PTAB Strategies and Insights - September 2020: Snap Shot Summer 2020 - Recent Trends in Applying 315(e)/325(e) Estoppel

This month we first refresh our readers on Shaw and SAS, and then we will look at two recent exemplary cases that we feel are illustrative of the current trends for petitioner estoppel.

We will show that the trend in the district courts for 35 U.S.C. §§ 315(e) and 325(e) estoppel analysis generally follows a two prong inquiry — first, whether the petitioner knew of the references (i.e., subjective prong), and second, whether a skilled searcher reasonably could have discovered the references through a diligent search (i.e., objective prong).

Background - Shaw and SAS

In Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc.[i], the Federal Circuit held since the “IPR does not begin until it is instituted,” only arguments made after institution are made “during” that IPR. Therefore, petitioner estoppel did not apply to non-instituted grounds.[ii]

After Shaw, the Supreme Court issued its SAS Inst., Inc. v. Iancu[iii] decision holding that the Board could not continue its practice of partial institutions, finding that 35 U.S.C. § 318(a) means the Board’s institution decision “must address every claim the petitioner has challenged.” But the Court did not explicitly rule that the Board must “institute” review on every ground asserted in the petition. Nonetheless, the Federal Circuit later observed that “[e]qual treatment of claims and grounds for institution purposes has pervasive support in SAS.”[iv] And the Board has effectively stopped the practice of having non-instituted grounds.[v] For example, if a majority of grounds should fail, the Board has denied institution on the entire petition. On the other hand, if a minority of the grounds should fail, the Board has instituted the petition and noted which grounds were strong and which were weak and would most likely not survive in the final written decision.

Palomar Techs., Inc. v. MRSI Sys., LLC – No Petitioner Estoppel

In Palomar Techs., Inc. v. MRSI Sys., LLC[vi], Patent Owner Palomar Technologies, Inc. moved for summary judgment by invoking IPR estoppel. The court denied their motion and ordered a bench trial on whether Petitioner MRSI was estopped from applying the references based on the two-prong inquiry. The court held that a prior-art reference not raised in an IPR is subject to IPR estoppel if: the petitioner actually knew of the reference (subjective prong) or if a skilled searcher conducting a diligent search reasonably could have been expected to discover the reference (objective prong).

Here, the court held IPR estoppel did not preclude a petitioner from asserting two prior art references not previously asserted in an IPR against a patent. In doing so, the Court rejected the argument that “courts should be particularly cautious about accepting a hindsight analysis” in the IPR estoppel context. In Palomar, the court addressed IPR estoppel under the scope established by the U.S. Supreme Court’s SAS decision[vii].

Under the subjective prong, the court found that there was no evidence to suggest that the petitioner actually knew of the references at the time of the IPR.

Under the objective prong, the court set forth several inquiries in assessing the evidence, including: (1) the difficulty of conducting a prior art search, (2) where the search is compounded by the large number of claims in the involved patent, (3) the lack of overlap of classes/subclasses and of principal search terms between the patent and the prior-art references at issue, and (4) whether the search itself produces useful results.

Ultimately, the court found that after a reasonably diligent searcher (a) spent more than 30 hours searching and (b) located invalidating prior art against all of the claims of the patent, they would have stopped searching. And...