American Technical Ceramics Corp. et al v. Presidio Components, Inc.
Filing
142
ORDER: For the reasons discussed in the attached Order, the court finds that Presidio is estopped from raising invalidity grounds that it did not include in its IPR petition to the PTO challenging the '547 Patent and, thus, it may not supplement its invalidity contentions or serve a new expert invalidity report. No later than February 6, 2019 the parties shall submit a joint letter informing the court of their availability for trial in August 2019. Ordered by Judge Kiyo A. Matsumoto on 1/30/2019. (Mazzurco, Vincent)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
AMERICAN TECHNICAL CERAMICS CORP.
and AVX CORPORATION,
Plaintiffs,
-against-
ORDER
14-CV-6544 (KAM)(GRB)
PRESIDIO COMPONENTS, INC.,
Defendant.
----------------------------------X
MATSUMOTO, United States District Judge:
Plaintiffs American Technical Ceramics Corp. (“ATC”)
and AVX Corporation (“AVX,” and together with ATC, “plaintiffs”)
initiated the instant action by filing a complaint (“Compl.” or
the “complaint,” ECF No. 1) on November 6, 2014, alleging
infringement by defendant Presidio Components, Inc. (“Presidio”
or “defendant”) of the following patents held by plaintiffs:
United States Patent No. 6,144,547 (the “‘547 Patent”), United
States Patent No. 6,337,791 (the “‘791 Patent,” together with
the ‘547 Patent, the “patents-in-suit”), and United States
Patent No. 6,992,879 (the “‘879 Patent”).
(See generally
Compl.; see also Compl. Ex. 1, ECF No. 1-3 (annexing ‘547
Patent, ‘791 Patent, and ‘879 Patent).)
After motion practice, two rounds of claim
construction by this court, and an inter partes review (“IPR”)
proceeding initiated by Presidio before the Patent Trial and
Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office
(“PTO”), (see ECF No. 74, Joint Motion to Stay at 2), the
remaining claims of infringement before this court concern all
but claim 1 of the ‘791 Patent, and the ‘547 Patent in its
entirety, the ‘879 Patent having been found unpatentable by the
PTAB.
(See ECF No. 126, Summary Judgment Order at 81
(dismissing plaintiffs’ claims for infringement of the ‘879
Patent and of claim 1 of the ‘791 Patent after IPR); ECF No. 79,
First Claim Construction Order dated November 7, 2016; ECF No.
136, Second Claim Construction Order dated November 2, 2018.)
After the court issued its second claim construction
decision, dated November 2, 2018 and construing the term
“terminations,” the parties submitted a joint status letter
dated November 16, 2018, in which plaintiffs requested a trial
date and defendant requested to supplement its invalidity
contentions as to the ‘547 Patent, exchanged pursuant to this
District’s Local Patent Rules.
(ECF No. 137, Joint Status
Letter dated November 16, 2018 (“JSL”) at 1, 3.)
Additionally,
Presidio requested leave to renew certain portions of its
summary judgment motion, which the court previously denied
without prejudice, pending further claim construction of the
term “terminations.”
Order at 53.)
(Id. at 3; ECF No. 126, Summary Judgment
Having construed “terminations,” (see ECF No.
136, Claim Construction Order at 26), the court found that a
2
genuine dispute of material issues of fact prevented it from
ruling as a matter of law on Presidio’s renewed motion, and thus
denied the motion.
(See Amended Minute Entry dated December 20,
2018.)
Pending before the court now is Presidio’s request to
supplement its invalidity contentions regarding the ‘547 Patent.
Plaintiffs object, stating that Presidio is estopped from
raising in this proceeding any invalidity ground that it “raised
or reasonably could have raised during [the IPR]” proceeding
challenging the ‘547 Patent, citing 35 U.S.C. § 315(e)(2).
at 2.)
(JSL
Presidio responds by relying on Shaw Industries Group,
Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir.
2016), to argue that because it did not petition the PTAB on the
invalidity grounds it now seeks to amend to its invalidity
contentions, it necessarily could not have raised the grounds
during the IPR and is thus not estopped.
(JSL at 4, 5-6.)
Plaintiffs argue in the alternative that, even if Presidio is
not estopped, it has failed to show good cause to reopen
discovery for the purposes of serving supplemental invalidity
contentions and a supplemental expert invalidity report.
For the reasons discussed below, the court finds that
defendant is estopped from raising invalidity grounds that it
did not include in its IPR petition to the PTO challenging the
‘547 Patent and, thus, it may not supplement its invalidity
3
contentions or serve a new expert invalidity report.
