Federal Circuit Overrules Previous Decision in Shaw Industries

Prior to the SCOTUS decision in SAS Institute, partial trial institutions were not uncommon.  Whether a proposed trial ground was found “redundant,” and excluded from trial, for example, created a strange estoppel calculus as to what “reasonably could have been raised” in that context.  That is, when a ground was raised, and was administratively barred from trial, how could estoppel be found as to that ground?

The short answer:  it wasn’t.  That was the decision of the Federal Circuit in Shaw Industries.

Since Shaw, partial institutions were barred by the Supreme Court in SAS Institute, which found all claims and grounds must move to trial if one claim is found reasonably likely to be found unpatentable.  Last week, the Federal Circuit finally had an opportunity to revisit Shaw.

In California Inst. of Tech. v. Broadcom Ltd, the debate was not about partial institution, or a “redundant” ground, but rather whether Shaw was still good law.  Shaw includes some helpful sound bites that otherwise may appear to stave off an estoppel determination post-SAS, and of course, such would be freely cited until Shaw was overruled.

In overruling Shaw, the Court explained (here):

When IPR proceedings result in a final written decision, 35 U.S.C. § 315(e)(2) precludes petitioners from raising invalidity grounds in a civil action that they “raised or reasonably could have raised during that inter partes review.”  In Shaw, this court held that IPR “does not begin until it is instituted.”  If IPR “does not begin until it is instituted,” grounds raised in a petition (or that reasonably could have been raised in a petition) were necessarily not raised “during the IPR.”  Only the grounds actually at issue in the IPR were raised, or reasonably could have been raised in the IPR.  Thus, estoppel did not bar the petitioner in Shaw from presenting a petitioned-for, non-instituted ground in future proceedings because the petitioner could not reasonably have raised the ground during IPR.

After Shaw, in SAS Institute, Inc. v. Iancu, the Supreme Court made clear both that there is no partial institution authority conferred on the Board by the America Invents Act and that it is the petition, not the institution decision, that defines the scope of the IPR.  Given the statutory interpretation in SAS, any ground that could have been raised in a petition is a ground that could have been reasonably raised “during inter partes review.”  Thus, the Supreme Court’s later decision in SAS makes clear that Shaw, while perhaps correct at the time in light of our pre-SAS interpretation of the statute cannot be sustained under the Supreme Court’s interpretation of related statutory provisions in SAS.

Accordingly, we take this opportunity to overrule Shaw and clarify that estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.  In a regime in which the Board must institute on all grounds asserted and the petition defines the IPR litigation, this interpretation is the only plausible reading of “reasonably could have been raised” and “in the IPR” that gives any meaning to those words.

As can be appreciated, the above framework is far less complicated and consistent with the original intent of the statute.  As I pointed out in 2017, there is at least one magistrate judge in Texas that was ahead of his time.