The US Supreme Court has asked for the government’s take on a closely watched appeal tackling the proper scope of inter partes review (IPR) estoppel, which bars (or estops) a defendant from raising certain IPR validity arguments in subsequent district court challenges. Last February, the Federal Circuit held in Caltech v. Apple and Broadcom that a petitioner is estopped not just from later asserting arguments actually raised in a successful petition, but also from including those arguments that they “reasonably could have” included. The defendants challenged that decision in September, arguing that by overruling its 2016 Shaw Industries Group v. Creel Automated Systems opinion—resolving a district court split over the application of IPR estoppel—the Federal Circuit had adopted an “atextual” and overly broad view of the governing statute. On January 17, the Supreme Court issued a Call for the Views of the Solicitor General, Elizabeth Prelogar, in that appeal, indicating that the Court may be closely scrutinizing the case. Meanwhile, the parties have continued to debate the merits of the Federal Circuit’s decision, with one amicus filing a brief in support of the petitioners.

The Litigation Below: SAS Institute Undermined Shaw, Rules Federal Circuit

The estoppel provision of the America Invents Act (AIA), 35 USC Section 315(e)(2), was designed to limit parallel litigation by curtailing petitioners’ ability to reuse certain validity arguments raised before the Patent Trial and Appeal Board (PTAB). Under Section 315(e)(2), a petitioner in an IPR that reaches a final decision (along with its real-party-in-interest or privy) may not assert, either in district court or before the International Trade Commission (ITC), an invalidity claim based “on any ground that the petitioner raised or reasonably could have raised during that” IPR. For the first several years after the AIA took effect, the PTAB followed a practice of partial institution in AIA reviews, under which it could choose to deny institution for some but not all invalidity grounds raised in a petition. This left three categories of grounds that could be subject to estoppel under the language of Section 315(e)(2): petitioned grounds instituted by the PTAB, those petitioned but not instituted, and those not raised in the petition in the first place.

However, that second category of estoppel was curtailed by Shaw. In that decision, the Federal Circuit—weighing IPR invalidity grounds not instituted as the result of a partial institution decision—ruled that estoppel only applies to grounds for which the PTAB instituted trial, concluding that an “IPR does not begin until it is instituted”. The holding led to a split among district courts addressing whether estoppel applied to unpetitioned claims. While Shaw was silent as to that category, some courts subsequently held that “those non-petitioned grounds could not reasonably have been raised during IPR because during IPR, the PTAB has already selected the specific invalidity grounds for consideration through its grant of the IPR petition. Under this logic, a petitioner would have no reasonable opportunity to raise new invalidity grounds in the midst of the actual ‘IPR stage’ of IPR proceedings” (as summarized by a district court ruling addressed in Caltech; emphasis in original). Other courts have rejected that logic, countering that “only allowing estoppel to attach to the invalidity grounds actually considered and ultimately addressed in the PTAB’s Final Written Decision would render the phrase ‘reasonably could have raised’ in Section 315(e)(2) largely superfluous” (as also recounted in the district court Caltech ruling).

Further complicating matters was the US Supreme Court’s 2018 decision in SAS Institute v. Iancu, which did not overrule Shaw but barred the practice of partial institution upon which the Shaw decision had been based. Other courts have subsequently held that since SAS effectively eliminated the circumstance where there are noninstituted grounds in an otherwise instituted IPR, the estoppel provision must refer to grounds not included in the IPR petition “for the words ‘reasonably could have raised’ to have any meaning at all” (here, the District of Massachusetts in a ruling from August 2018 (1:15-cv-13488)).

The Federal Circuit reviewed the decisions underpinning this split in Caltech, in affirming the Central District of California’s ruling that Apple was estopped from raising certain invalidity grounds in district court based on a prior set of IPRs. This review led the majority to conclude that SAS had indeed undercut Shaw: In SAS, the majority held, “the Supreme Court made clear both that there is no partial institution authority conferred on the Board by the America Invents Act and that it is the petition, not the institution decision, that defines the scope of the IPR”. Here, the panel asserted that it had the authority to revisit Shaw without en banc review even though SAS did not explicitly overrule it because the latter holding irreconcilably undermined the legal basis of the former. That basis for a panel reversal of Shaw, argued the majority, satisfies even the standard set by the “Ninth Circuit, which has one of the stricter approaches to panel overruling”.

