Argument Recap

As previewed on this blog, an important case that was argued this week at the Federal Circuit is Network-1 Technologies, Inc. v. Hewlett-Packard Company. This case involves a dispute regarding the correct application of 35 U.S.C. § 315(e)(2), which prohibits a petitioner in an inter partes review that results in a final written decision from asserting in a patent infringement case that a patent claim is invalid on any ground that the petitioner “raised or reasonably could have raised during that inter partes review.” A panel of the Federal Circuit including Judges Prost, Newman, and Bryson heard oral arguments in this case on Monday. Here is our argument recap.

Gregory Dovel of Dovel & Luner, LLP argued on behalf of Network-1. He presented arguments on two issues: (1) whether the district court correctly construed two claim terms; and, (2) when a party who would otherwise be time-barred from filing an inter partes review is allowed to join a timely-filed inter partes review, whether that party is estopped from presenting a validity argument in district court on the basis that that argument was not raised in the inter partes review.

With regard to the estoppel issue, Dovel argued that if a party who would otherwise be time-barred is allowed to join an earlier proceeding, then that party must submit all of its invalidity arguments and will be subject to estoppel in later litigation if it did not. He contended that the PTAB did not prohibit HP from making an invalidity argument, but instead merely rejected HP’s attempt to make certain invalidity arguments only because HP hadn’t shown how it could consolidate its schedule with the existing schedule in the earlier-filed proceeding. Dovel also argued that HP’s position, if accepted, would create a perverse rule: “Think of the perverse rule that we would have if HP was right. Avaya met the timing deadline. It timely filed a petition. Avaya was fully estopped when it lost. Under HP’s rule, HP misses the deadline, HP gets to take advantage of the IPR procedure, and if it loses the IPR there is no estoppel.” He went on to explain how, in his view, “[t]hat creates a perverse incentive . . . , if there are multiple defendants being sued, for a defendant to hold back, miss the deadline, and then file a duplicate petition and join so it is not estopped.”

Mark Perry of Gibson, Dunn & Crutcher argued on behalf of HP. On the estoppel issue, he argued that HP did not inappropriately receive two opportunities to present the same argument because HP was a “joinder party,” in other words the Patent Trial and Appeal Board required HP to join an earlier proceeding filed by another petitioner. He argued that an “original petitioner and a joinder party should be governed by slightly different standards with respect to the estoppel provision because of the realities of PTAB procedure.” He explained that a joinder party after the one year bar as a practical matter is unable to add additional or new grounds to the petition that it joins. Rather, he explained, the joinder party is limited to the grounds that have already been filed in the earlier petition. In questioning, he explained that “we looked pretty hard . . . and . . . could only find one case in the history of the PTAB in which the PTAB has ever allowed a joinder party to add additional grounds after the one year bar.”

In rebuttal, Network-1 responded to HP’s argument distinguishing joinder parties from original petitioners. Dovel stated that PTAB procedures do not prevent the joining party from adding new issues. Rather, he argued, the rule is that a party can add new issues, but most do not do so due to the time and effort required. “Most people simply duplicate another claim.” In essence, Network-1 argued that joinder parties are estopped from raising invalidity issues at trial because they have the ability to raise these issues with the PTAB. Dovel concluded his rebuttal by again stating that ignoring this rule creates a perverse system where HP gets to take full advantage of the IPR process and then raise its arguments again at trial if it is unsuccessful with the PTAB.

The panel allowed Perry to present a rebuttal argument on the estoppel issue given that it was raised in a cross-appeal. Perry limited this argument to highlighting the distinction between consolidation of petitions versus joinder of parties. Consolidation of petitions, he explained, allows additional issues to be combined, but joinder of parties (the situation here when a late petition is time-barred) does not allow additional issues to be combined. For support, Perry cited to Judge Dyk’s concurring opinion in Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co. There Judge Dyk explained that “[t]he issue [was] whether the time bar provision allows a time-barred petitioner to add new issues, rather than simply belatedly joining a proceeding as a new party, to an otherwise timely proceeding.” He stated that “Section 315(c) does not explicitly allow this practice.”

This case highlights the complexity of the modern patent statute, particularly in the context of inter partes review, as well as the complexity of modern patent litigation, particularly at the intersection of review proceedings before the Patent Trial and Appeal Board and patent infringement litigation in federal district court. The court’s resolution of this particular dispute will no doubt have important implications as parties consider whether to file petitions for inter partes review given the possibility of estoppel. In short, the breadth of the resulting estoppel is a significant consideration for those considering filing petitions.