A recent decision by the United States Federal Circuit (AVX Corporation v Presidio Components, Inc (Fed Cir, No 2018-1106, 13 May 2019)) has clarified the requirements for standing to appeal from an inter partes review (“IPR”) before the Patent Trial and Appeal Board (“the Board”), but has left open the issue of estoppel.
AVX Corporation (“AVX”) lodged an IPR against all the claims of US 6,661,639 (the ‘639 Patent) relating to ceramic capacitors. The Patentee of the ‘639 Patent, Presidio Components, Inc (“Presidio”), was a competitor of AVX. An IPR is a trial proceeding conducted before the Board to review the patentability of one or more claims of a patent on the basis of lack of novelty or obviousness (i.e. a ground raised under §§ 102 or 103) based on patents or printed publications.
The Board ultimately upheld several claims of the ‘639 Patent, which led to AVX appealing the decision to the Court of Appeals for the Federal Circuit. The first question that had to be addressed by the Federal Circuit was whether AVX had standing to appeal the IPR decision.
The judicial power of Federal Courts in the United States is derived from Article III of the United States Constitution. Article III grants the Federal Courts judicial power over cases or controversies. Accordingly, a party appealing to the US Federal Circuit from an IPR must demonstrate it has standing to appeal, namely it must demonstrate ‘(1) an “injury in fact,” (2) “a causal connection between the injury and the conduct complained of” and (3) a likelihood that “the injury will be redressed by a favourable decision.’” (citation omitted).
AVX argued two theories for establishing standing: (1) AVX is injured by The Board’s rejection of its challenge to the upheld claims as it is estopped from raising these invalidity challenges in a later non-Patent Office action or (2) AVX is injured because it reduces AVX’s ability to compete with Presidio.
AVX’s injury by estoppel theory was based on the estoppel provision of 35 USC § 315(e)(2), which states in part:
The petitioner in an inter partes review of a claim in a patent … may not assert in either a civil action … that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.
AVX argued that operation of §315(e)(2) effectively barred it from ever asserting in a district court, i.e. in a declaratory judgement action or as a counterclaim to an infringement action, that the upheld claims were invalid. This argument was rejected by the Federal Circuit. First, the Federal Circuit explained that estoppel itself does not create standing when a party is not already engaging in allegedly infringing activity. Second, the Federal Circuit clarified that as yet no such decision as to the application of this section and the ramifications of estoppel had been issued. The Federal Circuit also highlighted case law holding ‘“[i]t is axiomatic that a judgment is without preclusive effect against a party which lacks a right to appeal that judgment”’. Consequently, although the Federal Circuit declined to find standing on this issue, it left open the possibility that estoppel would not apply. Therefore, in a subsequent action before a district court, AVX can “test whether § 315(e) bars it from raising the … challenges that the Board reviewed and rejected”.
AVX’s second theory for standing was based on injury as a competitor of Presidio under a so called “competitor standing” theory where the actions of the government are implicated. The Federal Circuit explained that “competitor standing” had been recognized in many non-patent related circumstances where the actions of the government, e.g. cancellation of a tax benefit, actions of the Federal Communication Commission, resulted in “a nonspeculative threat to a concrete interest of the challenger”. In contrast to such cases, the government action here was the Board upholding claims “which do not address prices or introduce new competitors”. Accordingly, the mere existence of patent claims does not constitute a harm for a competitor of the patentee. However, the Federal Circuit opined that harm could be established where the challenger was “using the claimed features or nonspeculatively planning to do so”. Despite evidence of Presidio’s past infringement suits against AVX and AVX’s suspicions that Presidio would assert the upheld claims, The Federal Circuit found that AVX did not establish any current use or nonspeculative plans related to the upheld claims and, therefore, did not establish standing.
Since no theory for Article III standing was found persuasive, the Federal Circuit dismissed the appeal from the IPR decision upholding claims of the ‘639 Patent.
Take-home lesson: Petitioners clearing a path by proactively challenging patents in an IPR prior to engaging in or planning (potentially) infringing activity risk lacking standing to appeal adverse IPR decisions to the Federal Circuit. However, despite the estoppel provisions of §315(e)(2), such Petitioners may not be subject to estoppel with regard to the arguments raised during the IPR. However, the Federal Circuit was not definitive in this regard, noting that the issue of estoppel would need to be tested in a subsequent litigation.