Scott W. Doyle, Jonathan R. DeFosse and Arvind Iyengar ()
In 2011, Congress responded to an increasing chorus of voices seeking reform of the patent system by passing the Leahy-Smith America Invents Act (AIA). One of the primary drivers of the AIA was the perception that the U.S. Patent and Trademark Office (the Patent Office) was issuing too many invalid patents and thereby stifling innovation. To address these concerns, the AIA created “inter partes review” (IPR), an administrative process that allows third parties to petition the Patent Trial and Appeal Board (the Board) of the Patent Office to review claims of an already-issued patent and cancel claims found to be unpatentable based on certain types of printed prior art.
The benefits of IPR proceedings for parties wishing to challenge the validity of a patent are well-documented. IPRs afford petitioners the opportunity to seek a review of the validity of a patent in a forum that is both faster, due to statutory deadlines, and cheaper, due to limitations on discovery, than a district court. See 37 C.F.R. §42.100(c) (requiring the PTAB to limit the pendency of an IPR to one year from the date of institution); 37 C.F.R. §42.51 (limiting discovery to only those documents that fall within certain narrow categories). IPRs also provide petitioners a less rigorous standard of review than is applicable in district court, as the Board is not bound by a presumption that a patent is valid. In re Baxter Int’l, 678 F.3d 1357, 1364 (Fed. Cir. 2012) (“There is no presumption of validity in reexamination proceedings.”). Moreover, IPR proceedings are conducted before panels comprised of three administrative law judges with technical backgrounds and deep experience addressing issues of validity.
The primary disadvantage of IPR proceedings (at least from the perspective of a petitioner) is the possibility of estoppel. Specifically, under 35 U.S.C. §315(e)(2), once a final written decision is issued in an IPR, a petitioner may not advance invalidity arguments in parallel proceedings “on any ground that the petitioner raised or reasonably could have raised during [the IPR].” At the time the AIA was enacted, this provision was widely believed to represent a broad prohibition on later raising prior art invalidity arguments based on any printed publications or patents that could have been included in an IPR petition. As one senator noted, “if an inter partes review is instituted while litigation is pending, that review will completely substitute for at least the patents-and-printed-publications portion of the litigation.”1
Over the last year, courts have suggested that the scope of the IPR estoppel provision is more limited than many originally anticipated, however. In March 2016, the U.S. Court of Appeals for the Federal Circuit stated in Shaw Industries Group v. Automated Creel Systems, that a petitioner is not estopped from relying on prior art that the Board expressly declines to consider during IPR.2 In Shaw, the IPR petitioner raised nine prior art grounds for invalidating certain claims of U.S. Patent No. 7,806,360 (the ’360 patent). In its initial decision instituting IPR, the Board agreed to consider four of the identified grounds, but found the remaining prior art arguments to be redundant. The Board ultimately issued a final written decision rejecting the four grounds and confirming the validity of the subject claims. Shaw, the petitioner, then sought a writ of mandamus from the Federal Circuit ordering the Board to address all nine prior art arguments in the final written decision. Shaw argued that it was entitled to a final and appealable decision on each of the arguments since it would later be estopped from raising those arguments under §315(e). The Federal Circuit, however, disagreed.
