IPR Estoppel Remains Elusive for Patent Owners

In Finjan v. Blue Coat Systems, LLC, No. 15-cv-03295-BLF, (N.D. Cal. July 28, 2017), the court took the majority view on the scope of Inter Partes review estoppel, finding no estoppel for grounds of invalidity not included in a petition and for grounds of invalidity denied institution by the Patent Trial and Appeal Board.

Finjan had sued Blue Coat, among several others, for infringement of several cybersecurity patents relating to “content-based security,” counteracting malicious code in downloaded files based on the behavior of the code rather than a maintained list of viruses and malicious code. Finjan’s enforcement campaign had spawned numerous IPR petitions before the PTAB. Blue Coat had joined four inter partes reviews filed by other defendants against U.S. Patent Nos. 8,677,494 and 8,225,408, which the PTAB instituted, with some claims of the ’494 patent and all claims of the ’408 patent surviving. Finjan moved for summary judgment that the grounds of invalidity left out of the petitions but raised in the litigation against the ’494 and ’408 patents should be estopped. Blue Coat had also filed its own IPR petitions against U.S. Patent Nos. 6,154,844; 6,965,968; 7,418,731; and 8,079,086, but the PTAB denied institution. Finjan moved for summary judgment that the grounds of invalidity included in those petitions should be estopped.

First, some background: there is a split in district courts over 35 U.S.C. § 315(e), which estops a party from raising “any ground that the petitioner raised or reasonably could have raised during that inter partes review.” The Federal Circuit in Shaw Industries Group v. Automated Creel Systems found that grounds of invalidity denied institution based on redundancy are not estopped. The Federal Circuit reasoned that, because “[t]he IPR does not begin until it is instituted,” the redundant ground of invalidity could not have been raised during the IPR. A majority of district courts have interpreted Shaw broadly and found that estoppel only applies to grounds of invalidity that the PTAB instituted and rejected. (One example is IV v. Toshiba, previously covered on this blog.) However, other courts have found that grounds of invalidity left out of the petition are estopped or that grounds of invalidity denied institution on the merits by the PTAB are estopped. (One example is Douglas v. Meyer, also previously covered.) I covered this split in much more depth in a webinar available online.

In this case, the court sided with the majority view for the grounds of invalidity not included in the third-party petitions against the ’494 and ’408 patents. Those grounds were not estopped, and Blue Coat could raise them at trial. The court provides no reasoning besides spelling out both sides’ arguments and noting that one case in the majority view, Verinata Health v. Ariosa Diagnostics, had been decided in the Northern District as well.

Likewise, the court did not estop the grounds of invalidity included in Blue Coat’s petitions. In a separate section (the decision was an omnibus of several summary judgment motions), the court found no authority for the notion of estopping grounds of invalidity denied institution. I am aware of one case that did estop grounds of invalidity that were denied institution, Biscotti v. Microsoft (E.D. Tex. 2017), which the parties and the court apparently missed.

Lessons for Practice

First, district court decisions are persuasive authority, not binding, on other district court judges, and cases from the same district as the judge are generally more persuasive. This is a case in which there were cases on both sides, and the decision from a judge down the hall may have been what tipped the balance.

Second, while the court did not refer to the broad reading of Shaw as the majority view, the bulk of the cases fall on that side. But keep in mind that the Federal Circuit has not yet ruled on the applicability of estoppel to grounds of invalidity left out of the petition or denied institution on the merits. Shaw had an unusual procedural posture, and the Federal Circuit could easily restrict that case to its facts. (Or the Supreme Court could find inter partes review unconstitutional in Oil States, and none of this will matter.)

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