After B&B Hardware, What is the Full Scope of Estoppel Arising From a PTAB Decision in District Court Litigation?

The America Invents Act (AIA) created several adjudicative proceedings within the Patent Trial and Appeal Board (PTAB) of the U.S. Patent & Trademark Office, including inter partes review, post-grant review, and covered business method review (IPR, PGR, and CBM, respectively).^[1] The AIA also provided explicit estoppel provisions with respect to District Court litigation for those proceedings.^[2]

However, as far as District Court litigation goes, these provisions all run against the patent challenger (the Petitioner) in the PTAB proceeding. After an IPR or PGR proceeding, these provisions prevent a Petitioner from asserting in District Court that a claim is invalid on any “ground” that the petitioner “raised or reasonably could have raised during [the IPR or PGR].”^[3] For CBM proceedings, the estoppel is even more limited—to grounds the Petitioner actually raised.^[4] None of these provisions apply to the patentee. Nor do they clearly state that this is the only estoppel/preclusive effect that PTAB decisions will be given in District Court litigation. Indeed, the recent Supreme Court decision in B&B Hardware, Inc., v. Hargus Indus., Inc.,^[5] suggests that there may be additional impacts of estoppel on District Court litigation beyond the explicit estoppel provisions in the AIA.

Overview of B&B Hardware

In B&B Hardware, the Supreme Court addressed whether issue preclusion (collateral estoppel) can apply to issues decided by the other administrative board within the PTO, the Trademark Trial and Appeal Board (TTAB). The Court explained in B&B Hardware that the general rule for issue preclusion is “when an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.”^[6]

At issue in B&B Hardware was whether a likelihood of confusion determination that was made by the TTAB as part of its decision in a trademark opposition proceeding (to refuse registration for a mark that was similar to B&B Hardware’s mark) should be given preclusive effect in District Court litigation involving infringement of the mark.^[7] The Court held that issue preclusion applies “when the usages adjudicated by the TTAB are materially the same as those before the district court” and “[s]o long as the other ordinary elements of issue preclusion are met.”^[8]

The Court explained that “courts may take it as given that Congress has legislated with the expectation that the principle [of issue preclusion] will apply except when a statutory purpose to the contrary is evident.”^[9] The Court carefully analyzed the Lanham Act and found nothing that would bar the application of issue preclusion.^[10] The Court also noted the procedural protections afforded in a TTAB proceeding (much like those available in PTAB proceedings), including applying the same legal standards as would an Article III court (although the burden of proof may vary), applying the Federal Rules of Civil Procedure and Evidence, and allowing discovery and depositions. Moreover, the Court reasoned that the differences that do exist between the TTAB and Article III courts (including that under the TTAB’s procedures most proceedings are conducted in writing and lack a jury pursuant to the Seventh Amendment) do not affect the overall outcome. The Court concluded that “there was no categorical ‘reason to doubt the quality, extensiveness, or fairness’ of the agency’s procedures.”^[11]

Does the Presumption of Issue Preclusion Apply to PTAB Decisions?

In the patent arena, decisions of the PTAB’s predecessors have been understood to have at least some preclusive effect for more than fifty years.^[12] After B&B Hardware, the question of whether issue preclusion applies to PTAB decisions will likely be given a fresh look by litigants and the courts. The arguments for and against the application of issue preclusion will likely turn on the PTAB procedures for IPR, PGR, and CBM proceedings and the text and structure of the Patent Act. Given the correlation between TTAB proceedings and PTAB proceedings, and the lack of any express legislative proscription, there is a real risk to litigants that issues decided in PTAB Final Decisions may be given preclusive effect beyond the estoppel provisions of the AIA.

