In Verinata Health, Inc. v. Ariosa Diagnostics, Inc., Judge Susan Illston of the Northern District of California held that the IPR estoppel statute, 35 U.S.C. § 315(e), does not apply to invalidity grounds asserted in an IPR petition but denied institution on the merits. Case No. 12-cv-05501-SI (N.D. Ill. Jan. 19, 2017).

The plaintiff in Verinata alleged infringement of claims that had survived an IPR trial.  The petitioner in the trial, who was also a defendant in the infringement suit, had asserted three obviousness grounds: (1) Shoemaker, Dhallan, and Binladen, (2) Dhallan and Binladen, and (3) Quake and Craig.  The Board instituted trial only on Ground 1.  Ground 2 was denied institution as redundant, and Ground 3 was denied institution because the petitioner failed to establish a reasonable likelihood of success on the merits.  At the end of the IPR trial, the Board held that the petitioner failed to show that the challenged claims were unpatentable over the Ground 1 combination.

After the stay was lifted in the infringement suit, the plaintiff moved to strike the defendant’s invalidity contentions that included Grounds 2 and 3, arguing that the defendant was estopped under § 315(e). The court looked to the Federal Circuit’s interpretation of this statute in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. (which we wrote about here), in which the court held that IPR grounds denied as redundant were not subject to estoppel because the statute applies only to grounds that were raised or could have been raised during the IPR trial, that is, after institution.

The Verinata court interpreted Shaw broadly as standing for the proposition that “IPR estoppel only applies to grounds on which the PTAB actually institutes.”  The court stated that this interpretation ensures that estoppel applies only to arguments that received “proper judicial attention.”

Under this interpretation of § 315(e), the Verinata court held that Ground 3 was not subject to estoppel because it was denied institution and could not, therefore, have been raised during the IPR trial.

Interestingly, although Ground 2 was denied institution as redundant, the court held that it was nevertheless subject to estoppel because, as it was merely a subset of instituted Ground 1, the ground was raised, or reasonably could have been raised, during the IPR trial.

This decision follows another recent district court case, Intellectual Ventures I LLC v. Toshiba Corp., No. 13-453-SLR (D. Del. Jan. 11, 2017), that similarly interpreted Shaw broadly in holding that estoppel did not apply to grounds that could have been included in an IPR petition, but were not.

It remains to be seen whether the Federal Circuit will interpret Shaw so broadly (and § 315(e) so narrowly) when it hears appeals of cases like Verinata and Intellectual Ventures.  As it stands, however, the scope of IPR estoppel appears to be much narrower than many had expected.  If the scope of estoppel remains this narrow, the decision as to which grounds to include in a petition becomes somewhat less fraught.  A petitioner can include additional grounds in a petition without fear that a denial of institution will foreclose those grounds forever.  And a petitioner can hold back grounds as a backup defense for possible district court litigation without fear of being estopped.