As a result, the majority took the “opportunity to overrule Shaw and clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition”. The full Federal Circuit denied the defendant-appellants’ petition for en banc and panel review in May 2022.

The Petition for Certiorari: The Federal Circuit Erred by Departing from the Statute’s Plain Meaning

In a September 2 petition for certiorari (2022-0203), Apple and Broadcom argued that the Federal Circuit majority’s interpretation of Section 315(e)(2) is “erroneous” and “essentially rewrites the statute”, in part by ignoring the plain meaning of language attaching estoppel to grounds raised “during” the IPR. Per the petitioners, an IPR does not truly begin until the USPTO director institutes trial: “Under this statutory scheme . . . the submission of the petition is distinct from and precedes the inter partes review itself”. They argue that the Supreme Court has made this same distinction: In Oil States Energy Services v. Green’s Energy Group, which addressed the constitutionality of IPR, the Court used language referring to what the parties may do “during” an IPR after describing the PTAB’s validity examination as occurring “once inter partes review is instituted” (with similar language cited from SAS Institute).

Furthermore, Apple and Broadcom assert that “[t]he plain meaning of ‘during’ does not include actions ‘before’ an inter partes review even begins”, explaining that the plain meaning of the term “during” must be followed because it is not defined in the statute. As a result, the petitioners contend that estoppel “applies only to grounds that were raised or reasonably could have been raised between the point at which the PTO Director institutes inter partes review and the point at which either the review is dismissed or the Board issues a final written decision resolving the patentability of the challenged claims”.

This interpretation is further supported by surrounding statutory language, they argue: for example, Section 314(c) requires that an institution decision “include the date on which the review shall commence” (emphasis in petition). They assert that it would be “incongruous” with those provisions to interpret “during”, as used in Section 315(e)(2), as referring to a period of time before an IPR “shall commence”. The petitioners also observe that similar language can be found in Section 316(d)(1), which allows a patent owner to file a motion to amend “[d]uring an inter partes review instituted under this chapter” (emphasis in petition). The Federal Circuit thus violated the rules governing statutory interpretation by ignoring this plain meaning and reaching the opposite result, they conclude.

That conclusion is further justified, the petitioners continue, through language treating the “request and the review [as] distinct steps”, including references in Section 3.11 to IPR petitions as “requesting . . . review”, while Section 315(a) “used both ‘inter partes review’ and ‘petition’ in the same sentence and treated those terms as distinct”. This distinction is “also underscored by the statute’s assignment of different decisionmakers for these distinct stages”: the director for institution, and the PTAB for conducting an instituted IPR and issuing a final decision. That said, the petitioners acknowledge that “these lines have blurred in practice” due to the director’s delegation of the institution power to the PTAB.

Additionally, Apple and Broadcom argue that the Federal Circuit further erred by “attempting to justify” this position based on SAS Institute, as that decision “construed Section 318(a), a different provision with different language”. That opinion provides that where an IPR is instituted and not dismissed, the PTAB “must address every claim the petitioner has challenged” (emphasis in SAS Institute decision). Yet the petitioners observe that “[i]t said nothing about the language of Section 315(e) or statutory estoppel”.

Moreover, the petitioners assert that the Federal Circuit was wrong to argue that its “atextual interpretation of Section 315(e) ‘is the only plausible reading of ‘reasonably could have raised’ and ‘in the IPR’ that gives any meaning to those words”, as noted above. This is incorrect, they allege, because “[e]ven after SAS Institute, Section 315(e) estoppel still applies to instituted grounds the petitioner ‘reasonably could have raised during th[e] inter partes review,’ but elects not to pursue after institution”. For instance, they explain that there are circumstances where the Board institutes on one ground but criticizes other arguments (those that would have ostensibly been denied institution under the pre-SAS partial institution practice) that the petitioner then chooses to abandon based on the Board’s “initial feedback”. It does not matter that this may not be a common occurrence, they argue: a court does not have to look beyond a statute’s plain language as “long as the statutory scheme is coherent and consistent’” (quoting SAS Institute; internal citation omitted). “Here, it is possible to give meaning to every word of the statute while still remaining faithful to its plain meaning. The Federal Circuit was mistaken when it concluded otherwise”.

