PTAB Provides Infringers a Second Chance, Ruling That Claim Preclusion Does Not Apply to IPR Proceedings

The PTAB ruled last week that the common law doctrine of claim preclusion only applies at the PTAB in one direction, holding that Congress did not intend for an adverse district court judgment to block a party from pursuing a subsequent inter partes review challenge. 

As background, in April 2019, VLSI sued Intel for infringement of U.S. Patent No. 7,725,759 (“the ’759 Patent) in the Western District of Texas.  Ten months later, in February 2020, Intel filed an inter partes review petition challenging the validity of the patent.  The PTAB denied institution in August 2020 under Fintiv.  The litigation proceeded to trial in March 2021 and the jury sided with VLSI, finding the ’759 Patent valid and infringed, and awarding VLSI more than $2 billion in damages.  The district court entered final judgment on May 10, 2022.

Shortly after the jury verdict, but before final judgment was entered, Intel saw another opportunity to invalidate VLSI’s patent when, in June 2021, OpenSky Industries, LLC filed an IPR petition challenging several claims of the ’759 Patent, including the claims Intel had been found to infringe.  Even though Intel was barred from filing such a petition itself under 35 U.S.C. § 315(b) because it had been sued for infringement more than one-year prior, a carveout under Section 315(b) and (c) permitted Intel to file a petition identical to OpenSky’s and request joinder in that proceeding.  The PTAB granted Intel’s joinder request on June 8, 2022.  However, as soon as the district court entered final judgment against Intel, VLSI filed a motion asking the PTAB to terminate the proceeding as to Intel on the theory that the common law doctrine of claim preclusion (also called res judicata) barred Intel from relitigating its failed invalidity defense.

In a decision issued April 4, 2023, the PTAB denied VLSI’s motion to terminate, holding that claim preclusion does not apply to IPR proceedings, and therefore the adverse final judgment in the district court case does not bar Intel from again seeking to invalidate the ’759 Patent in the IPR proceeding.  In reaching its ruling, the PTAB considered the explicit language in the various statutes governing IPRs and Congress’s perceived intent. 

As a threshold matter, the PTAB rejected VLSI’s argument that Congress must provide a “clear statement” to overcome the presumption that common law claim preclusion applies.  Instead, relying on the Supreme Court’s holding in Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 108 (1991), the PTAB concluded that Congress need only evince some intention on the issue, which the PTAB found in IPR statute. 

First, the PTAB noted that the AIA’s estoppel provision, 35 U.S.C. § 315(e), explicitly only applies claim preclusion in one direction—from IPRs to future proceedings—demonstrating Congress’ intent that claim preclusion not apply from district court proceedings to IPRs.  Second, the PTAB noted that the AIA “inherently accepts” that parallel proceedings between district courts and the PTAB may address overlapping issues relating to invalidity, and that the AIA imposes a lower burden of proof for IPRs, thus further evidencing Congress’ intent not to apply claim preclusion to IPR proceedings because the different evidentiary burdens permits the possibility of inconsistent results.  Finally, the PTAB observed that Congress plainly knows how to draft a statute which applies claim preclusion in both directions, as former 35 U.S.C. § 317 applied “two-way” claim preclusion to inter partes reexamination, yet Congress chose to not to carry that scheme over to IPRs. 

While this decision is favorable to adjudged infringers, providing a second chance to challenge the validity of a patent even after an adverse final judgment in a district court proceeding, its reach is likely fairly limited.  The time bar under Section 315(b) prohibits a party from filing an IPR more than one year after the date on which the petitioner is served with a complaint alleging patent infringement, and it will be the rare case indeed where a final judgment is issued in litigation within one year of the complaint being filed.  Accordingly, to take advantage of the absence of claim preclusion, an adjudged infringer will have to rely on joinder with another party’s petition under Section 315(c) to get a second chance at invalidating the patent in an IPR.  This situation is unlikely to present itself in the context of a one-off, competitor versus competitor patent assertion, but will be more common in the context of a broader patent enforcement campaign.  As such, the PTAB’s ruling could provide another avenue for combatting industry-wide patent assertions by non-practicing entities.

In view of this recent decision, a defendant in patent infringement litigation will want to pay increased attention to any other IPR filings regarding the patent at issue.  It may just provide the second chance a defendant needs to attack the validity of the patent even after an adverse final judgment, creating the potential to avoid any as-yet unsatisfied damages award or ongoing royalty obligation, as Intel hopes to do here.