This week, we provide extensive write-ups about two consequential decisions issued by the United States Court of Appeals for the Federal Circuit concerning two procedural issues under the America Invents Act (“AIA”), both following Supreme Court decisions.  In In re: Palo Alto Networks, Inc., Appeal No. 2022-145 (Fed. Cir. Aug. 16, 2022), we discuss the Federal Circuit’s decision concerning whether a party is entitled to Director Rehearing of a decision by the Patent Trial and Appeal Board (PTAB) to deny institution of inter partes review (IPR) or post grant review petitions. 

Our first Case of the Week, however, covers the Federal Circuit’s most recent decision concerning the scope of the estoppel provision found in 35 U.S.C. §  315(e)(2), which concerns limitations on arguments that can be made in district court by petitioners who pursued the IPR path.

Click-To-Call Techs. LP v. Ingenio, Inc., Appeal No. 2022-1016 (Fed. Cir. Aug. 17, 2022)

This appeal is the sister case to the Supreme Court’s decision in Thryv, Inc v. Click-to-Call Techs., LP, 140 S. Ct. 1367 (2020).  That case concerned whether time bar decisions by the PTAB were reviewable by the Federal Circuit.  The appeal here concerns the parallel district court litigation that concerned the same patents, and actually involves the effect of a different Supreme Court case - SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018).

In the IPR proceedings, the PTAB initiated review of several claims, but denied the petition with respect to one ground: Freeman, which was raised as prior art to claim 27.  During the pendency of the appeal of the IPR, and while the district court action was stayed, the Supreme Court overruled the practice of partial institutions of IPRs in SAS.  Ingenio, however, never sought remand under SAS for the Board to consider Ingenio’s challenge to claim 27.

Following the conclusion of the IPR proceedings, the district court revived the litigation.  By then, all asserted claims had been rendered invalid except for claim 27.  Ingenio moved for summary judgment arguing that claim 27 was also invalid based not on Freeman, but based on the other prior art that was successfully used in the IPRs.  Click-to-Call argued that Ingenio was estopped from pressing this argument based on 35 U.S.C.§  315(e)(2).  The Court did not accept this argument, applying common law principles of issue preclusion.  Click-to-Call appealed.

The Federal Circuit reversed, holding that Ingenio was estopped as a matter of law.

The estoppel provision reads as follows “The petitioner in an inter partes review of a claim in a patent . . . that results in a final written decision . . . may not assert . . . in a civil action . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”

Unpacking what that means and how it applies requires revisiting the path through the Supreme Court’s decision in SAS.   Prior to SAS, the PTAB would frequently institute IPRs based only on some of the grounds asserted in the IPRs.  That raised a question how to apply the estoppel provision where the petition had sought review on some grounds, but the petition was denied on those grounds.  In Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016), the petitioner had sought review on 15 grounds.  The PTAB, finding them to be redundant, granted the petition in part, but declined to institute IPR based on other grounds.  The petitioner sought a writ of mandamus, relying in part on an argument that it would be estopped from raising the un-instituted grounds in district court.  The Court denied mandamus, holding that the un-instituted grounds formed no part of the IPR, and thus estoppel would not apply to those grounds.  The rule following Shaw was that the estoppel provision applied only to grounds that were instituted for trial in the IPR.  That ruling significantly weakened the effect of the estoppel provision.

The Supreme Court then issued its decision in SAS, holding that the PTAB could not partially-institute an IPR—rather, an IPR is governed by the petition, and either the petition is instituted or the petition (as a whole) is rejected.  Earlier this year, following SAS, the Federal Circuit overruled Shaw in California Institute of Technology v. Broadcom Ltd., 25 F.4th 976 (Fed. Cir. 2022).  See our write-up of that case here.  But the scope of the “reasonably could have raised” language remained unclear.  The Court further addressed that language the following week in Intuitive Surgical, Inc. v. Ethicon LLC, 25 F.4th 1035 (Fed. Cir. 2022).  There, the petitioner argued that it could not reasonably have raised arguments in its IPR petition because of page and word count limitations.  The Court rejected that theory, holding that the petitioner had choices and elected to use its pages and words on certain theories but not others.  But it still “reasonably could have raised” other theories within those limits.  See our write up of that case here.

Click-to-Call is at least the third time this year the Court has addressed the scope of the estoppel provision.  Here, the Court held that Ingenio reasonably could have raised its arguments concerning claim 27 during the IPR, because, post-SAS, it could have sought a decision on that claim from the PTAB as part of its IPR, and the PTAB was mandated to provide it.  Many parties in Ingenio’s position did just that following SAS.  Ingenio chose not to, however.  As the Court explained, “Ingenio thus forewent the route taken by many other parties post-SAS to have the Board address all claims and all grounds in their petitions. . . . Ingenio’s choice to leave unremedied the Board’s mistake does not shield it from estoppel as to a claim it included in its IPR petition.”

The Court also affirmed the district court’s decision denying Click-to-Call’s request to add new claims, finding that the district court did not abuse its discretion by limiting Click-to-Call to the claims originally asserted.

