IPR Estoppel Update: District Courts are Questioning the Reasoning of Shaw But are Compelled to Follow It

Challenging the validity of a patent in an inter partes review (IPR) or post-grant review (PGR) does not come without risk.  If the petitioner is unsuccessful in proving that the challenged claims of a patent are unpatentable, the petitioner is estopped from challenging those claims on any ground of challenge that the petitioner “raised or reasonably could have raised during” the instituted IPR or PGR.[1]  As discussed in my recent article, different estoppel standards have developed in the PTAB and the district courts after the Federal Circuit’s decision in Shaw Industries Group., Inc. v. Automated Creel Systems, Inc.[2]

Federal Circuit’s Reasoning in Shaw

In Shaw, the Federal Circuit held that an IPR petitioner was not estopped from raising a ground of challenge at the district court or in a later IPR proceeding when that ground of challenge was presented in an IPR petition but was denied institution as being “redundant” to the grounds of challenge that the PTAB instituted for review.  The panel of the Federal Circuit reasoned that the petitioner could “not raise—nor could it have reasonably raised—the [non-instituted] ground during the IPR,” because “[an] IPR does not begin until it is instituted.”[3]

Consistent with the reasoning in Shaw, the PTAB and district courts have similarly denied estoppel claims for grounds of challenge that were presented to the PTAB in an IPR petition but were denied institution.[4]

Extension of Estoppel Ruling in Shaw

However, some district courts have arguably extended the rationale in Shaw when addressing the scope of estoppel for grounds of challenge that “reasonably could have [been] raised” during an instituted IPR.  In Intellectual Ventures I v. Toshiba Corp.,[5] and Verinata Health, Inc. v. Ariosa Diagnostics, Inc.,[6] district courts held that, based on the rationale in Shaw, the defendants were not estopped from raising grounds of challenge based on publicly available prior art that the defendants could have presented in IPR petitions but did not do so.  In Intellectual Ventures, the court criticized the reasoning in Shaw but indicated that it was compelled to follow Shaw despite its reservations.[7]

The extension of estoppel to grounds of challenge that were not presented in an IPR petition goes beyond the Federal Circuit’s discussion of estoppel in Shaw.  In Shaw, the Federal Circuit’s decision addressed whether a petitioner would be estopped from raising grounds of challenge that were denied institution by the PTAB.[8]  Shaw had petitioned for a writ of mandamus to compel the PTAB to institute the non-instituted ground of challenge.  Shaw argued that “it may be estopped from arguing the [non-instituted] ground in any future proceedings.”[9]  In rejecting Shaw’s mandamus petition, the Federal Circuit explained that Shaw would not be estopped from raising the non-instituted ground in another proceeding, because Shaw could not raise the non-instituted ground “during the IPR” since the PTAB denied institution for that ground.[10]  Thus, in Shaw, the Federal Circuit did not consider the issue of whether a petitioner should be estopped from raising grounds of challenge that the petitioner chose not to present in its IPR petition.  The decisions in Intellectual Ventures and Verinata have thus extended the rationale in Shaw to preclude the application of estoppel to grounds of challenge that the petitioner could have presented in an IPR petition but did not do so.

Recent District Court Criticism of Shaw

In Douglas Dynamics, LLC v. Meyer Products LLC, the court extended estoppel under § 315(e)(2) to grounds of challenge that the defendant could have presented in its IPR petition but chose not to do so, in addition to instituted grounds of challenge that the PTAB held were insufficient to prove the challenged claims unpatentable.[11]  In doing so, the court criticized the Federal Circuit’s reasoning in Shaw, arguing that “Shaw’s narrow view of § 315(e) estoppel undermines the purported efficiency of IPR, especially if it were applied to allow post-IPR assertion of non-petitioned grounds.”[12]  The court explained that limiting estoppel to only those grounds of challenge that were denied institution by the PTAB was contrary to § 315(e) and “the legislative history, which clearly suggests that Congress intended IPR to serve as a complete substitute for litigating validity in the district court.”[13]  The court reasoned that:

[a] patent infringement defendant does not have to take the IPR option; it can get a full hearing of its validity challenge in district court. If the defendant pursues the IPR option, it cannot expect to hold a second-string invalidity case in reserve in case the IPR does not go defendant’s way.  In many patent cases, particularly those involving well-developed arts, there is an abundance of prior art with which to make out an arguable invalidity case, so it would be easy to have a secondary set of invalidity contentions ready to go.  The court will interpret the estoppel provision in § 315(e)(2) to preclude this defense strategy.[14]

