Post-Grant Review Estoppel – Looking Forward by Looking Back at Estoppel in Inter-Partes and Covered-Business-Method Review

In 2011, the Leahy-Smith America Invents Act (“AIA”) established new post-issuance procedures for challenging the validity of a granted patent before the Patent Trials and Appeal Board (“PTAB” or “Board”). Inter partes reviews (“IPRs”) and Covered Business Method patent reviews (“CBMs”) have been available since September 16, 2012, and their utilization since that time has exceeded expectations. A third mechanism, post-grant review (“PGR”), was also made available on that date, but because a PGR petition can only be filed for patents that were examined pursuant to the new First-Inventor-to-File scheme established by the AIA, it has not yet been significantly utilized. In addition, the potentially draconian estoppel provisions that attach to PGR petitions initially had practitioners questioning whether these proceedings would be useful at all.^[1] However, in the intervening years, the experience with IPRs and CBMs suggests that some of those earlier concerns may have been overblown. Nevertheless, because courts have not yet applied the estoppel provisions of PGRs, caution is still warranted. Here, we describe the IPR and PGR estoppel provisions of 35 U.S.C. §§ 315(e) and 325(e) and courts’ interpretations of those provisions thus far.

PTAB Estoppel

IPR proceedings are limited to challenges based on patents and printed publications under 35 U.S.C. §§ 102 or 103. On the other hand, PGR proceedings can be based on any type of validity challenge that is available in federal court. This includes attacks under 35 U.S.C. § 101 for patent eligibility, and under 35 U.S.C. § 112 for allegations of a lack of enablement, written description, and a failure to distinctly claim the invention. CBMs are actually a subset of PGRs, but are limited to review of patents that claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except . . . for technological inventions.”^[2] Nevertheless, the statutory estoppel provisions for IPRs and PGRs are similarly worded: a petitioner (or its real party in interest or privy) of an IPR or PGR of a patent claim that results in a final written decision may not request or maintain a proceeding before the PTAB with respect to that claim and may not assert that the claim is invalid in a civil action or International Trade Commission (“ITC”) proceeding “on any ground that the petitioner raised or reasonably could have raised” during the IPR or PGR.^[3] And, although the scope of estoppel based on IPRs is broad, the PGR estoppel is broader yet: the ability in a PGR proceeding to raise almost any invalidity allegation makes the “reasonably could have raised” language appear to essentially prevent any subsequent challenge to the claims.

From a policy perspective, at least some type of estoppel appears to make sense. It would be unreasonable to allow a petitioner to harass a patent owner by allowing repeated challenges to the validity of a patent. Moreover, because the petitioner initiates the proceeding before the Board, it is not unreasonable that they be bound by the final decision.

However, there are also strong policy considerations for not having broad estoppel provisions, especially for PGRs. Proceedings before the PTAB occur in an expedited manner with limited opportunity to present one’s position. This can prevent the parties from fully developing their cases. Moreover, any ability to obtain discovery during the proceeding is severely limited. This makes it nearly impossible to obtain any document solely in the possession of the patent owner. This is not as important for IPRs, because they are based on publically available documents. However, when considering issues like enablement and written description, the patent owner is likely to be in possession of information highly relevant to the proceedings. Facing the possibility of never being able to obtain this information, many petitioners could simply choose to forgo PGRs in favor of challenging validity in district court. However, such reasoning undermines the purpose of establishing PGRs in the first place. Therefore, it is useful to examine how the estoppel provisions have been applied in IPRs to see if PGR estoppel will be as draconian as anticipated.

Raised Estoppel

The first type of estoppel relates to grounds of invalidity that were actually raised in a petition. What qualifies as a raised ground is fairly straightforward. Less clear, however, is whether estoppel applies to grounds that were presented in a petition but not instituted by the Board. On its face, the statutory estoppel provisions only apply to claims that have reached a final written decision. But the Board may not institute trial on all presented grounds, for example if the petitioner did not meet its burden with regard to a particular ground or if the invalidity contention was redundant to another in the same or related petition. If those grounds were considered to have been “raised,” then a petitioner could be estopped from ever raising them again.

Fortunately for petitioners, the Federal Circuit has taken a narrow approach to raised estoppel. In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc.,^[4] the Court considered whether § 315(e) would apply to grounds that were not instituted because the Board considered them redundant. In that case, the petitioner, Shaw, argued that using redundancy to deny institution of a particular ground was improper, because estoppel would bar its assertion in the future. The Federal Circuit disagreed, pointing out that IPR proceedings occur only after institution. “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.”^[5] And even though the court was only applying the estoppel of § 315(e) to federal courts, it seems unlikely that a different standard would be applied at the PTAB or ITC because the related estoppel provisions are identical.

