Estoppel Stemming From A Failed Challenge In An Inter Partes Reexamination Attaches Only After All Appeals Have Been Exhausted

On October 3, 2011, in a matter of first impression, the United States Court of Appeals for the Federal Circuit identified the trigger for applying estoppel under 35 U.S.C. § 315(c) when a patent-in-suit is also subject to an inter partes reexamination at the U.S. Patent Office. The bottom line: All appeals in the reexamination must first be exhausted. Bettcher Industries, Inc. v. Bunzl USA, Inc., Fed. Cir., No. 2011-1038 (Oct. 3, 2011).

Section 315(c) estops a third party who successfully requests an inter partes reexamination from relying in litigation on certain invalidity arguments when the patent claims in the reexamination have been "finally determined" to be valid. In this case, the District Court for the Northern District of Ohio had held that the estoppel provision of § 315(c) applies at the conclusion of an inter partes reexamination when an examiner issues the Right of Appeal Notice. But the Federal Circuit reversed and held that estoppel under § 315(c) applies only after all appeal rights have been exhausted, including appeal to the Federal Circuit. Id. at 26.

What This Means for You

Faced with full-blown infringement litigation, accused infringers sometimes prefer to challenge the validity of a patent in an inter partes proceeding, often because this can be a less expensive option than litigation. But the benefits of reexamination bring with them the risk of estoppel. Following the Bettcher decision, however, this estoppel will not be triggered unless and until the challenging party has exhausted its right to appeal, which can take six years, on average. District courts will likely be less inclined to grant a stay of the litigation in light of this time horizon, making it more likely that expenses will increase with parallel proceedings rather than decrease.

Under the "America Invents Act," on the other hand, estoppel in an inter partes review proceeding will apply as soon as the Patent Trials and Appeals Board (PTAB) issues a written determination — regardless of appeals. 35 U.S.C. §315(e). Even though the parties will be able to appeal the PTAB's determination to the Federal Circuit, estoppel will prevent the challenger from maintaining a challenge at the district court level on the same grounds that were or reasonably could have been raised in the review proceeding. Thus, it should be possible to reach the point of estoppel within 12 - 18 months instead of six years. With resolution or estoppel that close in time, district courts may be more inclined to stay parallel litigation, and cost savings may become more achievable.

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