Estoppel and Inter Partes Review of Patent Validity

Do the estoppel provisions of the inter partes re-examination statute preclude a third party from relying on prior art in litigation where, after the third party has included the prior art in its request for inter partes re-examination, the USPTO has determined that the prior art does not present a substantial new question of patentability? The Federal Circuit, in dicta that some may find surprising, recently left this possibility open in a case decided under the inter partes re-examination provisions that applied prior to the America Invents Act taking effect on September 16, 2012.  Belkin International, Inc. v. Kappos, No. 2012-1090 (Fed. Cir. Oct. 2, 2012). Further, this possible hole in the inter partes estoppel provision may also exist in the provision applicable to the post-September 16, 2012, inter partes review regime.

The issue in this case was whether the (as of September 16, 2012, defunct) Board of Patent Appeals and Interferences “lacked jurisdiction to consider arguments based on three references that the Director [of the USPTO] had previously determined did not raise a substantial new question of patentability.” Belkin had filed its inter partes re-examination request alleging that four references raised ten substantial new questions of patentability concerning claims 1-32 of U.S. Patent 7,035,281, “directed to a wireless router.” The USPTO determined that one reference, U.S. Patent 6,560,217, raised a substantial new question of patentability concerning claims 1-3 and 8-10, but that the other three references did not raise substantial new questions of patentability.

Belkin petitioned for review of the denial of re-examination of claims 4-7 and 11-32. This petition was denied. Further, Belkin’s petition failed to seek review of the determination that the other three references did not present substantial new questions of patentability. However, after the Examiner issued an “Action Closing Prosecution” and a “Right of Appeal Notice” related only to the proposed rejection based on the ’217 patent, “Belkin appealed to the Board, challenging the examiner’s failure to make rejections involving the three references that the Director determined did not raise a substantial new question of patentability.”

The Board held that it did not have jurisdiction over Belkin’s appeal, because 35 U.S.C. § 312(c) states that the Director’s determination “shall be final and non-appealable.” Further, Belkin had nothing to appeal under 35 U.S.C. § 315(b) because “there had been no final decision on patentability regarding the [other] three references.”

Belkin argued to the Federal Circuit that on appeal the Board had jurisdiction to decide “whether the claims are patentable over all prior art.” The USPTO responded that the Board’s jurisdiction was limited to the scope of the re-examination ordered by the Director, i.e., to the reference that the Director determined presented a substantial new question of patentability.

The court agreed with the USPTO. Under the statute, if the Director has not determined that a reference raises a substantial new question of patentability, then the Examiner cannot consider it during re-examination. Although a rejection can be based on a new reference during a re-examination proceeding, this would mean that the Director had determined that the new reference raised a substantial new question of patentability; there is no other way in which a reference not included in the Director’s determination in response to a third-party’s inter partes re-examination request can be introduced. Here, the Director limited the re-examination to the ’217 patent, and never introduced any other prior art. Further, the Examiner’s decisions addressed only the ’217 patent.

After dismissing a number of Belkin’s arguments, the court turned to Belkin’s “concerns regarding estoppel.” Belkin had noted that 35 U.S.C. § 315(c), applicable to  inter partes re-examination proceedings prior to September 16, 2012, provides that, if the Director grants an inter partes re-examination request, a third party requester “is estopped from asserting at a later time, in any civil [patent infringement] action . . ., the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes re-examination proceedings.”

The court dismissed Belkin’s concerns, stating that “[t]he question whether or not the estoppel statute works to preclude citation of a piece of prior art that a requester cited to the PTO, but that the Director determined did not raise a substantial new question of patentability, is not before us.” The courts and not the USPTO have the “final say” on whether claims are patentable. A determination by the Director “that an issue does not raise a substantial new question is not a final determination of validity or patentability.” Because “Belkin merely asserted that the three references raised substantial new questions of patentability as to claims 1-3 and 8-10 — which the Director rejected — Belkin’s arguments regarding estoppel are thus not persuasive.”

As noted above, this case was decided under the pre-September, 16, 2012, inter partes re-examination regime, and not the post-September 16 inter partes review provisions. Presumably the court’s holding has applicability to the jurisdiction of the new Patent Trial and Appeal Board (PTAB).

The bigger question is whether the court’s dicta concerning estoppel are applicable to the new 35 U.S.C. § 315(e). That provision, applicable to inter partes review proceedings after September 16, 2012, provides that a third-party requester “in an inter partes review . . . that results in a final written decision [of the PTAB] . . . may not assert either in a civil [patent infringement] action [or an International Trade Commission proceeding] . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” Thus, estoppel in an inter partes re-examination applied once the Director had ordered re-examination, whereas estoppel in an inter partes review applies only after a final decision of the PTAB.

This may be, as they say, a distinction without a difference. In both the old inter partes re-examination and the new inter partes review, once the Director has made the initial determination concerning substantial new questions of patentability, any prior art references not determined to present substantial new questions would be considered by neither the Examiner nor the Board. Therefore, the “final written decision” referred to in the new 35 U.S.C. § 315(e) would, under the Federal Circuit’s reasoning, not constitute “a final determination of validity or patentability.”

In sum, the present case suggests that a party may be able to request an inter partes review using a given reference, and later use that reference as the basis for an invalidity argument in a civil action or ITC proceeding, but only if, ironically, the US PTO has determined that the reference does not present a substantial new question of patentability.

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