On February 4, 2022, the Federal Circuit decided California Inst. of Tech. v. Broadcom Ltd.  et al. 2020-2222, 2021-1527 (“Caltech”).   This decision received some immediate publicity for its reversal and remand of a massive damages award that exceeded $1 Bil.  While this part of the decision is certainly eye-catching, a ruling that is likely to be more significant to a wide range of parties and practitioners (“IPR”) is also buried in this decision.  In a rare move, the Caltech panel overruled a precedential panel decision and expanded the scope of estoppel arising from inter partes review (“IPR”).

35 U.S.C. § 315(e)(2) provides that a “petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision … may not assert either in a civil action … or in a proceeding before the International Trade Commission …that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”  This estoppel provision largely mirrors language first introduced in the context of inter partes reexaminations.   The purpose of this estoppel provision is to limit serial attacks on a patent in different forums and to motivate the challenger to bring the best arguments forward if they choose to initiate an IPR.   In the case of inter partes reexamination, this provision was generally applied broadly.

In 2016, the Federal Circuit decided Shaw Indus. Group Inc. v. Automated Creel Systems, Inc., 817 F. 3d 1293 (“Shaw”) which narrowly interpreted the estoppel provision of Section 315(e).  Specifically, Shaw held that the scope of an IPR is determined by the institution decision, and not the petition.  As a result, the “raised or reasonably could have raised” language was evaluated based not on what the petitioner argued or could have “reasonably raised” in the petition, but what the petitioner raised or could have reasonably raised after the board instituted the IPR.  

While Shaw was clear on its impact on arguments that were actually raised in a petition but not instituted in the IPR (no estoppel) District courts wrestled with the scope of Shaw in other contexts, especially in the case of arguments that were not included in the petition in the first instance.  See Caltech Slip Op at 21-22, collecting cases.  For patent owners, the narrow reading of the estoppel provision in Shaw meant that it would be far more likely to have to defend prior art invalidity challenges in both the PTAB and the district court.

In Caltech, the defendants raised prior art invalidity arguments before the district court that were not presented in their previously instituted IPRs.  Despite the holding in Shaw, the district court held that these invalidity arguments were barred by the estoppel provision of Section 315 since “Apple and Broadcom were aware of the prior art references at the time they filed their IPR petitions and reasonably could have raised them in those petitions even if they could not have been raised in the proceedings post-institution.” Slip Op. at 20.  The defendants appealed.

Significantly, Shaw was decided before the Supreme Court’s ruling in SAS Institute v. Iancu, 138 S. Ct. 1348 (2018) in which the Board’s prior practice of partial institution was eliminated and Shaw was specifically addressing arguments that were raised in a petition but not included in the institution decision.   The intervening Supreme Court decision allowed the panel in Caltech the revisit the precedential panel holding in Shaw without sitting en banc.  Indeed, not only did the Caltech panel choose not to follow Shaw, in a somewhat rare move it expressly overturned it and in single sentence significantly broadened the applicable scope of IPR estoppel:

Accordingly, we take this opportunity to overrule Shaw and clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.  Slip Op. at 23.

The Caltech holding is clearly a win for patent owners but also provides clarity on the potential scope of estoppel for petitioners and patent owners alike.  When making the decision to file an IPR petition, the benefits of the IPR must be weighed against the risks of the potentially broad reach of the estoppel provisions and how that may ultimately impact your trial strategy.  On the other hand, patent owners faced with an IPR will have additional confidence that if the Board confirms the validity of its claims, it likely will not have to face similar prior art-based arguments from the same party during litigation.

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