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AIA Estoppel in US District Court

By Kenneth R Adamo and Eugene Goryunov, Kirkland & Ellis LLP

The America Invents Act (AIA) created three post-grant patent challenges: IPR, CBMR and PGR. The Patent Trial and Appeal Board (PTAB) of the US Patent Office conducts these challenges and the conclusion of each challenge is accompanied by estoppel, at the US Patent Office and in US District Court and Section 337 investigations before the US International Trade Commission. This article discusses the quickly developing case law of US District Court estoppel.

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US District Court Estoppel

Section 315(e)(2) lays out the scope of US District Court estoppel:

CIVIL ACTIONS AND OTHER PROCEEDINGS: The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

Estoppel is only triggered when the PTAB issues a final written decision on the patentability of the challenged (and instituted) claims. Once triggered, estoppel prevents a petitioner that obtained the final written decision, and the real party in interest or privy of the petitioner, from asserting invalidity “on any ground that the petitioner raised or reasonably could have raised during that inter partes review”. The Court of Appeals for the Federal Circuit and three US District Courts have interpreted the application and applicability of this estoppel.

Shaw Industries Group v Automated Creel Systems (Federal Circuit)

The first case to address the scope of US District Court estoppel was Shaw Industries Group v Automated Creel Systems. An IPR petitioner petitioned the Federal Circuit for a writ of mandamus instructing the PTAB to re-evaluate its IPR institution decision. The PTAB instituted an IPR trial but declined to include “the Payne-based grounds”, finding them to be redundant. The IPR petitioner argued that the PTAB’s redundancy finding triggered US District Court estoppel that would prevent it from raising the Payne-based grounds in litigation.

The Federal Circuit acknowledged the IPR petitioner’s concern but disagreed with its interpretation of Section 315(e). According to the court, Section 315(e)

create(s) estoppel for arguments “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” Shaw raised its Payne-based ground in its petition for IPR. But 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. Thus, Shaw did not raise – nor could it have reasonably raised – the Payne-based ground during the IPR. The plain language of the statute prohibits the application of estoppel under these circumstances.

The court denied mandamus relief.

Following Shaw, three courts have recently reviewed and further interpreted and applied Section 315(e)(2) and the Federal Circuit’s Shaw decision.

Depomed v Purdue Pharma (District Of New Jersey)

In Depomed v Purdue Pharma, defendants moved to amend their invalidity contentions and to confirm that certain invalidity defences remain in the case, and the plaintiff cross-moved to strike defendants’ invalidity defences. One of the defendants filed a number of IPR petitions challenging claims of the asserted patents. The PTAB instituted IPR trials on all of the petitions but not on all grounds, finding a number of grounds to be redundant. The PTAB eventually issued a final written decision in each of the IPR trials. The plaintiff argued that US District Court estoppel precluded the defendants from asserting invalidity based on prior art grounds identified in defendants’ invalidity contentions but not included in the IPR petitions.

Relying on Shaw, the court found that:

if a claim of a patent is not instituted in an IPR, and there is no final written decision as to that claim, the estoppel provisions of 35 USC. § 315(e) do not apply. Similarly, if an invalidity ground is raised in a petition for IPR, but the PTAB declines to institute an IPR as to that invalidity ground, the estoppel provisions of 35 USC. § 315(e) do not apply to said invalidity ground because it was not raised nor could it have reasonably been raised during that IPR.

The court held that defendants were not estopped from asserting invalidity of claims that were not part of IPR trials even though the grounds for invalidity of those non-instituted claims were known before the PTAB issued its final written decisions. 

Intellectual Ventures I LLC v Toshiba Corp (District Of Delaware)

In Intellectual Ventures I LLC v Toshiba Corp, the plaintiff moved to prevent defendant from asserting invalidity against the patents-in-suit claiming it was estopped. The defendant had previously petitioned for an IPR trial which resulted in the PTAB issuing a final written decision finding the challenged claims (including the asserted claims) to be invalid. The court decided to let the case go to trial because the plaintiff had appealed the PTAB’s decision. The plaintiff’s motion argued that the defendant was estopped from asserting invalidity at trial because the grounds were either previously presented to the PTAB or could have been reasonably presented. The previously presented ground resulted in the IPR trial that invalidated the challenged claims and the other ground, while not previously presented, was based on publicly available patents and printed publications and could have been presented.

The court held that the defendant was estopped from raising the same ground it raised during the IPR trial. That ground had clearly been raised. The court relied heavily on the Federal Circuit’s Shaw decision to hold that defendant was not estopped from raising the second, not previously presented ground. Reading Shaw literally, the court concluded that the defendant may present the ground because it was not raised “during” the IPR trial even though the ground was based on public information.

Roughly one month later, the court issued a follow-on opinion. The court confirmed its earlier holding that estoppel applied to grounds included in the IPR trial but not to those raised but rejected by the PTAB at institution. As to the not previously presented ground, the court also confirmed its earlier holding that the defendant is not estopped from presenting the ground at trial. The court, however, was troubled by the implications of its decision:

In the absence of specific authority, it seems to me that I am left with two options, based on different policy considerations and with very different consequences. [plaintiff’s] reasoning leads to the conclusion that the PTAB is meant to be the invalidity arbiter of first resort and, therefore, a company that seeks an IPR must bring to the PTAB’s attention every ground the company has reason to think might be relevant; otherwise, it will be estopped from pursuing that ground in litigation. . . . On the flip side of the coin is [defendant’s] reasoning, which leads to the conclusion that a company can play games between the PTAB (IPR) and the courts (litigation), asserting some references in connection with the IPR but reserving some for litigation. As I stated in my prior opinion on this matter, that outcome does not strike me as necessarily consistent with the notion of having a parallel administrative proceeding that is supposed to supplant litigation and provide a faster, cheaper, better resolution to patent disputes.

At bottom, the court left its original opinion in place “with the hopes that an appeal may clarify the issue for future judges in future cases”.

Verinata Health v Ariosa Diagnostics (Northern District Of California)

The most recent case addressing US District Court estoppel is Verinata Health v Ariosa Diagnostics. There, the plaintiff moved to strike portions of the defendant’s invalidity contentions. Central to the dispute was the scope of estoppel as interpreted by the Federal Circuit in Shaw. The plaintiff argued that estoppel applied to any invalidity grounds raised, or that reasonably could have been raised, “in” an IPR petition. The defendant, on the other hand, argued that estoppel applied only to grounds raised, or that reasonably could have been raised, “after” institution of the IPR trial. The court found the defendant’s position more tenable and held that estoppel applied only to grounds raised, or that reasonably could have been raised, “during” the IPR trial.

The defendant asserted three grounds of invalidity in its IPR petition: obviousness over the combination of A and B; obviousness over the combination of X and Y; and obviousness over the combination of A, B, and C.

The PTAB instituted an IPR trial on only the third ground (A, B and C) and reached a final written decision. The defendant was thus estopped from raising the third ground at trial as it was raised during an IPR trial, the court held.

The PTAB did not institute on the second ground (X and Y) and the defendant was not estopped from raising it at trial.

The PTAB did not institute on the first ground (A and B) finding it to be redundant of the third ground (A, B and C). The court, however, held that the defendant raised, or could have raised, the first ground (A and B) in the IPR trial because “the combination of [A and B] is simply a subset of the instituted grounds” that includes C in the combination. 

Conclusion

The state of the law on US District Court estoppel is still developing. To date, there has only been one Federal Circuit decision on the issue. Practitioners, however, would do well to keep a close eye on the current state of the law and make sure to understand any nuances in their particular jurisdictions.

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