One of the recurring themes of this column is that patent cases with big verdicts help interesting questions get decided. Not that they are the only patent cases that present interesting questions, of course. (We all love patent litigation precisely because there is really no such thing as a routine case.) Rather, cases with big verdicts are almost certain to get appealed, with appeals that 1.) present a lot of issues, while also going deep into the appeals process because such large sums of money are at stake, and 2.) because those cases are reviewed with such breadth and rigor on appeal, we often get new law made on issues that may not be worth litigating in more run-of-the-mill cases.
For the latter, the prohibitive costs of modern patent litigation often force the parties to stay within budget as they try to build a complete record on the major issues of infringement, invalidity, and damages at trial. In contrast, big verdict cases have no need to countenance such financial prudence. In those cases, every legal alley is worth exploring, no matter how unclear it may be that something worthwhile will come from the effort — and if necessary, taken all the way up to en banc federal circuit review or the Supreme Court.
I have been covering one such example of a big-ticket case, Caltech’s quest to extract maximum money from Apple and Broadcom’s patent infringement, on these pages for years. In 2020, I discussed the billion-dollar verdict that Caltech earned at trial, while both handicapping the prospects of the verdict holding up on appeal and the effect large verdicts can have on the patent ecosystem at large. In 2022, I covered the federal circuit’s decision remanding the case for a new damages trial. (There is a lot under seal, which makes handicapping that remanded proceeding difficult, but there was an evidentiary hearing held on June 8, so we may get news soon.) While the case resumes in the trial court on the headline issue of damages, a more arcane issue relevant to patent practice arose out of the case as well.
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That issue is the proper scope of the estoppel that should apply to defendants that lose IPRs and are trying to argue invalidity in the trial court. This past Thursday, the Supreme Court considered at Conference whether to grant certiorari on Apple’s petition from October 2022, arguing that “the Federal Circuit adopted an atextual interpretation of Section 315(e)(2) that applies estoppel to any ground that reasonably could have been raised in the petition filed before an inter partes review is instituted.” For its part, the federal circuit found that Apple knew of certain prior art, but chose not to include that art in its multiple IPR petitions against the asserted Caltech patents. When Apple tried to use that art in the district court — after losing the IPRs — the court granted Caltech’s motions for summary judgment that Apple was estopped based on the IPR statute. As a result, Apple had no invalidity defense at trial.
The federal circuit affirmed that the district court had properly granted Caltech’s motion, based on what it considers the proper scope of post-IPR statutory estoppel — namely, “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.” In the Supreme Court, Apple, along with some amici, pressed the argument that the federal circuit got it wrong. Supporting the federal circuit’s view, in addition to Caltech, is the solicitor general’s office, on behalf of the United States. I will discuss the arguments they raise in turn.
At the heart of Apple’s argument is the statutory language in 35 U.S.C. § 315(e)(2) that estoppel should apply to “any ground that the petitioner raised or reasonably could have raised during that inter partes review.” In particular, Apple’s petition focuses on the word “during,” which Apple argues the federal circuit constructively changed to the word “before.” Likewise, Apple takes issue with the federal circuit’s reliance on the Supreme Court decision in SAS Institute, which Apple says “makes the plain language reading of Section 315(e) even more coherent, because it makes the prospect of a petitioner not raising an argument after institution more likely.” One amicus brief in support of Apple was filed on behalf of Patent Law Professors, requesting that the Supreme Court “reverse the Federal Circuit and hold that statutory estoppel applies only to grounds that were raised or reasonably could have been raised during the inter partes review proceeding.” Their brief points to procedural limitations like IPR page limits, as well as the challenges that a factfinder would face in determining what prior art an IPR filer knew about — or should have known about — before filing their petition. In their view, that uncertainty would present an unwelcome roadblock, because “innovation markets cannot function efficiently with uncertainty on whether a party facing a patent infringement lawsuit is barred from defending against it on grounds of invalidity of the patent.”
On the other side, both Caltech and the solicitor general’s office defend the federal circuit’s holding. For Caltech, arguments around page limits and concerns about unfairly burdening patent challengers are a bunch of hokum in a case where Apple “filed a total of eight petitions spanning 112,000 words, and the Patent Trial and Appeal Board (PTAB) instituted review of seven of those petitions.” That assault, in Caltech’s view, meant that “Petitioners’ serial attacks on Caltech’s patents … are a textbook example of the abusive conduct Congress was trying to prevent” when it codified the IPR statute’s estoppel provision. Caltech also points out that very few IPRs result in a situation where a party is actually estopped, since the number of IPR final written decisions that result in a patentee win numbers around 160 annually – with many of those cases not making it to trial due to settlement or other decisions. And in the brief filed for the United States, the government argues that a narrow estoppel post-IPR “threatens to multiply the costs and burdens that Congress established inter partes review to mitigate.” As a result, the government asks that SCOTUS decline the invitation to review the federal circuit’s statutory construction and its application to the Caltech case.
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Ultimately, the Supreme Court denied Apple’s petition yesterday. As a result, the federal circuit’s finding of a broad estoppel post-unsuccessful IPR remains undisturbed. We can expect, however, that other unsuccessful IPR litigants will continue to push for a narrower estoppel application in terms of their validity defenses at trial. For now, the risk of an unsuccessful IPR filing having real consequences remains something that patent defendants must weigh in deciding their defense strategy. Here, Apple’s eight IPR bites may end up seeing them pay a hefty price for prioritizing the PTAB over the jury.
Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.