In three recent decisions, the Federal Circuit reiterated the importance of determining estoppel in PTAB proceedings on a claim-by-claim basis.

In the earlier related decisions, In re Affinity Labs of Texas, LLC [1] , 856 F.3d 883 (Fed. Cir. 2017) and In re Affinity Labs of Texas, LLC [2], 856 F.3d 902 (Fed. Cir. 2017), the court addressed the effects of a district court judgment and settlement of a district court litigation on pending pre-AIA reexamination proceedings.

Affinity Labs of Texas filed district cases alleging Volkswagen Group of America, Inc. and Apple Inc. infringe U.S. Patent 7,324,833. Both Volkswagen and Apple requested inter partes reexaminations challenging all claims of the patent on different asserted grounds of unpatentability. Richard King also filed a request for ex parte reexamination of all claims of the ‘833 patent. The Patent Office granted all three requests and merged the three proceedings. Apple separately requested inter partes reexamination alleging invalidity of all claims of U.S. Patent 7,440,772, which the Patent Office granted.

Apple and Affinity Labs settled their dispute, with Apple dismissing its invalidity claims in the district court action without prejudice and filing a notice of non-participation in each reexamination proceeding. Affinity Labs petitioned the Patent Office to terminate the ’772 patent reexamination because pre-AIA 35 U.S.C. § 317(b) required that the reexamination not be maintained if the requester withdraws its participation. The Patent Office denied Affinity Labs’ petition because the settlement did not constitute a final decision against Apple. The Patent Office examiner rejected all of the patent’s claims and the PTAB upheld the examiner’s rejection. On appeal to the Federal Circuit, the court agreed that § 317(b) does not prohibit the Patent Office from continuing the ’772 patent reexamination. In re Affinity Labs of Texas, LLC [2], 856 F.3d 902, 905 (Fed. Cir. 2017).

The district court case against Volkswagen proceeded to trial on claims 28 and 35 of the ‘833 patent. The jury found Volkswagen infringed both claims and found that Volkswagen did not meet its burden of proving the claims invalid. Volkswagen initially appealed, but reached a settlement with Affinity Labs. Volkswagen then filed a notice of non-participation in the ’833 patent reexamination. Affinity Labs petitioned the Patent Office to vacate the entire merged ’833 reexamination arguing that the pre-AIA § 317(b) extends to all parties and all claims. The Patent Office denied Volkswagen’s petition, but separated the Volkswagen reexamination from the merged proceeding and determined that it would not reexamine claims 28, 35, or their dependent claims. The Patent Office examiner ultimately determined that numerous other claims in the ’833 patent were unpatentable, and the PTAB affirmed those rejections. On appeal, the Federal Circuit affirmed the PTAB’s decision, concluding that the Patent Office properly limited estoppel to the party involved in the district court litigation and to the particular patent claims addressed in the district court’s judgment. The Federal Circuit emphasized that both the statute and the reexamination proceedings are focused on a claim-by-claim analysis so estoppel should be limited just to the claims at issue. In re Affinity Labs of Texas, LLC [1], 856 F.3d 883, 889-894 (Fed. Cir. 2017).

A final written decision on instituted claims is not a final written decision on the patentability of non-instituted claims.

In the third recent estoppel decision, Credit Acceptance Corp. v. Westlake Services, __ F.3d __, 2017 WL 2485469, case no. 2016-2001 (Fed. Cir. June 9, 2017), the court considered estoppel under 35 U.S.C. § 325(e)(1) in Covered Business Method proceedings. In that case, Westlake filed a CBM petition seeking review of all claims of U.S. Patent 6,950,807. In a decision that pre-dated the Supreme Court’s decision in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014), the PTAB instituted review based on § 101 with respect to some, but not all of the challenged claims. After the Alice decision, Westlake filed a new CBM petition challenging the remaining claims under § 101. The PTAB instituted review in the second CBM, rejecting Credit Acceptance Corp.’s (CAC’s) argument that estoppel should preclude the second CBM challenge. The PTAB held that estoppel did not apply because the first proceeding had not yet resulted in a final written decision, so the estoppel argument was not ripe.

In the first CBM, the PTAB found each of the challenged claims unpatentable under § 101. CAC renewed its motion to terminate the second proceeding based on estoppel. The PTAB again denied the motion on the grounds that estoppel applies on a claim-by-claim basis and the final written decision in the first proceeding did not address the claims at issue in the second. Id. at * 5. The PTAB then issued a final written decision finding all claims in the second CBM unpatentable under § 101.

CAC appealed the PTAB’s decision. On appeal, Westlake and the PTO argued that the PTAB’s application of the estoppel is not appealable. According to Westlake, the PTAB’s application of estoppel is akin to the PTAB’s decision to institute review, which is not appealable. The Federal Circuit rejected this argument, concluding that the estoppel provision (§ 325(e)(1)) does not refer to “institution” decisions and, in fact, is not limited to institution decisions. Rather, estoppel governs at any stage of a Patent Office proceeding. Id. at *8. Further, a parallel estoppel provision also applies in district court and ITC proceedings, so it would be inconsistent to make decisions on estoppel at the PTAB not appealable while district court and ITC decisions on estoppel could be appealed.

Turning to the merits of the PTAB’s estoppel decision, CAC argued that estoppel should apply to all claims challenged in a petition where any portion of the petition results in a final written decision. The Federal Circuit stated that CAC’s argument is foreclosed by the court’s earlier decision in Synopsys Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1314 (Fed. Cir. 2016). In Synopsys, the court held that the validity of claims for which the PTAB did not institute inter partes review can still be litigated in the district court. Because the statutory estoppel language Synopsys interpreted in the IPR context is identical to the statutory language governing CBM estoppel, the court concluded that, in CBM proceedings, a final written decision on instituted claims is not a final written decision on the patentability of non-instituted claims. Credit Acceptance Corp. v. Westlake Services, __ F.3d __, 2017 WL 2485469, case no. 2016-2001 at * 13 (Fed. Cir. June 9, 2017). The court then went further to state that the holdings in its earlier IPR decisions (Synopsis and Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016)) apply equally to PGR statutes and regulations as well, since they also contain identical language. The scope of the estoppel set forth in Shaw is discussed in greater detail here.

The three Federal Circuit decisions collectively were presented with the application of estoppel in the context of inter partes reexamination, inter partes review, covered business method patent review, and post grant review. Consistently, the court seems to emphasize that if estoppel applies, it applies only to those claims that were the subject of a final decision on the merits.