A. PTAB Procedures

The PTAB procedures for IPR, PGR, and CBM proceedings are similar to the TTAB procedures that the Court considered in B&B Hardware and found “no categorical reason to doubt the quality, extensiveness, or fairness [of].”^[13] For example, like TTAB proceedings, IPR, PGR, and CBM proceedings are decided by Administrative Judges, have written procedural rules, offer discovery, and use the Federal Rules of Evidence.^[14] Moreover, like TTAB decisions, PTAB decisions are appealable to the Federal Circuit.^[15] Given these similarities, it seems unlikely that there is a “categorical reason to doubt the quality, extensiveness, or fairness” of PTAB procedures for IPR, PGR, and CBM proceedings. Accordingly, the Court’s reasoning in B&B Hardware may similarly apply to these PTAB procedures, such that PTAB decisions may give rise to issue preclusion.

B. Patent Act

One obvious difference between the Patent Act and the Lanham Act considered by the Supreme Court in B&B Hardware which may affect issue preclusion is that the AIA sets out explicit estoppel provisions for IPR, PGR and CBM proceedings. The Lanham Act does not contain any corollary estoppel provisions for TTAB proceedings.

One could argue that, by explicitly providing for estoppel arising from PTAB decisions, Congress intended to proscribe any further preclusive effect of those proceedings. It remains to be seen, however, whether courts will agree with this argument. Indeed, there is little to no legislative history to support such an assertion. To the contrary, the legislative record contains two June 2011 letters to the Chairman and Ranking Member of the House Judiciary Committee that suggest otherwise. Senator Kyl requested that these letters, written by Judge Michael McConnell, former Circuit Judge of the Tenth Circuit and current Professor at Stanford Law School, be entered into the record because they were “circulated widely among members and staff and have played a substantial role in the debate about section 18.”^[16]

In his letters, Judge McConnell analyzes the constitutionality of AIA § 6 (related to IPR and PGR proceedings) and § 18 (related to CBM proceedings) and states that he saw “nothing in sections 6 and 18 of the proposed Act that would alter or interfere with existing principles of res judicata or collateral estoppel in the context of a final judgment, much less allow the PTO to disturb the final judgment of a court.”^[17] While Professor McConnell’s letters are not typical sources of legislative history relied on by courts—such as Committee Reports or statements by members of Congress—they were entered into the record by Senator Kyl and indicate that issue preclusion was contemplated during the debate on the AIA.

Further, Congress knows how to clearly say when issue preclusion should not apply and has already done so in the patent context. In legislative history related to the U.S. International Trade Commission (ITC), for example, a Senate Report explicitly states that res judicata and collateral estoppel should not apply to ITC decisions:

The Commission’s findings neither purport to be, nor can they be, regarded as binding interpretations of U.S. patent law in particular factual contexts. Therefore, it seems clear that any disposition of a Commission action by a Federal Court should not have res judicata or collateral estoppel effect in cases before such courts.^[18]

Based on this specific legislative history, the Federal Circuit has held that ITC decisions are not given any preclusive effect.^[19] The authors have not been able to identify any similar proscriptive statements in the legislative history of the AIA, however.

The (Preclusive) Possibilities

The PTAB can and must decide a variety of issues in IPR, PGR, and CBM proceedings. As for ultimate conclusions, the PTAB may determine anticipation and obviousness over printed publications in IPR proceedings and generally all patentability grounds in PGR and CBM proceedings.^[20]

But the risk of issue preclusion goes well beyond these ultimate conclusions. Many subsidiary findings that are necessary to the decision could also be given preclusive effect if issue preclusion applies generally to PTAB decisions. Below are just a few examples of the kinds of PTAB determinations that may be necessary to its decisions:

• the priority date that patent claims should be afforded;
• the scope of the teachings of a particular prior art reference;
• the level of ordinary skill in the art;
• written description support (or lack thereof) for a limitation in a claim; and
• factual findings underlying enablement (including enablement of a prior art reference).

All of these (and many other) factual findings may have significant repercussions in subsequent District Court litigation involving the same—or “related”—patents.

Regarding “related” patents, the Federal Circuit has ruled, for example, that obviousness in a prior litigation can bind a patentee in subsequent litigation involving a related patent.^[21] One could argue that the preclusive effect of PTAB decisions should extend to related patents as well.

