PTAB Strategies and Insights - September 2020: Snap Shot Summer 2020 - Recent Trends in Applying 315(e)/325(e) Estoppel

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This month we first refresh our readers on Shaw and SAS, and then we will look at two recent exemplary cases that we feel are illustrative of the current trends for petitioner estoppel.
 
We will show that the trend in the district courts for 35 U.S.C. §§ 315(e) and 325(e) estoppel analysis generally follows a two prong inquiry — first, whether the petitioner knew of the references (i.e., subjective prong), and second, whether a skilled searcher reasonably could have discovered the references through a diligent search (i.e., objective prong).
 
Background - Shaw and SAS
 
In Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc.[i], the Federal Circuit held since the “IPR does not begin until it is instituted,” only arguments made after institution are made “during” that IPR. Therefore, petitioner estoppel did not apply to non-instituted grounds.[ii]
 
After Shaw, the Supreme Court issued its SAS Inst., Inc. v. Iancu[iii] decision holding that the Board could not continue its practice of partial institutions, finding that 35 U.S.C. § 318(a) means the Board’s institution decision “must address every claim the petitioner has challenged.” But the Court did not explicitly rule that the Board must “institute” review on every ground asserted in the petition. Nonetheless, the Federal Circuit later observed that “[e]qual treatment of claims and grounds for institution purposes has pervasive support in SAS.”[iv] And the Board has effectively stopped the practice of having non-instituted grounds.[v] For example, if a majority of grounds should fail, the Board has denied institution on the entire petition. On the other hand, if a minority of the grounds should fail, the Board has instituted the petition and noted which grounds were strong and which were weak and would most likely not survive in the final written decision.
 
Palomar Techs., Inc. v. MRSI Sys., LLC – No Petitioner Estoppel
 
In Palomar Techs., Inc. v. MRSI Sys., LLC[vi], Patent Owner Palomar Technologies, Inc. moved for summary judgment by invoking IPR estoppel. The court denied their motion and ordered a bench trial on whether Petitioner MRSI was estopped from applying the references based on the two-prong inquiry. The court held that a prior-art reference not raised in an IPR is subject to IPR estoppel if: the petitioner actually knew of the reference (subjective prong) or if a skilled searcher conducting a diligent search reasonably could have been expected to discover the reference (objective prong).
 
Here, the court held IPR estoppel did not preclude a petitioner from asserting two prior art references not previously asserted in an IPR against a patent. In doing so, the Court rejected the argument that “courts should be particularly cautious about accepting a hindsight analysis” in the IPR estoppel context. In Palomar, the court addressed IPR estoppel under the scope established by the U.S. Supreme Court’s SAS decision[vii].
 
Under the subjective prong, the court found that there was no evidence to suggest that the petitioner actually knew of the references at the time of the IPR.
 
Under the objective prong, the court set forth several inquiries in assessing the evidence, including: (1) the difficulty of conducting a prior art search, (2) where the search is compounded by the large number of claims in the involved patent, (3) the lack of overlap of classes/subclasses and of principal search terms between the patent and the prior-art references at issue, and (4) whether the search itself produces useful results.
 
Ultimately, the court found that after a reasonably diligent searcher (a) spent more than 30 hours searching and (b) located invalidating prior art against all of the claims of the patent, they would have stopped searching. And the court found that reasonably diligent searcher may have stopped searching before finding the two pieces of prior art asserted in the litigation. So the defendant petitioner was not estopped from using the new prior art.
 
Gree, Inc. v. Supercell OY – Petitioner Estoppel
 
In Gree, Inc. v. Supercell OY[viii], the court held that PGR estoppel precludes defendant-petitioner Supercell from using two known prior art references under the subjective prong and two newly discovered references under the objective prong.
 
The court barred Supercell’s own documents under the subjective prong. Defendant-petitioner Supercell conceded that it was aware of its own Clash of Clans and Mastermind references before filing its November 2017 PGR petition. But Supercell argued that the references should not be barred under estoppel because § 325(e) estoppel does not apply to non-petitioned grounds as opposed to non-instituted grounds, relying on Shaw.[ix] The court disagreed and applied the estoppel analysis under SAS concluding that “for the words ‘reasonably could have raised’ to have any meaning at all,” they must refer to non-petitioned grounds.[x] Therefore, the court found that Supercell was estopped from raising the “non-petitioned” references at trial.
 
