IPR Estoppel – A Truly Double-Edged Sword

Since its creation by the America Invents Act of 2011, Inter Partes Review (or IPR) has been a valuable tool for current or future patent defendants. However, the risk/reward calculus has changed over the years since the IPR originated. In particular, the estoppel effects of an IPR decision are now a much more important consideration on the risk side of the equation.

The old regime: Multiple Tries to Invalidate a Patent Claim, Under Shaw Industries

Congress intended that IPR’s provide a vehicle for patent challengers to have a participatory “mini-litigation” in front of the Patent and Trademark Office (USPTO), specifically before the newly-created Patent Trial and Appeal Board (PTAB). Previously, challengers could file ex parte reexaminations, which precluded challenger participation after initial reexamination petition. Or the challenger could file an inter partes reexamination, which allowed for some limited participation. Congress intended that IPR’s have fuller participation, but at a price.  

The PTAB’s IPR implementing regulations and practices were designed to parse each “ground” in an IPR petition. The PTAB panel would then institute an IPR on a selective set of grounds from a petition or even only certain patent claims from a selected ground. The PTAB could reduce the scope of the instituted IPR to only certain claims or certain grounds that met the “reasonable likelihood that the petitioner would prevail” standard. 

This practice resulted in a greatly diminished estoppel effect of IPR proceedings. One of Congress’ stated goals of creating the IPR was to potentially streamline litigation.  Accordingly, Congress included a strongly-worded estoppel provision in the law: 

The petitioner in an inter partes review . . . 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 . . . or in a proceeding before the International Trade Commission . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

35 U.S.C. § 315(e)(2) (emphasis added).  

Because the PTAB could pick and choose the grounds/claims to institute, then un-instituted grounds and claims are never fully vetted out in an IPR proceeding. And if the un-instituted grounds and claims are not vetted out, then courts held that there is no estoppel effect as to the un-instituted matters. Under Shaw Industries, the courts essentially limited the estoppel only to the prior art that was actually instituted in the IPR and vetted out in the final written decision. 817 F.3d 1293 (Fed. Cir. 2016).  Art that was included in the petition but not instituted, along with any unraised prior art, was by and large free to use in any litigation invalidity defense. Under this old regime, and perhaps contrary to the legislative intent, a patent challenger did not have to make an agonizing choice between pursuing an anticipation/obviousness defense in litigation or initiating an IPR – it could have done both. 

The current law: IPR Estoppel has teeth

The Supreme Court overruled the PTAB’s partial-institution practice in SAS Institute Inc. v. Iancu (2018), ruling that the IPR statutes’ text required that the PTAB institute the entire petition if it determined that the “reasonable likelihood that the petitioner would prevail” standard based on any ground directed to any patent claim was met. Essentially, the Supreme Court made it an all-or-nothing option for the PTAB on institution of an IPR. 

The SAS decision caused courts to reassess the estoppel provisions. Now that IPR institutions were all-or-nothing, courts came down on the side that the focus was now on the petition, rather than what the PTAB decided to institute. While a complete failure in the petition to get any grounds instituted still does not create estoppel, the courts have decided that now, any prior art that was raised in a petition that was instituted, or the petitioner reasonably could have raised, may be estopped from use by the petitioner in a later court proceeding. In almost all cases, this is a much larger pool of prior art grounds that are estopped than were pre-SAS. Also, though the PTAB would now institute on all grounds in the petition, the Final Written Decision need not opine on each ground instituted. Thus, the scope of the Final Written Decision could be narrower than the Petition. Yet, the estoppel effect is based on the Petition scope. 

Having established this new rule, courts then needed to address the question of what a petitioner “reasonably could have raised.” IPR proceedings are limited to prior art that is printed matter; you cannot raise a “public use” defense in an IPR nor present a physical object as prior art, and former section 102(g) prior art not based on a patent or publication likewise is not available in IPR. 