Given that
Presidio could have, but did not explain why it did not include
the grounds it now seeks to supplement to the invalidity
contentions when it sought IPR, the court need not address
whether Presidio has shown good cause to reopen discovery.
Moreover, the court notes that Presidio’s submissions, to date,
have lacked specifics concerning what new grounds it intended to
raise, and why those grounds were not available to it when it
petitioned for IPR.
Though the court previously indicated it would issue a
pretrial scheduling order with a trial date, the court currently
has a conflicting criminal trial scheduled for the parties’
requested June 24, 2019 trial date.
Letter dated January 24, 2019.)
(See ECF No. 141, Joint
Should that criminal trial be
rescheduled, the court will inform the parties and they should
be prepared to proceed on June 24, 2019.
However, the parties
should also be prepared for a later trial date, and shall inform
the court of their availability for trial in August 2019 by
joint letter submitted no later than one week from the date of
this Order.
DISCUSSION
I.
LEGAL STANDARD
When deciding issues in a patent case, a district
court applies the law of the circuit in which it sits to non4
patent issues and the law of the Federal Circuit to issues of
substantive patent law.
In re Cambridge Biotech Corp., 186 F.3d
1356, 1368 (Fed. Cir. 1999); see also Coconut Grove Pads, Inc.
v. Mich & Mich TGR, Inc., 222 F. Supp. 3d 222, 250 n.6 (E.D.N.Y.
2016).
Federal Circuit law also governs issues that are not
substantive patent law if “the issue pertains to patent law, if
it bears an essential relationship to matters committed to [the]
exclusive control [of the Federal Circuit] by statute, or if it
clearly implicates the jurisprudential responsibilities of [the
Federal Circuit] in a field within its exclusive jurisdiction.”
Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356,
1359 (Fed. Cir. 1999) (en banc in relevant part) (internal
citations and quotation marks omitted).
A. Inter Partes Review
The America Invents Act (“AIA”), Pub. L. No. 112-29,
125 Stat. 284 (2011), introduced IPR as a procedure in which the
PTAB may review the patentability of one or more claims in a
patent.
See generally 35 U.S.C. §§ 311-319.
The IPR process
allows a party to petition the PTO to establish the invalidity
of certain claims in a patent under Sections 102 or 103 of Title
35.
Id. § 311(a)-(b).
Institution of IPR is discretionary, and
the PTAB may decide to institute IPR on all, some, or none of
the petitioned grounds.
35 U.S.C. § 314(a); 37 C.F.R. §
42.108(a) (“[T]he Board may authorize the review to proceed on
5
all or some of the challenged claims and on all or some of the
grounds of unpatentability asserted for each claim.”); id. §
42.108(b) (“At any time prior to institution of [IPR], the Board
may deny some or all grounds for unpatentability for some or all
of the challenged claims.”)
An instituted IPR proceeding is
held before a panel of three administrative judges,
35 U.S.C. §
6(a)-(c), 311, and the panel issues a final written decision,
usually within twelve months, with respect to the patentability
of the patent claims challenged by the petitioner,
id. §
318(a).
This procedure was enacted with the policy goals of
streamlining the patent process in general and in focusing
patent enforcement litigation, thus limiting costs for all
parties and preserving judicial resources.
SAS Inst., Inc. v.
ComplementSoft, LLC, 825 F.3d 1341, 1357 (Fed. Cir. 2016)
(Newman, J.) (concurring in part, dissenting in part) (“The
America Invents Act was designed—after a decade of hearings and
revisions—to reduce the cost of patent litigation, to resolve
major validity issues in an expert tribunal, and to put an end
to repetitive challenges.”), rev’d on other grounds, SAS Inst.,
Inc. v. Iancu, 138 S.Ct. 1348 (2018).
The legislative history
of § 315(e) indicates that Congress intended IPR to serve as a
complete substitute for litigating the validity of patent claims
in the district court.
See, e.g., Patent Reform Act of 2009:
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Hearing Before the House Comm. on the Judiciary, 111th Cong. 153
(2009) (statement of Rep. Manzullo) (“It is clearly appropriate
to have an administrative process for challenging patent
validity, but it should exist within a structure that guarantees
a quick—and final—determination.”); Patent Reform: The Future of
American Innovation: Hearing Before the Senate Comm. on the
Judiciary, 110th Cong. 13 (2007) (statement of Jon Dudas,
Director, USPTO) (“[T]he estoppel needs to be quite strong that
says on the second window any issue that you raised or could
have raised you can bring up no place else. That second window,
from the administration’s position, is intended to allow
nothing—a complete alternative to litigation.”); see also
Douglas Dynamics, LLC v. Meyer Prods. LLC, No. 14-CV-886, 2017
U.S. Dist. LEXIS 58773, at *13 (W.D. Wisc. Apr. 18, 2017).
