Federal Circuit Clarifies IPR Estoppel Burden

A recent Federal Circuit opinion clarified that patent owners carry the burden of proving that inter partes review (IPR) estoppel applies to invalidity grounds not included in their IPR petitions. The Federal Circuit also endorsed—for the first time—the “skilled searcher” standard often used by district courts in determining whether a nonpetitioned ground could have reasonably been raised at the PTAB pursuant to 35 USC § 315(e).

In Ironburg Inventions Ltd. v. Valve Corp.,[1] the US Court of Appeals for the Federal Circuit vacated the Western District of Washington’s conclusion that IPR estoppel applied to certain invalidity grounds raised by Valve Corp., holding that Valve was estopped from raising invalidity grounds for which an IPR was requested but not instituted,[2] but was not estopped as to later-discovered invalidity grounds that were not raised in the IPR petition.

After being sued for infringing US Patent No. 8,641,525 related to a video game controller, Valve filed an IPR petition requesting the United States Patent and Trademark Office (USPTO) find the ’525 patent claims unpatentable. The Patent Trial and Appeal Board (PTAB) instituted the IPR in September 2016, which ultimately resulted in the cancellation of some, but not all, of the challenged claims.

Subsequently, Valve learned of additional, allegedly invalidating prior art from a third-party IPR and attempted to use this later-discovered prior art to invalidate the remaining claims during the district court litigation. The district court granted the patent owner’s motion to preclude Valve’s use of the nonpetitioned grounds based on IPR estoppel pursuant to Section 315(e).

IPR Estoppel Statute

Section 315(e)(2) provides that an IPR petitioner (or a real party in interest or privy) may not assert that a claim is invalid on any ground the petitioner raised or reasonably could have raised during the IPR. The Federal Circuit noted that “reasonably could have raised” includes not only grounds asserted in the petition and instituted by the PTAB but also grounds that “reasonably could have been asserted against the claims included in the petition.”[3]

Note that IPR estoppel also applies to other proceedings within the USPTO, as successfully proven when the USPTO stopped a subsequent patent reexamination for G.W. Lisk* based on IPR estoppel from a previous IPR.

Skilled Searcher Standard

Prior to Ironburg, the Federal Circuit had not articulated a standard for estoppel based on later-discovered prior art.[4] Many district courts adopted the “skilled searcher” standard in which a patent challenger is estopped from asserting later-discovered prior art that “a skilled searcher conducting a diligent search could have been expected to discover.” Ironburg adopted the “skilled searcher” standard, finding it consistent with the statutory requirement under 35 USC § 315(e)(2).

While the district court correctly identified the “skilled searcher” standard as the appropriate standard, the Federal Circuit found that the district court did not properly assign the burden of proof, which it implicitly placed on Valve.[5]

In its analysis, the district court relied on the patent owner’s evidence that some of the later-discovered references were listed on the ’525 patent and others were found in the prior art search conducted by Collective Minds, the third party that filed the later IPR.

In the Federal Circuit’s view, the district court’s decision rested on an assumption not proven in the record: that Collective Minds’ search was reasonably diligent and did not involve extraordinary “scorched earth” measures that an ordinary skilled searcher would not otherwise take.[6]

In preventing the reexamination of G.W. Lisk’s patent, a declaration from an expert prior art searcher persuaded the USPTO that a reasonably diligent search would have uncovered the additional art cited in the reexamination request.[7] In that case, the USPTO noted that one of the additional references was a well-known and widely available textbook on internal-combustion engines and found it “apparent that a ‘scorched-earth search’ would not have been required to uncover the prior art applied in the grounds in the request.”[8]

Patent Owners Have Burden of Proof on IPR Estoppel

The Federal Circuit agreed with Valve that the estoppel burden of proof should be placed on the party seeking to benefit from the assertion of estoppel: the patent owner. The court further noted the consistency of the holding “with the general practice that a party asserting an affirmative defense bears the burden to prove it.”[9]

The Federal Circuit rejected the patent owner’s argument that while the initial burden to assert estoppel should be on the party invoking it, the burden should thereafter be shifted to the responding party. It dismissed the patent owner’s contention that patent challengers often seek to protect details of their search efforts by asserting attorney-client privilege.

Conclusion

Beyond finding that patent owners have the burden to prove IPR estoppel and endorsing the skilled searcher standard, the Federal Circuit’s decision emphasized the importance of performing a diligent search as part of preparing an IPR petition.

Petitioners should consider the value of conducting a diligent prior art search, even if they believe they have sufficient grounds to successfully challenge a patent’s validity at the PTAB. And patent owners should be ready to provide sufficient evidence to meet their burden in proving estoppel applies when confronted with serial challenges to their patents—potentially by following the blueprint laid out in G.W. Lisk’s case.

*Morgan Lewis represented G.W. Lisk in this matter.