United States: An Invalidity Argument Without A Home? The PTAB's Discretion To Ignore Grounds For Invalidity

By Shaun R. Snader1 & George C. Beck

The post-grant proceedings established by the America Invents Act – inter partes review (IPR), covered business method (CBM) review, and post-grant review (PGR) –promise faster, less expensive results as compared to district court litigation, and an adjudicative body with expertise in patent law. A significant tradeoff to these new post-grant proceedings is the risk of estoppel.

The estoppel provisions provide that a petitioner in a post-grant proceeding that results in a final written decision as to any claim of a patent cannot assert in district court or International Trade Commission Section 337 litigation an invalidity argument as to the claim "that the petitioner raised or reasonably could have raised during that post-grant review." 35 U.S.C. §§ 315(e)(2)2 and 325(e)(2). Thus, an accused infringer may choose to raise invalidity defenses at the USPTO, but risks being precluded from raising the same defenses in district court or the ITC.

In view of the risk of estoppel, a petitioner often wishes to raise all available grounds for invalidity. However, faced with a large number of petitions presenting multiple grounds of invalidity, the Patent Trial and Appeal Board (PTAB or Board) has declined to institute review on grounds the Board deems to be "redundant." See Liberty Mutual Insurance Co., v. Progressive Casualty Insurance Co., CBM-2012-00003, Order (Redundant Grounds), (Oct. 25, 2013) ("Liberty Mutual Order"). As a result, some grounds of invalidity may not be considered by the PTAB, even if timely raised and regardless of merit. It remains unclear whether this exercise of the Board's discretion may result in a petitioner entirely losing the ability to assert non-adopted grounds in defense of a subsequent patent infringement claim in district court or the ITC.

The Board's Discretion to Institute Review

The Board has designated the Liberty Mutual Order as "representative." Relying on 37 C.F.R. §42.20(c), the Liberty Mutual Order held that the petitioner must show that a ground of invalidity must be not be redundant to other grounds presented. The Board has designated the Order as "representative" and has found grounds to be "redundant" in many proceedings. Consequently, while instituting trial in the proceeding, it has declined to institute on all asserted grounds for reasons of "administrative necessity." See United States Postal Service v. Return Mail, Inc., CBM2014-00116, Paper 24, p. 33 (Feb. 20, 2015) ("USPS"); HTC Corp. v. Flashpoint Tech., Inc., IPR 2014-01249, Paper 12, March 10, 2015) ("HTC"). The Board's decisions in USPS and HTC illustrate the Board's approach to multiple grounds of invalidity and further clarify the Board's justification for refusing to grounds deemed to impose an administrative burden.

In USPS, the Board instituted a covered business method review of certain claims of a Return Mail, Inc. patent based on the U.S. Postal Service's and United States' petition, but the Board did not institute trial on all grounds of invalidity raised by the petitioner. See CBM2014-00116, Paper 11. The Board denied certain grounds for institution "for reasons of administrative necessity to ensure timely completion of the instituted proceeding." Paper 11 at 32-33. In response, the petitioner requested hearing and argued that the Board lacked authority to deny grounds based on administrative necessity.

The Board denied the request for rehearing and held that it has discretion to institute or not institute review as to each ground of review raised in the petition, regardless of merits, based on § 324(a), which sets forth the standard for instituting a post-grant review. According to the Board, section 324(a) "is written in permissive terms—identifying when the USPTO is authorized to institute a post-grant review, but not requiring a review to be instituted. Thus, Congress has given the [USPTO] discretion whether to institute a review or not institute a review." Paper 24 at 3. The Board also relied on its own rules permitting the PTAB to "deny some or all grounds for unpatentability for some or all of the challenged claims" (37 C.F.R. § 42.208(b)) and the Congressional mandate for swift, efficient resolution. Id. Thus, the Board held that it "is not obligated to institute a trial on every ground with respect to which there is a reasonable likelihood that a petitioner would prevail in showing unpatentability of specific claims." Paper 24 at 5.

The petitioner in USPS also argued that it should not be precluded from arguing the denied grounds in the proceeding on appeal or in a future post-grant proceeding or litigation. Id. The Board declined to speculate on what effect its decision may have in district court litigation and also declined to issue an "advisory opinion as to whether a ground included in a petition, but denied without consideration of its merits, has been presented to the Office under 35 U.S.C. § 325(d)." Id. Section 325(d) permits, inter alia, the USPTO to decline to institute a post-grant proceeding based on "the same prior art or arguments previously presented to the Office." 35 U.S.C. § 325(d).

HTC involved an IPR petition, rather than a CBM petition, but reaches the same result as USPS. As in USPS, the petitioner presented multiple grounds for trial, but the Board denied certain grounds for trial without addressing them on the merits. The petitioner argued in a request for rehearing that the Board lacked the authority to decline trial on grounds without reaching the merits. The Board disagreed. HTC at 4-8.

