United States: Federal Circuit Panel Splits In Important Decision Regarding Its Jurisdiction Over Institution Of IPRs

Last Updated: October 10 2016
Article by Allen M. Sokal

In Husky Injection Molding Systems Ltd. v. Athena Automation Ltd., Appeal Nos. 2015-1726, 1727 (Sept. 23, 2016), the panel majority, consisting of Judges Lourie (the opinion's author) and Stoll, differed sharply with dissenting Judge Plager over the court's jurisdiction to review the PTAB's institution of an inter partes review. This decision could have broad implications. In his dissent, Judge Plager listed three categories of issues in addition to the issue before the court "that this court is obligated to consider" despite 35 U.S.C. § 314(d). Dissenting op. at 8.1

Husky, the patent owner, appealed from the board's decision that assignor estoppel did not preclude institution of the IPR. A co-inventor of the challenged patent assigned the patent to Husky and subsequently left Husky and formed Athena, the petitioner. The board rejected Husky's argument that assignor estoppel barred Athena from filing its petition. The board relied on 35 U.S.C. § 311's broad statutory mandate that "a person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent." After the board issued its final decision that the prior art anticipated some of the challenged claims, Husky raised the same estoppel issue in its appeal to the Federal Circuit. The panel majority held that it lacked jurisdiction to consider that issue because of the prohibition under § 314(d) that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable."

Both the panel majority and Judge Plager recognized that the Supreme Court left open the possibility of exceptions to § 314(d) in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016). But they interpreted those exceptions differently.

Since the panel majority and the dissent construed Cuozzo somewhat differently, quoting what the Supreme Court actually said may be useful:

[O]ur interpretation [of § 314(d)] applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office's decision to initiate inter partes review. . . . This means that we need not, and do not, decide the precise effect of § 314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond "this section [i.e. § 314]." . . . Thus, contrary to the dissent's suggestion, we do not categorically preclude review of a final decision where a petition fails to give "sufficient notice" such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, cancelling a patent claim for "indefiniteness under § 112" in inter partes review. . . . Such "shenanigans" may be properly reviewable in the context of § 319 and under the Administrative Procedure Act, which enables reviewing courts to "set aside agency action" that is "contrary to constitutional right," "in excess of statutory jurisdiction," or "arbitrary [and] capricious."

136 S. Ct. at 2141-42.

Based on that discussion, the panel majority concluded that a two-part inquiry determines whether the court has jurisdiction to review a challenge to the board's decision whether to institute:

First, we must determine whether the challenge at issue is "closely tied to the application and interpretation of statutes related to the Patent Office's decision to initiate inter partes review," or if it instead "implicate[s] constitutional questions," "depend[s] on other less closely related statutes," or "present[s] other questions of interpretation that reach, in terms of scope and impact," "well beyond 'this section.'" . . . If the latter, our authority to review the decision to institute appears unfettered. But if the former, § 314(d) forbids our review. One further exception remains, however. At the second step of the inquiry, we must ask if, despite the challenge being grounded in a "statute closely related to that decision to institute," . . . it is nevertheless directed to the Board's ultimate invalidation authority with respect to a specific patent . . . . If so, we may review the challenge.

Slip op. at 14 (citations omitted).

The panel majority's "further exception"–challenges directed to the board's ultimate invalidation authority with respect to a specific patent–appears to be narrower than the Supreme Court's permitting review of agency action "outside its statutory limits." The panel majority derived that exception from the Federal Circuit's own case law that preceded the Supreme Court's decision in Cuozzo. As will be shown below, that explains part of the disagreement between the panel majority and the dissent.

More specifically, the panel majority relied on (1) Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. 2015), cert. denied, No. 15-1145, 2016 WL 1029054 (U.S. June 27, 2016), which held that the court had jurisdiction to determine whether a challenged patent satisfies the criteria for a covered business method review, since otherwise the board would be exceeding its statutory authority to evaluate and invalidate the patent in a CBM review, and (2) Achates Reference Publ'g, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015), which held that the court lacked jurisdiction to review the board's decision regarding whether the petitioner complied with the time bar of 35 U.S.C. § 315(b), because that raised the question of "who could petition for review rather than whether the Board could ultimately invalidate the patent." Slip op. at 11-14.