B. ESTOPPEL
To give effect to the Congressional goal of reducing
the costs of patent litigation and resolving issues before an
expert patent tribunal, the AIA codified an estoppel provision
meant to prevent an unsuccessful IPR petitioner from later
arguing in a related patent infringement case that a “claim is
invalid on any ground that the petitioner raised or reasonably
could have raised during that [IPR].”
35 U.S.C. § 315(e)(2).
The Federal Circuit ruled in Shaw that this estoppel provision
does not apply to rejected, non-instituted grounds that were
7
included
and thus raised in an IPR petition, but never
instituted by the PTAB as part of the IPR.
Inc., 817 F.3d at 1300.
Shaw Indus. Grp.
The court in Shaw did not, however,
address the circumstances presently before the court—when a
litigant seeks to argue invalidity on non-petitioned grounds,
grounds that it never included or raised in its IPR petition in
the first place but reasonably could have.
In reaching its decision in Shaw, the Federal Circuit
noted that estoppel applies to “any ground that the petitioner
raised or reasonably could have raised during that [IPR],” thus
applying its literal meaning.
Id. (emphasis added).
The
Federal Circuit reasoned that an “IPR does not begin until it is
instituted” by the PTO.
Id.
Therefore, according to the court
in Shaw, a ground that is not instituted by the PTO could not
have been reasonably raised during an IPR, and the petitioner is
not estopped from arguing the ground in a later infringement
action.
Id.; see also In re Cuozzo Speed Technologies, LLC, 793
F.3d 1268, 1272 (Fed. Cir. 2015) (“IPRs proceed in two phases.
In the first phase, the PTO determines whether to institute IPR.
In the second phase, the Board conducts the IPR proceeding and
issues a final decision.” (citations omitted)).
Accordingly,
the court in Shaw held that § 315(e)(2)’s plain language
“prohibit[ed] the application of estoppel” when the petitioner
“did not raise—nor could it have reasonably raised—the
8
[rejected] ground during the IPR.”
Shaw Indus. Grp., Inc., 817
F.3d at 1300 (emphasis in original).
II.
ANALYSIS
Plaintiffs seek to preclude Presidio from raising new,
non-petitioned prior art references in this action based on
§ 315(e)(2).
Both parties claim that a majority of district
courts that have confronted this issue have applied Shaw as they
argue it should be applied.
The court finds, in any event, that
a majority of district courts applying Federal Circuit precedent
would not control this court’s decision.
Of course, the
reasoning of sister courts are likely to be helpful to this
court in reaching its decision.
Plaintiffs assert that Shaw
should be given a narrow interpretation to apply only to noninstituted grounds and cite to several district courts that have
so ruled in circumstances similar to those before the court.
(JSL at 2.)
See, e.g., Cobalt Boats, LLC v. Sea Ray Boats,
Inc., No. 15-CV-0021, 2017 U.S. Dist. LEXIS 96909, at *8 (E.D.
Va. June 5, 2017) (concluding that estoppel applies to nonpetitioned grounds); Biscotti Inc. v. Microsoft Corp., No. 13CV-1015, 2017 U.S. Dist. LEXIS 144164, at *22-23 (E.D. Tex. May
11, 2017) (applying estoppel to non-petitioned grounds that the
petitioner reasonably could have raised in its IPR petition),
adopted by 2017 U.S. Dist. LEXIS 143675, at *4 (E.D. Tex. June
2, 2017); iLife Techs., Inc. v. Nintendo of Am. Inc., No. 13-CV9
4987, 2017 U.S. Dist. LEXIS 87769, at *18-19 (N.D. Tex. May 30,
2017); Network-1 Techs., Inc. v. Alcatel-Lucent USA, Inc., No.
11-CV-492,
2017 U.S. Dist. LEXIS 178857, at *10-11 (E.D. Tex.
Oct. 27, 2017); Parallel Networks Licensing, LLC v. IBM Corp.,
No. 13-CV-2072, 2017 U.S. Dist. LEXIS 28461, at *27-30 (D. Del.
Feb. 22, 2017); Oil-Dri Corp. of Am. v. Nestle Purina Petcare
Co., No. 15-CV-1067, 2017 U.S. Dist. LEXIS 121102, at *17-27
(N.D. Ill. Aug. 2, 2017); Douglas Dynamics, 2017 U.S. Dist.
LEXIS 58773, at *11-13.