The court also barred Supercell from using newly discovered documents under the objective prong. The court held that Supercell could have found the new documents through a diligent search if they had performed one before filing its PGR petition. The court relied on two key pieces of evidence: (1) Supercell did not conduct a pre-petition prior art search and instead petitioned only under 35 U.S.C. §101 (subject matter ineligibility) grounds and (2) when Supercell performed a prior art search post-PGR it was able to find the references. So, deciding to raise only § 101 arguments in a petition did not excuse a failure to perform a pre-petition search or a failure to raise prior art arguments in the petition.
 
Finally, the court rejected Supercell’s argument that the relevance of the newly discovered references only became apparent in light of patent owner Gree's infringement contentions. Instead, the court held that when a reference is found in a later prior art search there is a reasonable inference that it could have been found earlier by a skilled searcher.[xi]
 
Thus, petitioner Supercell was estopped from raising the new and old prior art references at trial pursuant to § 325(e)(2).
 
Key Takeaways
 
The scope of § 315(e)/325(e) petitioner estoppel has broadened under SAS under both the objective and subjective prongs. Under the subjective prong, since PTAB institution will effectively institute all raised and could have been raised grounds, a failure to raise known references can result in estoppel under §§ 315(e)/325(e). Under the objective prong, a diligent prior art search should not be deferred until district court trial, but rather should be conducted pre-petition and all relevant references should be relied on in the petition to avoid potential petitioner estoppel. 


[i] Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016)

[ii] Credit Acceptance Corp. v. Westlake Servs., 859 F.3d 1044, 1052-53 (Fed. Cir. 2017)

[iii] SAS Inst., Inc. v. Iancu, 138 S.Ct. 1348, 1354 (2018)

[iv] PGS Geophysical AS v. Iancu, 891 F.3d 1354, 1360 (Fed. Cir. 2018); see also BioDelivery Sci. Int’l, Inc. v. Aquestive Therapeutics, Inc., 898 F.3d 1205, 1209 (Fed. Cir. 2018) (“We agree that SAS requires institution on all challenged claims and all challenged grounds.”)

[v] See U.S. Patent & Trademark Office, Guidance on the Impact of SAS on AIA Trial Proceedings (Apr. 26, 2018), https://www.uspto.gov/patents-application-process/patent-trial-and-appeal-board/trials/guidance-impact-sas-aia-trial (“the PTAB will institute on all challenges raised in the petition”)

[vi] Palomar Techs., Inc. v. MRSI Sys., LLC, Case No. CV 18-10236-FDS, 2020 WL 2115625 (D. Mass. May 4, 2020).

[vii] SAS Inst., 138 S.Ct. 1348 (2018).

[viii] GREE, Inc. v. Supercell Oy, Case No. 2:19-cv-00071-JRG-RSP, 2020 WL 3893697 (E.D. Tex. Jul. 9, 2020).

[ix] Shaw Indus. Grp., 817 F.3d 1293 (Fed. Cir. 2016)

[x] Biscotti Inc. v. Microsoft Corp., Case No. 2:13-CV-01015-JRG-RSP, 2017 WL 2526231, *6 (E.D. Tex., May 11, 2017) (finding this understanding consistent with the legislative history of the America Invents Act); Wi-LAN Inc. v. LG Elecs., Inc., 421 F. Supp. 3d 911, 924 (S.D. Cal. 2019) (finding all post-SAS cases have held the same); Palomar Techs., Inc. v. MRSI Sys., LLC, 373 F. Supp. 3d 322, 331 (D. Mass. 2019) (collecting cases); Oil-Dri Corp. of Am. v. Nestle Purina Petcare Co., No. 15-CV-1067, 2017 WL 3278915, *7–8 (N.D. Ill. Aug. 2, 2017); see also Return Mail, Inc. v. U.S. Postal Serv., 139 S. Ct. 1853, 1867 n.10 (2019) (discussing how AIA estoppel precludes people from relitigating issues in subsequent proceedings before the Board and district court)

[xi] Citing Wi-LAN, 421 F. Supp. 3d at 925–26 (S.D. Cal. 2019) (“Evidence that [petitioner-defendant] discovered these references through a prior art search is clear evidence that [petitioner-defendant] reasonably could have discovered these references through a diligent search.”)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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