Even though a narrow application of the estoppel provisions would appear positive for petitioners, it does set up some perverse incentives. For example, generally a petitioner is motivated to only present its best arguments in a petition because of the limited word count. But if estoppel does not apply to any ground raised but not instituted, petitioners may be motivated to include every conceivable argument in their petitions, even if multiple petitions are required. Any ground not instituted will be clear from any estoppel and can be reserved for later proceedings.

Could-Have-Raised Estoppel

The second type of estoppel, related to arguments that could have been raised, is more uncertain and has been a serious concern for parties contemplating PGR petitions. In the IPR context, district courts have started interpreting could-have-raised estoppel as provided in § 315(e)(2). These early cases are also likely to be informative in interpreting the comparable language for PGR could-have-raised estoppel provided in § 325(e)(2).

However, due to the significant differences between IPR and PGR proceedings, the interpretation of § 315(e)(2) will not necessarily control all § 325(e)(2) interpretation issues. For example, because IPRs are limited to anticipation and obviousness (§§ 102 and 103) based on patents and printed publications, the grounds that “could have been” raised are similarly limited.^[6] In contrast, because PGRs can be based on any ground of invalidity in 35 U.S.C. § 282, including patent eligibility (§ 101), indefiniteness and enablement (§ 112), and anticipation and obviousness based on non-printed prior art, the scope of estoppel will be equivalently broadened.^[7] Therefore, could-have-raised estoppel in IPR and PGR proceedings will be different for at least the reason that PGR could-have-raised estoppel potentially encompasses both prior art challenges as well as other invalidity challenges. Indeed, the legislative history on this topic suggests that PGR estoppel was not meant to be as broad as that for IPRs. For example, when commenting on the new post-grant proceedings in Congress, Senator Kyl, who was actively involved in the enactment of the AIA, only addressed IPR-type could-have-raised estoppel, and therefore his comments in the Senate may not be applicable to PGR could-have-raised estoppel.^[8] In fact, Mattal’s Guide to the Legislative History of the American Invents Act asserts that PGR could-have-raised estoppel was added to the AIA by mistake.^[9]

Could-Have-Raised Estoppel for Prior Art Challenges

The United States District Court for the Northern District of Illinois interpreted § 315(e)(2) in Clearlamp, LLC v. LKQ Corp.^[10] In Clearlamp, the district court found, in the context of granting summary judgment of obviousness, that § 315(e)(2) did not bar the defendant from using a datasheet as a prior art reference that was not raised in the IPR.

The district court noted that “reasonably” is not defined in the statute or case law, and so, the court looked to the legislative history. The court considered a statement by Senator Kyl during the floor debate on the AIA regarding could-have-raised estoppel to be the “most on point” legislative history and applied it to the facts of the case:

The present bill also softens the could-have-raised estoppel that is applied by inter partes review against subsequent civil litigation by adding the modifier “reasonably.” It is possible that courts would have read this limitation into current law’s estoppel. Current law, however, is also amenable to the interpretation that litigants are estopped from raising any issue that it would have been physically possible to raise in the inter partes reexamination, even if only a scorched-earth search around the world would have uncovered the prior art in question. 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.^[11]

In this regard, the court ruled that § 315(e)(2) estoppel applies to “prior art that could have been found by a skilled searcher’s diligent search.”^[12] The court noted that the PTAB has similarly relied on Senator Kyl’s floor statement in its interpretation of could-have-raised estoppel for subsequent PTO proceedings after an IPR provided in § 315(e)(1).

Citing Seventh Circuit case law, the district court found that the patentee had the burden to prove that estoppel applies.^[13] The court explained that “[o]ne way to show that a skilled searcher would have found [the prior art] would be (1) to identify the search string and search source that would identify the allegedly unavailable prior art and (2) present evidence, likely expert testimony, why such a criterion would be part of a skilled searcher’s diligent search.”^[14] The court found that the patentee had not tried to prove the first step and so did not carry their burden.

The court also rejected the patentee’s argument that unavailable prior art that is redundant (or cumulative) prior art falls within the could-have-raised estoppel. The court explained that redundancy was not the relevant inquiry and explained that “[m]erely being redundant to a ground that could have been asserted during inter partes review does not estop the alleged infringer from relying upon a ground based upon prior art that was not reasonably available during inter partes review.”^[15] While the district court’s judgment in Clearlamp was appealed to the Federal Circuit, the case settled before briefing.^[16] Thus, Clearlamp did not present the appellate court an opportunity to discuss the contours of the could-have-raised estoppel in IPRs.

