The Estoppel Effects of IPR May Be Significantly Limited

29 March 2016 IP Litigation Current Blog

A recent case at the Federal Circuit seems to significantly limit the estoppel effect of an Inter Partes Review (IPR) that is instituted on some grounds, but not all.  The case adds another arrow in the strategic quiver of litigators when deciding whether to bring an IPR and what art should be presented to the PTAB.  In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., the Federal Circuit held that the statutory language creating estoppel effects following institution of an IPR did not extend to non-instituted grounds.

In February 2012, Automated Creel Systems, Inc. (“ACS”) sued Shaw Industries Group, Inc. (“Shaw”) for infringement of U.S. Patent No. 7,806,360 (“the ’360 patent”). The suit was later dismissed without prejudice.  Within a year of service of the complaint, Shaw filed an IPR on all twenty-one claims of the ’360 patent.  The Federal Circuit explained that the ’360 patent included two types of claims:  one set which included a limitation requiring “interposing” and one set that did not.  Shaw’s petition included fifteen different grounds for institution relating to the twenty-one claims.  But only three of the fifteen grounds related to the interposing claims.  Ground 3 argued that the interposing claims were obvious in view of the combination of Munnekehoff and Ligon; ground 8 alleged obviousness over Barmag in view of Ligon; and ground 11 alleged anticipation by Payne.  The Board instituted the IPR on Grounds 3 and 8 (the obviousness combination) but denied institution on Payne because it was “redundant in light of [its] determination that there is a reasonable likelihood that the challenged claims are unpatentable based on the grounds of unpatentability on which we institute an inter partes review.”  IPR2013-00132, 2013 WL 8563792, at *20 (P.T.A.B. July 25, 2013).  Following institution and trial, the PTAB concluded that Shaw failed to show by a preponderance of the evidence that the interposing claims were unpatentable in light of Grounds 3 and 8.

Shaw appealed the PTAB’s decision to deny institution on the Payne reference and sought a writ of mandamus instructing the PTO to institute the IPR on the Payne reference, arguing that the fact that it raised the Payne reference in the IPR, and because the PTO denied the IPR on that ground, it was now estopped from arguing Payne in any future proceeding. Shaw was primarily concerned with 35 U.S.C. § 315(e) which states:

(1) Proceedings before the Office.—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)…may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

(2) 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)…may not assert in either 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.

Shaw’s fear was that because the PTAB determined that the Payne reference was “redundant” to grounds already at issue in the IPR and because the redundant grounds were ultimately found to be insufficient to invalidate the claims, that it would be estopped in any future litigation from relying on the Payne reference.

In its brief, the PTO argued to the Federal Circuit that “the denied ground never became part of the IPR.” Therefore, according to the PTO, no estoppel effect would attach.

The Federal Circuit denied the writ of mandamus, explaining that Shaw’s fear of estoppel was misplaced. The court explained that § 315(a) “would not estop Shaw from bringing its Payne-based arguments in either the PTO or the district courts.”  Slip Op. at 11.  The Federal Circuit construed the statute as estopping only those grounds “that the petitioner raised or reasonably could have raised during that inter partes review.”  § 315(a) (emphasis added).  Even though the Payne reference was included in the petition, the Federal Circuit reasoned that because the Board denied institution on that reference, the Payne reference never became part of the IPR.  The Federal Circuit relied on its Cuozzo decision to explain that “the IPR does not begin until it is instituted.”  Slip Op. at 11.  The court thus concluded that because the statute limits the estoppel effect to those grounds raised “during the IPR,” estoppel can only attach to those references on which the IPR was actually instituted and decided.  The Federal Circuit summarized its finding by noting that “the plain language of the statute prohibits the application of estoppel under these circumstances” and therefore denied mandamus. Id.

However, the Shaw case still leaves an opening for doubt as to the estoppel effect on a denied “redundant” ground.  Judge Reyna, who joined the unanimous decision in full, drafted a separate concurrence in which he cautioned that the issue of whether estoppel would apply to “redundant” grounds “is not properly before us,” “nor is it for us to decide in the first instance.”  Concurrence at 7.

Thus, defendants whose IPRs are not instituted on all grounds may no longer need to fret about the severe consequences of estoppel under § 315(a) with respect to the art the PTO determined insufficient for institution. Strategically, defendants may consider filing multiple similar grounds such that if the PTAB institutes on one of the grounds, and denies the others, the defendant will have the opportunity to argue different art in two forums.

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