Scope of Estoppel Post-IPR Proceedings Becoming Clearer

New York Law Journal | March.27.2017

Under 35 U.S.C. §315(e)(1), a petitioner who files a petition for inter partes review (IPR) that proceeds to a final written decision "may not assert … in a civil action … that the claim [at issue in the IPR] is invalid on any ground that the petitioner raised or reasonably could have raised during that" IPR. This estoppel provision has been the subject of a number of Federal Circuit and district court decisions. Most of these decisions have interpreted §315(e)(1) narrowly and have recognized many circumstances where IPR arguments do not give rise to estoppel. One recent decision out of the Northern District of California—Verinata Health v. Ariosa Diagnostics, Case No. 12-cv-05501 (N.D. Cal., Jan. 19, 2017)—represents an exception to this general trend. Verinata held that §315(e)(1) can, in certain circumstances, apply to invalidity grounds included in an IPR petition that the Patent Trial and Appeal Board (PTAB) determined to be redundant and did not institute and carry through to a final written decision.

To help put Verinata in context, a summary of the state of the law regarding IPR estoppel prior to the decision follows.

Scope of IPR Estoppel Prior to 'Verinata'
There are several types of invalidity arguments that cannot be raised in an IPR at all. In particular, an IPR can only address "a ground that could be raised under section 102 or 103 and only on the basis of prior art consisting of patents or printed publication." 35 U.S.C. §311. Thus, it is not possible for a petitioner to raise §101, §112, or invalidity arguments based on prior use, sale, knowledge, or invention. See Synopsys v. Mentor Graphics , 814 F.3d 1309, 1316 (Fed. Cir. 2016). Since §315(e)(1) applies only to "ground[s] that the petitioner raised or reasonably could have raised," it follows that the issuance of an IPR final written decision cannot prevent a defendant from making these types of arguments in district court. See id. Indeed, some courts have found that a petitioner is not estopped from making on-sale bar or prior invention invalidity arguments even when there is some documentary overlap between those arguments and invalidity grounds that were part of an IPR. For instance, in Depomed v. Purdue Pharma, Case No. 13-571 (D.N.J. Nov. 4, 2016), the plaintiff attempted to argue that §315(e)(1) applied to defendant's on-sale bar and 102(g) defenses. See id. at 12.

With respect to the on-sale bar, the plaintiff argued that the defendant had access to "sufficient documentation" regarding the on-sale product that would have allowed this invalidity defense to be included in the defendant's earlier IPR. Id. at 13. With respect to 102(g), the patentee argued that the defense was premised on two publicly available patent applications that also could have served as the basis for an IPR ground. Id. The court disagreed that the on-sale and 102(g) defenses were barred. According to the court, "the use of patents or printed publications" to support such arguments does not "transform these defenses" into "a statutory ground for relief in an IPR." Id. at 16. Further, the court also noted that while the defendant did point to some published documents, many of the documents cited in support of the invalidity defenses were confidential. Id. at 17; see also Star Envirotech v. Redline Detection, Case No. 12-01861, at 5 (C.D. Cal. Jan. 29, 2015) (refusing to strike invalidity defense based on a prior sale despite the fact that the challenger had access to a printed user manual for the on-sale product when it filed an IPR because "the physical machine itself discloses features claimed in the [patent] that are not included in the instruction manual, and it is therefore a superior and separate reference").

Next, §315(e)(1) states that it applies when "inter partes review of a claim in a patent … results in a final written decision." Interpreting this language, courts have determined that estoppel applies on a claim-by-claim basis. An IPR petitioner is not estopped from challenging the validity of any claims that were not at issue in IPR. See Synopsys, 814 F.3d at 1313-14.

Last, courts have also found that §315(e)(1) does not apply to an invalidity ground that was included in an IPR petition but not instituted. See Shaw Indus. Group v. Automated Creel Sys. , 817 F.3d 1293, 1300 (Fed. Cir. 2016). Estoppel does not apply because these non-instituted grounds do "not become part of an IPR" and thus "were not raised and, as review was denied, could not be raised in the IPR." HP v. MPHJ Tech. Invs. , 817 F.3d 1399, 1347 (Fed. Cir. 2016).

