by Dennis Crouch
On Feb 4, the Federal Circuit issued an important decision in California Institute of Technology v. Broadcom Ltd. and Apple Inc. (Fed. Cir. 2022). Four of the big issues are listed below:
- IPR Estoppel: The most important legal precedent in the case is a pro-patentee interpretation of the IPR estoppel provision found in 35 U.S.C. § 315(e)(2). That prevision bars an IPR petitioner involved in patent litigation from asserting any invalidity grounds that the petitioner had “raised or reasonably could have raised during that inter partes review.” Id. Here, the court makes clear that the scope estoppel is not tied to the grounds raised to in the IPR, but rather truly does extend to any ground “reasonably could have been included in the petition.” Slip Op. This decision expressly overrules Federal Circuit precedent to the contrary. Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016).
- Big money: The jury had awarded a $1 billion+ damage award; the Federal Circuit vacated that award and ordered a new new trial on damages. The court also vacated an infringement finding with regard to one of the patent claims because the district court did not instruct the jury on the construction of a particular term (“variable number of subsets”).
- Eligibility: The inventive feature here is use of bit repetition to better ensure wireless signal transmission. On appeal, Broadcom argued that the claim lacked eligibility because it employs a mathematical formula. The Federal Circuit dismissed that argument out-of-hand with a direct quote from the Supreme Court. Diamond v. Diehr, 450 U.S. 175, 187 (1981) (“[A] claim drawn to subject matter otherwise statutory does not become nonstatutory simply because it uses a mathematical formula, computer program, or digital computer.”).
- Extraterritoriality: The infringing chips are made abroad and installed in Apple devices abroad. U.S. patents only cover infringement within the territorial bounds of the United States. The jury found infringing sales in the U.S. On appeal, the Federal Circuit found the jury instructions appropriate. Notably, the court refused to require any jury instructions on the presumption against extraterritorial application of U.S. patent laws. Rather, the instructions properly walked through factors for determining whether a particular sale occurred in the United States.
= = = =
In this post, I am just going to focus on the estoppel issues: Argument estoppel is a big deal with inter partes review. By design, patent challengers get one-bite at the Apple; one shot at invalidating the patent claims based upon obviousness or anticipation. Of course, the devil is in the details with this sort of rule.
Rather than relying upon traditional judge-made principles of res judicata, Congress specified within the statute how estoppel works for IPR proceedings. The basic rule is that, once a patent claim is subject to a final-written-decision in an IPR, the IPR petitioner is estopped from asserting “that claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” 35 U.S.C. 315(e)(2) (applies also to real-party-in-interest and privies). Timing here is important, but favors estoppel. Namely, once the IPR reaches Final Written Decision, the challenger is prohibited from continuing to assert invalidity, even if the litigation was already filed and had been pending prior to IPR institution.
The scope of estoppel provided by 315(e) has been subject to substantial litigation. One key decision is Shaw Industries Group, Inc. v. Automated Creel
Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016). In Shaw, the Federal Circuit substantially limited the scope of estoppel. Shaw was a partial institution case — the PTAB had instituted IPR on only some grounds. The court particularly held that 315(e) did not estopp the petitioner from later raising the non-instituted challenges in district court litigation. The court reasoned that those could not have reasonably been raised in the IPR since the petitioner’s attempt had been denied by the PTAB. But Shaw raised further questions about where to draw the line, and district courts across the country came-up with a variety of conclusions about the scope of estoppel. The most pro-challenger readings focused on grounds that could have been raised after institution, and thus concluded that estoppel was fairly strictly limited only to the grounds actually instituted. See, e.g., Koninklijke Philips N.V. v. Wangs All. Corp., 2018 WL 283893, at *4 (D. Mass. Jan. 2, 2018).
Shaw was based upon a procedural posture that the Supreme Court eventually ruled improper. Notably, Shaw presumed that partial IPR institution was proper. In SAS, the Supreme Court rejected that approach and instead held that IPR institution is an all-or-nothing decision by the USPTO. SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018) (PTAB does not have partial institution authority; and that the IPR petition defines the scope of the IPR).
Ordinarily, each Federal Circuit panel is bound to follow precedent set-out by prior a Federal Circuit panel. My colleague Tommy Bennett refers to this as the “Rule of Circuit Precedent.” However, since Shaw‘s foundation had been undermined, the panel here in CalTech concluded that it was no longer binding precedent.
The panel here has the authority to overrule Shaw in light of SAS, without en banc action.
Although SAS did not expressly overrule Shaw, the court concluded that the Supreme Court had “undercut” Shaw‘s “theory [and] reasoning . . . in such a way that the cases are clearly irreconcilable.” Quoting Henry J. Dickman, Conflicts of Precedent, 106 Va. L. Rev. 1345 (2020).
With this newfound freedom, the court rewrote the rule of estoppel — this time in a much broader sense:
Accordingly, we take this opportunity to overrule Shaw and clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.