Above all, the petitioners underscore that the Federal Circuit may not “displace the statute’s plain text” in an “attempt to give meaning to the phrase ‘reasonably could have raised’” (citation omitted). Although they note that courts should generally avoid statutory interpretations that “render language superfluous”, they explain that the overriding “cardinal” rule is that the plain language of the statute is presumed to reflect Congressional intent, while the rule against surplusage should not be applied when it would result in ambiguity, if the resulting reading would be “repugnant” to the rest of the statute (citation omitted), or if such a reading would give the statutory language an “unusual meaning”.

Lastly, the petitioners argued that certiorari is warranted due to the potentially sweeping implications of the Caltech ruling—which they argued would “allow invalid patents to avoid full scrutiny” and thus threaten the public’s interest in keeping “patent monopolies . . . within their legitimate scope” (citing Oil States). They note that the case has already had an impact, as both the Federal Circuit and district courts have applied Caltech’s expanded version of IPR estoppel in litigation before them. More broadly, they note that the extent that the Supreme Court has already paid attention to the IPR system reflects “the novelty of the legal questions the statute has generated”, especially since the question presented in this case “has ‘fiercely split’ district courts for years” (citation omitted). They assert that the Court’s focus on IPR also reflects its “importance to the functioning of the patent system”, which is of particular significance due to the “high stakes of patent litigation”, as shown by the $1.1B damages verdict originally entered by the Central District of California and reversed in the Caltech opinion (a judgment not at issue in this appeal).

Caltech’s Opposition Brief and the Petitioners’ Reply

The California Institute of Technology (Caltech) has countered Apple’s and Broadcom’s reading of Section 315(e)(2), arguing in its opposition brief that the Federal Circuit had “correctly interpreted and applied the statute’s plain text, which precludes parties from raising in district court invalidity grounds they knew of and thus ‘reasonably could have raised’ in a prior inter partes review”.  That reading, the respondent asserts, is consistent with the “statute’s legislative purpose and history”, as the estoppel provision was intended to “curtail[] abusive practices of serial litigation by which challengers attacked the same patent claims repeatedly both in court and in administrative proceedings”. In contrast, the petitioners’ countervailing reading of the statute is “unnatural and illogical”, Caltech contends, citing the concerns over surplusage that Apple and Broadcom addressed in their brief.

The university argues that the petition should also be denied for two other reasons. One is that, according to Caltech, the challenged decision is allegedly of “extremely narrow application”. The university alleges that it applies only in cases meeting all of the following criteria: where the PTAB rejects an instituted ground in a final decision, where “the petitioner knowingly withheld other second-string invalidity grounds from its petitions”, where it then successfully asserts those grounds in a later proceeding, and where that invalidity ruling survives appeal. Per Caltech, the number of cases meeting those criteria is “is vanishingly small”. The other reason is that according to the respondent, this case is a “poor vehicle” for determining the scope of the estoppel provision—due to its interlocutory posture, as a retrial on damages is pending; because Apple allegedly could have raised the grounds later raised in district court before the PTAB, meaning that the Board thus “did not block” it from doing so; and because “the Federal Circuit has not yet had the opportunity to consider or address Petitioners’ conjectural scenarios in which the PTAB supposedly might prevent a party in the future from raising all possible invalidity grounds by deeming petitions overlong or multiplicative”.