'Verinata'
The Verinata decision addresses many of the same factual circumstances discussed above and arrives at the same conclusions regarding the applicability of §315(e)(1). But, one additional factual scenario was also addressed: the Verinata court was confronted with an IPR invalidity ground that was not instituted, but was entirely subsumed within a ground that was instituted and proceeded to final written decision. Departing from the trend to interpret §315(e)(1) narrowly, Verinata found that §315(e)(1) can apply to this type of non-instituted ground.

In this case, plaintiff Verinata Health asserted two patents—U.S. Patent Nos. 8,318,430 (the '430 patent) and 7,955,794 (the '794)—against defendant Ariosa Diagnostics. Ariosa then filed a series of petitions for inter partes review. The district court granted a stay pending the resolution of the IPRs.

Ariosa's petition relating to the '430 patent asserted three grounds: (1) obviousness over Dhallan and Binladen, (2) obviousness over Quake and Criag, and (3) obviousness over references Dhallan, Binladen, and Shoemaker. The PTAB instituted IPR only on the third ground. The '794 petition also included three grounds (1) anticipation by Fan, (2) obviousness over Fan and Lizardi, and (3) obviousness over Straus, Rothberg, and Walt. The PTAB instituted IPR only on the first ground. Ariosa's two IPRs then proceeded to final written decision. In connection with the '430 patent, the PTAB rejected Ariosa's arguments because it found the evidence regarding motivation to combine lacking. In connection with the '794 patent, the PTAB found that Ariosa had failed to establish that Fan was prior art.

After the final written decision, the district court lifted the stay. Ariosa continued to pursue invalidity arguments tracking grounds (1) and (2) from the '430 IPR petition and grounds (1), (2), and (3) from its '794 petition. According to Ariosa, all but one of these invalidity arguments were "grounds for which it petitioned IPR but the PTAB did not institute trial" making 315(e)(1) inapplicable. While IPR had been instituted in connection with ground (1) in the '794 petition (anticipation by Fan), Ariosa argued that the PTAB's final written decision focused on a "technicality" and did not analyze "patentability" in a way that would give rise to estoppel. Verinata moved to strike all these invalidity defenses.

Following a number of Federal Circuit cases discussing §315(e)(1), including the Shaw decision cited above, the district court found that Ariosa was not estopped from pursuing invalidity arguments that tracked ground (2) from its '430 petition (obviousness over Quake and Craig), or grounds (2) and (3) in its '794 petition (obviousness over Fan and Lizardi, and obviousness over Straus, Rothberg, and Walt). The court explained that estoppel did not apply to these arguments because "the PTAB did not institute" IPR on these grounds. Id. at 7, 8-9. The court did, however, find that Ariosa was estopped from pursuing ground (1) from the '794 petition. While the court recognized that the PTAB "never specifically compared Fan with the challenged claims of the '794 patent," it nonetheless issued a final written decision in which it found that "failed to carry its burden to demonstrate that Fan was prior art under §102." Id. at 9-10. This is all that is required to trigger §315(e)(1).

These decisions are consistent with and very closely track past Federal Circuit and district court rulings. The Verinata court also determined, however, that Ariosa was estopped in connection with ground (1) from the '430 petition (obviousness over Dhallan and Binladen). The district court recognized that the "PTAB did not institute on this exact ground" because it viewed it as "redundant" of the Dhallan, Binladen, and Shoemaker. Id. at 7. Estoppel does not typically apply to non-instituted grounds. Regardless, the district court found the combination of Dhallan and Binladen to be "simply a subset of the instituted grounds." Id. Thus, the court held that Ariosa had effectively raised obviousness over references Dhallan and Binladen during IPR and was estopped from continuing to pursue invalidity arguments based on those two references in district court. Id. at 7-8.

In sum, while §315(e)(1) has been interpreted relatively narrowly, the Verinata decision provides patent owners with a new avenue to argue—in certain circumstances—that an IPR petitioner should be estopped from asserting non-instituted IPR grounds in district court.

A. Antony Pfeffer is a partner and K. Patrick Herman is of counsel at Orrick, Herrington & Sutcliffe in New York.

Reprinted with permission from the March 27, 2017 edition of the New York Law Journal © 2017 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected].