Issue 41: PTAB Trial Tracker

Derivation Showing Overcome by Evidence of Respondent’s Prior Conception in Rare Derivation Proceeding

The Board issued a decision in a rare derivation proceeding filed by Global Health Solutions LLC (“Petitioner”) directed at claims in an application of Marc Selner (“Respondent”). Global Health Solutions LLC v. Selner, Paper 91, DER2017-00031 (March 30, 2023). The Board found that Petitioner had not proven, by a preponderance of evidence, that any one of the asserted claims of Respondent’s application was derived from the work of another inventor.

The Board applies the substantive law of the Federal Circuit and Court of Customs and Patent Appeals on the issue of derivation, which requires sufficient independent corroboration to satisfy a “rule of reason” standard for prior conception. Applying this legal framework, the Board found that Respondent proved prior conception of the alleged “invention disclosed to Respondent” through Respondent’s email communications that stated every element of the disputed invention. Although Petitioner argued that Respondent’s email communications lacked independent corroboration, which requires evidence in addition to the inventor’s own statements and documents, Respondent submitted a declaration of a law clerk of Respondent’s lead attorney who testified that she accessed Respondent’s America Online (“AOL”) email account, located the emails, and prepared them as exhibits in this proceeding without modification or alteration. The Board found these facts, in view of the fact that AOL is a well-known email service provider, sufficient to corroborate the emails.

Takeaway: The Board’s decision serves as a reminder of the complex legal framework for a showing of derivation and the requirement that petitioner must show prior conception of the invention and communication to respondent. Even in the case of such a showing, such evidence may be overcome by a showing of respondent’s prior conception. The decision also offers some insight into the rule of reason standard for “independent corroboration” and one potential strategy for making such a showing when relying on email communications as evidence.

District Court Permits Introduction of IPR Certificate Canceling Claims in Jury Trial as Relevant to Liability and Damages

In G.W. Lisk Co. Inc. v. Power Packer NA, Inc., Civil Action No. 4:17-cv-00273-SMR-SBJ (S.D. Iowa, April 13, 2023), the District Court denied Plaintiff Lisk’s motion in limine to prohibit introduction of the IPR Certificate canceling certain claims of the asserted patent. The Court explained that the cancellation of claims, which define the scope of the patent, is relevant to liability and damages, but the certificate may not be used to suggest the remaining claims are invalid. The Court noted that validity was not at issue and that it had previously excluded references to confusing terms such as inter partes review, but decided that the IPR certificate would be presented to the jury, who would be instructed that “validity could be challenged,” but is not an issue at trial. Id. at 4, 7 (emphasis added).

Takeaway: Patent Owners who are concerned about the effect of PTAB claim cancellations on the jury’s understanding and subsequent decision on infringement may request a similar procedure with respect to the introduction of the IPR certificate into evidence.

The Patent Challenge that Never Ends: OpenSky and Intel's Claims in IPR are Not Precluded by District Court Litigation

After prevailing over Intel Corp. at the district court and persevering through inter partes review proceedings plagued by misconduct and sanctions, VLSI Technology must continue to defend its “integrated circuit” patent against challenger OpenSky Industries, now joined by Intel Corp. The Board recently refused VLSI’s motion to terminate proceedings, finding that district court proceedings cannot be the basis for claim preclusion in an IPR. See OpenSky Industries, LLC v. VLSI Technology LLC, Paper 132, IPR2021-01064 (April 4, 2023).

The Board’s decision turned on how to frame the standard for claim preclusion. Intel argued that the American Invents Act (AIA) did not expressly identify common law claim preclusion when listing circumstances whereby IPRs may be estopped by parallel district court litigation, and therefore common law preclusion should not apply. VLSI, on the other hand, argued that because the AIA did not clearly exclude common law preclusion, the Board should apply it in the ongoing IPR proceeding. Upon a close reading of the relevant AIA provisions, the Board agreed with Intel, finding that “the AIA expressly imposes claim preclusion in one direction—from an IPR to other proceedings—but not in the other direction—from district-court litigation to Office proceedings.”

Takeaway: Generally, claim preclusion is a one-way street, and the Board is unlikely to apply claim preclusion from district court proceedings to inter partes review proceedings. This reinforces that patent owners must take IPRs seriously, even in circumstances where they have already prevailed on validity of the same patent in district court.

Federal Circuit Defines Standard for Determining IPR Estoppel for References Omitted from a Petition

In Ironburg Inventions Ltd. v. Valve Corporation, Civil Action No. 21-2296, 2023 WL 2749199 (Fed. Cir. 2023), the Federal Circuit held that Valve was estopped from litigating the grounds that were in the petition but not instituted (the “Non-Instituted Grounds”), but vacated the district court’s holding that Valve was “also estopped from litigating its later-discovered invalidity grounds” (the “Non-Petitioned Grounds”). Id. at 3. The Board had partially instituted Valve’s IPR petition prior to the Supreme Court’s decision in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), and Valve did not seek remand to the Board. The district court had granted plaintiff’s motion to preclude reliance on three prior art references cited in the Non-Petitioned Grounds.

The estoppel statute applies to “any ground that the petitioner raised or reasonably could have raised” in the IPR proceeding. Id. at 30. The Federal Circuit explained that “[t]he petition, not the institution decision defines the scope of the IPR litigation.” Id. at 31 (internal citations omitted). Therefore, the Non-Instituted Grounds, which were raised in the petition, triggered the estoppel statute.

