Federal Circuit Clarifies Patent Claim Assertion After PTAB Unpatentability Decisions

On February 10, the Federal Circuit held in Kroy IP Holdings, LLC v. Groupon, Inc. that a final written decision of the Patent Trial and Appeal Board (PTAB) concluding that certain claims are unpatentable does not prevent the patent owner from asserting in a district court proceeding similar claims that were not challenged in front of the PTAB.

This decision reversed a district court’s dismissal of infringement claims based on collateral estoppel where the patent claims at issue were “immaterially different” from claims that were found unpatentable by the PTAB during inter partes review (IPR). The plaintiff had amended its complaint to include new claims after the claims identified in the original complaint were challenged in two IPR proceedings. The defendant’s IPR challenges of the original claims were successful, but the defendant did not separately challenge the claims added by the amended complaint. Nevertheless, the district court dismissed infringement counts based on those new claims due to similarities to the originally-asserted claims. Key to the Federal Circuit’s reversal was the difference in legal standards applied by the PTAB and district courts. Collateral estoppel generally does not apply where a second action involves application of a different standard, such as a different burden of proof. Therefore, proving unpatentability of materially similar claims in the PTAB by a preponderance of the evidence is insufficient to warrant application of collateral estoppel in a district court action where invalidity must be proven by clear and convincing evidence. 

In reaching its decision, the Federal Circuit relied upon its recent decision in ParkerVision, Inc. v. Qualcomm Inc., which held that a plaintiff was not barred from presenting factual evidence supporting the patentability of method claims where that evidence conflicts with the PTAB’s earlier fact findings relating to apparatus claims of the same patent. The Federal Circuit also distinguished its holding in XY, LLC v. Trans Ova Genetics, L.C. as relating to a “limited exception” preventing assertion of claims in a district court when unpatentability of those same claims is determined by the PTAB and affirmed by the Federal Circuit. The court clarified that the outcome in XY did not stem from direct application of PTAB fact findings, but rather from the retroactive cancellation of claims as a matter of law. In other words, claims found unpatentable by the PTAB may not be asserted in a district court proceeding because they no longer exist, not because the PTAB’s underlying factual findings must be accepted by the district court. In order to apply collateral estoppel to fact findings, the prior proceeding must have applied the same legal standards, such as in a prior district court proceeding relating to similar claims.

This decision demonstrates the potential risk of using IPR proceedings to challenge only those claims of a patent that have been asserted in an infringement proceeding. Even if the challenged claims are found unpatentable by the PTAB, the patent owner is not barred from later asserting infringement of similar claims that were not challenged in front of the PTAB. 

For more information on this ruling, please contact Fitch Even partner Mark A. Borsos, author of this alert.

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