Slip Op. In the litigation, Apple and Broadcom had hoped to rely upon several prior art references during litigation. However, evidence showed that they were “aware” of those references by the time that they filed the IPR petition. Even though they were not included within the IPR petition, they “reasonably could have” been used as the basis for an IPR challenge. Thus, the appellate panel affirmed the district court’s ruling barring the subsequent challenge in litigation.
The “aware of” requirement is quite broad, and the Federal Circuit did not delve further into defining the “reasonably could have” threshold. For its part, the district court in this case had gone a step further and expanded estoppel to also include any grounds relying upon prior art “a skilled searcher conducting a diligent search reasonably could have been expected to discover.” California Inst. of Tech. v. Broadcom Ltd., 2018 WL 7456042 (C.D. Cal. Dec. 28, 2018) (subsequent modifications omitted). This test is a based upon a statement made by Senator Kyl as the America Invents Act was being debated. 157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011). In his testimony, Sen. Kyl expressed that the estoppel provision had been “softened” by adding “reasonably.” Without that term, the estoppel would have been
amenable to the interpretation that litigants are estopped from raising any issue that it would have been physically possible to raise in the inter partes reexamination, even if only a scorched-earth search around the world would have uncovered the prior art in question. Adding the modifier ‘‘reasonably’’ ensures that could-have-raised estoppel extends only to that prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.
Statement of Sen. Kyl.
Although it is unclear how far reasonableness extends, it is clear that IPR estoppel is now based upon a use-it-or-lose-it principle. Holding arguments back at the IPR petition stage is effectively a waiver of those arguments.
Remember that this is only one D. The patentee may have to defend against other IPRs from others and will have to defend the patent in DC from other Ds if they file other complaints.
My prediction: those firms that file IPRs and try to make it so that esstoppel doesn’t attach to the people that are paying for the IPR are going to see quite a boom.
Now the USPTO has to do more to stop multiple IPRs from being filed.
Actually, I am thinking the opposite – the ‘slender reed’ that those like Unified Patents have been clinging to is that those PAYING THEM are somehow not privies to the resultant action.
They are.
When the situation is finally “officially” clarified, their business model is going to go Ka-blooey, as ALL of their clientele are going to be considered privies to ALL of their filings (and you want to talk about massive number of filings….
Dennis – can you please write a post about the extraterritorial issue tomorrow?
By design, patent challengers get one-bite at the Apple.
Or, rather, Apple gets one bite at the patent.
“Apple gets one bite at the patent”
Let’s just see what VirnetX has to say about that, shall we. 🙂
“patent challengers get one-bite at the Apple”
Well . . . that’s certainly what Congress intended.
And yet (considering IPRs / PRGs — Dist. Ct. forum-hopscotching) . . . just look at where we are today.
Here a bite, there a bite, everywhere a bite, bite . . .
Many understood that Shaw was inconsistent with the language and spirit of 315(e)(2), which is why so many district court decisions (many of which were cited in the panel decision) found various ways to distinguish Shaw or confine it to its facts.
But the justification for “overruling” Shaw seemed questionable. A three-judge panel cannot “overrule” a previous three-judge panel decision except in very narrow circumstances. In this case, the Federal Circuit invoked the principle from the Ninth Circuit that a later panel can “overrule” an earlier panel decision in light of an intervening Supreme Court case that was irreconcilable with the prior decision. But the Ninth Circuit applies that principle when the Supreme Court holding is directly in conflict with the rule of law articulated in and essential to the outcome of a prior panel decision. This is a very narrow exception to the en banc requirement designed to preserve the integrity of appellate precedent. After all, if a three-judge panel can willy-nilly overrule an earlier three-judge panel decision, then three-judge panel decisions will not be respected as binding precedent by lower courts or the public.
Here, using the intervening SAS decision as an excuse to overrule Shaw seemed flimsy. There was nothing in Shaw suggesting that its holding was predicated on availability of partial IPR institution. The decision rested on a narrow reading that a non-instituted ground is not estopped because it could not have been raised “during” an IPR, but that a fact pattern does not depend on partial institution. The same scenario, for example, arises when a petitioner files a second or follow-on IPR petition that isn’t instituted (and there were two IPR petitions in Shaw). Even before SAS, most of the cases involving Shaw/IPR estoppel issues involved non-instituted grounds in separate IPR petitions.
I don’t think many would disagree that Shaw had its flaws, but there is a reason the law generally forbids a later panel from overruling an earlier panel without proceeding en banc. The narrow circumstances in which that may be proper were not present; the Federal Circuit instead overruled Shaw because of an underlying procedural posture that cannot exist after SAS, but which Shaw never suggested was a factor in (let alone essential to) its holding. Despite the errors of Shaw, the panel should have applied the Shaw decision and allowed the issue to be raised en banc. Let’s hope this decision isn’t a harbinger of more questionable “overruling” of earlier cases by three-judge panels.
Good points LR.
