PTAB Decisions Add Some Clarity to Estoppel in AIA Post-Grant Proceedings

Saturday, August 15, 2015

The Leahy-Smith America Invents Act (“AIA”) created three new mechanisms for members of the public, including competitors, to challenge the validity of an issued U.S. Patent. As of June 30, 2015, 3,160 petitions for inter partes review (“IPR”), 362 petitions for covered business method patent (“CBM”) review, and 10 petitions for post-grant review had been filed with the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”). Although AIA post-grant proceedings have been available since September 16, 2012, several procedural issues remain unclear, and the U.S. Court of Appeals for the Federal Circuit has not yet had the opportunity to consider many of the USPTO’s practices in conducting AIA trials.

Recently, the PTAB issued two decisions that cast some light on one thorny AIA trial issue: the breadth of the preclusive effect of AIA trial proceedings through the AIA’s estoppel provision, 35 U.S.C. § 325(e)(1), and related Patent Rule, 37 C.F.R. § 42.73(a).

Estoppel Effects Only Patent Claims For Which Review Is Granted

In Westlake Services, LLC v. Credit Acceptance Corp., Case No. CBM2014-00176, the PTAB considered a petitioner’s challenge to U.S. Patent No. 6,950,807, titled “System and method for providing financing.” The ‘807 patent claims methods for facilitating the sale of goods on credit, such as automobiles, by using information about the seller’s current inventory and a prospective customer’s credit worthiness to provide financing scenarios for each product available for sale.

The petitioner originally filed a petition for CBM review for all 42 claims of the ‘807 patent. The PTAB granted the petition for some claims, but denied it with respect to others. Subsequently, after the Supreme Court’s latest decision on patent eligibility of computer-implemented methods, the petitioner filed a second petition challenging the ‘807 patent. The PTAB granted the petition for CBM review as to the claims for which it did not previously grant review in the first petition. See, e.g., Alice Corp. Pty. Ltd v. CLS Bank Int’l, 134 S. Ct 2347 (2014). Subsequently, the PTAB issued a final decision on the first petition, ruling that the claims at issue in the trial were unpatentable.

The patent owner then moved the PTAB to find that petitioner’s challenges to the remaining ‘807 patent claims in the second proceedings were barred by the AIA’s estoppel provision, 35 U.S.C. § 325(e)(1), which requires that:

The petitioner in a post-grant review of a claim in a patent under this chapter that results in a final written decision under section 328(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that post-grant review.

The patent owner argued that since the initial petition resulted in a final decision, the estoppel applied to all issues that the petitioner raised or could have raised in that proceeding, even though the petition was not granted as to some claims.

In an opinion listed as a “Representative Decision” on the USPTO website, the PTAB denied the motion and refused to apply estoppel so broadly. The PTAB ruled that the estoppel required by § 325(e)(1) must be applied on a “claim-by-claim” basis, and that it only attaches to the claims in a petition that result in a final decision, not claims merely included in a petition when review is not granted as to those claims. Among other things, the USPTO’s comments to the proposed revised Patent Rules implementing AIA post-grant proceedings included the observation that a “determination not to institute an inter partes review, post-grant review, or covered business method patent review is not a final written decision within the meaning of 35 U.S.C. § 318(a), as amended, and 35 U.S.C. § 328(a), and thereby does not trigger the estoppel provisions under . . . 35 U.S.C. § 325(e).” 77 Fed. Reg. 48680, 48703-04 (Aug. 14, 2012).

The PTAB also declined to consider whether the second petition challenging the ‘807 patent should be barred under 35 U.S.C. § 325(d), which proscribes redundant petitions. The PTAB stated that it had considered the effect of § 315(d) when it originally granted the second petition as to the claims not included in its first decision to institute review, and determined that the provision did not bar the second petition.

The complete decision is available here.

Estoppel From Prior Proceeding Limited To Claims, Not Defenses

In a second decision involving an IPR proceeding, the PTAB ruled that estoppel does not apply to issues in a prior post-grant proceeding that were defenses, not grounds for invalidating a challenged patent. Arris Group, Inc. v. C-Cation Techs., LLC, Case No. IPR2015-00635 (designated “Informative Decision”).

In Arris Group, the patent owner sought discovery in an attempt to establish that the petitioner was in privy with a petitioner in an earlier IPR proceeding challenging the same patent. The prior IPR concluded with the patent owner expressly disclaiming one claim and the PTAB entering an adverse judgment. If the petitioner in the later IPR proceeding was in privity with the petitioner in the earlier proceeding, the second petition would be untimely under 35 U.S.C. § 315(b).

The petitioner argued that discovery would not lead to useful information because the patent owner was estopped from raising privity as a defense. The patent owner relied on 37 C.F.R. § 42.73(a), which provides that, “[a] judgment, except in the case of a termination, disposes of all issues that were, or by motion reasonably could have been, raised and decided.” The petitioner argued that rule precluded the patent owner from raising privity as a defense.

The PTAB rejected the patent owner’s argument and allowed the requested discovery. The panel held that, “§ 42.73(a) relates to the scope of a judgment, not its preclusive effect with regard to other proceedings. In other words, the rule provides that a judgment disposes of all issues in a particular proceeding that were, or reasonably could have been, raised and decided. Petitioner cites no authority for its contention that the adverse judgment entered in [the earlier IPR proceeding] with respect to claim 14 has preclusive effect beyond that proceeding.”

The PTAB also ruled that the privity argument was not barred by res judicata, since a defense is not a “claim” that can be barred under that doctrine. See Foster v. Hallco Mfg. Co., 947 F.2d 469, 478 (Fed. Cir. 1991) (contention that asserted patent was invalid is a defense, not a “claim” subject to claim preclusion).

The full PTAB opinion is available at here.