Patent Litigation Estoppel, Still a Quagmire?

Patent litigation estoppel applies when a party’s previous activities forfeit their ability to petition for certain legal rights/defenses in the future. Just when one might have thought that they had patent litigation estoppel all straightened out in their heads, the Court of Appeals for the Federal Circuit issued two head-scratching, precedential opinions on the topic. Fairchild (Taiwan) Corp. v. Power Integrations, Inc., Case No.: 2017-1002 (Fed. Cir. April 21, 2017); Novartis AG, et al. v. Noven Pharm., Inc., Case Nos: 2016-1678 & -1679 (Fed. Cir. April 4, 2017).

Whether a patent litigant is asserting a patent or defending infringement, the Patent Office’s post-grant proceedings have shown to be a preferred complementary litigation strategy to district court proceedings. For patent owners, post-grant proceedings save time and money, many required by statute to conclude within 12 months of institution. 35 USC §§316(a)(11) & 326(a)(11)(2011). While recent statistics from the Board show that an unpatentability finding for challenged claims is quite possible, it is still very improbable – survived claims reigning in at about 70% with settlements. US PTO Patent Trial and Appeal Board Statistics (March 31, 2017) http://www.uspto.gov/patents-application-process/patent-trial-and-appeal-board/statistics. Certainly, the statistics show that patentees can expect a reasonable review of issued claims.

At least some post-grant proceedings are a staple of many accused infringers’ defense strategies as well and with good reason. The lower burden of proving unpatentability (by a preponderance of the evidence versus by clear and convincing evidence) might reasonably suggest that the Patent Office is a better venue for invalidity than district court. Moreover, the more lenient claim construction standard of broadest reasonable interpretation should allow for more prior art while concerns about infringement are essentially irrelevant to the Office’s proceedings. The increased efficiencies are also to the benefit of more frugal accused infringers. Not to mention that both parties can also enjoy the comparative competency level of a three-judge panel of industry experts to that of a single district court judge sitting in much broader subject-matter jurisdiction.

Though PTO post-grant filings are universally desirable, when litigants engage in different tribunals – district court and the Patent Office – on the same subject matter estoppel concerns can arise. Traditional claim and issue preclusion may apply. Plus, each post-grant proceeding has codified estoppel provisions that apply once a final written decision has been made. 35 USC §§315(e) & 325(e)(“The petitioner… may not request or maintain a proceeding… on any ground that the petitioner raised or reasonably could have raised during that inter partes review [or post-grant review].”). It may sound simple… but is it???

For example, in Fairchild, one might not have initially expected estoppel to apply because the inter partes reexam request came after a jury verdict that was however being appealed. (applying pre-AIA estoppel provisions to inter partes reexams). In 2008, an infringement suit was brought in district court where a jury found four (4) of the issued claims non-obvious. Power Integrations, the accused infringer, appealed to the Federal Circuit. In the interim, in 2012, Power Integrations also requested an inter partes reexam at the Patent Office. That reexam was broader in scope than the district court’s finding, encompassing twenty-nine claims including those four previously found non-obvious. Both the examiner in the Central Reexamination Unit and Board found the subject claims obvious in 2015. However, in 2016, the Court of Appeals affirmed the jury verdict of non-obviousness thus inviting Fairchild’s motion to vacate and remand the PTO decision based on estoppel with respect to the four (4) jury-and-now-CAFC certified claims. The panel reasoned that estoppel “restrictions appl[y] when ‘all appeals have terminated.’” citing Bettcher Indus., Inc. (The remand order, however, still required that the remaining claims be invalidated). So, Fairchild demonstrates a circumstance where one might be able to initially request an IPR (provided the AIA 1-year-litigation bar has not been met) but later be incapable of enjoying its findings due to a future ripening estoppel.

In Novartis, one might have initially expected estoppel to apply because there were prior district and appellate court decisions in contradiction to the later Patent Trial and Appeal Board’s IPR obviousness findings. Here, the panel articulated that the PTAB could reach a different conclusion because the record differed from the prior litigation in the following manners: (1) additional prior art was presented, (2) additional expert testimony was provided, and (3) the varying burdens of proof. So, Novartis represents a case where one might have initially balked at the possibility of bringing a patentability challenge to the Patent Office after having been rejected by the courts only to be incorrect as to whether preclusion applied.