Estoppel Arising From PTAB Trials

Gerald M. Murphy, Jr. and Lynde F. Herzbach for Corporate Counsel

January 27, 2016

More than two years has passed since the first final written decision in an inter partes review (IPR) in Garmin v. Cuozzo Speed Tech. While the process and rules for post-grant proceedings, such as IPRs, have been clarified by the numerous Patent and Trial Appeal Board (PTAB) decisions and reviews by the U.S. Court of Appeals for the Federal Circuit, one area that still has not been fully tested or developed is the application of estoppel arising from PTAB post-grant proceedings. There is little guidance from district courts as to how the “reasonably could have raised” standard for estoppel of petitioners will be applied. There is also little to no guidance regarding possible patent owner estoppel from either the district courts or the U.S. Patent and Trademark Office (PTO), and such guidance may not be available until enough time has passed for applications related to patents subject to post-grant proceedings are issued by the PTO and tested by district courts.

The Law

Under 35 U.S.C. §§315(e) and 325(e), if there is a final written decision, then estoppel could arise in both PTO proceedings and civil actions in district courts or before the International Trade Commission (ITC). Estoppel affects both petitioners and patent owners. In addition, under 37 C.F.R. §42.73, a patent owner is precluded from taking action inconsistent with an adverse judgment. These include obtaining a patent claim that is not patentably distinct from a finally refused or cancelled claim, or amending a specification or drawing after the amendment was denied by the PTAB in any application or patent that has the same written description. Further, the statute and legislative history are clear that the estoppel of a petitioner applies only to grounds that were raised or reasonably could have been raised, and that a scorched-earth search around the world is not required. The estoppel extends only to prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.

Strategic Considerations for Petitioners

Prior to filing a proceeding before the PTAB, a petitioner should carefully assess the type of proceeding and the possible effects of each on later estoppel. Proceedings created by the America Invents Act include post-grant review (PGR) IPR, and covered business method review (CBM). The arguments that can be made and the evidence that may be relied upon vary among the three proceedings. A petitioner in a PGR or CBM can argue a claim is unpatentable due to any of the grounds identified in 35 U.S.C. §282(b)(2) or (3), which includes invalidity based on anticipation, obviousness, double-patenting as well as invalidity for failure to comply with §112 or §251. The evidence and prior art in a PGR is not limited by the statute or rules. However, in an IPR, a petitioner is limited to prior art in the form of patents and publications and can only raise invalidity grounds based on such patents and publications under 35 U.S.C. §§102 or 103. Recognizing these differences is important due to the effect the limitations, or lack of limitations, have on the application of estoppel. If it is not possible to present the prior art or invalidity arguments in an IPR, then there is no possibility the petitioner “reasonably could have raised” them, and thus no estoppel. For example, because it is not possible to rely on nonpatent or nonpublication prior art or invalidity arguments beyond those based on 35 U.S.C. §§102 or 103, a petitioner could not be estopped from relying on the excluded prior art and invalidity arguments. Therefore, if a petitioner wishes to limit estoppel as to such types of prior art and invalidity arguments, it may be best to consider an IPR as a first choice.
Another important strategy consideration is that estoppel shall not apply to a petitioner, or the real party in interest or privy of the petitioner who has settled under 35 U.S.C. §§317 or 327 prior to a final written decision. This carve-out is especially important when considering possible settlement at a late stage of the proceeding. Even though the PTAB is required to dismiss the petitioner upon settlement between the petitioner and patent owner, the PTAB is not required to end the proceeding based on that settlement, and can proceed to a final written decision. The exception ensures that no matter when the petitioner settles, there is no possibility of estoppel even if there is a final written decision after the petitioner is dismissed.

