PTAB Estoppel & Inequitable Conduct

Inequitable conduct before the USPTO is an equitable defense to patent infringement that, if proved, bars enforcement of a patent. Thereasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011).  Given the increasing inventory of Final Written Decisions (FWD) in larger patent portfolios, practitioners are only now beginning to confront issues of inequitable conduct relating to agency based estoppel.  That is, if a patent owner advances a position inconsistent with a previous PTAB FWD on a patent/related patent under 37 C.F.R. § 42.73(d)(3), whether such a practice constitutes inequitable conduct. It just might.

But, for the time being, the courts’ lack of experience with the PTAB’s rule-based estoppel is benefiting patent owners.

The agency’s rule-based estoppel is codified by 37 C.F.R. 42.73(d)(3)(i). This rule states that when a patent claim is cancelled or finally refused in a PTAB trial, the Patent Owner is thereafter precluded from taking an inconsistent action before the USPTO. This preclusion includes, obtaining in any patent, a claim that is not patentably distinct from the finally refused or cancelled claim.  As I have written previously, patent prosecutors should be wary of this rule. 

Rule 42.73(d)(3)(i) was most recently raised in Papst Licensing GMBH & Co. v. Samsung Electronics Co., (here).  In Papst, defendant Samsung filed a motion for leave to file supplemental pleading alleging that plaintiff Papst engaged in inequitable conduct when it advanced a position during reexamination alleged to be inconsistent with FWDs in IPRs of related patents.

In 2015, Papst filed an action asserting that Samsung infringed five related patents. Samsung filed IPRs against four of the asserted patents, and the Board decided that all challenged claims were unpatentable and that certain claims were unpatentable, in part, based on the disclosure of prior art reference “Kawaguchi.” Papst appealed the Board’s findings, but later voluntarily dismissed the appeals, making the PTAB’s decisions final.

As to the remaining asserted patent, Samsung requested an ex parte reexamination. During the reexamination, the Examiner issued a Non-Final Office Action rejecting several claims as anticipated by Kawaguchi. Papst responded, arguing that Kawaguchi did not anticipate because Kawaguchi failed to teach certain limitations—a position inconsistent with the PTAB’s previously issued final written decisions in the related patents.  Papst never informed the USPTO that the PTAB’s decisions became final, the Examiner allowed the claims, and the USPTO issued a Reexamination Certificate.

At district court, after the jury returned its verdicts, Samsung moved for leave to file a supplemental pleading of inequitable conduct for Papst’s failure to disclose the finality of the final written decisions to the USPTO. Samsung argued that after the Board’s decisions became final, Papst was precluded from making arguments inconsistent with the Board’s findings due to collateral estoppel.

Courts have the discretion to grant or deny leave to supplement claims, and they consider a few factors, including whether the supplement is futile—i.e., it “would fail to state a claim upon which relief could be granted.” A pleading of inequitable conduct requires that the accused infringer must show that the patent applicant misrepresented or omitted material information with the specific intent to deceive the PTO, and the accused infringed must identify “the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.”

The court found that the supplemental pleading would be futile because Samsung “failed to plausibly allege that the final written decisions precluded Papst’s arguments during reexamination.” Specifically, the court found that Samsung did not adequately plead that collateral estoppel applied because Samsung did not plead that Kawaguchi’s teachings at issue were “actually litigated” in the related patents:

It is not sufficient for Samsung to merely allege that Papst’s arguments were contrary to the PTAB’s findings. First, this is not a case where the prior art or the PTAB’s findings on the prior art were not disclosed to the PTO. . . . Moreover, a prosecution attorney’s argument regarding a prior art teaching generally does not constitute a misrepresentation. . . . Samsung must therefore plead facts to allege not only that Papst’s arguments were contrary to the PTAB findings, but that “issue preclusion” applies to those findings.

But, the Court seemed to lean mostly on traditional aspects of issue preclusion above rather than the agency’s rule-based estoppel, explaining in a footnote:

Samsung has not supported its assertion that 37 C.F.R. § 42.73(d)(3), which precludes patent owners from taking actions inconsistent with an “adverse judgment,” applies to adverse Final Written Decisions. See SDI Techs. v. Bose, IPR2014-00343, Paper No. 32 at 9, 2015 WL 3749668, at *4 (June 11, 2015) (finding that an “adverse judgment” under § 42.73(d)(3) does not refer to final written decisions). The parties did not address whether asserting collaterally estopped arguments constitutes misrepresentations before the PTO. The Court is not aware of any case finding that raising collaterally estopped arguments can serve as the basis of a misconduct or inequitable conduct claim.

In other words, the Court reasoned that the FWD in the related Papst case was not truly “adverse” until it became final (appeals exhausted).  As to the last statement, those cases will eventually make their way to the Federal Circuit.  Another aspect of such fact patterns for patent prosecutors to keep in mind is that the Office of Enrollment & Discipline (OED) may also be interested in these scenarios going forward.  Still another reason for patent prosecutors to be mindful of related AIA trial proceedings before the PTAB.