US patent law gives defendants a variety of options for challenging patent validity within and outside district court, including through administrative proceedings brought before the USPTO. Yet when a party’s validity challenge reaches a final decision, that party is then limited in its ability to subsequently take certain related actions, including relitigating certain validity arguments in another proceeding—a principle known as estoppel that is reflected in the America Invents Act (AIA) and various regulations issued by the USPTO under that law. The Federal Circuit has now issued a new precedential decision, in SoftView v. Apple, that upheld one such regulation, one that prevents patent owners from “obtaining” claims that are “not patentably distinct” from claims invalidated by the Patent Trial and Appeal Board (PTAB)—a broader estoppel standard than the one that applies in district court. While the appellate court also found that the USPTO was within its authority to issue that regulation in the first place, it additionally determined that the PTAB had been wrong to find that the provision also bars “maintaining” existing claims that meet this same criterion.

The regulation in question (37 C.F.R. § 42.73(d)(3)) stems from a provision of the AIA, 35 U.S.C. § 316(a)(4), that instructs the USPTO director to establish regulations “governing inter partes review . . . and the relationship of such review to other proceedings under this title”. That regulation, which generally relates to the application of estoppel in USPTO proceedings, provides the aforementioned limit on “obtaining” claims as part of a broader provision that prevents patent owners from taking actions “inconsistent” with an adverse judgment by the PTAB. In contrast, common law collateral estoppel, also known as issue preclusion, applies only where a prior adjudication addressed the “same issue”, which in this context means that where a claim is invalidated in light of prior art, a patent owner will not be precluded from litigating a different claim unless it is essentially identical to the first claim.

Prior Litigation: One of the First IPRs Ever Filed Triggers Setbacks for Previously Filed Reexams

In the litigation below, Section 42.73(d)(3) was applied in the context of an inter partes review (IPR) brought by Kyocera (IPR2013-00007) in October 2012, one of the first wave of petitions filed soon after AIA reviews first became available the month prior. The IPR came in response to litigation filed by NPE SoftView LLC and was preceded by a series of ex parte and inter partes reexaminations filed by Apple and Motorola Mobility (prior to its acquisition by Google and later Lenovo) that were stayed pending the outcome of the IPR. In March 2014, the PTAB issued a final written decision in which it invalidated all 18 petitioned claims from the challenged patent (7,461,353).

After the stay was lifted in November 2015, SoftView proposed 108 amended claims in one of the ex parte reexams filed by Apple, claims that the USPTO then found patentable over prior art—though the Federal Circuit notes that “to the extent they differ more than trivially from the canceled claims, the amended claims merely combine limitations from multiple canceled claims”. In the inter partes reexams, the examiner found the “overwhelming majority” of claims to be unpatentable under Section 103; while the PTAB overturned that determination for lack of evidence, it separately rejected all claims under 37 C.F.R. § 42.73(d)(3), finding each to be “either essentially the same as a canceled claim or merely a combination of limitations that had previously been invalidated on obviousness grounds in the IPR”, concluding as a result that the claims were not “patentably distinct” from those invalidated in the IPR. Notably, the PTAB reached this conclusion for both the proposed amended claims and those already issued. SoftView appealed in October 2022 (23-1005), and USPTO Director Kathi Vidal intervened in defense of the regulation and the PTAB’s application of it in March 2023.

The Federal Circuit’s Ruling on Appeal

–  The PTAB’s Application of “Patentably Distinct” Was Consistent with the Regulation at Issue

Ruling on appeal on July 26, the Federal Circuit began with SoftView’s argument that the PTAB had misapplied the term “patentably distinct”, as used in the regulation, in a manner that gave the IPR decision broader preclusive effect than it would have under an application of common law collateral estoppel.

Here, the court noted that the Board had applied the same definition of “patentably distinct” as the one used in “obviousness-type double patenting cases and in interference proceedings”: as barring “a patent owner from obtaining a claim that would be anticipated by, or obvious in light of, a previously canceled claim” (emphasis added). Furthermore, since “‘patentably distinct’ has a specialized meaning in patent law”, the Federal Circuit presumed “that the PTO intended to adopt that meaning when it promulgated the regulation” under applicable Supreme Court precedent concerning the use of “[i]dentical words used in a given field of law”. This is particularly the case, held the Federal Circuit, in light of the fact that in all three relevant contexts (this regulation, obviousness-type double patenting, and interference proceedings) the term is used for a similar purpose: to prevent patent owners from “exploiting patent claims that are not materially distinguishable from claims that have either expired or been invalidated in prior proceedings”.

