No Estoppel for Art in Contentions but Not IPR Petition

Earlier this month in Koninklijke Philips N.V. v. Wangs Alliance Corp., Civil Action No. 14-12298-DJC (D. Mass. Jan. 2, 2018), the District of Massachusetts added another case to the majority view of the scope of inter partes review estoppel, deciding that Wangs could assert prior art included in invalidity contentions but omitted from a subsequent IPR petition.

Philips had asserted infringement of seven patents: Patent Nos. 6,147,458; 6,250,774; 6,561,690; 6,586,890; 6,788,011; 7,038,399; and 7,352,138. In due course, Wangs filed invalidity contentions against the patents-in-suit, and at the one-year deadline, Wangs petitioned for IPRs. The PTAB granted the IPRs for six of the seven patents. While the court stayed the case, the PTAB handled the IPRs, ruling for Wangs on some claims but not others. In the immediate motion, Philips moved to prevent Wangs from relying on prior art left out of its contentions under local rules, and to estop Wangs from relying on prior art included in its contentions but not in its IPR petitions.

Several courts have tackled the IPR estoppel issue, to differing results. Section 315(e) of Title 35 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 held that estoppel does not apply to grounds of invalidity on which the PTAB denies institution based on redundancy. Because “[t]he IPR does not begin until instituted,” according to the Federal Circuit, redundant grounds of invalidity cannot be raised during the IPR. Most district courts have interpreted Shaw broadly, applying estoppel only to grounds of invalidity that the PTAB instituted and then rejected in a final written decision. Examples of the majority view previously covered on this blog are IV v. Toshiba and Finjan v. Blue Coat Systems. The minority view, in cases such as Douglas v. Meyer, applies estoppel to grounds of invalidity omitted from the petition or denied institution on the merits. This split is covered in more depth in my webinar here.

This case sides with the majority view. While sympathetic to the gamesmanship concern in Douglas about keeping “a second-string invalidity case in reserve—particularly because Wangs waited until after the Markman hearing to move for a stay—the court felt that Shaw compelled the outcome. The reasoning of Shaw was essential to the holding and was not “mere dicta.” The court denied Philips’s motion for summary judgment and allowed Wangs to raise the prior art it wanted to at trial.

Lessons for Practice

This issue has not yet been decided by the Federal Circuit, so it is likely worth it for both sides to fight to include or exclude prior art from trial under § 315(e). Defendants often should petition for an IPR while holding back a “second-string” defense for district-court trial because the cases continue to fall to that side of the split.

For a plaintiff, this issue should be raised not just in pretrial motions but also when the defendant requests a stay. Granting a stay is discretionary, and courts typically give a lot of weight to simplification of the issues. In this case, the court implicitly expressed regret over granting the stay: “Excluding grounds not raised in a petition and grounds not instituted by the IPR from the scope of estoppel essentially constrains the potential of any such stay to narrow the issues before this Court.” I’d wager that, under similar circumstances, this judge won’t grant a stay next time.

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