Accordingly, the court in Douglas Dynamics held that the defendant was estopped from raising invalidity grounds that it could have presented in its IPR petition but chose not to do so.[15]   The court explained that it “will apply § 315(e)(2) estoppel to grounds not asserted in the IPR petition, so long as they are based on prior art that could have been found by a skilled searcher’s diligent search.”[16]  Thus, the court held that the defendant was estopped from asserting (1) the instituted grounds of challenge that the defendant unsuccessfully raised “during” the IPR, and (2) the grounds of challenge that the defendant could have presented in the IPR petition based on publicly available prior art but chose not to do so.[17]  The court held that the defendant was not estopped from asserting grounds of challenge that the defendant asserted in its IPR petition but that were denied institution, explaining that “until Shaw is limited or reconsidered, this court will not apply § 315(e)(2) estoppel to non-instituted grounds.”[18]

In Douglas Dynamics, the court also disagreed with “Shaw’s interpretation of the term ‘during’ in § 315(e).”[19]  The court explained that “Shaw does not satisfactorily reconcile the narrow interpretation of ‘during’ with the broader language ‘reasonably could have raised.’  What are the grounds that the petitioner ‘reasonably could have raised’ if the petitioner is limited to raising them after review is instituted, when the opportunity to assert new grounds is exceedingly limited?  The more reasonable interpretation is that ‘during that inter partes review’ includes not only the instituted review itself but also the petition process.” [20]

Conclusion

The court’s decision in Douglas Dynamics is contrary to the decisions in Intellectual Ventures and Verinata, where the defendants were not estopped from asserting invalidity contentions that they could have asserted in the corresponding IPR petitions. The Federal Circuit likely will need to clarify the scope of estoppel under §315(e)(2) to address the inconsistencies developing in the district courts. Until that time, petitioners before the PTAB may wish to consider presenting multiple grounds of challenge in one or more petitions to preserve the ability to later pursue any grounds of institution that may be denied institution.  Under Shaw, district courts have consistently precluded the application of estoppel to non-instituted grounds of challenge that are presented in an IPR petition.  However, as demonstrated by the aforementioned cases, there is a wide variance between district courts’ interpretation of the scope of “reasonably could have [been] raised” estoppel for grounds of challenge that are not presented in an IPR petition.  The court’s decision in Douglas Dynamics may be an outlier, but it would be imprudent to assume that it is.


[1] See 35 U.S.C. §§ 315(e)(1)-(2), and 325(e)(1)-(2).  Estoppel also extends to the petitioner’s real party-in-interest and any privies of the petitioner.

[2] 817 F.3d 1293, 1300 (Fed. Cir. 2016).

[3] Id. (citing In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1272 (Fed. Cir. 2015)); see also HP Inc. v. MPHJ Tech. Invs., LLC, 817 F.3d 1339, 1347 (Fed. Cir. 2016) (citing the Shaw decision, the Federal Circuit held that “the noninstituted grounds do not become a part of the IPR. Accordingly, the noninstituted grounds were not raised and, as review was denied, could not be raised in the IPR.”).

[4] See, e.g., Apotex Inc. v. Wyeth LLC, IPR2016-00873, Paper 8 at 8-9 (PTAB Sept. 16, 2015) (holding that estoppel under 35 U.S.C. § 315(e)(1) does not apply to grounds of challenge that were denied institution); Depomed, Inc. v. Purdue Pharma L.P., No. 13-571, Mem. Op. Dkt. 238 at 15-16 (NJD Nov. 4, 2016) (Bongiovanni, MJ) (holding that the defendant was not estopped from challenging the validity of claims 11 and 12 before the district court because the PTAB denied institution for the grounds of challenge asserted against claims 11 and 12 in IPR petitions).

[5] Intellectual Ventures I LLC v. Toshiba Corp., 1-12-cv-00453, 2016 WL 7341713 at *12-13 (D. Del. Dec. 19, 2016) (Robinson, DJ).

[6] Verinata Health, Inc. v. Ariosa Diagnostics, Inc., 12-cv-05501-SI, 2017 WL 235048 at *4 (N.D. Cal. Jan. 19, 2017 (Illston, DJ).

[7] Intellectual Ventures, 2016 WL 7341713 at *13 (“Although extending [Shaw’s] 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 a reasoned way around the Federal Circuit’s interpretation in Shaw.”).

[8] 817 F.3d at 1300.

[9] Id. at 1299.

[10] Id. at 1300 (emphasis original).

[11] Douglas Dynamics, LLC v. Meyer Prods. LLC, 14-cv-886-jdp, 2017 WL 1382556 at *4-*5 (W.D. Wisc. Apr. 18, 2017) (Peterson, DJ).

[12] Id. at *4.

[13] Id. (citing SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1354 (Fed. Cir. 2016) (Newman, J., dissenting).

[14] Id. at *4.

[15] Id.

[16] Id. at *5.

[17] Id.

[18] Id.

[19] Id., n. 2.

[20] Id.

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