Broad Estoppel for IPR Petitioner Asserting Prior Art in District Court

Uncertainty over IPR estoppel continues. In Douglas Dynamics, LLC v. Meyer Products LLC, the Western District of Wisconsin recently ruled that grounds of invalidity left out of a petition for inter partes review are estopped and cannot be raised in district court—contrary to the rulings of other district courts. Civ. No. 14-cv-886-jdp (W.D. Wis. Apr. 18, 2017).

Before delving into the district court’s reasoning, some background: The America Invents act states that an IPR petitioner may not reassert a ground of invalidity—an allegedly anticipatory reference or obviousness combination—in court “that the petitioner raised or reasonably could have raised during that inter partes review.” 35 U.S.C. § 315(e)(2). The Federal Circuit interpreted this provision in Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016), holding that grounds of invalidity are not estopped if a petitioner includes them in a petition but the PTAB does not institute on those grounds. The Federal Circuit reasoned that the inter partes review begins upon institution, so noninstituted grounds cannot be raised during the IPR, as § 315 requires.

Some district courts extended Shaw to grounds of invalidity not even included in the petition. One example, previously covered twice on this blog, is Intellectual Ventures I LLC v. Toshiba Corp., Civ. No. 13-453-SLR (D. Del. Dec. 19, 2016). The district court reasoned that, just as a noninstituted ground cannot be raised “during” the IPR, a ground not included in the petition likewise cannot be raised “during” the IPR since the petitioner is limited to arguing based on instituted grounds. This is so even if the petitioner reasonably could have included the grounds in the petition.

The same fact pattern arose in Douglas. Douglas Dynamics sued Meyer Products over a patent about mounting a snow plow, and Meyer responded, as defendants frequently do, by filing an IPR petition. Meanwhile in district court, Meyer disclosed invalidity contentions asserting the same grounds of invalidity as the IPR petition, plus a few more. The PTAB instituted review on only some of the grounds included in the petition, and the court granted a stay jointly sought by both parties. The patent survived the IPR, leaving three types of grounds of invalidity: instituted grounds (those included in the petition and denied on the merits); noninstituted grounds (those included in the petition but on which review was not instituted); and nonpetitioned grounds (those not included in the petition).

The parties agreed that the instituted grounds were estopped. The court followed the holding in Shaw, ruling that Meyer could continue asserting the noninstituted grounds. From there, the court deviated from the IV court’s extension of Shaw, ruling that estoppel applied to grounds of invalidity that Meyer left out of its petition.

The court lays out the policy rationale in a well-written opinion. “A patent infringement defendant does not have to take the IPR option; it can get a full hearing of its validity challenge in district court. If the defendant pursues the IPR option, it cannot expect to hold a second-string invalidity case in reserve in case the IPR does not go the defendant’s way.” The legislative history “clearly suggests that Congress intended IPR to serve as a complete substitute for litigating validity in the district court.”

But this decision’s flaw is only respecting the holding in Shaw while disregarding the reasoning. In fact, the only engagement in this opinion with the rationale of Shaw is a footnote beginning, “For the record, this court is not persuaded by Shaw’s interpretation of the term ‘during’ in § 315(e).” The opinion all but challenges the Federal Circuit to rule further on IPR estoppel.

Lessons for Practice

So what should a defendant considering filing an IPR petition do? At this point, several district courts have weighed in on the issue. If your court has done so, respond to that court’s ruling accordingly. If the court follows IV, file the IPR and hold back “a second-string invalidity case” for use in court. If the court follows Douglas, assume you have one shot to prove your invalidity case, and push the case in the venue—district court or PTAB—that you think will give that case its best hearing.

If your court has not ruled on this issue: ¯\_(ツ)_/¯.

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