In Fairchild (Taiwan) Corp. v. Power Integrations, Inc., Appeal 2017-1002 (Fed. Cir. Apr. 21, 2017), the Federal Circuit determined that no inter partes reexamination proceeding can be brought or maintained on issues that a party raised or could have raised in a since-concluded civil action. Specifically, once the court issues a final judgment in the civil action that the party has not sustained its burden of proving the invalidity of the patent claim, the party may neither initiate nor maintain a challenge to the patent claim in an inter partes reexamination. The decision is an interesting contrast to the decision in Novartis AG v. Noven Pharmaceuticals Inc. where the Federal Circuit affirmed the PTAB’s inter partes review decisions finding obvious certain patents that were previously found nonobvious in district court. The contrast is grounded in differences in the statutory estoppel provisions that apply to the different proceedings.
In Fairchild, the parties’ dispute dates back to 2008, when Fairchild accused Power Integrations with infringing three patents, including U.S. Patent No. 7,259,972. Fairchild at 2. The jury concluded that the ’972 patent claims were infringed and not obvious. Id. On appeal, the Federal Circuit upheld the jury’s verdict with respect to obviousness but reversed the jury’s infringement verdict, and remanded for further proceedings unrelated to the ’972 patent claims. Id. (citing Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 843 F.3d 1315, 1340–42 (Fed. Cir. 2016)). In 2012, Power Integrations requested inter partes reexamination of select claims of the ‘972 patent, including claims that had been at issue in the earlier litigation. Id. The examiner rejected all of those claims in the reexamination, and the PTAB affirmed the examiner’s rejection. Id. Fairchild appealed to the Federal Circuit and filed a motion to vacate that aspect of the PTAB’s reexamination decision, following the issuance of the Federal Circuit’s mandate in the earlier litigation regarding the ’972 patent. Id. The court granted the motion.
The statute, pre-AIA 35 U.S.C. § 317(b) (2006), governing the issue raised in Fairchild’s motion to vacate states: “Once a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28, that the party has not sustained its burden of proving the invalidity of any patent claim in suit … then neither that party nor its privies may thereafter request an inter partes reexamination of any such patent claim on the basis of issues which that party or its privies raised or could have raised in such civil action….” The Federal Circuit rejected Power Integrations’ argument that by vacating and remanding the previous litigation between the parties, the Federal Circuit rendered the decision in the civil action not “final” for § 317(b) purposes. According to the Federal Circuit, the proceedings on remand were unrelated to the ‘972 patent. Fairchild at 3. The Federal Circuit therefore determined that none of the unresolved issues on remand would have any effect on the validity determinations regarding the ‘972 patent. Id. Accordingly, the court granted Fairchild’s motion to vacate the reexamination, on the basis that, under § 317(b), the inter partes reexamination could no longer be maintained with respect to claims that Power Integrations was not able to prove invalid in district court proceedings.
The contrast between this decision, directed to inter partes reexamination, and the decision in Novartis Pharmaceuticals Inc. v. Noven Pharmaceuticals Inc., directed to an IPR, reflects a difference in the statutory sections governing the two proceedings. Although IPRs replaced inter partes reexaminations when they became available in 2012, there is no section comparable to pre-AIA § 317(b) with respect to IPRs. Accordingly, an accused infringer who is unsuccessful in proving patent claims invalid in district court may later use an IPR proceeding to prove that the same claims are unpatentable (as long as the IPR petition was filed not more than one year after the party was sued for infringement of the challenged patent, 35 U.S.C. § 315(b)). In Novartis, the Federal Circuit justified the different invalidity conclusions reached by the PTAB and the district court by noting that the evidentiary standard in an IPR is preponderance of the evidence while the evidentiary standard in district court litigation is clear and convincing evidence. Novartis at 7-8. While noting that ideally a district court and the PTAB would arrive at the same invalidity conclusion, the Federal Circuit implied that Congress permitted different results by “provid[ing] a separate review mechanism before the USPTO with its own standards.” Id. at 8. However, the same could be said of inter partes reexamination. As in inter partes review, the evidentiary standard to prove invalidity in inter partes reexamination is preponderance of the evidence. 37 C.F.R. § 42.1 (2012). But here, the estoppel provision in pre-AIA § 317(b) prevents the potential for different conclusions.