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Uncertainty Regarding the Scope of IPR Estoppel – Part II

As discussed in Part I of this article, the scope of IPR estoppel under 35 U.S.C. § 315(e) remains unclear.  In Part II, we explore several approaches that courts may apply.

Specifically, the approaches considered herein contemplate the meaning of the phrase “reasonably could have raised” in the IPR estoppel statute.  Clearly, Congress did not intend for estoppel to apply only to grounds actually raised in an IPR, or else Congress would have said this—like it did in the actually-raised provision for CBMs.  What is not clear is whether Congress intended for all grounds that could have been raised (that is anticipation or obviousness based on any patent or printed publication) to be estopped, or only some of these grounds (giving meaning to the word “reasonably” in the statute).

In determining the meaning of the phrase “reasonably could have raised” in 35 U.S.C. § 315(e), courts will have to weigh the merits of a rule-bound approach that promotes certainty but may at times produce unfair results, against a more flexible standard-bound approach that is responsive to the equities in a given case, but lends lesser predictability. Courts will also have to consider two different categories of grounds: (1) grounds raised in a petition, but not instituted; and (2) grounds not raised at all.

Until courts clarify the issues set forth above, the full range of possible permutations should be considered when preparing IPR petitions.

(1) Grounds raised in a petition but not instituted

(a) Never estopped

One possibility (perhaps most likely given the Federal Circuit’s opinions to-date) is that a petitioner will never be estopped from asserting grounds raised in a petition that were not instituted.  This outcome is consistent with Shaw and its progeny, and it advantageously prevents the application of estoppel to grounds that the petitioner was not permitted to fully litigate before the PTAB.  See, e.g., Shaw Indus. Group., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016).  See generally Part I of this article.

One problem with this approach is that it encourages petitioners to game the system by including “laundry lists” of possible grounds in order to avoid estoppel effects.  Or less blatantly, a second- or third-favorite ground might be cursorily included in a petition, with the expectation that it would most likely be denied institution, for the purpose of preserving that ground for district court.  This gamesmanship would tend to erode the benefits that the estoppel provision is designed to promote, and consequently, district courts may be less inclined to stay proceedings pending the outcome of a related IPR.

(b) Sometimes estopped

Another option is that estoppel will apply to grounds not instituted because they are purportedly cumulative or duplicative of the instituted grounds, but estoppel will not apply to grounds denied institution on the merits or for some other procedural reason.  This option would be responsive to the case where a non-instituted ground is thought to be so similar to a ground that is fully litigated before the PTAB that it can be treated as such.

This option is consistent with Verinanta Health, and has the benefit of considering the context of an institution decision.  This does not address the gamesmanship problem noted above, however, because petitioners could still include “laundry lists” of minimally related grounds without fear of estoppel.  Further, it is not clear how well tailored this approach is to judicial economy.  That is, if the PTAB has denied institution based on the merits, it may signal that a court should not reconsider the grounds (absent a good reason to do so).

One problem with this approach is that the PTAB does not always clarify why it is not instituting on a ground.  That is, it may decline to institute based simply on the fact that two proposed grounds address the same claim, and one ground has already been instituted (i.e., redundancy per se).  Or it may decline to institute because it believes full adjudication of all of the asserted grounds would be administratively infeasible.  Where the PTAB fails to explain itself in detail, courts may have to substantively weigh in on the merits of the grounds to determine whether they are in fact duplicative, thus at least partially negating the benefits of estoppel.

(c) Exception for bad faith

Courts may also apply an exception to the general “no estoppel” rule, where it appears that a petitioner has included grounds in a petition solely for the purpose of preserving them in district court.  The more egregious examples of “laundry list” pleadings would be easy to spot, permitting straightforward application of estoppel in such cases.  However, it may be difficult in some instances to draw a line.  If a petitioner has two or three strong grounds, the petitioner may strategically raise the second- and third-strongest grounds in abbreviated form in order to avoid estoppel.  Where some  meaningful analytical detail is provided, it may be less clear whether estoppel should apply.

Of course, if the PTAB instituted on all grounds or on none, and stopped its practice of partial institution, such gamesmanship would not be an issue.  As explained in Part I of this article, this type of institution appears to be what Judge Newman envisions.  See, e.g., SAS Institute, Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1358 (Fed. Cir. 2016) (“The ‘complete substitution’ for section 102 and 103 issues cannot occur unless all the claims challenged in the petition are included when post-grant review is accepted.”).    But given the statutory time limits on the IPR proceedings, 35 U.S.C. § 316(a)(11), the PTAB may be administratively unable to fully adjudicate the merits of every ground raised in an IPR petition.  Cf. CBM2012-00003, Paper 7, 1-2 (PTAB 2012) (petitioner raised 422 grounds against 20 claims).

(2) Grounds not raised at all in petition

(a) Always estopped

It is possible that petitioners will be estopped from raising any grounds not included in a petition.  This is a strong form of estoppel, and is consistent with most practitioners’ original interpretation of the IPR estoppel provisions under 35 U.S.C. § 315(e)—i.e., an IPR petitioner whose petition resulted in a final written determination should be estopped from arguing in district court any §§ 102 and/or 103 challenge based on prior art patents or printed publications.

This approach is a bright-line rule, and also encourages petitioners to bring the best art forward in a petition.  Diligence and care are required to make sure that grounds are not overlooked.  This approach is most likely to make IPR proceedings become substitute validity proceedings, and consequently, greatly simplify the corresponding litigation.  Thus, under this approach, district courts will be most likely to stay litigations pending the outcomes of IPRs, which is in the interest of judicial efficiency.

Yet the rule fails to consider how diligent the petitioner was in searching for prior art and why certain art may not have been included in an IPR petition.  Accordingly, courts may be inclined to grant some reprieve where sympathetic facts are presented.

(b) Sometimes estopped

A more lenient standard could hinge the application of estoppel to grounds not raised in a petition on whether a diligent search would have found the reference.  This analysis may be akin to a rebuttable presumption.  For example, IPR estoppel is presumed to apply, but the petitioner can rebut the presumption by showing that the reason the reference was excluded was because the reference did not show up in a diligent search—not because petitioner decided not to include the reference, or failed to conduct a diligent prior art search.  Alternatively, the presumption could go the other way—IPR estoppel is presumed not to apply, but the party asserting estoppel can rebut the presumption by showing that a diligent search would have found the reference.

As explained in Part I of this article, this is consistent with the approach that the Northern District of Illinois took in Clearlamp.  There the court found that a newly discovered prior art reference could be used “only if it could not have been found by a skilled searcher performing a diligent search,” and further that the burden is on the party asserting estoppel to show that a diligent search would have found the reference.

This approach inserts some murkiness into the IPR issue, which would hinge on what courts determine a reasonable diligent search would discover.  At one extreme of this spectrum, only prior art that was of severely limited availability would be exempt from estoppel (e.g., thesis that is not available in electronic form and is only at a specific institution).  At the other end, a petitioner may be able to claim exemption merely from having hired a prior-art search firm (or multiple search firms) to conduct a search.  At the first extreme, this “sometimes estopped” approach would have only negligible benefits over the “always estopped” approach.  At the second extreme, a narrow estoppel risks allowing defendants to raise some prior art challenges in an IPR and others before the district court, permitting the sort duplicate litigation that the estoppel provision was meant to prevent.  Like reexamination proceedings, IPRs could risk becoming “another forum” for deciding some of the invalidity disputes that are likely to arise in a case.