United States: AIA Post-Grant Proceedings: Parties Seeking Stay Of A District Court Case Pending An Ipr Should Be Prepared To Be Estopped Even If They Are Not The Party Who Filed The IPR Petition

Last Updated: December 24 2013
Article by Taras A. Gracey, Stephanie Schonewald and Amanda K. Streff

A party seeking to stay a District Court litigation pending an inter partes review (IPR) that the party did not file should consider joining the IPR at the Patent Trial and Appeal Board (PTAB) or seek to limit any estoppel to art that was actually raised during the IPR.  That is because they likely are to be estopped from pursuing an invalidity defense under §§ 102 or 103 by the District Court should the patent owner prevail at the PTAB. 

Under 35 U.S.C. § 315(e)(2), a "petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest (RPI) or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review."  RPIs and privies have been interpreted very narrowly by the PTAB to parties that have "exercised or could have exercised control over a party's participation in a proceeding." See AIA Post-Grant Proceedings: Uncertainty Regarding The Scope Of "Privy" And "Real Parties-In-Interest" In AIA Proceedings Remains", November, 1, 2013. But even under a broader standard (the more traditional Taylor standard), RPIs and privies are related or connected to the party in the proceeding.

In e-Watch Inc. v. Mobitix Corp., Civ. No. 12-CV-00492-FB-PMA (W.D. Tex.), e-Watch sued Mobitix in the Western District of Texas asserting patent infringement of a number of patents.  Mobitix subsequently filed IPR petitions on the four of these patents.  Recently, the PTAB instituted all four petitions.  In the meantime, on February 11, 2013, e-Watch sued another company (Avigilon) in the Southern District of Texas, asserting patent infringement of three of the patents that Mobitix filed IPR petitions.  e-Watch Inc. v. Avigilon Corp., Civ. No. H-13-0347 (S.D. Tex.).  Avigilon filed a motion to stay the district court litigation pending the outcome of the IPR petitions filed by Mobitix.  e-Watch argued that, should e-Watch prevail in the IPRs, Avigilon should be estopped under § 315 of the American Invents Act from asserting any invalidity arguments under §§ 102 or 103 on any prior art that was raised by Mobitix or reasonably could have been raised.  Avigilon did not dispute that estoppel would apply, but instead argued that such estoppel should apply only to those grounds actually raised in the IPR by Mobitix.  The Avigilon Court granted the stay, but ordered that further argument be heard on the extent of the estoppel against Avigilon.  That hearing occurred on December 12, 2013.  As of publication, no further order has been issued by the Court.

In an almost identical case, a different district court agreed with Avigilon's position.  In Pi-Net International, Inc. v. Focus Business Bank, et al., Case No. C-12-4958 PSG (N.D. Cal.), Pi-Net filed a patent infringement suit against three defendants asserting two patents.  SAP America, Inc. (SAP), not a party to the litigation against Focus Business Bank, et al., filed IPR petitions on the same two Pi-Net patents at issue in the Focus Business Bank litigation.  The Focus Business Bank defendants moved to stay the district court litigation pending the outcome of the IPRs initiated by SAP.  The district court granted the stay on the condition that the defendants agree "to be bound by an estoppel similar to the provisions of Section 315(e) such that they may not assert in this suit that the claim is invalid on any ground that SAP raised or reasonably could have raised during the IPR."   Pi-Net International, Inc. v. Focus Business Bank, et al., Case No. C-12-4958 PSG, Dkt. No. 58 (N.D. Cal. Aug. 16, 2013).  The defendants would agree only to be estopped "from raising any invalidity reference, or combination of references, that was already presented to the PTO in SAP's IPR petitions, including those for which the PTO declined to institute review" but not agree to be estopped from those grounds which reasonably could have been raised but were not.  Pi-Net International, Inc. v. Focus Business Bank, et al., Case No. C-12-4958 PSG, Dkt. No. 74 (N.D. Cal. Oct. 3, 2013).  The Court acquiesced and so ordered.  Id.

With these two cases in mind, if a defendant aims to stay a district court litigation pending an IPR of the patent-in-suit initiated by an unrelated party, that defendant should be prepared to be estopped at least on the invalidity arguments actually raised by the IPR petitioner and possibly on those arguments that reasonably could have been raised.  Neither Avigilon nor the Focus Business Bank defendants are RPIs or privies of the IPR petitioners, creating a new non-party arguably outside of the reach of the estoppel provision in § 315(e)(2), but yet they are attempting to take advantage of the IPRs by seeking stays in the district courts.  Courts, therefore, are struggling with the level of estoppel that should apply in these circumstances.  While the Pi-Net court limited the estoppel to the prior art actually raised in the SAP IPRs, other courts, including the Avigilon court, may not, but rather estop a defendant from raising invalidity defenses on prior art that was raised or reasonably could have been raised in the IPR.  A different option is to seek joinder under 37 CFR § 42.122(b):  "Joinder may be requested by a patent owner or petitioner. Any request for joinder must be filed, as a motion under §42.22, no later than one month after the institution date of any inter partes review for which joinder is requested."  Therefore, a defendant has three strategic options in situations where an IPR has been instituted against the patent-in-suit due to an IPR petition being filed by someone other than that defendant:  1) not seek a stay and hope the PTAB invalidates the patent before expending too many resources in the district court litigation; 2) seek a stay conditioned on any estoppel being limited only to the art that was actually raised by the IPR petitioner; or 3) seek a stay and seek to join the IPR under §42.122, if possible, with the complete understanding that that defendant will be estopped fully.  All three options require very careful consideration before deciding on how to proceed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Amanda K. Streff
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