The court in Shaw emphasized that estoppel under §315(e) only applies to invalidity arguments that were raised or could have been raised “during … inter partes review.” The court then noted that IPR does not begin until the Board issues its initial decision instituting the proceeding.3 As a result, prior art arguments included in the original petition seeking IPR are not raised “during” an IPR proceeding because such arguments precede institution of that proceeding. Moreover, the Federal Circuit noted that a petitioner cannot reasonably raise arguments in an IPR proceeding if the Board states in its institution decision that it will not consider those arguments. According to the Federal Circuit, “[t]he plain language of the statute prohibits application of estoppel under these circumstances.”4
Although the Federal Circuit’s statements in Shaw regarding the scope of the IPR estoppel provision are arguably dicta, district courts have nevertheless relied on the court’s analysis in applying the estoppel provision.5 For example, in Illumina v. Qiagen N.V., the District Court for the Northern District of California allowed a defendant to raise a prior art argument that the defendant had previously raised in an IPR petition.6 The district court noted that the Board refused to institute IPR based on the defendant’s argument and “[t]he Federal Circuit recently held that statutory estoppel does not apply to grounds raised in a petition but not instituted.”7
In Intellectual Ventures I v. Toshiba, the District Court for the District of Delaware (Judge Sue Robinson) extended the reasoning of Shaw one step further, finding that §315(e) does not estop a petitioner from making arguments based on prior art that was never presented to the Board in an IPR petition.8 The district court noted that the Federal Circuit has interpreted the language of §315(e) “quite literally” to estop only those arguments that could have been raised “during” an IPR proceeding—i.e., following the Board’s institution decision.9 The district court noted that “[a]lthough extending the above logic to prior art references that were never presented to the PTAB at all (despite their public nature) confounds the very purposed of this parallel administrative proceeding, the court cannot divine a reasoned way around the Federal Circuit’s interpretation in Shaw.”10
On a motion for reconsideration, the court in Intellectual Ventures I elaborated on the difficult issues courts must confront in determining the scope of the IPR estoppel provision. The court noted that interpreting §315(e) broadly to estop any argument that could have been, but was not, included in the original IPR petition is inconsistent with “all of the limitations imposed by the [Board] on IPR proceedings (e.g., page limits for petitions, 14 point type, and portrait-view claim charts).”11 The court also noted that a broad interpretation of §315(e) would be anomalous in light of Shaw since it would prohibit district courts from considering new prior art arguments while allowing courts to nevertheless consider “references initially rejected by the [Board].”12 “On the flip side of the coin,” the court noted that narrowly interpreting §315(e) incentivizes gamesmanship by allowing a company to “assert some references in connection with the IPR but reserv[e] some for litigation.”13 On the whole, the court held that §315(e) does not estop a party from raising arguments that were never presented to the Board. Judge Robinson, however, openly hoped for “an appeal [that] may clarify the issue for future judges in future cases.”14
The decisions in Shaw, Illumina, and Intellectual Ventures I suggest that the scope of the IPR estoppel provisions in §315(e) may be far narrower than originally anticipated. Looking forward, however, it seems likely that the Federal Circuit will accept Judge Robinson’s invitation to consider this issue more fully. In the meantime, petitioners should remain cautious and acknowledge the possibility that, despite recent cases, §315(e) could ultimately be interpreted to broadly estop all arguments that could have been included in the initial IPR petition, as opposed to only those arguments that the Board ultimately accepted for IPR.
1. 157 Cong. Rec. S1360-94 (daily ed. March 8, 2011) (statement of Sen. Grassley).
2. Shaw Industries Group v. Automated Creel Systems,817 F.3d 1293 (Fed. Cir. 2016).
3. Id. at 1300 (citations omitted) (emphasis in original).
4. Id. at 1300 (citations omitted) (emphasis in original).
5. Id. at 1305 (J. Reyna, concurring) (“Whether estoppel applies, however, is not for the Board or the PTO to decide. Nor is it for us to decide in the first instance, despite the invitation from Shaw Industries, because the issue is not properly before us.”); see also In re McGrew, 120 F.3d 1236, 1239 (Fed. Cir. 1997) (quoting United States v. Crawley, 837 F.2d 291, 292 (7th Cir. 1988) (“dictum consists, inter alia, of statements in judicial opinions upon a point or points not necessary to the decision of the case”).
6. See Illumina, Inc. v. Qiagen N.V., 2016 U.S. Dist. LEXIS 122571, *17 (N.D. Cal. Sept. 9, 2016).
7. Id. (citing Shaw, 817 F.3d at 1300); see also Verinata Health v. Ariosa Diagnostics, Case No. 12-cv-05501-SI, 2017 U.S. Dist. LEXIS 7728 at *6-10 (N.D. Cal. Jan. 19, 2017) (limiting estoppel to prior art that was raised following the Board’s institution decision).
8. Intellectual Ventures I v. Toshiba, Civ. No. 13-453-SLR at *26 (D. Del. Dec. 19, 2016).
10. Id. at *26-27.
11. Intellectual Ventures I v. Toshiba Corp., Civ. No. 13-453-SLR at *3 (D. Del. Jan. 11, 2017).