Courts that have found Shaw applies only to noninstituted grounds, that is, courts that have estopped a
petitioner from asserting invalidity grounds the petitioner did
not, but could have petitioned for IPR, focus on the policy
goals animating the IPR process and the estoppel provision.
See, e.g., Network-1 Techs., 2017 U.S. Dist. LEXIS 178857, at *7
(“Limiting estoppel . . . would frustrate the litigation
efficiencies the America Invents Act was designed to produce.”);
Douglas Dynamics, 2017 U.S. Dist. LEXIS 58773, at *13 (“This
interpretation respects the statutory language and it is
consistent with the legislative history, which clearly suggests
that Congress intended IPR to serve as a complete substitute for
litigating validity in the district court.”).
Some of those
courts have reasoned that not estopping a party would allow “a
second bite at the apple” and would negate any time or cost
10
savings intended to be generated by the IPR process.
Parallel
Networks Licensing, 2017 U.S. Dist. LEXIS 28461, at *30;
Cobalt
Boats, 2017 U.S. Dist. LEXIS 96909, at *8-9 (“It would waste
this Court’s time to allow a stay for a year during IPR
proceedings and then review invalidity arguments that Defendants
could (and perhaps should) have raised in their IPR petition.”).
Defendant responds by citing to several courts that
have extended the Federal Circuit’s literal reading of 35 U.S.C.
§ 315(e)(2) in Shaw, and thus permitted a petitioner to raise
non-petitioned grounds that were accordingly not among the
grounds on which the PTAB instituted IPR.
See, e.g.,
Intellectual Ventures I LLC v. Toshiba Corp., 221 F. Supp. 3d
534, 553-54 (D. Del. 2016) (applying Shaw to non-petitioned
grounds but noting that such a result “confounds the very
purpose of this parallel administrative proceeding”);
Koninklijke Philips N.V. v. Wangs All. Corp., No. 14-CV-12298
2018 WL 283893, at *4 (D. Mass. Jan. 2, 2018) (“The broader
reading of the estoppel provision is foreclosed by Shaw.”);
Finjan, Inc. v. Blue Coat Sys., LLC, 283 F. Supp. 3d 839, 856-57
(N.D. Cal. 2017); see also Verinata Health, Inc. v. Ariosa
Diagnostics, Inc., No. 12-CV-5501, 2017 WL 235048, at *3 (N.D.
Cal. Jan. 19, 2017) (collecting cases).
Cf. HP Inc. v. MPHJ
Tech. Invs., LLC, 817 F.3d 1339, 1347 (Fed. Cir. 2016) (holding
estoppel provision in 35 U.S.C. § 315(e)(1), with identical
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“raised or reasonably could have raised during the [IPR]”
language, did not apply to non-instituted grounds).
1
The court finds that Shaw does not foreclose
plaintiffs’ position that non-petitioned grounds are subject to
§ 315(e)(2)’s estoppel provision.
Indeed, Shaw dealt only with
petitioned but non-instituted grounds, and the Federal Circuit
has not considered estoppel for non-petitioned grounds. See OilDri Corp. of Am., 2017 U.S. Dist. LEXIS 121102, at *19 (“Shaw .
. . focused on noninstituted grounds rather than nonpetitioned
grounds . . . [t]hus, there is no binding case that is directly
on point.”)
Although Shaw’s reasoning has been extended by some
district courts to non-petitioned grounds because non-petitioned
grounds literally could not have been raised during IPR, for
this court to so hold would render the estoppel provision
meaningless.
See Cobalt Boats, 2017 U.S. Dist. LEXIS 96909, at
*8 (“[T]he broad reading of Shaw renders the IPR estoppel
provisions essentially meaningless because parties may pursue
two rounds of invalidity arguments as long as they carefully
craft their IPR petition.”);
cf. Intellectual Ventures I, 221
F. Supp. 3d 534, 553-54 (“Although extending the [Federal
The PTAB similarly takes this approach when considering successive IPR
petitions under 35 U.S.C. § 315(e)(1). Great W. Cas. Co. v. Intellectual
Ventures II LLC, IPR No. 2016-01534, Paper No. 13, at 10, 11-14 (PTAB Feb.
15, 2017) (“[T]he Board’s determination not to institute an [IPR] . . . is
not a final written decision . . . and thereby does not trigger the estoppel
provisions under 35 U.S.C. [§] 315(e).”)
1
12
Circuit’s] logic [in Shaw] to prior art references that were
never presented to the PTAB at all (despite their public nature)
confounds the very purpose of this parallel administrative
proceeding, the court cannot divine a reasoned way around the
Federal Circuit’s interpretation in Shaw.”), reconsideration
denied, 2017 WL 107980, at *1 (D. Del. Jan. 11, 2017).