Based on that analysis, the panel majority's conclusion that it lacked authority to review the board's determination that assignor estoppel does not apply at the PTO followed. Applying the first prong of its two-part inquiry, the panel majority reasoned that determining whether assignor estoppel applies at the PTO in an IPR requires interpreting 35 U.S.C. § 311(a): "a person who is not the owner of the patent may file with the Office a petition to institute an inter partes review of the patent." The panel majority further reasoned that interpreting "a person who is not the owner of a patent may file" to either include or foreclose assignor estoppel "is very 'closely related' to any decision to initiate inter partes review." Slip op. at 16.

Turning to the second prong, the panel majority further concluded that whether assignor estoppel applies at the PTO does not fall within any of the exceptions to § 314(d). It raises no constitutional concern. Because it is a creature of the common law, it does not "depend on other less closely related statutes." And, according to the panel majority, it does not involve an "interpretation of an issue that reaches, in terms of scope and impact, well beyond § 314," which requires the Director to determine whether the petitioner has a reasonable likelihood of prevailing regarding patentability, because if assignor estoppel applies, an assignor "may not challenge the patentability of the patent earlier assigned, and any petition filed by an assignor or his or her privies falls far short of the 'reasonable likelihood' standard guarding against improper institution." Slip op. at 15-17.

Finally, the panel majority concluded that the question raised by the petition did not relate to the board's ultimate invalidation authority. As noted above, the panel majority narrowed that exception to § 314(d) to questions addressing not who can petition for review of a patent, but rather whether the board can ultimately invalidate the patent. Since assignor estoppel operates only to prevent the assignor of a patent from challenging that patent, it does not prevent a tribunal from evaluating the validity of the patent when parties other than the assignor challenge it. The panel majority therefore held that it had no jurisdiction to review the board's determination that assignor estoppel does not preclude an assignor from petitioning for inter partes review.

Judge Plager, in dissent, took strong issue with the panel majority's reasoning. He disagreed that the applicability of assignor estoppel depends on interpretation of § 311(a) and further reasoned that § 311 reasonably can be considered a "less closely related statute" than § 314(a)-(c), which govern the decision to institute an IPR. Moreover, he argued that the question of whether assignor estoppel applies to the decision to institute an IPR "could be considered to be one that 'present[s] other questions of interpretation that reach, in terms of scope and impact, well beyond'" § 314. Dissenting op. at 7. Observing that because the Supreme Court left open whether several categories are exceptions to § 314(d), the dissent stressed that "this court must undertake that determination in future cases. . . . [T]here is a range of reviewable issues that this court is obligated to consider. Examples may include, among others, filing deadlines and joinder and estoppel issues. . . . Whether the Board properly ruled on the application of assignor estoppel to this case is clearly subject to this court's judicial power of review. Accordingly, I find the majority's analysis of this case, its unnecessary commentary approving prior cases that may no longer be good law in light of Cuozzo, and its discussion of why the question of the application of assignor estoppel to this case does not relate to "the Board's ultimate invalidation authority," unhelpful. Dissenting op. at 8.

Though dissenting, Judge Plager seems to have the better argument. For example, given the Supreme Court's exceptions to § 314 for issues "that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond" § 314, those categories would seem to call for an assignor estoppel exception a fortiori. In other words, a common law doctrine, not being a creature of statute, is further removed from closely related statutes than are less closely related statutes and presents questions reaching far beyond § 314. As Judge Plager noted, "[a]ssignor estoppel is an equitable doctrine that is recognized in the common law. Given the long tradition of judicial review of administrative decision-making, and the Supreme Court's specific reference in Cuozzo to the APA's provisions mandating review of agency action, it would seem anomalous to say that the application of such a rule to proceedings before the Board, a unit of an administrative agency, is exclusively for the agency to decide." Dissenting op. at 6-7. In any event, the broad implications of this issue suggest that ultimately at least the en banc court will have to resolve it.


1 The court also unanimously reversed the board's decision that a patent application that the petitioner relied on as an anticipation did not incorporate by reference a patent that the petitioner relied upon to complete the anticipation. That ruling, however, did not break any new ground.

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