The opinion can be found here.

By Nika Aldrich

In re: Palo Alto Networks, Inc., Appeal No. 2022-145 (Fed. Cir. Aug. 16, 2022)

In our second Case of the Week, the Federal Circuit considered whether Patent Trial and Appeal Board litigants are entitled to Director review of decisions denying institution of America Invents Act proceedings.  Petitioner/appellant Palo Alto Networks (PAN) argued that the USPTO Director’s stated policy of refusing to consider such requests for review ran afoul of the Appointments Clause of the United States Constitution, and sought a writ of mandamus compelling the Director to consider its requests for review of Board decisions denying institution on its petitions for inter partes review (IPR) and post grant review (PGR) of patents owned by Centripetal Networks, Inc.  The Court denied mandamus relief, finding that the Appointments Clause requires only that the Director have the authority to review institution decisions, not that the Director actually exercise that authority.

The arguments in this case trace to the Supreme Court’s recent decision in United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021).  In that case, a patent owner whose claims had been found unpatentable by the Board argued that because the AIA’s rehearing provisions at 35 U.S.C. § 6(c) provided that “[o]nly the [Board] my grant rehearings” of final decisions, the administrative patent judges (APJs) comprising the Board’s panels were improperly vested with principal authority to adjudicate private rights without review by officers appointed by the President and confirmed by the Senate.  The Supreme Court agreed, finding that the statute violated the Appointments Clause by “assign[ing] APJs ‘significant authority’ in adjudicating the public rights of private parties, while also insulating their decisions from review and their offices from removal,” and held § 6(c) to be unenforceable “to the extent that its requirements prevent the Director from reviewing final decisions rendered by the APJs.”  Id. at 1986-87.  The Supreme Court remanded the case to the Director to determine whether to rehear the petition, but notably made “clear [that] the Director need not review every decision of the PTAB.  What matters is that the Director have the discretion to review decisions rendered by the APJs.”  Id. at 1987-88.  Our write-up of the Arthrex decision is available here.

In the instant case, PAN sought to compel Director rehearing not of the final written decisions at issue in Arthrex, but of decisions denying institution in the first instance.  After PAN filed its IPR and PGR petitions and while they were pending, the USPTO updated its guidance regarding Director review, noting that the agency “does not accept requests for Director review of decisions on institution.”  Accordingly, when the PTAB denied institution on PAN’s petitions, the USPTO rejected PAN’s request for Director rehearing of those decisions.  After PAN filed its mandamus petition, the USPTO again updated its guidance to add that “the Director has always retained and continues to retain the authority to review such decisions sua sponte after issuance (at the Director’s discretion),” and proceeded to undertake such a review in two unrelated IPR proceedings before issuance of the Federal Circuit’s opinion in this case.  PAN argued that the USPTO’s policy of refusing parties’ requests for Director rehearing ran afoul of the Appointments Clause for reasons similar to those at issue in Arthrex.

The AIA vests the Director with sole and non-appealable authority to determine whether to institute IPR and PGR proceedings, which the Director by regulation has delegated to the PTAB.  (See 35 U.S.C. §§ 314, 324; 37 C.F.R. § 42.4(a).)  In rejecting PAN’s arguments, the Federal Circuit noted that such delegations are typically premised on the delegating official maintaining the power to review delegee decisions, that the Director’s regulations did not preclude such review, and that it made no difference that the regulations did not expressly retain any procedural avenue for Director intervention.  The Court explained that the purpose of the Appointments Clause is to maintain political accountability for executive actions to an elected official (i.e. the President), “not to guarantee procedural rights to litigants.”  Relying on Arthrex itself and collecting authority finding no Appointments Clause violation where the delegating principal officer had de facto discretion to review decisions by inferior officers—regardless of whether that discretion was exercised—the Court found that the USPTO’s policy of refusing party requests was not unconstitutional, and denied PAN’s petition for mandamus relief.

Judge Reyna filed a concurring opinion, agreeing with the outcome but arguing that since the USPTO had made clear that the Director retained authority to sua sponte review institution decisions, PAN’s petition sought relief that had already been granted and so was effectively moot.  As such, Judge Reyna did not think it was necessary to embark on the detailed analysis set forth in the majority’s opinion.

The opinion can be found here.

By Jason A. Wrubleski

ALSO THIS WEEK

Par Pharmaceutical, Inc. v. Eagle Pharmaceuticals, Inc., Appeal No. 2021-2342 (Fed. Cir. Aug. 18, 2022)

In an appeal from a district court decision, the Federal Circuit addressed challenges to the lower court’s holding of non-infringement and denial of declaratory judgment. First, finding no clear error, the Court affirmed the district court’s holding of non-infringement, explaining that the district court properly relied on the specifications. Next, the Court affirmed the district court’s denial of Par’s request for declaratory relief, finding that there was no clear error as the district court properly relied on the specifications and Eagle’s expert testimony. The Court affirmed the district court’s decision.

The opinion can be found here.

By Annie White

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This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.