The Board relied on its discretion under 35 U.S.C. § 314(a) and mandate to consider "regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings." HTC at 5 (quoting 35 U.S.C. § 316(b)); see also 37 C.F.R. § 42.100(c)). Indeed, the applicable rules state that the PTAB may "deny some or all grounds for unpatentability for some or all of the challenged claims." 37 C.F.R. § 42.108(b). The Board concluded "that if we were to institute all eleven of these asserted grounds, even though some of these grounds —to some extent— may overlap, it would serve to add expense to the parties in briefing, and temporal delay to the Board rendering a decision." HTC at 4. HTC declined to address issues of estoppel3 because "[t]he question of estoppel is premature at this point." HTC at 6.

Notably, the petitioner in HTC argued that due process required that the Board consider on the merits every ground for trial. See HTC at 7-8. The Board rejoined that "[p]lacing reasonable limits upon the trial in order to have the proceedings move forward less expensively and more efficiently does not equate to a denial of a due process right. Indeed, in its current posture, [HTC] could obtain almost the complete relief it seeks." Id. at 7 (emphasis added).

The Board's comments in HTC highlight the fact that the risk of estoppel as to non-adopted grounds is only presented if the petitioner fails to prevail as to the adopted grounds. If the Board ultimately issues a final written decision finding all challenged claims invalid, any concerns as to estoppel applying to non-adopted grounds become moot.

But petitioners do not always obtain a complete victory as to all claims subject to institution. If the petitioner presented a meritorious ground of invalidity that was denied based on entirely on administrative efficiency, application of estoppel would appear to raise due process concerns.

Decisions Not To Institute Are Generally Not Subject To Appellate Review

Due process concerns arising from a PTAB denial to institute are exacerbated by the apparent lack of appellate review. Specifically, 35 U.S.C. § 314(d), entitled "No Appeal," provides that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." See also 35 U.S.C. § 324(e) (analogous statute for post-grant review). The Federal Circuit has held that § 314(d) precludes interlocutory review of decisions whether to institute IPR. St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373, 1375-76 (Fed. Cir. 2014). More recently, the Federal Circuit held that § 314(d) also prohibits review of a decision to institute IPR even after a final decision. In re Cuozzo Speed Techs., LLC, 778 F.3d 1271 (Fed. Cir. 2015).

While the Federal Circuit has not addressed specifically whether a denial to institute on certain grounds (while adopting others), is reviewable, it seems likely that it would hold that it lacks jurisdiction to do so based on its characterization of § 314(d) as a "broadly worded bar on appeal." St. Jude, 749 F.3d at 1375.

The Board May Decline to Reconsider Non-Adopted Grounds In A Second Petition

Petitioners may seek to avoid potential estoppel effects by filing a subsequent petition including the arguments not addressed on the merits in the earlier petition. For example, petitioner might present additional arguments explaining how the non-adopted grounds are not redundant to those adopted in an earlier petition.

The Board, however, has not been receptive to this strategy. Section 325(d) grants the USPTO discretion to decline to institute a post-grant review if it is based on "the same or substantially the same arguments previously presented to the Office." Relying on this authority, the Board has exercised its discretion to deny "second" petitions that seek to correct deficiencies identified by the Board with respect to an earlier petition by the same party. See Unilever, Inc. v. Proctor & Gamble Co., Paper 17, No. IPR2014-00506 (July 7, 2014) ("informative") (rejecting second petition based on failure by petitioner to present argument or evidence that newly cited references were not known or available at time of filing the first petition). Thus, the option of a second petition has not proven viable in practice.

An Open Issue To Be Decided By the Courts

In sum, a potential petitioner should carefully consider the possibility of forfeiting defenses by proceeding with a post-grant proceeding. This is especially true where there are multiple grounds of unpatentability arguments for a claim, each with its own unique strengths and weaknesses. Given the increasing number of final decisions by the PTAB confirming claims after instituting trial on a subset of the grounds presented in the petition, this issue will surely be raised in concurrent district court litigation, and ultimately, the Federal Circuit.


1. Shaun Snader is the Vice President, Associate General Counsel, Intellectual Property at United Therapeutics Corporation. The views expressed in this article are his own and not necessarily the views of his employer.

2. CBM reviews are generally treated as post-grant reviews with some exceptions. One exception is that estoppel from CBM review applies to only arguments raised, not arguments that reasonably could have been raised.

3. The statute applicable to the estoppel effects of an inter partes review proceeding is 35 U.S.C. § 315(e), rather than section 325(e), which applies to post-grant reviews. Both statutes are effectively identical.

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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