So now courts turn to “what reasonably could have been raised” and focus on what a reasonable prior art search should have found. Courts have determined that any patent or printed publication that a petitioner actually knew about or that a skilled searcher conducting a diligent search reasonably could have been expected to discover falls under the “reasonably could have been raised” aspect of the estoppel provision. See, e.g., Palomar Techs. Inc. v. MRSI Sys. LLC, 373 F.Supp.3d 322 (D. Mass 2019). This, though, is an intensely factual question. It’s easy when the evidence shows that art in question was actually found by the petitioner’s searches. It’s thornier when there is no such evidence; the party asserting estoppel bears the burden, and needs to show that a skilled searcher conducting a diligent search should have found the reference. A reference that cannot be so shown might also be combinable with a reference that was raised and is otherwise estopped, since this is a new combination of prior art references, which may be deemed obviousness “grounds” that could not have been raised in the IPR.

This test obviously raises unanswered questions. For example, for a search, does the patentee (usually the patentee is asserting the estoppel against the petitioner): (i) have to construct the search queries; (ii) identify the databases that would be searched [i.e., does one do a scorched earth prior art search or replicate the search a Patent Office Examiner might do]; (iii) identify the skill of the searcher [akin to a person of ordinary skill in the art of searching]; (iv) justify that huge costs for a prior art search would still be reasonable? After all, the patentee has every incentive to construct an estoppel argument that has no bounds and unlimited money to conduct the search. And costs matter too.  Often a prior art search strategy involves multiple databases, some of which are free, some which are very costly. Also, searching English language abstracts are cheaper than conducting native foreign language searches using native language speakers/readers. Patent lawyers know that many prior art cases involve the level of access of the publication; i.e., recall the doctoral thesis shelved in foreign libraries were in fact prior art. 

In a later litigation, an estopped piece of prior art also may or may not be combinable with a physical object that is asserted to be prior art, whether under Section 102(g) or otherwise. A physical object cannot be raised in an IPR, because IPRs are limited to patents and printed publications as prior art. Thus, one might initially think that combining a physical object with other prior art, even if that art might be estopped on its own, is permissible. However, Delaware district court Judge Stark (a judge often seen in the many Hatch-Waxman cases) ruled that a physical object can be estopped if there were publications that describe that physical object that could have been raised in the IPR. Wasica Finance GmbH v. Schrader Intl., Inc., 432 F.Supp.3d 448 (D. Del. 2020). Specifically, Judge Stark noted that the statutory language of requirements for an IPR petition mentions both “grounds” and the “evidence” on which the “grounds” are based, while the estoppel statute specifically mentions only “grounds” and therefore even if a piece of “evidence” was not available for IPR purposes one is still estopped from asserting IPR-rejected “grounds” that were based on different, but essentially the same, information carried in that “evidence.” Id. at 445-6. 

Just how far this “grounds” estoppel formulated by the Wasica opinion extends has not been fully explored yet by courts, but regardless, the estoppel effects of an IPR loss by a petitioner are far greater than they were in the earlier days of IPR. If you are considering an IPR, it is now of even greater importance that you (1) obtain high quality prior art searches, (2) if they exist, use available printed publications describing any physical object you might believe to be prior art rather than waiting to use the physical object in a litigation invalidity defense, and (3) be sure you are using your best prior art combinations in the IPR, because the scope of estoppel can extend far beyond the art you actually use in your IPR petition.

How we can help you?

We help clients in IPRs, patent litigation, and appeals. Whether to utilize IPRs to challenge a patent is definitely not a simple decision. One must consider the changing status of the law in this regard, the long turn implications of an IPR challenge including the cost/benefit analysis. We can help you conduct that analysis and make a better informed decision.  

About Upadhye Tang LLP 

Upadhye Tang LLP is an IP and FDA boutique firm concentrating on the pharmaceutical and medical device spaces. We help clients with navigating the legal landscape by helping on counseling and litigation. Clients call us to help move drug and device approvals along and to represent them in IP and commercial litigation. Call Shashank Upadhye, 312-327-3326, or by email: shashank@ipfdalaw.com, for more information. 

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