In Biscotti Inc. v. Microsoft Corp., Magistrate Judge Roy S. Payne of the Eastern District of Texas recommended finding that the IPR estoppel statute, 35 U.S.C. § 315(e), applies to all grounds included in an IPR petition except those that are denied institution for purely procedural reasons, such as for redundancy. Case No. 2:13-CV-01015-JRG-RSP (E.D. Tex. May 11, 2017).
After being sued for infringement, the defendant in Biscotti filed several IPR petitions challenging dozens of claims. Some of the grounds were instituted, and the case was stayed pending resolution of the IPR trials, from which several claims survived. After the stay was lifted, the defendant continued to maintain that certain asserted claims were invalid on the basis of grounds that were similar to those that were relied on in the IPRs.
On the plaintiff’s motion for summary judgment that estoppel barred defendant’s invalidity grounds, the Magistrate considered four categories of grounds: (1) grounds that were instituted but failed to establish unpatentability, (2) grounds denied institution on the merits, (3) grounds not included in the petition, but that reasonably could have been, and (4) grounds denied institution for redundancy. The Magistrate recommended that estoppel should apply to the first three grounds, but not to the fourth.
The decision on the fourth category followed the Federal Circuit’s holding in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. (which we wrote about here), in which the court held that grounds denied institution as redundant were not subject to estoppel under § 315(e)(2).
As for the second and third categories, the Magistrate acknowledged that a broad reading of Shaw, which some other district courts have followed (for example, see our discussion of Verinata here), would exempt these categories from estoppel. However, the Magistrate reasoned that a narrower interpretation of Shaw was more consistent with the purpose of IPRs to streamline patent disputes. Indeed, the Magistrate noted that limiting estoppel to only instituted grounds would have the effect of protracting and complicating litigation rather than simplifying it.
While some courts may read Shaw as broadly exempting from estoppel grounds that were denied on the merits or that were not included in the petition, the Biscotti decision shows that some courts may take a more narrow interpretation and read Shaw to apply only to grounds denied for redundancy. Therefore, in deciding which grounds to include in a petition, it is risky to hold grounds in reserve in the hopes of using them in subsequent district court litigation if needed.