On this point, the Federal Circuit rejected SoftView’s argument that the PTAB should instead have read “not patentably distinct” to mean “substantially the same”, which was the language in an earlier draft of the statute and, per the patent owner, would better reflect common law collateral estoppel principles. However, the court found to the contrary that in context, these phrases mean the same thing: It determined that the change from the original language to the current phrasing was meant to clarify, by replacing a term that lacks a specialized meaning in patent law (“substantially the same”) with an equivalent phrase that has one (“not patentably distinct”), also citing Federal Circuit caselaw that treats the terms as having the same meaning. Thus, the court found that the switch proposed by SoftView would not help its position, as the PTAB would have reached the same result as to estoppel with either interpretation.

The Federal Circuit was also not convinced by SoftView’s argument that “[S]ection 42.73(d)(3)(i) should be construed as adopting common law principles of collateral estoppel”. This contention had been based on the USPTO’s comments during the preceding notice-and-comment rulemaking that the proposed regulation was consistent with common law, among other sources of law. This “position [was] unpersuasive”, per the court, because the PTAB’s analysis comparing the challenged claims with those previously invalidated “paralleled” the one that would be performed in comparing the challenged claims to prior art. Moreover, the court found that the underlying purpose of that analysis by the PTAB was to determine whether the adjudication of an issue in a prior case barred it from being relitigated in a subsequent case, observing that under Federal Circuit caselaw, this is the “same question” addressed by the common-law rule.

–  The USPTO’s Issuance of the Estoppel Regulation Was a Proper Use of its Rulemaking Authority

That said, while finding that the PTAB’s application of Section 42.73(d)(3) was consistent with the regulation’s text, the court determined that the question of whether it was proper for the regulation to exceed the common-law rule— by “calling for a comparison between the claims an applicant is ‘obtaining’ and the ‘finally refused or canceled claim’”—depended on whether the USPTO had the authority to issue the regulation in the first place.

The Federal Circuit held that the USPTO did in fact have this authority, agreeing with Director Vidal and the appellees that Section 42.73(d)(3) was “lawfully promulgated” under the rulemaking authority established by 35 U.S.C. § 316(a)(4), which (as noted above) empowers the USPTO director to set regulations “establishing and governing inter partes review under this chapter and the relationship of such review to other proceedings under this title”. While acknowledging that the statute providing the USPTO’s general authority to issue regulations governing its proceedings (35 U.S.C. § 2(b)(2)(A)) does not allow it to promulgate substantive rules, the court held that Section 316(a)(4) provides a separate source of rulemaking power to issue such regulations by “refer[ring] broadly to regulations ‘governing inter partes review and the relationship of such review to other proceedings’ before the PTO”, and thus does not merely extend to procedural rules. Here, the court found that barring actions “inconsistent” with an adverse judgment by the PTAB “is clearly directed to ‘governing inter partes review’ and the ‘relationship of such review to other proceedings’ before the PTO”, particularly in light of the fact that one of the regulation’s stated purposes is to “ensure the integrity of the trial procedures”. Since it would undermine the outcome of an IPR to allow claims to issue that are not patentably distinct from invalidated ones, the regulation’s estoppel provision properly falls within the aforementioned rulemaking authority, the court determined.

That said, the Federal Circuit noted in a footnote that the USPTO’s “authority under Section 316(a)(4) is not unbounded”, merely empowering it to regulate IPR proceedings and not legislate new patent laws. The court explicitly stated that it was not here addressing the “exact limits” of Section 316(a)(4), and that it would need to do so in a case with dedicated briefing on that issue—importantly, briefing that addresses the impact of the Supreme Court’s June 28 opinion in Loper Bright Enterprises v. Raimondo. That landmark decision overturned a 40-year-old doctrine called Chevron deference that had previously given many agencies wide latitude to set certain regulations. While Chevron required courts to defer to federal agencies’ interpretation of the laws governing them when those statutes were ambiguous, Loper Bright now provides that no such deference is required. Stakeholders have observed that Loper Bright could, at the very least, expose the USPTO’s regulatory efforts to setbacks in the form of litigation, even if the remaining, lesser standard of deference still standing (Skidmore) could give the USPTO a tool to defend regulations challenged under the Supreme Court’s new holding.

For a deeper dive on Loper Bright and its potential impact on the USPTO, see “As USPTO Continues Rulemaking Push, Supreme Court Eliminates Chevron Deference” (July 2024).

–  The PTAB Erred by Extending the Estoppel Regulation to Include Maintaining Existing Claims

The Federal Circuit ended its analysis by holding that it “disagreed” with the PTAB’s determination that Section 42.73(d)(3)(i) barred patent owners from not just “obtaining” new claims that are “not patentably distinct” from those invalidated by the PTAB, but also “maintaining” existing claims with that same issue: “By its terms, the regulation applies to ‘obtaining’ a claim—not maintaining an existing claim”. As a result, the Federal Circuit vacated the PTAB’s decision rejecting the SoftView claims already issued but affirmed as to the “amended claims”.