By Doug Pearson, Ph.D.

Since the Federal Circuit’s decision in Shaw Indus. Grp., Inc. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016), district courts have been finding no estoppel in court proceedings for invalidity positions that were presented, but not instituted, in counterpart IPR proceedings.  But what about “non-petitioned grounds” (i.e., grounds never raised in an IPR petition to begin with) or dicta by the PTAB about teachings of asserted prior art references?  The District Court in Oil-Dri Corporation of America v. Nestle Purina Petcare Company recently found that non-petitioned grounds that were not raised in a counterpart IPR petition, but reasonably could have been raised, gave rise to estoppel that precluded presenting those grounds for invalidity in district court.  Oil-Dri, 1-15-cv-01067 (ILND August 2, 2017, Order).  The Court also found that PTAB dicta stating that a single prior art reference would not render claims unpatentable did not give rise to estoppel for that reference in district court because, though a petitioned ground, the PTAB did not institute on that ground and because the PTAB stated that such ground “was not properly part of [the IPR proceeding].”

Recall that 35 U.S.C. § 315(e)(2) provides that a petitioner of an IPR that results in a final decision will be estopped from asserting invalidity in a civil action based on “any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  The statute provides a similar estoppel provision that precludes a petitioner of an IPR that results in a final decision from raising or maintaining a proceeding before the PTO (e.g., another IPR) “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  35 U.S.C. § 315(e)(1).  The Federal Circuit in Shaw previously held that grounds raised by a petitioner in an IPR petition but not instituted by the PTAB are not subject to estoppel in district courts or other IPR proceedings under the reasoning that an IPR does not “begin” until instituted, and that grounds raised in an IPR petition but not instituted by the PTAB are therefore not raised “during” that IPR.  Shaw, 817 F.3d at 1300.  Based on Shaw, district courts have found no estoppel in district court proceedings for invalidity grounds that were raised in an IPR petition but not instituted.  Some courts applying a particularly strict view of Shaw have found no estoppel in district court even for “non-petitioned” grounds, such as discussed in one interesting instance in a prior posting.  Other courts have distinguished non-petitioned grounds from non-instituted grounds and have found estoppel for invalidity grounds that were not raised in a counterpart IPR petition, but reasonably could have been raised.  The Oil-Dri Order identifies various such cases and considers both treatments of non-petitioned grounds.  See Oil-Dri Order at 14-16.

Against this backdrop, the Court in Oil-Dri was asked to decide the estoppel effect on invalidity grounds in district court given the outcome in IPR2015-00737, in which Purina challenged claims 1-13, 30, and 32 of USP 5,975,019 entitled “Clumping Animal Litter” in an IPR before the PTAB.  Purina had challenged the claims in the IPR in five grounds based on two references:  anticipation based on each of Hughes and Pattengill, obviousness  based on each of Hughes and Pattengill individually, and obviousness based on Hughes and Pattengill in combination.  The PTAB instituted only on the ground based on the combination of Hughes and Pattengill, and issued a final written decision that Purina had not shown by a preponderance that any challenged claims were unpatentable.  Purina appealed PTAB’s decision to the Federal Circuit, and, with that appeal pending, the district court took up the issue of estoppel on invalidity grounds for the district court proceeding.  Order at 4-5.

The Oil-Dri Court considered Shaw and the opposing views on estoppel in district court for non-petitioned IPR grounds of unpatentability, and found that “[a] party raises an invalidity ground before the PTAB by including it in its IPR petition.”  Order at 16.  Following Shaw, the Court found that the four invalidity grounds that were petitioned but not instituted in the IPR did not give rise to estoppel and could be pursued in district court.  Order at 9-12.  There was a wrinkle, however.  The PTAB, in dicta, had stated in its final written decision that “[even] if we were to consider Pattengill alone, we find that Patengill does not render the challenged claims obvious.”  Order at 11.  The Court, in considering whether this comment had any estoppel effect, noted that the PTAB had nonetheless declined to institute on Pattengill alone and had expressly stated in its final written decision that “to the extent that Petitioner’s arguments are directed to obviousness in view of Pattengill alone, they are not properly part of this proceeding.”  Order at 11.  The Court found these comments of the PTAB noteworthy and declined to find any estoppel effect based on that PTAB dicta since, as stated by the PTAB, the Pattengill anticipation ground was “not properly part of this [IPR] proceeding.”  Order at 11.

Having found that “[a] party raises an invalidity ground before the PTAB by including it in its IPR petition,” the Court also evaluated whether the non-petitioned grounds involving seven references identified in the Order reasonably could have been raised by Petitioner in the IPR.  In doing so, it evaluated expert declarations, including that by Patent Owner’s declarant, who stated that “a reasonably skilled patent searcher” would have located four of the references, for which the Petitioner had no rebuttal.  The Court then found that Petitioner would estopped from raising those four references for invalidity in district court.

The case presents a reminder to Petitioners that non-petitioned grounds that reasonably could have been raised in an IPR petition may be found by district courts to fall outside the contours of the Shaw decision and subject to estoppel for invalidity purposes in district court proceedings.  It also presents an example where a district court declined to be swayed be PTAB dicta regarding impact of a reference relative to challenged claims in making an estoppel decision for related district court proceedings.

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Doug Pearson advises clients across a host of intellectual property (IP) and technology issues, particularly in the development, management, and enforcement of worldwide patent portfolios. He holds a Ph.D. in applied physics and leverages broad technical experience in electronics, signal processing, materials, optics, computational methods, and information technology in working with expert witnesses on what are often case-dispositive issues.