Aiming to bring about an objective, transparent, and less expensive patent system, the Leahy-Smith America Invents Act (“AIA”) created inter partes review (“IPR”), covered business method (“CBM”) review, and post-grant review (“PGR”) proceedings before the Patent Trial and Appeal Board (“PTAB”). The results have been mixed after five years of enactment of the AIA. For instance, some litigants have noted that rather than serving as mere alternatives to litigation, these proceedings have emerged as important strategic supplements to patent disputes. And as parties test the bounds of how PTAB decisions may be used in federal courts, judges’ reactions have been mixed.
As one might expect, district courts have been willing to consider litigants’ arguments concerning final outcomes of PTAB proceedings. For example, in XY, LLC v. Trans Ova Genetics, LC, the jury found that the defendant had willfully infringing ten patents in suit, opening the door to enhanced damages. No. 13?cv?876, at 1–2 (D. Colo. Apr. 8, 2016). The court, however, took note of the PTAB’s “finding of invalidity as to” one of the infringed patents and an upcoming PTAB hearing “as to the possible invalidity of” another infringed patent. Id. at 14. It thus determined the defendant’s invalidity defenses to be objectively reasonable and vacated the willfulness finding. Id. at 15.
But when district courts consider final outcomes at the PTAB, those outcomes are not always dispositive. For example, in Credit Card Fraud Control Corp. v. MaxMind, Inc., a defendant attempted to recover attorney’s fees under 35 U.S.C. § 285, citing the patent owner’s request for adverse judgment of the asserted claims in a related CBM review as evidence of “an improper intent to use the litigation to extract a nuisance settlement.” No. 3:14-cv-3262, 2016 WL 3355163, at *2 (N.D. Tex. Apr. 4, 2016). Disagreeing that the plaintiff’s conduct was unreasonable so as to justify an award of fees, the court acknowledged the plaintiff’s “business explanation for terminating its defense before the PTAB” (i.e., the patent’s imminent expiration and the potential for low damages due to the defendant’s low revenue). Id. at *3.
Taking a step further, some litigants have asked district courts to consider and admit into evidence preliminary PTAB decisions regarding whether to institute post-grant proceedings. Such requests have had mixed success.
On one end of the spectrum are district courts that have embraced the use of PTAB institution decisions. In doing so, they have taken measures to mitigate potential drawbacks of the approach. For example, in Universal Elecs., Inc. v. Universal Remote Control, Inc., the court held that the PTAB’s decision not to institute the defendant’s petition for inter partes review was admissible, and that “any potential confusion can be addressed by appropriate jury instructions on the standard of proof applicable to patent invalidity defenses and counterclaims.” No. 12?cv?329, at 12 (C.D. Cal. Apr. 21, 2014). Indeed, federal judges have recognized that the PTAB’s adherence to different legal standards does not necessarily undermine how they might inform issues before the district court. For instance, in Procter & Gamble Co. v. Team Techs., Inc., the district court granted a defendant’s motion for partial summary judgment of no invalidity based on, among other things, a PTAB institution decision’s rejection of “the same inherency arguments, with respect to the same references, under a lower standard of proof.” No. 12-cv-552, at 21 (S.D. Ohio July 3, 2014). Moreover, despite the PTAB’s lack of authority to invalidate a claim in an IPR on indefiniteness grounds, some district courts have looked to the PTAB’s refusal to institute based on indefiniteness issues. For example, in Cayenne Med., Inc. v. Medshape, Inc., the court granted summary judgment of invalidity in large part based on the PTAB’s refusal to institute because of indefiniteness issues with the asserted claims. No. 2:14-cv-0451, at 7–8 (D. Ariz. May 6, 2016); see also Fortinet, Inc. v. Sophos, Inc., No. 13-cv-05831, at 14 (N.D. Cal. Oct. 28, 2015) (finding the PTAB’s analysis regarding the lack of corresponding structure for an alleged means-plus-function limitation to be “persuasive,” though “not binding in any way”).
On the other end of the spectrum are district courts that have declined to use PTAB institution decisions. That reluctance may arise from the notion that institution decisions do not reflect the outcome of full-fledged adjudication. For example, in Adidas AG v. Under Armour, Inc., the court explained that the “PTAB’s choice not to institute an IPR is not the type of adjudication that leads to issue preclusion.” No. 14-cv-00130, at 2 (D. Del. Dec. 15, 2015). Other times, reluctance stems from potential evidentiary problems. Indeed, in Wis. Alumni Research Found. v. Apple, Inc., the court found that “any probative value of [a non-instituted IPR] is substantially outweighed by the risk of unfair prejudice, as well as the risk of jury confusion.” No. 14-cv-062, at 14 (W.D. Wis. Sept. 29, 2015). Likewise, in Personalized Media Commc’ns, LLC v. Zynga, Inc., the court explained “that the danger of undue prejudice [with an institution decision] is extremely high, and that the danger of unfair prejudice cannot be mitigated simply by the use of a limiting instruction.” No. 2:12-cv-00068, at 2 (E.D. Tex. Nov. 8, 2013). And in Allure Energy Inc., v. Nest Labs, Inc., the court noted “the danger of misleading the jury and waste of time involved in [instructing the jury].” No. 9:13-cv-00102, at 2 (E.D. Tex. May 18, 2015).
In the middle of the spectrum are district courts that draw a line between permissible and impermissible use of PTAB institution decisions, rather than fully embracing or declining to use them. For instance, in Ultratec, Inc. et al. v. Sorenson Commc’ns, Inc., the court barred the defendant from relying on a PTAB institution decision (and related evidence) during the damages phase to argue that the asserted patents were entitled to diminished value. No. 3:13?cv?00346 at 4 (W.D. Wisc. Oct. 8, 2014). In particular, the court indicated that “because of the different standards, procedures and presumptions applicable to IPR proceedings, evidence concerning the proceedings is irrelevant and highly prejudicial to the jury’s determination of the validity of the patents.” Id. The court did, however, allow the defendant to use the PTAB’s findings outside the presence of the jury, to rebut allegations of willfulness. Id.
As the above cases illustrate, PTAB decisions have affected district court cases in different ways. Determining whether the use of a PTAB decision is likely to be permitted or will have any effect requires a multifactorial analysis that considers at least the nature of the PTAB outcome (e.g., final or preliminary), factors contributing to that outcome (e.g., whether they were based on the merits of the case), and potential drawbacks attached to the requested use (e.g., jury confusion). Additional considerations might include, for example, the level of sophistication of the technology already being considered by the jury, which might factor into a court’s analysis of the likelihood of jury confusion. Parties seeking to rely on PTAB decisions in district court should consider these factors. The AIA has only been in place for five years and the law in this area will continue to develop over the next several years.
Michael Stramiello, Daniel Zeilberger, and Joseph Palys also contributed to this article.