Federal Circuit Rules that PTAB Claim Construction in Inter Partes Reexamination Proceeding Is Not Binding on District Court in Later Litigation

Thursday, August 11, 2016

Skyhawke Technologies, LLC v. Deca International Corp., Case No. 2016-1325 (Fed. Cir. July 15, 2016)

One recurring question arising from AIA trials and other post-grant proceedings before the PTAB is whether a claim construction ruling made during the administrative proceeding is binding on a district court in a subsequent infringement lawsuit or other litigation. In B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (2105), the Supreme Court ruled that a factual finding by the Trademark Trial and Appeal Board could have preclusive effect if all the normal elements of issue preclusion are satisfied. During the PTAB’s consideration of a petition for review under the AIA, the Board generally must construe the challenged claims. What effect should that claim construction have on later district court proceedings involving the same patent? In a recent decision, the Federal Circuit strongly suggested that a PTAB claim construction ruling would not have a preclusive effect.

In Skyhawke, the defendant Deca filed an inter partes reexamination against Skyhawke’s U.S. Patent No. 7,118,498, which Skyhawke had asserted against Deca in district court. During the reexamination process, the examiner initially rejected all of the ‘498 patent claims based on obviousness, but later confirmed the patentability of the claims. Deca then appealed to the PTAB. The PTAB affirmed the examiner’s finding of patentability based in part on a “lengthy” analysis construing one disputed term in the ‘498 patent claims.

After the PTAB’s affirmance, the Skyhawke filed an appeal with the Federal Circuit seeking “correction” of the PTAB’s claim construction and affirmance of the PTAB’s ultimate decision. Deca moved to dismiss the appeal for lack of jurisdiction.

In a decision written by Circuit Judge Hughes, the Federal Circuit granted Deca’s motion to dismiss the appeal. Emphasizing that “Courts of appeals employ a prudential rule that the prevailing party in a lower tribunal cannot ordinarily seek relief in the appellate court[,]” the Federal Circuit dismissed Skyhawke’s appeal because Skyhawke was the prevailing party before the PTAB. To reach its decision, the Federal Circuit took several facts into account.

First, the Federal Circuit rejected Skyhawke’s concern that the district court would adopt the Board’s claim construction in Skyhawke’s concurrent litigation with Deca. It noted that if the district court did view the PTAB’s construction as preclusive, Skyhawke would be able to appeal that claim construction. Moreover, the appeals court stated that it “cannot foresee how the claim construction reached by the Board could satisfy” the elements of issue preclusion under B&B Hardware. Slip op. at 4. The Federal Circuit noted that Skyhawke had no opportunity to appeal the ruling, and because the PTAB applied a broadest reasonable construction standard rather than the Phillips claim construction standard used in federal court litigation, the PTAB had not “actually litigated” the issue that would be decided by a subsequent district court.

Second, the Federal Circuit found that judicial estoppel did not apply because Skyhawke had not advocated for, and successfully achieved, the claim construction issued by the PTAB. To the contrary, Skyhawke had argued against the claim construction. For similar reasons, the Federal Circuit noted that prosecution history disclaimer would not apply to the Board’s claim construction because Skyhawke had opposed the statements made by the Board in construing the claims and made its opposition apparent in the administrative record.

Although the Federal Circuit noted that in rare circumstances a party that prevailed below could present an appealable issue, Skyhawke’s concern that a district court would view the PTAB’s adverse claim construction as binding did not warrant deviating from the general prudential rule that a prevailing party cannot seek relief on appeal. Thus, the court dismissed the appeal.

Although the Skyhawke decision involved an inter partes reexamination proceeding, the decision may be significant in evaluating issue preclusion based on PTAB rulings in IPR or other AIA post grant proceedings. If the patent owner succeeds in avoiding cancellation, it likely will not be able to appeal to the Federal Circuit. That fact, and the PTAB’s use of the broadest reasonable interpretation standard rather than the standard used in district court litigation, may be factors preventing a PTAB claim construction ruling from having a preclusive effect in subsequent litigation.