Prepare for More Estoppel if the Supreme Court Reverses Federal Circuit on Partial IPR Institutions

On May 22, 2017, the Supreme Court granted certiorari in SAS Institute v. Lee to determine whether the Patent Trial and Appeals Board (“Board”) is required by statute to institute every claim challenged in a petition for inter partes review (“IPR”) if any claim in the petition is instituted. Based on the Federal Circuit’s recent track record at the Supreme Court, the Supreme Court will likely reverse the Federal Circuit and, this time, require that institution become an all-or-nothing decision. If this reversal happens, then estoppel due to IPR proceedings will become more extensive, and defendants will need to consider strategies for minimizing unwanted estoppel.

The PTAB currently institutes IPRs on a claim-by-claim basis, resulting in partial institution decisions where some claims are instituted and others are not. Partial institutions are not uncommon. According to Docket Navigator, the PTAB issued partial institutions 50% of the time in 2013 and 23% of the time in 2016. Based on these partial-institution rates, the Supreme Court’s decision will have a significant impact on AIA practice by creating estoppel in situations where it does not currently apply.

When the PTAB addresses a claim in a final written decision, 35 U.S.C. § 315 estops a petitioner, and a party in privity with the petitioner, from challenging that claim “on any ground that the petitioner raised or reasonably could have raised” in the IPR. The estoppel provision is broad—once the PTAB finds a claim not unpatentable in a final written decision, the statute bars the petitioner, with a few exceptions, from using most written material (e.g., patents or printed publications) to attack validity in a district court litigation.

Partial institutions lessen the value of estoppel because the petitioner avoids estoppel on claims that were challenged but not instituted. The PTAB never issues a final written decision for these challenged-but-not-instituted claims. And because estoppel only applies to claims receiving a final written decision, these non-instituted claims escape the estoppel statute See, e.g., Shaw Industries Group v. Automated Creed Systems, 817 F.3d 1293, 1300 (Fed. Cir. 2016). In effect, the PTAB’s current practice saves a petitioner from estoppel on claims it had little chance of invalidating. Thus, under the current practice, a petitioner currently only risks estoppel on claims that it stands a good chance of invalidating. But if the Supreme Court decides as expected, estoppel will attach to all challenged claims of an instituted IPR. Final written decisions will more often include claims found valid, and a petitioner will no longer be able to avoid estoppel for some claims by relying on the PTAB to sort strong challenges from weak ones at the institution stage.

Defendants in patent litigation will therefore need to carefully choose which claims to challenge in IPR proceedings. For some defendants, avoiding estoppel may be more desirable than pursuing IPR of a claim when invalidity arguments strengthen non-infringement positions or play better to a jury than to a judge. However, defendants who choose to challenge a claim in an IPR could mitigate the likelihood of estoppel by grouping claims according to their likely validity and filing a separate petition directed to each group.

In fact, setting aside all other considerations, a defendant in an all-or-nothing institution framework could minimize estoppel by addressing each claim in a separate petition. Each claim would be instituted on its own merits, and under Shaw estoppel would be avoided for each claim the PTAB declined to institute, giving the petitioner a second chance on some of its weakest invalidity positions. In most instances, this approach will not be practical—filing a separate petition for each claim would be expensive and would likely not be permitted by the PTAB. See, e.g., Blue Coat v. Finjan, IPR 2016-01441, paper 14 at 10-12 (PTAB Jan. 23, 2017) (denying institution of one of seven petitions directed to a patent, in part because the petitioned claims depended from claims addressed in other petitions and the prior art used was largely duplicative of that used in the other petitions). However, the general principle of filing more petitions that each address fewer claims could still be used to minimize estoppel. This strategy also has the advantage of providing more pages to thoroughly address each claim.

For example, a petitioner could group claims according to the strength of the invalidity arguments and file a petition directed to each group. If a defendant is able to accurately evaluate its case, claims identified as “likely valid” are less likely to be instituted if they are grouped together than if they were filed with claims identified as “likely invalid,” minimizing the risk of estoppel. This approach may be particularly well-suited when the validity of a group of claims largely depends on one or more claim-construction arguments unique to those claims. Those claims could be addressed in their own petition: if the defendant’s claim construction arguments are successful, then institution and invalidity are likely; if the claim construction arguments do not succeed, then both institution and estoppel may be avoided.

The utility of the above strategy depends on a defendant’s ability to accurately identify how likely the PTAB is to institute each challenged claim. The strategy will also work best when there is a clear difference in the relative strength of invalidity arguments among claims so that a defendant can meaningfully group them. Those conditions may not always be present, such as when reasonable arguments exist both for and against invalidity of the challenged claims. A defendant considering IPR should therefore be careful to weigh the potential benefits of breaking one petition into several against the potential downsides.

One obvious downside of this strategy is increased cost. Another potential downside is it may decrease the likelihood that concurrent district-court litigation is stayed due to an IPR. For example, some district courts base stay decisions on the ratio of instituted claims to the claims at issue in litigation. But the goal of filing multiple petitions is to decrease the likelihood of estoppel by avoiding institution of claims the PTAB will likely find valid. Fewer instituted claims may make some district courts less likely to stay a corresponding litigation.

A defendant considering filing several petitions to address groups of claims will therefore need to decide whether the odds of avoiding estoppel outweigh cost considerations and a potentially reduced likelihood of stay. Estoppel concerns will often take precedence, given the severity of the estoppel provision and the significant partial-institution practice that will no longer be permitted the Supreme Court’s decision.

The Author

Jason German

Jason German is an associate in Baker Botts's Intellectual Property group, where he serves clients as a creative advocate and practical advisor in a variety of intellectual property practice areas across a wide range of technological fields. In particular, Mr. German has significant experience in patent litigation, patent prosecution and pre-litigation consulting for a diverse set of clients.

For more information or to contact Mr. German, please visit his Firm Website Page.

Jason German

Wayne Stacy is a partner in Baker Botts's Intellectual Property group with twenty years of experience litigating high stakes patent and trade secret cases. He is skilled in competitor-against-competitor cases where injunctions and large damages are at issue. He has tried cases in leading patent jurisdictions such as the Northern District of California and the Eastern District of Texas, and has represented clients before the Patent Trial and Appeal Board (PTAB).

For more information or to contact Mr. Stacy, please visit his Firm Bio Page.

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Discuss this

There are currently 1 Comment comments.

  1. Anon June 25, 2017 11:04 am

    I think that there is a much cleaner and direct message here.

    Regardless of whether or not the Supreme Court reverses the CAFC (and regardless of the discussion on the merits of how much discretion did Congress provide the PTAB, how Chevron deference may come into play, and which meaning of the word “any” prevails), petitioners already have full discretion as to what claims to attack in a petition.

    If a petitioner is concerned with any estoppel effect on a claim challenged, then the petitioner ALREADY has within their power the choice to not challenge that particular claim.

    It seems to be making a mountain out of a molehill with some “scary” notion that estoppel may attach to actions taken by petitioners.

    I am less impressed with counsel giving advice of “throw the kitchen sink at ’em” (which may currently be the case with if claims challenged do not stick), and I am more impressed with counsel giving advice of making whatever “is thrown” being worthy of being thrown in the first place.