The Supreme Court has declined to step into a dispute over 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. This issue has been simmering since a precedential Federal Circuit decision last February that significantly expanded the reach of such estoppel: in Caltech v. Broadcom, it held 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 Court’s June 26 denial of a certiorari petition from codefendants Apple and Broadcom effectively upholds Caltech with respect to estoppel. Yet that decision is far from the last word on the issue: the Federal Circuit has since clarified other uncertainties with respect to estoppel that were not resolved in Caltech, while a USPTO rulemaking package proposed earlier this year floats even larger changes.
The Litigation Below: Federal Circuit Resolves District Court Split over IPR Estoppel, Overruling Shaw
The relevant 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.
That second category of estoppel was curtailed by the Federal Circuit in its 2016 Shaw Industries Group v. Creel Automated Systems opinion. In Shaw, the court—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”. However, the holding led to a split among district courts over whether estoppel applied to unpetitioned claims, on which Shaw was silent. Some held that unpetitioned claims could not be raised “during” an IPR—thereby not subjecting them to estoppel—because “during IPR” referred to the period after institution, when the USPTO has “already selected the specific invalidity grounds for consideration”, thereby giving no “reasonable opportunity” for the petitioner to raise any other invalidity grounds during the “actual ‘IPR stage’” (as summarized in Caltech). Others held that this narrower reading 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 later 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)).
In Caltech, a Federal Circuit majority finally resolved that split, concluding that SAS had indeed undercut Shaw: In SAS, the majority held, the Supreme Court had both eliminated the practice of partial institution and confirmed “that it is the petition, not the institution decision, that defines the scope of the IPR”. As a result, the majority “overrule[d] Shaw and clarif[ied] 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 decision’s original wording was interpreted by some stakeholders as establishing that an IPR against even one claim of a patent could lead to estoppel as to all claims of that patent. However, the court subsequently modified the opinion to clarify that Caltech extends estoppel to grounds that “reasonably could have” been included but not to all claims. The full Federal Circuit then denied the defendant-appellants’ petition for en banc and panel review in May 2022.
The defendants asked the Supreme Court to revisit that ruling last September, arguing that by overruling Shaw the Federal Circuit had adopted an “atextual” and overly broad view of the governing statute that could “allow invalid patents to avoid full scrutiny”. The California Institute of Technology (Caltech) countered that the Federal Circuit’s reading had been both correct and consistent with the “statute’s legislative purpose and history” with respect to its intended purpose of deterring “abusive practices of serial litigation”. In January 2023, the Supreme Court then issued a Call for the Views of the Solicitor General (CVSG). US Solicitor General Elizabeth Prelogar filed the requested brief representing the views of the US government in May, arguing in part that the Federal Circuit’s interpretation of the law was correct in light of SAS, which establishes that all petitioned grounds “will actually be raised in any instituted review”. As noted above, the Supreme Court denied certiorari on June 26.
More on the Caltech decision’s holding on estoppel, and the ensuing Supreme Court appeal (including certain amicus briefs), can be found here: “Supreme Court Seeks Government’s Views on Ruling that Broadened IPR Estoppel” (January 2023).
Meanwhile, the litigation below remains active, though at a relative standstill, over two other key issues—namely, damages and infringement. In the same opinion as its estoppel ruling, the Federal Circuit also vacated a $1.1B award for Caltech after determining that the district court was wrong to allow a “legally erroneous” two-tiered damages theory that applied separate hypothetical negotiations to the sale of the same chips, additionally vacating its infringement verdict as to one of the three tried Wi-Fi patents. The appellate court ordered new trials on both issues.
However, on May 1, Central District of California Judge George H. Wu vacated the date for a damages retrial that had been set for June 6 after the defendants raised issues regarding standing. In particular, they alleged that Caltech lacked Article III (constitutional) standing (dealing with a court’s power to hear a case, wherein a party must have suffered an injury redressable by the court) to assert two of the patents-in-suit due to an exclusive license agreement in which it purportedly conveyed substantial rights in those patents to Cellular Elements LLC, an entity controlled by Intellectual Ventures LLC. They argue that a subsequent amendment to the license that removed those two patents did not “convey back to Caltech the right to recover for past damages”. Additionally, they allege under facts largely redacted that the university lacks statutory standing, which partly addresses whether a plaintiff may file a claim under a particular statute. An evidentiary hearing was held on the standing issue on June 6, and the parties are due to submit proposed Findings of Fact and Conclusions of Law on issues stemming from that hearing by July 14.
For more on the Federal Circuit’s decision and the underlying litigation as relevant to damages and infringement, see “Federal Circuit Trims Infringement Verdict Against Apple and Broadcom and Nixes $1.1B Damages Award in Caltech Wi-Fi Suit” (February 2022).
Estoppel Since Caltech: Federal Circuit Issues Clarifying Decision; USPTO Releases Controversial Reform Package
As that litigation moves forward on other issues, the Federal Circuit has since released a decision that clarifies estoppel issues not addressed in Caltech. In its April Ironburg Innovations v. Valve opinion, the court addressed two underlying considerations. The first, the question over the proper standard for determining whether a party “reasonably could have raised” an argument in its PTAB petition, had not been fully dealt with before by the appellate court but was not disputed by the parties here, who both agreed with the district court that the standard covers any grounds “a skilled searcher conducting a diligent search reasonably could have been expected to discover”. The Federal Circuit adopted this position as well, concluding that this standard correctly delineates which grounds the petitioner “reasonably could have raised” in its petition.
Additionally, the Federal Circuit addressed the issue of which party holds the burden of proof under this standard, noting that the district court appeared to have treated petitioner Valve as holding that burden. However, the appellate court instead agreed with the petitioner that the “burden of proving, by a preponderance of the evidence, that a skilled searcher exercising reasonable diligence would have identified an invalidity ground rests on the patent holder, as the party asserting and seeking to benefit from the affirmative defense of IPR estoppel”. The Federal Circuit treated this conclusion as “consistent with the general practice that a party asserting an affirmative defense bears the burden to prove it”. In early June, the full court declined to rehear the case.
Beyond the courts, stakeholders are also debating an extensive PTAB reform proposal from the USPTO that could, in part, expand IPR estoppel even further. In late April, the agency released an Advance Notice of Proposed Rulemaking (ANPRM) that, in part, floats a potential new standard that could bind far more than just a petitioner’s real party-in-interest or privy by the outcome of prior petitions. The ANPRM proposes the creation of a “substantial relationship” test that would in part cover instances where “multiple entities are defending infringement claims in district court litigation”, under which the USPTO notes that parties may pool their resources to file a single challenge a patent, and would also bar certain third-party organizations from filing IPRs.
This is one of many aspects of the ANPRM that have proven controversial, as shown by comments submitted in response—some of which argue that the “substantial relationship” test would violate the AIA, as the statute does not include a standing requirement (and for which one was initially considered, but rejected). Some arguing from the licensee/petitioner side have further contended that this test is problematic for its breadth; Amazon, for instance, argues that it encompasses “at least litigation co-defendants and parties that are in a supplier-customer relationship”. Others, including Apple, Ciena, and Red Hat, have asserted that the rule could encourage gamesmanship by incentivizing patent owners to target under-resourced alleged infringers, in the hope that an inadequate and thus unsuccessful IPR could reduce the options of subsequent defendants to challenge the same patent’s validity at the PTAB.
For a deep dive on comments submitted in response to the ANPRM, see “Public Comments Reveal Fault Lines over USPTO’s NHK-Fintiv Rulemaking Proposal” (June 2023).
