Federal Circuit: Estoppel Does Not Apply to Non-Instituted Grounds

Authored by Brian S. Mudge and Ksenia Takhistova

In a recent precedential opinion in Shaw Indus. Group, Inc. v. Automated Creel Sys., Inc.1, the Federal Circuit decided that IPR estoppel provisions in § 315(e) will not apply to any invalidity ground that the petitioner raised in the petition but the PTAB chose to not institute for redundancy. Another precedential opinion issued less than two weeks later in HP Inc. v. MPHJ Tech. Investments, LLC2 confirmed this result.


Both cases involve an appeal from PTAB final decisions in IPR proceedings. In the first case, Shaw was once a defendant in a patent-infringement case brought by Automated Creel over its US Patent No. 7,806,360 directed to “creels” for supplying yarn and other stranded materials to a manufacturing process. Shaw filed two petitions for inter partes review of the ’360 patent claims, which were later consolidated and resulted in one final decision. The Board did not institute many grounds proposed by Shaw, denying them as redundant, including a ground from the first petition that some of the ’360 patent claims were anticipated by the Payne reference. In the final written decision, the Board invalidated some, but not all, of the ’360 patent claims based on the instituted grounds. Shaw appealed from the Board’s decision, and also petitioned for a writ of mandamus, requesting the Federal Circuit to instruct the PTO to institute IPR based on the Payne reference.

HP, the petitioner in the second case, filed an IPR petition for review of MPHJ’s U.S. Patent No. 6,771,381 directed to a virtual copying method and system. HP alleged seven grounds of anticipation and one ground of obviousness in its petition. The PTAB instituted review on two of the anticipation grounds only, and declined to institute on other grounds, including the sole obviousness ground, based on redundancy. In the final written decision, the Board found all challenged claims unpatentable as anticipated, except for claim 13. HP appealed the Board’s anticipation ruling, and also challenged the Board’s decision not to institute the obviousness ground.

Estoppel Rulings:

In both cases, the petitioners raised concerns that the Board’s rejection of grounds based on redundancy would, under § 315(e), estop the petitioners from asserting those grounds in other proceedings. Section 315(e) includes two estoppel provisions, (1) and (2), directed at the “Proceedings before the [Patent] Office” and “Civil actions and other proceedings,” respectively. Both provisions preclude a “petitioner in an inter partes review of a claim in a patent . . . that results in a final written decision” from challenging validity of the same patent claim “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

In support of its mandamus request directing the PTAB to reevaluate its redundancy decision, Shaw argued that without such relief it would be precluded by section 315(e)(1) from raising invalidity arguments based on the Payne reference in any future proceedings. The PTO, an intervenor in the case, argued that Shaw’s interpretation of the estoppel provision is incorrect because “the denied ground never became part of the IPR.” (slip op. at 11). The Federal Circuit majority agreed:

“We agree with the PTO that § 315(e) would not estop Shaw from bringing its Payne-based arguments in either the PTO or the district courts. Both parts of § 315(e) create estoppel for arguments ‘on any ground that the petitioner raised or reasonably could have raised during that inter partes review.’ Shaw raised its Payne-based ground in its petition for IPR. But the PTO denied the petition as to that ground, thus no IPR was instituted on that ground. The IPR does not begin until it is instituted. See Cuozzo, 793 F.3d at 1272 (‘IPRs proceed in two phases. In the first phase, the PTO determines whether to institute IPR. In the second phase, the Board conducts the IPR proceeding and issues a final decision.’ (citations omitted)). Thus, Shaw did not raise—nor could it have reasonably raised—the Payne-based ground during the IPR. The plain language of the statute prohibits the application of estoppel under these circumstances.”

Maj. op. at 11 (emphases in original). Key to the Federal Circuit’s ruling is its focus on the wording of the estoppel statute which is directed to grounds a petitioner raised or reasonably could have raised “during” the IPR. Since the court had previously held that the IPR proceeding itself (i.e., the “review”) only begins once after trial is instituted, a logical extension of that ruling means that grounds not included in the trial upon institution because of redundancy could not be grounds that a petitioner raised (or could have raised) in the IPR.

Judge Reyna, in a separate opinion, explained that this holding was not necessary to decide the case: “Whether estoppel applies, however, is not for the Board or the PTO to decide. Nor is it for us to decide in the first instance, despite the invitation from Shaw Industries, because the issue is not properly before us.” (Reyna concurring op. at 7). Indeed, one of his major concerns that led him to write separately relates to the uncertainty of application of section 315(e) estoppel provisions in other fora:

The Board’s improper, conclusory statements declining to implement inter partes review (“IPR”) of grounds it found to be “redundant” leave me deeply concerned about the broader impact that the Redundancy Doctrine may have on the integrity of the patent system. In particular, other tribunals will be tasked with deciding whether estoppel applies based on cryptic statements the U.S. Patent and Trademark Office (“PTO”) makes under the guise of its presumed “complete discretion” over IPR institution.

(Id. at 1). Nevertheless, he “fully join[ed] the panel opinion” and “concurr[ed] specially in the judgment”. (Id.).

In the HP case, HP urged the court to review the Board’s decision not to institute on the obviousness ground, expressing concerns that estoppel would prevent it, as petitioner, from raising the ground in a later proceeding. The Federal Circuit panel found that it lacks jurisdiction to review the Board’s decision not to institute the obviousness ground, relying on its prior decisions in SightSound3; Achates4; and Cuozzo5.

In dicta, the court followed Shaw in discounting the concern over estoppel, stating: “the noninstituted grounds were not raised and, as review was denied, could not be raised in the IPR. Therefore, the estoppel provisions of § 315(e)(1) do not apply.” (slip op. at 13, citing Shaw).

