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US: IPR institution denied for redundancy – Neither appealable nor grounds for estoppel

SheetmetalBEParties that regularly submit inter partes review (IPR) and other post-grant petitions with multiple, potentially redundant grounds for review now have clearer guidance on (1) whether the institution of those petitions can be reviewed; and (2) whether estoppel applies to rejected grounds for review. In the recent Automated Creel Systems v. Shaw Industries decision, the Federal Circuit held that when the U.S. Patent Office (PTO) denies institution of an IPR on a particular invalidity ground because it is redundant of another ground, that decision cannot be reviewed on appeal.  The Federal Circuit also stated, in dicta, that the estoppel provisions relating to IPR proceedings do not apply to denied institution grounds. Those grounds for invalidating a patent claim can be raised in future litigation.  Finally, Judge Reyna, in a concurring opinion, argued that the PTO’s refusal to provide an explanation for denying institution on redundant grounds constitutes a violation of the PTO’s obligations under the Administrative Procedure Act (APA).

Automated Creel Systems (ACS) sued Shaw Industries for patent infringement. Shaw Industries responded by filing an IPR petition seeking to invalidate the patent-in-suit.  The IPR petition included three grounds for invalidating claims with three separate sets of prior art.  The PTO’s Patent Trial and Appeal Board instituted the IPR on two grounds and denied institution on the third ground as being redundant.  In its final decision, the Board found for ACS and concluded that Shaw Industries failed to show that the challenged claims were unpatentable based on the instituted grounds.  Shaw Industries appealed to the Federal Circuit and argued that the refusal to institute the IPR on the denied ground was error.

A Federal Circuit panel consisting of Judges Moore, Reyna, and Wallach denied the appeal, holding that the St. Jude Medical Cardiology Division v. Volcano Corp. decision, 749 F.3d 1373 (Fed. Cir. 2014), as well as the plain language of 35 U.S.C. § 314(d) prevent the Federal Circuit from exercising jurisdiction over PTO decisions to institute or deny an IPR.  This holding confirms that § 314(d)’s language applies not just to whether a petition is time-barred but also to seemingly substantive grounds for denial, such as redundancy.

The Federal Circuit panel also, in dicta, left the door open to a future challenge to ACS’s patent on the denied ground.  Shaw, in petitioning the Federal Circuit for a writ of mandamus to have the PTO reconsider the denied portion of the IPR petition, argued that it was harmed by the PTO’s denial because of the estoppel effect accorded to final written decisions of the PTO under 35 U.S.C. § 315(e). The Federal Circuit stated that mandamus was unwarranted because no such harm existed.  The Court reasoned that because institution on one ground was denied, the arguments related to that ground were never considered by the PTO and, thus, § 315(e) would have no preclusive effect preventing Shaw from presenting those arguments in the future.  This reasoning, if adopted in the future, would effectively adopt and extend the PTO’s precedential Westlake Services, LLC v. Credit Acceptance Corp., CBM2014-00176 (Paper No. 28) (May 14, 2015), decision which held that claims for which CBM institution was denied may be challenged in a future CBM petition.