Although various district courts have ruled in a
manner favorable to either parties’ positions, given the dearth
of guidance from the Federal Circuit, this court finds
persuasive the reasoning in Milwaukee Electric Tool, Corp. v.
Snap-On Inc., 271 F. Supp. 3d 990 (E.D. Wisc. 2017), and Oil Dri
Corp. of America.
The court in Milwaukee Electric Tool sought to
preserve some of the policy goals supporting the creation of IPR
in holding “that a petitioner is estopped from asserting
invalidity contentions based on prior art that it could
reasonably have included in its IPR petition but did not.”
Milwaukee Elec. Tool, 271 F. Supp. 3d at 1029.
The court
explained that a petitioner who raises grounds that are not
instituted, “to no fault of its own,” has not had a full hearing
on the merits of its invalidity contentions.
Id. (quoting Oil-
Dri Corp. of Am., 2017 U.S. Dist. LEXIS 121102, at *23); see
also Verinata Health, Inc., 2017 WL 235048, at *3 (“Indeed,
limiting IPR estoppel to grounds actually instituted ensures
13
that estoppel applies only to those arguments, or potential
arguments, that received (or reasonably could have received)
proper judicial attention.”)
Conversely, a petitioner that
chooses not to raise certain invalidity grounds in its IPR
petition only has itself to blame.
See Oil-Dri Corp. of Am.,
2017 U.S. Dist. LEXIS 121102, at *26 (“[T]he fairness and due
process concerns that arise in the context of noninstituted
grounds . . . do not exist in the context of nonpetitioned
grounds.”)
The Milwaukee Electric Tool court concluded that a
petitioner is subject to IPR estoppel when it fails to raise
those grounds it “reasonably could have raised” in its IPR
petition.
Milwaukee Elec. Tool, 271 F. Supp. 3d at 1029; see
also Oil-Dri Corp. of Am., 2017 U.S. Dist. LEXIS 121102, at *2223 (“[I]f a party does not include an invalidity ground in its
petition that it reasonably could have included, it necessarily
has not raised a ground that it ‘reasonably could have raised
during [that IPR].’”)
Presidio’s view of § 315(e)(2) would only trigger
estoppel in the odd situation when a petitioner raises a ground
in a petition, the PTAB subsequently institutes IPR on that
ground, the petitioner then chooses not to argue invalidity on
that ground during the IPR, but once again changes course to
raise that invalidity ground in federal court.
Such a
capricious strategy is hard to fathom, and indeed warrants
14
estoppel, but is hardly the only inefficiency the AIA and IPR
intended to counter.
See Oil-Dri Corp. of Am., 2017 U.S. Dist.
LEXIS 121102 at *23-24 (“The Court has difficulty understanding
why a party would pursue such a strategy.”)
As the court in
Oil-Dri Corp. of America reasoned, the policy goals driving the
creation of the IPR process support a broader interpretation of
the estoppel provision of § 315 as the narrow interpretation
“invites parties to take ‘a second bite at the apple’” and would
“hardly promote[] efficiency or reduce[] the burden on federal
courts.”
Id. at *25.
This court agrees with the Milwaukee Electric Tool and
Oil-Dri Corp. of America courts, and thus holds that Presidio is
barred by the estoppel provision of § 315 and, thus, may not
supplement its invalidity contentions to raise grounds that it
reasonably could have raised in its IPR petition challenging the
‘547 Patent.
When a party chooses to seek IPR, but only on
certain grounds, that choice comes with consequences, notably
the risk of estoppel under § 315(e)(2).
See iLife Techs., 2017
U.S. Dist. LEXIS 87769, at *18-19 (“[Defendant] should have
presented ‘all of its best evidence.’ . . . ‘In exchange for the
expedited adjudication of its best case,’ [defendant]
surrendered the right to judicial review of its secondary
grounds for invalidity.’” (quoting Douglas Dynamics, 2017 U.S.
Dist. LEXIS 58773, at *5)).
Accordingly, the court declines to
15
reopen discovery so that Presidio can serve new invalidity
contentions on grounds that it could have, but chose not to,
raise in its IPR petition challenging the ‘547 Patent.
CONCLUSION
For the foregoing reasons, the court denies Presidio’s
request to supplement its invalidity contentions and serve a
revised expert invalidity report.
SO ORDERED.
Dated: January 30, 2019
Brooklyn, New York
_________/s/
_______
HON. KIYO A. MATSUMOTO
United States District Judge
Eastern District of New York
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