge in district court. If the defendant pursues the IPR option, it cannot expect to hold a second-string invalidity case in reserve in case the IPR does not go defendant's way. In many patent cases, particularly those involving well-developed arts, there is an abundance of prior art with which to make out an arguable invalidity case, so it would be easy to have a secondary set of invalidity contentions ready to go. The court will interpret the estoppel provision in § 315(e)(2) to preclude this defense strategy.[13]

Another district has adopted the court’s rationale from Douglas. Biscotti Inc. v. Microsoft Corp. held petitioners estopped from asserting grounds in the litigation that had not been raised in an IPR petition and that could have been found pursuant to a diligent search.[14]

Notably, the Biscotti court additionally estopped certain petitioned-for but noninstituted grounds, taking an even narrower view of Shaw. Specifically, the court held that grounds included in a petition but determined by the PTAB to not establish a reasonable likelihood of unpatentability would also give rise to estoppel.[15] Limiting Shaw to its facts, the court noted that only grounds included in a petition but for which the PTAB found redundant or declined to institute review for another procedural reason would be exempt from estoppel in district court.[16]

Strategic Considerations Looking Forward

The foregoing case law has important implications for how petitioners and patent owners can best position themselves for litigation. For example, petitioners may want to consider potentially insulating themselves from future application of estoppel by filing petitions with multiple grounds and/or multiple petitions. Additionally, if a petitioner elects to omit any grounds from the IPR petition, the petitioner may then want to pursue those grounds in subsequent district court litigation. On the other hand, patent owners should consider moving for estoppel in district court of all instituted grounds and those that could have reasonably been raised.

The precise boundaries of estoppel continue to develop and it remains to be seen how the Federal Circuit will further clarify its holding in Shaw through new case law. Practitioners should continue to stay abreast of case law and formulate client strategy accordingly.