Possible Effects for Patent Owners

A patent owner’s strategic decisions to cancel or amend claims during post-grant proceedings can have estoppel effects for related applications and patents. Thus, a patent owner should consider possible effects of cancelling claims, amending claims and prosecuting claims in related applications that are not patentably distinct and have the same specification.
Patent applications with the same specification as a challenged patent may need to be reviewed to determine if there were restriction requirements or other clear indications that the claims of different patents are patentably distinct. In order to avoid a charge of inequitable conduct, the patent applicant should disclose information regarding an adverse decision or other estoppel arising from post-grant proceedings during prosecution of any related, co-pending or future applications that are not patentably distinct and have the same specification. Not only is such a disclosure required, it is also in the patent applicant’s best interests because petitioners could possibly make third-party submissions during prosecution regarding the possible estoppel. In addition, if the patent applicant can prove to the examiner that the estoppel does not apply to the pending claims, any issued claims will have the benefit of the presumption of validity and the possibility of deference to the PTO’s determination of “patently distinct.”

Estoppel During PTAB Trials

The PTAB has clarified that it applies estoppel on a claim-by-claim basis. It has also made clear that the petitioner is not estopped from challenging previously unchallenged claims or claims where institution had previously been denied even if other claims of the same patent were previously challenged on the same grounds, and that the prior art that petitioner reasonably could have raised in prior proceedings includes prior art that a skilled searcher conducting a diligent search reasonably could have been expected to discover.

Interestingly, in a Nov. 4, 2015 order, the PTAB found the petitioner was estopped pursuant to 35 U.S.C. §325(e)(1), dismissed the petitioner prior to the oral hearing, but did not terminate the proceeding. See Apple v. Smartflash. The case proceeded to an oral argument on Jan. 6, with only the patent owner participating, even though the patent owner was successful in its estoppel argument. Thus, a patent owner should endeavor to bring an estoppel claim as soon as possible, preferably as part of a patent owner preliminary response or motion practice shortly after an institution decision. The PTAB can decide it will not terminate a proceeding where the proceeding has advanced to the point where a final decision is in the best interests of justice, and in those cases, the patent owner will need to continue defending its patent even after the petitioner is dismissed.

Estoppel in Civil Actions

There are few district court decisions regarding estoppel from PTAB proceedings. Most of the analysis is in factual scenarios where estoppel does not apply. For example, a district court in Texas confirmed in 2013 that estoppel does not apply to claims where an IPR was not instituted. Nat'l Oilwell Varco v. Omron Oilfield & Marine.

In Star Envirotech v. Redline Detection, a California court held last year that a defendant was not estopped from raising an actual machine as a prior art reference because the machine itself could not have been relied on as prior art in a related IPR due to the limitations to patents and publications. The court allowed the actual machine to be included in obviousness combinations with prior art asserted in an instituted IPR.

In Choon’s Design v. Zenacon, a patent owner filed suit alleging infringement of a patent that was previously the subject of a petition for an IPR and where other non-asserted claims of the same patent were cancelled by the PTAB at the request of the patent owner. The defendant argued that the patent owner was estopped under 37 C.F.R. §42.73(d)(3) from asserting infringement of the non-cancelled claims because those claims were not patentably distinct from the cancelled claims. The court evaluated whether defendant had proven that it would be implausible for a person skilled in the art to find the asserted claims not obvious in light of the cancelled claims, while noting that it had “doubts about whether this is the appropriate analysis to determine whether estoppel under 37 C.F.R. §42.73(d)(3) applies.” After a detailed analysis, the Court decided the asserted claims were patentably distinct from the cancelled claims.

Future of the Estoppel Provisions

While we await further guidance from the PTO, district courts or the ITC regarding the interpretation of “reasonably could have raised,” Congress may end up beating them to the punch for PGRs. The issue of whether to change the estoppel provision has been debated by both the Senate and House Judiciary Committees. The June 2, 2015 version of the Protecting American Talent and Entrepreneurship Act, S. 1137 (sec. 15) and the H.R.9 - Innovation Act (sec. 9) both included a change that would limit estoppel in civil actions or ITC proceedings arising out of PGR proceedings to grounds that were actually raised and would eliminate the “reasonably could have raised” language. The legislative history suggests that this language was supposed to be limited to IPRs and should not apply to PGRs. It may take some time for Congress to put forth a proposed bill that will be signed into law. However, it is interesting to note that the estoppel provision is already on the radar of both the House and Senate judiciary committees.


Reprinted with permission from the January 27, 2016 edition of Corporate Counsel© 2016 ALM Media Properties, LLC. All rights reserved.
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