Child thinking with Pros and Cons on a blackboard concept for choice, for and against, confusion, inspiration and solution

The Federal Circuit recently confirmed the Board’s interpretation that § 315(e) estoppel does not take effect with respect to prior art that the Board declines to address as redundant. In two recent cases, Shaw Industries Group v. Automated Creel Sys., Nos. 15-1116, 15-1119, __ F.3d __, at*6-9 (Fed. Cir. Mar. 23, 2016) and HP, Inc. v. MPHJ Tech. Invs., No. 2015-1427, __ F.3d __, at *13 (Fed. Cir. Apr. 5, 2016) the court held that “the noninstituted grounds do not become a part of the IPR” and, thus, estoppel does not apply to those grounds in a subsequent court or Board proceeding.

In Shaw, the patent owner, Automated Creel Systems (ACS) sued the accused infringer, Shaw, but voluntarily dismissed the case without prejudice. Within one year from service of the complaint, Shaw filed an IPR petition asserting invalidity of all claims in the patent. The Board instituted on all claims except claim 4, but excluded certain asserted invalidity grounds as redundant. Shaw then filed a second petition, but that filing occurred more than one year after service of the Complaint. ACS argued that the second petition should be time-barred, but the Board held that voluntary dismissal of the suit without prejudice “nullifie[d] the effect of the alleged service of the Complaint.” The Board consolidated the two IPRs and issued a single Final Written Decision that concluded Shaw had not proven invalidity as to several of the claims.

a party is not estopped from raising grounds excluded from the IPR as redundant in a subsequent court or Board proceeding

On appeal, in addition to seeking to invalidate the remaining claims, Shaw challenged the Board’s exclusion of certain of its invalidity grounds as redundant. As part of that argument, Shaw expressed concern that the statutory estoppel provisions of Section 315(e) would preclude it from raising the excluded invalidity grounds in future proceedings. The Federal Circuit held that it does not have the authority to review the Board’s decision not to institute IPR as to the grounds it deemed redundant. However, the court adopted the Board’s interpretation that estoppel would not apply to grounds for which institution had not been granted. ACS also appealed the Board’s determination that ACS’s voluntary dismissal removed any statutory time bar resulting from the original service of its complaint. But, again, the Federal Circuit held that the Board’s decision as to timeliness of a petition constitutes a decision on institution over which the court does not have jurisdiction.

Judge Reyna concurred in the result, but wrote separately to address concerns about the Board’s so-called “Redundancy Doctrine” and the court’s authority to define the scope of estoppel. Expressing concern about the Board’s position that it need not provide any reasoned basis why or how the denied grounds are redundant, Judge Reyna characterized this claim to unchecked discretionary authority as “unprecedented.” The Administrative Procedure Act, to which the PTO and its Board are subject, requires reasoned decision-making for agency rulemaking and adjudications to promote sound results. Because decisions on redundancy often constitute a substantive decision, in Judge Reyna’s view, whether that decision creates estoppel is ambiguous and problematic. Further, such a determination on whether estoppel applies is a decision that, according to Judge Reyna, is not properly before the Federal Circuit but must be determined in the first instance by the district court or the International Trade Commission.

Similarly, in the HP case, HP challenged the Board’s exclusion of invalidity grounds as redundant expressing concerns about the effects of estoppel. Citing to an admission by the Director of the PTO, the court again confirmed that a party is not estopped from raising grounds excluded from the IPR as redundant in a subsequent court or Board proceeding.

For parties preparing an IPR petition, these decisions may make strategic planning even more complicated. Parties have always had the difficult task of balancing compliance with the petition page limit against concerns about future estoppel effects as to grounds not included with the petition. Barring trial court adoption of Judge Reyna’s contrary view, the Federal Circuit has now essentially confirmed the viability of deliberately including grounds that may be found redundant to preserve those grounds as a fallback plan in the event that the IPR is unsuccessful and the battle returns or moves to the district court. While giving comfort to those concerned about the scope of estoppel, these decisions also emphasize the importance of the many decisions that go into drafting the petition.