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.
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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.