Estoppel Effect of USPTO Decision Attaches Only After All Appeals Exhausted

Estoppel, as it relates to inter partes patent reexamination (IPX) proceedings and the new inter partes review (IPR) of the AIA, has been a topic of discussion here over the past few weeks. As if on cue, the CAFC has chimed in with a bit of clarification on the topic of (IPX) estoppel as it relates to 35 USC § 315.

The USPTO has maintained the position that IPX estoppel (35 USC § 317) only attaches after all appeals are exhausted. That is to say, the USPTO will not honor an intermediate court result to for the purposes of vacating an ongoing IPX, or denying a new request, by operation of estoppel. Instead, the USPTO awaits a final appeal decision (or time for filing of such to pass). The Office has not had much opportunity to comment on the complimentary statute § 315 (c), which provides the estoppel effect of a USPTO decision on the district courts.  This analysis was performed this past week by the CAFC.

The timing of 315 estoppel attachment was explored in Bettcher Industries, Inc. v. Bunzl  USA, Inc., (Fed. Cir. 2011). During ther litigation dispute between the parties, Bunzl sought IPX of  U.S. Patent 7,000,325 (relating to a meat cutting assembly). In the reexamination, a Right of Appeal Notice was issued (RAN) confirming the patentability of certain claims at issue in the parallel litigation.

Bettcher took the position that the RAN was a final determination of patentability in accordance with 315 (c). In pursuing this argument before the district court, Bettcher convinced the court to refuse consideration of the prior art considered in the IPX based on an estoppel theory. For their part, Bunzl argued that IPX estoppel could not attach until the appeals process concluded, consistent with the USPTO interpretation of 317.

This dispute over the time of estoppel attachment was pursued to the CAFC, along with other issues.  Specifically at issue was the meaning of “final determination” as recited in 315 (c).

In deciding this issue of first impression, the CAFC examined legislative history of the IPX statutes and the language used across the various IPX statutes. The Court also considered the USPTO’s interpretation of 317, according Chevron deference. Ultimately, the CAFC held that the estoppel effect of a USPTO determination under 315 does not attach until all appeals are exhausted (consistent with the USPTO interpretation of 317), explaining that:

The relevant House and Senate records confirm that § 317(b) applies “after any appeals.” 145 Cong. Rec. 29276, 29973 (1999). And the Patent Office has interpreted § 317 consistent with this legislative history in M.P.E.P. § 2686.04 (emphases in original):

While Congress desired that the creation of an inter partes reexamination option would lead to a reduction in expensive patent litigation, it nonetheless also provided in the statute that a court validity challenge and inter partes reexamination of a patent may occur simultaneously; but once one proceeding finally ends in a manner adverse to a third party, then the issues raised (or that could have been raised) with respect to the validity of a claim in that proceeding would have estoppel effect on the same issues in the other proceeding.

. . .

The 35 U.S.C. 317(b) estoppel applies only in a situation where a final decision adverse to the requester has already been issued. If there remains any time for an appeal, or a request for reconsid-eration, from a court (e.g., District Court or Federal Circuit) decision, or such action has already been taken, then the decision is not final, and the estoppel does not attach.

While we believe that § 317(b) is clear, even if it were ambiguous, the Patent Office’s interpretation that § 317(b) does not apply “[i]f there remains any time for an appeal” would be entitled to deference. See Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336 (Fed. Cir. 2008) (holding that the “Patent Office had the authority under 35 U.S.C. § 2 to interpret section [of the act creating inter-partes reexamination] because that interpretation both governs the conduct of proceedings in the Patent Office, not matters of substantive patent law, and is a prospective clarification of ambiguous statutory language.”).

The CAFC also justified the consistent interpretation of 315 and 317 on other statutory interpretation grounds, the full opinion (here) is worth a read.

Of course, once the case heads back down to the lower court for consideration of the IPX art, the IPX appeal will be before the CAFC. Absent a reversal of the USPTO determination in the IPX, this maybe a hollow victory for Bunzl as estoppel will attach upon such a final determination of the CAFC (barring further appeal).

As noted last week, the new estoppel provisions of IPR provide for estoppel attachment at the time of a written PTAB decision.