“Let’s hope this decision isn’t a harbinger of more questionable ‘overruling’ of earlier cases by three-judge panels.”
(Of course, when it comes to eligibility . . . and the CAFC implicitly “overrules” (or ignores) earlier, also-precedential cases.)
While Congress slumbers.
The “eligibility precedent” is in shambles — but this is directly traceable all the way to the top (the Supreme Court), whose own decisions are at the center of the self-conflicting Gordian Knot.
It is decidedly UNhelpful (in a root cause manner) to not recognize this, and to continue to not recognize this.
A three-judge panel cannot “overrule” a previous three-judge panel decision except in very narrow circumstances.
My understanding is that precedential decisions get passed around the Federal Circuit before they are published. If the other judges disagreed, I’m sure there would have been internal pushback.
Let’s hope this decision isn’t a harbinger of more questionable “overruling” of earlier cases by three-judge panels.
The facts that led to this decision aren’t common. I wouldn’t worry too much about it.
An internal review process is obviously not a substitute for the proper en banc review that should be required to overrule a precedential case.
> The facts that led to this decision aren’t common. I wouldn’t
> worry too much about it.
The “overruling” here was based on an intervening Supreme Court decision, and as the Supreme Court doesn’t take that many patent cases, so you might be right.
The “overruling” here was based on an intervening Supreme Court decision, and as the Supreme Court doesn’t take that many patent cases, so you might be right.
This.
So what happens if you file a first IPR petition on Ground 1 that is instituted and file a second IPR petition on Ground 2 that is denied under Fintiv factors?
The court did not address this particular question. The implication is that estoppel will attach once the first one reaches Final Written Decision. However, I could also see a different FedCir panel distinguishing the cases.
TT, this is actually a fact pattern that came up in post-Shaw estoppel cases in district courts. Shaw actually incentivized patent challengers to file second or third IPR petitions against the same patent because, most likely, the PTAB would deny institution under General Plastic or other 314(a) discretionary factors as an IPR petitioner is typically only allowed one petition per patent. This created at least an argument under Shaw that the prior art in these later-filed IPR petitions is free from estoppel under 315(e)(2), because it could not have been raised during IPR. It was never 100% clear if that argument worked under Shaw, but I think under this new case, that argument is dead on arrival.
[T]he district court in this case had gone a step further and expanded estoppel to also include any grounds relying upon prior art “a skilled searcher conducting a diligent search reasonably could have been expected to discover.”
I would not characterize that test as “go[ing] a step further.” The district court applied the straightforward sense of the statutory language in a manner that furthers the ends that IPRs were intended to serve.
IPRs are supposed to be an alternative forum to address anticipation and obvious, not an additional forum. Once the IPR finishes, questions of anticipation and obviousness should be regarded as settled, except where on-sale or public-use art is involved.
If the only reason that an IPR petitioner is not “aware” of a given reference is that the petitioner could not be bothered to do a search, that is the petitioner’s own fault. Such sloppiness should not be held against the patentee. The district court applied the right test. I hope that future applications of Caltech make that clear.
+1
Just to clarify (not to disagree), but:
“
Once the IPR finishes, questions of anticipation and obviousness should be regarded as settled, except where on-sale or public-use art is involved.”
Only applies to THAT petitioner (and its privies — here’s looking at you, Unified Patents), and there is no actual Quiet Title against prior art ( recalling the term that is used on purpose is “not invalid” as opposed to “valid”).
+2
+1
I do hope that Broadcom/Apple seek en banc review. While I agree with the panel’s reasoning here regarding Shaw, I would appreciate the certainty provided by an en banc decision that decisively overrules Shaw. Parties in future cases should not be forced to waste time and money arguing over whether Shaw has been appropriately overruled.
Fair point.
Right – under FedCir precedent, a later panel can reject this decision if they feel that the original panel improperly overruled Shaw.
Too bad Judge Rich is no longer around to write that opinion.
Atlantic Thermoplastics Co. v. Faytex Corp., 974 F.2d 1279, 1281 (Fed. Cir. 1992) (Rich, J., dissenting from denial of review en banc).
Applies — ever more so — to the Gordian Knot of eligibility jurisMISprudence.
But this move would require the judges a subsequent panel to put a bit of its political capital on the line, so I don’t see it happening too readily (cf. Judge Rich’s dissent from denial of en banc rehearing in Atlantic Thermoplastics.)
I think I made my post at about the same time as Greg. 🙂
Id.
To note: Alappat was affirmed in a first case after a Supreme Court case implicated its brethren. As Greg notes – such is the controlling earliest such precedent.
Meh. As the past number of years has painfully demonstrated only too well, a number of the members of the CAFC are only too happy to use any basis and reasoning they can pull out of their bag of tricks to abolish patents they don’t like.
I hate it when people quote statements of Senator Kyl. He has been repeatedly busted putting in statements after the fact, at hearings that he did not attend, to make it look like he was there and spoke words that other senators heard. Frankly that should be illegal as honest services fraud.
Comments are closed.