Accordingly, in situations where a patent survives a PTAB proceeding, both the patentee and the challenger and those in privity with the challenger may be bound by any such determinations that were necessary to the PTAB’s decision in subsequent District Court litigation.

The Supreme Court in B&B Hardware emphasized that the issue decided by the TTAB must be the same issue in the District Court litigation for issue preclusion to apply.^[22] However, on the patent side, it is not always clear whether the PTAB and District Courts decide the same issue. For example, one could argue that decided issues involving claim construction are not the same because the PTAB and District Courts use different standards for claim construction—the PTAB uses the “broadest reasonable interpretation” standard and District Courts use the “ordinary and customary meaning” standard.^[23] As another example, one could argue that decided issues are not the same because the PTAB decides patentability while District Courts decide invalidity. But that distinction seems to turn on different burdens of proof used in the respective forums rather than any substantive difference in legal standards used, for example, to decide anticipation, obviousness, written description, or enablement.

It will be interesting to see how litigants and the courts address B&B Hardware in the context of PTAB decisions. In the meantime, practitioners should consider the risk that issue preclusion may apply to PTAB decisions until a court holds otherwise.

[2] AIA § 6; 35 U.S.C. § 315(e)(2) (IPR estoppel); id. § 325(e)(2) (PGR estoppel).

[3] 35 U.S.C. § 315(e)(2) (IPR); id. § 325(e)(2) (PGR).

[4] AIA § 18(a)(1)(D).

[5] 135 S. Ct. 1293 (2015).

[6] Id. at 1303 (citing Restatement (Second) of Judgments § 27, p. 250 (1980)).

[7] Id. at 1299.

[8] Id. at 1310.

[9] Id. at 1303 (quoting Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U.S. 104, 108 (1991)) (emphasis added and internal quotations omitted).

[10] Id. at 1305-06.

[11] Id. at 1309.

[12] See, e.g., Coakwell v. United States, 292 F.2d 918, 920-21, 130 USPQ 231, 234 (Ct. Cl. 1961) (“Where the losing party fails to effectively review the Patent Office action in one of the courts and it becomes final, it is . . . binding on the parties.”).

[13] B&B Hardware, 135 S. Ct. at 1309.

[14] See 15 U.S.C. § 1067; 35 U.S.C. § 6 (administrative judges); 37 C.F.R. Part 2 (trademark regulations); 37 C.F.R. §§ 2.120 and 2.122; 37 C.F.R. Part 42 (procedural rules); and 37 C.F.R. §§ 42.51 (discovery) and § 42.62 (Federal Rules of Evidence).

[15] See 15 U.S.C. § 1071(a); 35 U.S.C. § 141(c); and AIA § 18(a)(1).

[16] Cong. Rec. 5374 (Sep. 7, 2011) (statement of Sen. Kyl).

[17] Id. at 5374, 5376.

[18] S. Rep. No. 1298, 93d Cong. 2d Sess. 196.

[19] See Tandon Corp. v. ITC, 831 F.2d 1017, 1018 (Fed. Cir. 1987); but see Texas Instruments Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558, 1569 (Fed. Cir. 1996) (district courts can “attribute whatever persuasive value to the prior ITC decision as it considers justified”).

[20] 35 U.S.C. § 315(b); id. § 321(b); AIA § 18(a)(1)(C).

[21] Ohio Willow Wood Co. v. Alps South, LLC, 735 F.3d 1333, 1342-43 (Fed. Cir. 2013) (issue preclusion against patentee based on patent that issued from continuation application applied to subsequent litigation involving patent that issued from parent application where claims “describe substantially the same invention”).

[22] B&B Hardware, 135 S. Ct. at 1303.

[23] Compare In re Cuozzo Speed Techs., LLC, 778 F.3d 1271, 1278-82 (Fed. Cir. 2015) with Phillips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (en banc). However, in cases where the District Court adopts the PTAB’s claim construction, sameness would be a given.

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