Implications of the Estoppel Rulings:

These two precedential Federal Circuit decisions may have broad applicability in circumscribing the potential scope of the AIA estoppel provisions. Both cases held that the estoppel provisions of section 315(e) – barring grounds a petitioner “reasonably could have raised during” an inter partes review – would not preclude the challenger from raising in subsequent federal court or PTAB proceedings the prior art that it included in the petition but on which the trial was not instituted because of redundancy – thus effectively limiting estoppel to prior art grounds that the challenger “could have raised” after institution of an IPR. But it is well-settled that after institution the patent challenger cannot bring up any additional prior art that was not included in the IPR petition, with the possible exception of prior art grounds asserted in opposing a patent owner’s motion to amend.6 Thus, under the Federal Circuit’s reasoning as expressed in these cases, estoppel would bar in subsequent proceedings only the prior art grounds on which the review was instituted and the final written decision issued.

The same logic would arguably apply to any prior art grounds that were raised by the petitioner but rejected by the PTAB in the institution decision because they did not meet the required showing of success. Indeed, neither Shaw nor HP hinged its ruling on the reason why certain prior art was not included in the IPR trial – be it redundancy or failure to establish the likelihood of success on the merits. Instead, the Shaw court agreed with the PTO that the estoppel provision § 315(e) did not apply because “the denied ground never became part of the IPR.” Shaw, slip op. at 11. The HP decision simply followed Shaw. HP, slip op. at 13. Based on these two decisions, a petitioner should be able to argue that any ground not instituted on the merits cannot give rise to estoppel, because the rejected prior art ground would not be one the petitioner “raised or reasonably could have raised during that inter partes review.” Shaw, slip op. at 11.

By the same logic, these two decisions also lend a strong argument that estoppel would not apply to any prior art that the petitioner did not bring to the PTAB’s attention in its IPR – as the petitioner “could not have raised” such prior art during the IPR as-instituted. Under the court’s reasoning, estoppel will only apply to the actual prior art grounds on which the PTAB instituted the IPR and issued a written decision.

The net effect of these cases – as extended by the foregoing logical conclusions – would be to convert the statutory language from “reasonably could have raised” to “actually raised and tried.” This means that petitioners would not give up any other invalidity arguments at all by filing petitions for post-grant proceedings at the PTAB – a concern that many patent-infringement defendants and would-be petitioners originally had with the estoppel provisions of section 315(e). This result would present a substantial advantage for patent challengers.7

Alternatively, one can argue that prior art not presented in the petition (i.e., prior art that was not excluded by a redundancy ruling or a ruling that the argument was not sufficiently strong to warrant instituting trial) may nevertheless (and, in fact, should) be precluded by estoppel.

First, the “reasonably could have raised” language in the estoppel provision has to have some meaning and preclude at least some prior art challenges that were not actually “raised” during an IPR – holding otherwise (as discussed above) would completely eviscerate “reasonably could have raised” from the statute. Congress could not have intended this result.

Furthermore, as a practical matter, there is a fundamental difference in fairness between the two scenarios – one where a petitioner legitimately attempts to raise multiple grounds but the PTAB rejects some for reasons relating to considerations of its overall obligations to handle cases expeditiously; and the other where a petitioner intentionally withholds certain grounds with the aim of presenting them in a second- or third-wave of challenges to the patent, to be launched if the first-wave challenge fails. It would seem unfair to apply estoppel against the petitioner in the first scenario, but not so much in the second. Moreover, it would be unfair to the patentee if the estoppel provision is not applied in the second scenario, as it would upset the delicate balance Congress struck between patentees and challengers in the post-grant review proceedings.

Finally, extending the reasoning of the Federal Circuit’s Shaw and HP decisions – arguably dicta in each case – to those cases where a petitioner would pick and choose among prior art grounds, with the attempt to “hold back” certain grounds for other proceedings, would turn the statute directly against the legislative intent, and instead risk providing a patent challenger the ability to launch serial attacks against a patent without any substantial downside – a concern that Congress attempted to address in crafting the estoppel provisions.

Either way, as the PTAB rules governing post-grant proceedings continue to evolve, and various factual scenarios play out before the courts, we are likely to hear more on the estoppel issue in the months and years to come.

1Shaw Indus. Group, Inc. v. Automated Creel Sys., Inc., Nos. 2015-1116, 2015-1119 (Fed. Cir. March 23, 2016)

2HP Inc. v. MPHJ Tech. Investments, LLC, No. 2015-1427 (Fed. Cir. Apr. 5, 2016)

3SightSound Techs., LLC v. Apple Inc., 809 F.3d 1307, 1313–14 (Fed. Cir. 2015)

4Achates Reference Publ. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015)

5In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1273–74 (Fed. Cir. 2015), cert. granted sub nom. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 890 (Jan. 15, 2016) (No. 15-446)

6In MasterImage 3D, Inc. v. RealD Inc., IPR2015-00040, Paper 42 (July 15, 2015) (precedential), the PTAB explained that if the patent owner sets forth a prima facie case of patentability in its motion to amend, the petitioner may “attempt to rebut that prima facie case, . . . by identifying and applying additional prior art against proposed substitute claims.” Id. at 4 (emphasis added).

7The same would be true for post-grant review proceedings, as the PGR estoppel provision, §325(e), is identical to the IPR provision. For covered business method proceedings, however, estoppel in later civil actions and ITC proceedings is limited to any claim on any ground actually raised during the review, as the statute excludes application of §325(e)(2). Full estoppel from a CBM review still applies during the subsequent USPTO proceedings under §325(e)(1).