Shaw-shank Relitigation: District Courts Chiseling Away at Estoppel Provisions

June, 27th, 2017

Categories: Articles, Blog Tags: CAFC, IPR, litigation, PTAB, USPTO

By Robert D. Keeler

Congress established inter partes review (“IPR”) as a less expensive, more efficient method of challenging the validity of a patent. Indeed, Congress explained that the IPR is a “complete[] substitute for [] civil litigation” regarding invalidity based on patents and printed publications. See, e.g., 157 Cong. Rec. S1375, 1358 (Mar. 8, 2011) (statement of Sen. Grassley). Congress also enacted estoppel provisions of 35 U.S.C. § 315(e), which prevents petitioners from asserting “any ground that the petitioner raised or reasonably could have raised during [] inter partes review” in subsequent proceedings.

There are at least three situations where estoppel arguably applies: (1) instituted grounds that become part of a final written decision; (2) petitioned but non-instituted grounds, and (3) grounds not raised in an IPR petition. The Federal Circuit has confirmed that estoppel applies in the first situation. See Shaw Indus. Grp. Inc. v. Automated Creel Svs. Inc., 817 F.3d 1293, 1297-300 (Fed. Cir. 2016). As is discussed below, the case law is less clear as to whether estoppel applies to the second and third situation.

Recently, the Federal Circuit addressed the second situation in the context of petitioned invalidity grounds that were not instituted due to redundancy. The Court found no estoppel in this situation because the grounds were not raised “during that inter partes review” under § 315(e). Shaw, 817 F.3d at 1299-300 (“Shaw raised its Payne-based ground in its petition for IPR. the PTO denied the petition as to that ground, thus no IPR was instituted on that ground. The IPR does not begin until it is instituted. . . . The plain language of the statute prohibits the application of estoppel under these circumstances.”); see HP Inc. v. MPHJ Tech. Inv. LLC, 817 F.3d 1339, 1347 (Fed. Cir. 2016). The Federal Circuit relied heavily on the PTAB’s broad discretion to manage an IPR given the required time limitations. Shaw, 817 F.3d at 1298-300; 35 U.S.C. § 316. Therefore, the Court reasoned that the PTAB’s procedural decisions should not trigger § 315(e). Shaw, 817 F.3d at 1300.

Some district courts broadly interpret Shaw as only requiring estoppel for invalidity grounds that received “proper judicial attention.” Verinata Health, Inc. v. Ariosa Diagnostics, Inc., No. 12-cv-05501-SI, 2017 WL 235048, at *3 (N.D. Cal. Jan. 19, 2017) (“Indeed, limiting IPR estoppel to grounds actually instituted ensures that estoppel applies only to those arguments, or potential arguments, that received (or reasonably could have received) proper judicial attention.”) (collecting cases), appeal denied sub nom. In re Verinata Health, Inc., No. 17-109 at *2 (Fed. Cir. Mar. 9, 2017); see Princeton Digital Image Corp. v. Konami Digital Ent. Inc., No. 12-1461-LPS-CJB, 2017 WL 1196642 (D. Del. Mar. 30, 2017.). This interpretation protects a patent defendant’s right to have all presented invalidity theories substantively considered by a Court or the PTAB. Verinata, 2017 WL 235048 at *2-3. This effectively denies estoppel for any non-instituted ground, whether in an IPR petition or not. However, this eviscerates the “reasonably could have [been] raised” portion of the statute, because any instituted ground will always be part of the PTAB’s final written decision.

Other district courts narrowly limit Shaw to its facts to estop defendants from asserting non-petitioned invalidity grounds. This allows the Courts to prevent gamesmanship by saddling patent defendants with the reasonable consequences of their decision to file for IPR. See, e.g., Douglas Dynamics v. Meyer Products LLC, Case No. 14-cv-886, 2017 WL 1382556 (W.D. Wis. April 18, 2017). These Courts are generally concerned that allowing multiple rounds of invalidity arguments both at PTAB and in Court would be judicially inefficient. Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15cv21, 2017 WL 2605977, at *3 (E.D. Va. June 5, 2017) (“It would waste this Court’s time to allow a stay for a year during IPR proceedings and then review invalidity arguments that Defendants could (and perhaps should) have raised in their IPR petition.”); Biscotti, Inc. v. Microsoft Corp., No. 2:13-cv-01015, 2017 WL 2526231 (E.D. Tex. May 11, 2017). Therefore, these Courts broadly apply estoppel to cover any ground that a “skilled searcher conducting a diligent search reasonably could have been expected to discover.” Biscotti, 2017 WL 2526231 at *8; see Clearlamp, LLC v. LKQ Corp., No. 12-cv-2533, 2016 WL 4734389, at *8 (N.D. Ill. Mar. 18, 2016); 157 Cong. Rec. S1375 (Mar. 8, 2011) (statement of Senator Jon Kyl) (“Adding the modifier ‘reasonably’ ensures that could-have-raised estoppel extends only to that prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.”).

Practice Point:

Both petitioners and patent owners should pay attention to the evolving scope of § 315(e) estoppel. Petitioners benefit from the broad view of Shaw, which allows them to put their best art forward in an IPR and retain invalidity grounds unadjudicated by the PTAB for district court. However, broad view also hurts patent owners by extinguishing the broad estoppel provisions envisioned by Congress. Meanwhile, the narrow view of Shaw locks petitioners to the grounds raised in their IPR petitions, leaving petitions only with grounds not instituted for procedural reasons in district court. Accordingly, since the Federal Circuit has yet to decide which view applies, petitioners should file IPR petitions with every possible ground, including repetitive grounds to hopefully preserve arguments for subsequent district court litigation.

WHIPgroup is leading counsel for U.S. and international technology companies. We specialize in patent and trademark law.

© 2017 Whitmyer IP Group, Stamford, Connecticut.