On Wednesday, January 30, 2019, Judge Kiyo A. Matsumoto of the United States District Court for the Eastern District of New York denied the request of defendant Presidio Components, Inc., (the “Company”) to supplement its invalidity contentions. American Technical Ceramics Corp. et al. v. Presidio Components, Inc.
, Case No. 14-cv-6544 (E.D.N.Y. Jan. 30, 2019). Judge Matsumoto determined that the Company was statutorily estopped from raising invalidity grounds that it did not include in its petition for inter partes
review (“IPR”) to the U.S. Patent and Trademark Office (“USPTO”), and, thus barred the Company from supplementing its invalidity contentions in the subsequent district court proceeding.
Thirty-five U.S.C. § 315(e)(2) estops an unsuccessful IPR petitioner in an IPR that reaches final written decision from later arguing in a related patent infringement case (including a district court case or an International Trade Commission investigation) that a “claim is invalid on any ground that the petitioner raised or reasonably could have raised during that [IPR].” The Federal Circuit has held, prior to the Supreme Court’s all-or-nothing institution mandate in SAS
—which we discussed in our prior posts, see Shearman & Sterling LLP, US Supreme Court Approves IPRs, But Requires Decision on All Challenged Claims, Need-to-Know Litigation Weekly, May 1, 2018, https://www.lit-ip.shearman.com/us-supreme-court-approves-iprs-but-requires-decision
, and Shearman & Sterling LLP, Federal Circuit Expands The Supreme Court’s SAS Holding To Require Institution On All Grounds Argued In An IPR Petition, July 10, 2018, https://www.lit-ip.shearman.com/federal-circuit-expands-the-supreme-courts
—that Section 315(e)(2) estoppel does not apply to grounds included in an IPR petition, but not instituted as part of the IPR proceeding. See Shaw Industries Group, Inc. v. Automated Creel Systems, Inc.
, 817 F.3d 1293 (Fed. Cir. 2016).
In the instant litigation, American Technical Ceramics Corp. and AVX Corporation (“Plaintiffs”) sued the Company alleging infringement of three patents. As a collateral attack on the patents during the litigation, the Company petitioned for IPR. In the IPR, the USPTO found unpatentable in final written decisions only one of the three patents, leaving claims from the two remaining patents at issue in the district court litigation. Subsequently, after claim construction, the Company requested to supplement its invalidity contentions as to one of the two remaining patents. Based on Shaw
, the Company argued that because it did not petition the USPTO on the invalidity grounds it sought to add to its invalidity contentions, it was not estopped, as—having not petitioned on them—it necessarily could not have raised those grounds during the IPR.
In rejecting the Company’s argument, Judge Matsumoto first noted that Shaw
did not address the circumstances that were presently before the court—i.e.
, a litigant attempting to argue invalidity on non-petitioned
grounds, grounds that it never included or raised in its IPR petition in the first place but reasonably could have. District courts across the country have varied interpretations of Shaw
, and the Company and Plaintiffs each cited to non-binding decisions favorable to their opposing positions. Judge Matsumoto agreed with the courts that found broad estoppel. According to the Judge, Shaw
did not foreclose Plaintiffs’ position that non-petitioned grounds are subject to Section 315(e)(2)’s estoppel provision. The Court explained that extending Shaw
’s reasoning in the manner suggested by the Company would render the estoppel provision meaningless, and that the Company’s interpretation would only trigger estoppel in the odd situation when a petitioner raises a ground in a petition, the USPTO subsequently issues IPR on that ground, the petitioner then chooses not to argue invalidity on that ground during the IPR, but once again changes course to raise that invalidity ground in federal court.
Judge Matsumoto’s reasoning relied heavily on the policy goals supporting the creation of IPR—namely, to reduce the costs of patent litigation and to resolve complicated patent issues before an expert patent tribunal and not the federal judiciary. She explained that these policy goals support a broader interpretation of the estoppel provision in Section 315, as a narrower interpretation invites parties to take a second bite at the apple and hardly promotes efficiency or a reduced burden on federal courts.
Given the trend of district courts to more broadly apply Section 315 estoppel—especially in the wake of SAS’s
all-or-nothing mandate—IPR petitioners should continue to carefully evaluate the relevant district court or ITC judge’s statutory interpretation in view of the potential invalidity arguments at the petition stage, or risk having potentially case-dispositive invalidity arguments estopped in subsequent litigation.