However, other district courts have taken a seemingly expansive reading of Shaw, resulting in an application of could-have-raised estoppel that essentially eliminates that section of the statute. In Intellectual Ventures I LLC v. Toshiba Corporation,^[17] the United States District Court for the District of Delaware considered whether a defendant was estopped from alleging obviousness because it had previously filed an IPR petition, even though the particular art had not been cited. The district court reasoned that because Shaw focused on grounds raised “during” the IPR proceeding, meaning only grounds instituted, it was essentially impossible to raise any ground “during” an IPR that was never presented in a petition. The court therefore denied summary judgment, even though that outcome was contrary to policy: “Although extending the above logic to prior art references that were never presented to the PTAB at all (despite their public nature) confounds the very purpose of this parallel administrative proceeding, the court cannot divine a reasoned way around the Federal Circuit’s interpretation in Shaw.”^[18] In a subsequent reconsideration opinion, the district court acknowledged that Shaw might not be so clear cut, but because the court felt that it was not its place to make policy determinations, it did not change its initial decision.^[19] In contrast, however, in an even more recent decision, the Delaware Court concluded that a different petitioner was estopped from asserting prior art references that it reasonably could have raised in an IPR because it would receive “a second bite of the apple . . . .”[20]  

Similarly, in Verinata Health, Inc. v. Ariosa Diagnostics, Inc.^[21], the United States District Court for the Northern District of California granted-in-part and denied-in-part a motion to strike a defendant’s invalidity contentions that involved prior art presented in IPR. In this regard, the court permitted the defendant to assert obviousness “based on” prior art references on which the IPR was instituted “as combined with art not presented during the IPR.”^[22] The patentee filed a petition for a writ of mandamus with the Federal Circuit, asking the appellate court to direct the district court to enforce § 315(e)(2), which the court denied.^[23]

Intellectual Ventures and Verinata may give the Federal Circuit an opportunity to discuss the impact of Shaw on could-have-raised estoppel. It is possible that the Federal Circuit’s decisions in these cases will be informative of could-have-raised estoppel for prior art challenges in PGRs, given the similar language of the relevant statutory provisions.

Could-Have-Raised Estoppel for Other Invalidity Challenges

Even though district court cases interpreting § 315(e)(2) may not be helpful in interpreting the PGR could-have-raised estoppel provision for other invalidity challenges, courts may look to PTAB cases that interpret the PGR could-have-raised estoppel for subsequent PTO proceedings after an PGR or CBM. In Apple Inc. v. Smartflash LLC, the PTAB found that § 325(e)(1) barred the petitioner from raising a § 101 challenge in a CBM proceeding because the petitioner reasonably could have raised that challenge in an earlier CBM proceeding.^[24] The Board rejected the petitioner’s argument that the Supreme Court’s decision in Alice Corp. Pty., Ltd. v. CLS Bank Int’l,^[25] issued after the petition in the earlier CBM proceeding was filed, permitted the petitioner to raise its § 101 challenge. The PTAB explained that § 325(e)(1) “does not make exceptions for intervening case law that clarifies jurisprudence.”^[26]

While the PTAB found in Apple that case law that only “clarifies jurisprudence” does not prevent could-have-raised estoppel for subsequent PTO proceedings, the term “reasonably” suggests that a petitioner should not be estopped from asserting eligibility, indefiniteness, enablement, and non-printed prior art challenges in district court litigation in some circumstances. Again, Senator Kyl’s statement during the floor debate is informative: “the modifier ‘reasonably’” was added to “soften[ ]” IPR could-have-raised estoppel.^[27] He also suggested that petitioners should not be “estopped from raising any issue that it would have been physically possible to raise in” the PTAB proceeding.^[28] PGR could-have-raised estoppel should be similarly reasonable.

How will courts interpret PGR could-have-raised estoppel for other invalidity challenges? Case law involving reconsideration, altering or amending judgment, and new trials in district court litigation may be useful.^[29] For example, reconsideration can be appropriate where “a significant change in the law has occurred” or “significant new facts have been discovered”^[30] A similar standard could be adopted for PGR could-have-raised estoppel. For example, PGR could-have-raised estoppel might not apply where new case law decided after the petition was filed supports an invalidity challenge that was previously unsupported. Similarly, PGR could-have-raised estoppel might not apply where new evidence discovered after the petition was filed supports an invalidity challenge that was previously unsupported. While such situations should be rare, it is difficult to say that previously unsupported invalidity challenges “reasonably” could have been raised during the PRG.

Conclusion

After the passage of the AIA, many practitioners viewed the statutory estoppel provisions applied to PGR proceedings as so draconian that PGRs might never be used to challenge issued patents. However, in the intervening years, the IPR estoppel provisions have not been applied as strictly as feared. This gives hope to potential PGR petitioners. Nevertheless, because there are significant differences between these two types of proceedings, practitioners are still advised to be cautious before seeking post-grant review of a patent.^[31]

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