The Federal Circuit then turned to the Non-Petitioned Grounds, explaining that “the district court improperly placed the burden of proof on Valve, to show that it could not reasonably have raised the Non-Petitioned Grounds in its petition, when instead the burden of proof rests with Ironburg to prove that these were grounds Valve reasonably could have raised during the IPR.” Id. at 32. The Federal Circuit held that the estoppel statute “estops a petitioner as to invalidity grounds a skilled searcher conducting a diligent search reasonably could have been expected to discover, as these are grounds that the petitioner ‘reasonably could have raised’ in its petition.” Id. at 33. The Federal Circuit further held “that the burden of proving, by a preponderance of the evidence, that a skilled searcher exercising reasonable diligence would have identified an invalidity ground rests on the patent holder, as the party asserting and seeking to benefit from the affirmative defense of IPR estoppel.” Id. at 35.

Takeaway: The Federal Circuit clarified the scope of IPR estoppel for grounds not raised in a petition, holding that the party seeking to prevent reliance on an invalidity ground (i.e., the Patent Owner) has the burden of proving, by a preponderance of the evidence, that a skilled searcher exercising reasonable diligence would have identified such invalidity ground.

Arthrex Challenges the PTO’s Delegation of Duties

Arthrex, Inc. (“Arthrex”) filed a petition for writ of certiorari in the Supreme Court of the United States asking “whether the Commissioner for Patents’ exercise of the Director’s authority pursuant to an internal agency delegation violated the Federal Vacancies Reform Act [(FVRA)].” Petition for Certiorari, Arthrex, Inc. v. Smith & Nephew et al., No. 22-639 (U.S. filed Jan. 6, 2023). The Supreme Court previously “held that APJs could not enter final decisions invalidating patents without an opportunity for review by a superior executive officer,” vacating and remanding “so Arthrex could seek review by a properly appointed officer at the PTO.” Id. at 2. Arthrex argues that it has not received “the remedy the Court directed” because there was no superior executive officer at the PTO to provide the review. The Director’s office was vacant before the appointment of the current Director, Kathi Vidal, and no Acting Director had been appointed by the President. Id. at 3. “Instead, Commissioner for Patents Andrew Hirshfeld, an inferior officer appointed by the Secretary of Commerce, was running the agency pursuant to the PTO’s internal organization plan.” Id. Arthrex argues that the FVRA describes three mechanisms for temporary superior executive officers, none of which are satisfied by the PTO’s plan allowing “the Director broad authority to delegate functions to other officers and employees.” Id. at 9. The appellate court found that the FVRA “applies only to functions and duties that a [presidentially appointed, Senate-confirmed] officer alone is permitted by statute or regulation to perform. It does not apply to delegable functions and duties.” Id. at 14 (internal citation omitted).

In it opposition brief, the government argued that the PTO’s internal organization plan “is an exercise of the Director’s delegation authority, not of any power conferred by the FVRA” and “authorizes the Commissioner to perform only the ‘non-exclusive’ (i.e., delegable) functions of the Director.” Brief For The Federal Respondent In Opposition, Arthrex, Inc. v. Smith & Nephew et al., No. 22-639 at 5 (U.S. filed Apr. 12, 2023).

Arthrex countered that the government’s interpretation would mean that the “FVRA does not apply to the PTO at all, and it applies to other agencies only in the exceptionally rare instances where Congress makes a duty non-delegable—something Congress virtually never does.” Reply For Petitioner, Arthrex, Inc. v. Smith & Nephew et al., No. 22-639 at 1 (U.S. filed Apr. 28, 2023).

Takeaway: This is a case to watch. If the Supreme Court denies cert, the appellate court’s ruling, allowing delegation, will stand. However, if the Supreme Court sides with Arthrex, it will likely impact cases that were reviewed by Commissioner Hirshfeld.

IPR Estoppel Applies to Patents and Printed Publications Describing Prior Art Systems

In Singular Computing LLC v. Google LLC, Civil Action No. 19-12551-FDS (D. Mass. Apr. 6, 2023) (D.I. 447), the court denied Singular’s motion for partial summary judgment of validity, but estopped Google from asserting invalidity grounds for which it “was actually aware, or reasonably could have become aware, as of the time of the inter partes review of those patents before the Patent Trial and Appeal Board.” Id. at 15.

Google filed IPRs challenging the asserted patents, in which the Board ultimately issued Final Written Decisions confirming the validity of the challenged claims. Id. at 1. In the district court litigation, Google sought to present invalidity arguments related to three prior art systems. The evidence relating to these arguments included “source code, oral presentations, expert testimony describing system features, non-public details regarding workstation parameters, non-public documents submitted in response to third-party subpoenas, and expert testimony based on observations at a conference” as well as printed publications. Id. at 14.

Singular moved for partial summary judgment under 35 U.S.C. § 315(e)(2) to estop Google from presenting invalidity arguments cumulative of those it previously included in its IPRs. Singular argued Google should be precluded from “asserting any system-based invalidity arguments that are ‘cumulative’—that is, duplicative—of printed publications or patents that it could have presented at IPR.” Id. at 8. The court rejected this argument because the “Patent Act says nothing about estopping invalidity claims that are ‘cumulative’ or ‘duplicative’ of those raised in an IPR proceeding.” Id. The court, however, did not go as far as allowing defendant to avoid estoppel by combing “any evidence that it could not have presented at the IPR proceeding with any printed publications or patents.” The court reasoned that “[t]o allow a party to present the same evidence styled as a different ‘theory’ of invalidity would permit a party challenging a patent to make a complete end-run around the estoppel bar.” Id. at 9-10. Ultimately, the court barred Google from presenting invalidity theories based on printed publications that it raised or could have raised at the PTAB, even if those printed publications describe a system or device that itself could not be relied on at the PTAB.

Takeaway: Patent practitioners should be aware that while invalidity theories based on prior art systems or products may be presented in district court following an IPR, the patents or printed publications related to and describing those prior art systems may be precluded under 35 U.S.C. § 315(e)(2) if the petitioner reasonably could have become aware of those documents at the time the IPR was filed.