Apple and Broadcom have pushed back against Caltech’s arguments on statutory interpretation and “cert-worthiness” in their reply. As to the former, they point out that Caltech has not specifically contradicted their argument that the phrase “‘during that inter partes review’ refers exclusively to the period after the Director has instituted inter partes review”, rejecting the university’s position as merely an improper attempt to “rewrite the statute” in the same erroneous manner as the Federal Circuit. Caltech’s surplusage argument fails, they continue, because the presumption against surplusage may only be applied where the “competing interpretation gives effect to every clause and word of a statute” (citing Microsoft v. i4i), whereas “the Federal Circuit’s atextual interpretation effectively reads the words “during that inter partes review” out of the statute”. The petitioners further argue that Caltech’s citations to the legislative history are both an improper attempt to rewrite the statute as well as unconvincing, as the university relies on “vague floor statements from legislators” pushing alternative views of estoppel not reflected in the final statute, allegedly misconstrues the core intent behind the AIA (the purpose of which, they counter, is to “encourage administrative patent challenges”), and raises “inapt analogies” to IPR’s predecessor, inter partes reexamination.

With respect to cert-worthiness, the petitioners also rejected Caltech’s framing of the issue as narrow and infrequently arising—countering that the issue is actually one that could arise frequently, as 80% of IPRs involve parallel district litigation. Beyond its economic significance, the petitioners argue that Caltech has undersold the decision’s impact on the patent system, explaining it will unduly “compel many more parties to withdraw defenses without awaiting a court order”.  Moreover, they assert that Caltech has “underestimate[d] the burden” the Federal Circuit’s decision will have on district courts evaluating estoppel: Now, they must not only evaluate what could have been asserted in the petition being addressed, but must also “decide a difficult counterfactual question predicting how the Director would have exercised the Director’s broad discretion to institute a different petition” (emphasis in reply). Another undue burden not addressed by Caltech, the petitioners add, is the one that the Federal Circuit now “forces on a cautious petitioner: either (1) forgo inter partes review, or (2) expend resources filing a multitude of petitions including every possible invalidity ground—on pain of estoppel—knowing that the agency considers such a barrage to be burdensome and may deny institution as a result”.

Amicus Briefs

The case has also attracted two amicus briefs, beginning with one filed on October 6 by trio of law professors: Christa J. Laser of the Cleveland-Marshall College of Law, Mark A. Lemley of Stanford Law School, and Timothy Murphy of the University of Idaho College of Law. The professors cite their “interest in the proper interpretation and application of patent law statutes” and argue that the Federal Circuit’s reading of the estoppel statute “is inconsistent with the statutory text and the canon of consistent usage”. In particular, they argue that the proper reading is the same one advanced by the petitioners: that the phrase “during that inter partes review” refers to “the time period between institution and final decision”, citing statutory language that distinguishes the process of deciding whether to institute from the remainder of the IPR, language that refers to the date when the IPR “shall commence”, and language stating that the “length of review” is the “time between the institution . . . and . . . final written decision”.

The professors also raise questions of “procedural fairness” raised by the Federal Circuit’s broad interpretation of the estoppel provision. Specifically, they note that petitioners must work within strict page limits that prevent them from raising all potential invalidity arguments, which may later force them to face “a billion-dollar infringement verdict on a patent where legitimate grounds for invalidity are barred from consideration despite never being decided before”. Such “future proceedings” may also be further complicated by the need to determine “what prior art a petitioner should have known about at the time of its petition”.

The second amicus brief was filed the following day by Unified Patents, which noted the aspects of its business that involve the filing of IPRs against NPE patents and cited its interest in “ensuring that petitioners and patent owners have a final, conclusive interpretation of the estoppel provisions”. In contrast to the law professors’ brief, Unified takes no position on the proper interpretation of the statute. Rather, its brief focuses on the need to conclusively resolve the uncertainty over this issue one way or the other: “At this point, it is better to have a rule firmly established, regardless of what the rule is, than to have dueling interpretations that linger in the law. Only this Court can provide that surety”.

For more on the Caltech decision, including details on the portion not focused on IPR estoppel, see “Federal Circuit Trims Infringement Verdict Against Apple and Broadcom and Nixes $1.1B Damages Award in Caltech Wi-Fi Suit” (February 2022).