Timing of AIA Petitioner Estoppel: "Counterintuitive" or Merely Wrong?

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The U.S. Court of Appeals for the Federal Circuit (CAFC) recently suggested that statutory petitioner estoppel after issuance of a Final Written Decision (FWD) by the Patent Trial and Appeal Board (PTAB) in an Inter Partes Review (IPR) does not take effect until all appeals have been exhausted.[1] Relying on its understanding of relevant statutory language and lower court (and administrative agency) decisions only, a U.S. district court recently applied statutory estoppel (under the America Invents Act (AIA), 35 U.S.C. Section 315(e)(2)) against the petitioner immediately upon the PTAB’s issuance of a FWD so as to preclude the petitioner’s assertion of certain validity challenges at trial.[2] In that case, however, the petitioner’s IPR validity challenge was successful and the patent claims had been declared unpatentable by the PTAB. 

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Yet, relying on CAFC precedent regarding the timing of collateral estoppel against a patentee, generally, the district court simultaneously ruled that the FWD did not have preclusive effect against the patentee whose patent claims had been invalidated by the PTAB, at least until all appeals had been exhausted. Thus, because the patent owner’s appeal of the PTAB’s FWD to the CAFC was still pending, the patent owner was allowed to assert the previously PTAB-invalidated patent claims at trial, while the alleged infringer – and successful IPR petitioner – was precluded from raising at trial the same invalidity defenses on which it had already succeeded in its IPR according to the PTAB’s issued Final Written Decision. The district court acknowledged “that allowing Plaintiff to proceed at trial on claims that have been found by the PTAB to be invalid while at the same time preventing Defendant from asserting [already successful] prior art defenses against these claims based on estoppel under [AIA 35 U.S.C.] § 315(e)(2) seems counterintuitive.”[3] The trial court continued: “That said, it is a permissible result that follows from the statute and relevant case law.”[4]

Whether this “counterintuitive” result is “permissible” is debatable; in any event it is not compelled by either the statute or controlling case law.[5] As the CAFC recently explained in Olaplex, the relevant estoppel provisions of the AIA do “not say when a final decision begins to have estoppel effect (on the petitioner).”  The CAFC specifically noted that this issue has not been decided in any prior appellate decisions, and the Olaplex court likewise did not decide the issue in that decision.  Thus, neither the AIA nor any appellate decision compels the result reached by the TrustID trial court.

Under the estoppel provision relating to inter partes reexamination (which was replaced by IPR with enactment of the AIA in 2012), estoppel rights arose only when all appellate rights were exhausted. The pre-AIA estoppel provision stated that a “third-party requester whose request for an inter partes reexamination results in an order [equivalent to an AIA final written decision] is estopped from asserting at a later time, … the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings.” The phrase “at a later time” was held by the CAFC to mean “at a later time after all appellate rights have been exhausted.”[6] Congress is presumed to have been aware of the CAFC’s statutory interpretation when it enacted the America Invents Act’s petitioner estoppel provisions.

Moreover, the “counterintuitive” result reached by the TrustID trial court requires acceptance of the proposition that Congress intended to create a post-grant validity challenge scheme that (1) would have no effect whatsoever on a losing patent owner plaintiff at a trial subsequently conducted at any time during the multi-year CAFC appellate process following the PTAB’s issuance of an FWD invalidating the asserted allegedly infringed claims, yet (2) would simultaneously preclude the winning IPR petitioner (typically the allegedly infringing defendant) from presenting its already-successful prior art invalidity defenses at that same trial. In the absence of any articulated plausible rationale for such a scheme, this proposition is starkly illogical, at best.

Collateral estoppel against the patent owner must be the necessary corollary of statutory petitioner estoppel if the AIA’s post-grant validity challenge scheme is to make any intuitive sense at all. In an appeal where the issue is properly and squarely raised, the CAFC should fix the “counterintuitive” misinterpretation of the statute by both district courts and the PTAB. Either of two logical answers are possible: (1) the losing party is precluded from proceeding at trial with losing prior art invalidity defenses, if petitioner, or invalidated patents claims, if patent owner, from the moment the PTAB issues its Final Written Decision unless and until the result is changed on appeal, or (2) neither party is estopped from taking any legal position whatsoever at trial until all appellate rights have been finally exhausted.[7]