What happens in litigation at the patent office doesn't stay at the patent office

Litigants in patent cases must carefully plan their strategies because Patent Office litigation almost inevitably spills over into district court-related cases. In the last 18 months, two landmark decisions by the Federal Circuit Court of Appeals in Washington, D.C. impacted patent litigation nationwide: Caltech and Ironburg clarified the influence of U.S. Patent Office litigation on patent validity in parallel federal district court patent litigation.

Traditionally, patent validity is decided during jury trials in federal district court. In September 2011, Congress passed the America Invents Act, or AIA, allowing for patent validity litigation in the Patent Office. Since its enactment in 2012, parties have taken advantage of two AIA-created proceedings to litigate before the Patent Office certain patent validity defenses: inter partes reviews and post-grant reviews, also called IPRs and PGRs. Usually, accused infringers assert that under what's known as "prior art," the patent should not have issued because the invention was already known or obvious based on prior knowledge.

Patent Office administrative proceedings are considered to be a more favorable forum because they are designed to be faster and less expensive than traditional litigation. According to data from Docket Navigator from 2012 to 2022, the Patent Office determines a patent is invalid because the invention was already known or obvious in the prior art in about 70% of IPRs. In contrast, a district court finds a patent invalid only approximately 37% of the time. Unsurprisingly, defendants in district court litigation flocked to the Patent Office, and IPRs have been wildly popular from the start.

But litigating validity in the Patent Office comes with a trade-off: statutory IPR estoppel. If the validity challenge fails and the patent is wholly or partly confirmed in a Patent Office IPR trial, statutory estoppel under 35 U.S.C. § 315(e)(2) bars the challenger from raising invalidity challenges in a parallel district court litigation that "the petitioner raised or reasonably could have raised during that inter partes review." Importantly, estoppel applies to parallel district court litigation as soon as the Patent Office issues its final decision. Appealing the decision to the Federal Circuit does not delay the effects of estoppel.

In recent years, district courts have been all over the map in deciding which prior art defenses are estopped and which are not. Some district courts determined that estoppel applied to all arguments that could have been raised in an IPR petition. Other courts decided that estoppel only applied to arguments actually considered by the Patent Office during the IPR.

The Federal Circuit, which hears all patent appeals nationwide, has recently jumped into the fray and provided important clarity on the scope of IPR estoppel.

In 2022, the Federal Circuit overruled an earlier case and confirmed that IPR "estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all grounds not stated in the petition but which reasonably could have been asserted against the claims included in the petition." Cal. Inst. of Tech. v. Broadcom, 25 F.4th 976, 991 (Fed. Cir. 2022), petition for cert. pending, No. 22-203 (filed Sept. 2, 2022). This decision eliminated some of the parties' key validity defenses and had a devastating impact on the jury trial. In Caltech, defendants were barred from "presenting an invalidity case at trial on the ground of statutory estoppel," and the subsequent jury verdict awarded Caltech over $1 billion in damages. Id. at 985, 989.

Last month, the Federal Circuit issued another decision providing further guidance on the scope of estoppel. In Ironburg, the Court clarified the standard for determining "what invalidity grounds not presented in a petition are estopped pursuant to § 315(e)(2)." Ironburg Inventions v. Valve Corp., 64 F.4th 1274, 1297-98 (Fed. Cir. 2023). It held that a patent challenger could have "reasonably... raised" ground(s) in its petition if they are "invalidity grounds a skilled searcher conducting a diligent search reasonably could have been expected to discover." Id. at 1298.

The rulings in Caltech and Ironburg underscore the importance of patent challengers winning at the Patent Office to avoid facing the consequence of estoppel barring key defenses in district court later. In this new and fast-evolving area of the law, these recent Federal Circuit decisions lay the groundwork for additional guidance on the scope of IPR estoppel.

Michelle Armond is a partner, and Monica Arnold is an associate at Armond Wilson LLP.