Patentee Estoppel Can Shut Down Related Prosecution

Patent prosecutors might consider PTAB estoppel a pure post-grant concern. That is, a litigation issue restricted to district courts after a failed PTAB challenge, or an issue raised in the context of a second-bite at the PTAB apple. But, PTAB estoppel can effect both failed petitioners and unsuccessful patent owners. Patent owner estoppel, often overlooked, is only now beginning to impact patent prosecution.

Prosecutors beware.

Patent owner estoppel stems from 37 C.F.R. 42.73(d)(3)(i). This rule recites that when a patent claim is cancelled or finally refused in a PTAB trial, the Patent Owner is thereafter precluded from taking an inconsistent action before the USPTO. This preclusion includes, obtaining in any patent, a claim that is not patentably distinct from the finally refused or cancelled claim.

Many Patent Owners are now learning that losing at the PTAB could mean that related prosecution (e.g., continuations, reexamination, and reissue) is estopped. The policy behind Rule 42.73 is justified by the agency as a means to ensure that parties do not walk away from a PTAB proceeding only to re-present the same claims (or indistinct variations) in another, ex parte proceeding — undermining AIA trial proceedings. And, the agency has explained that any “indistinct” claim amendments should be made during the trial, not elsewhere.

As estoppel relates to a “finally refused or cancelled claim,” and many such cases must go through appeal to the Federal Circuit, it has taken a few years for the first few cases to pop up. Likewise, patent examiners don’t appear to have a mechanism for being alerted to such estoppel (and third parties are unable to bring such issues to the examiner’s attention in ex parte prosecution).

Given these practical dynamics, the first few instances of patentee estoppel have been raised in a patent reissue, and a litigation relating to a concluded IPR.

Unified Patents recently raised estoppel in a reissue protest. The protest was filed after a Patent Owner canceled all challenged claims in an IPR trial initiated at the request of Unified. After the IPR, the Patent Owner sought to procure indistinct claims in a patent reissue application (protest here)*

The take away for prosecutors is that Patent Owner estoppel is real. When prosecuting cases related to concluded/ongoing AIA trials, it is important to keep abreast of AIA Trial judgments. Likewise, it is important to realize that your Duty of Disclosure, Candor and Good Faith could be triggered by such a judgment.

The second, matter was reviewed by the Federal Circuit today in Arthrex, Inc., v. Smith & Nephew, Inc., Arthrocare Corp. (here). This case demonstrates the potential impact on continuation portfolios, and provides a PTAB takeaway for patent litigators.

In Arthrex, Patent Owner sought to avoid the impact 42.73 estoppel by disclaiming all challenged claims before the IPR was even instituted. The Patent Owner argued that such a cancellation before institution was not an “adverse judgment” under the terms of 42.73(b) since the provision on point is limited to disclaiming/cancelling claims subject to “trial,” and no other provisions of this section apply to disclaimer. The Patent Owner hoped the PTAB would agree (as it had done in other cases, simply terminating the proceeding). The idea being if there is no “adverse judgment”, its pending continuation applications would not be subject to 42.73 estoppel.

The PTAB disagreed and found the request to fall within the terms of 42.73(b), holding the disclaimer to be an adverse judgment. The dispute was thereafter appealed to the Federal Circuit (where there was also an interesting debate on appeal jurisdiction).

In a split decision, the Federal Circuit agreed with the PTAB’s interpretation of 42.73(b), but the judges in the majority questioned whether the PTAB had the power to promulgate the rule. (The Court did not reach this question as neither party briefed it).

This case demonstrates the potential estoppel risk to continuation portfolios prosecuted in parallel to an AIA trial proceeding. Prosecutors would be wise to structure their portfolios to avoid this exposure.

The takeaway for litigators is that disclaimer before institution may avoid 42.73 estoppel should the Federal Circuit later find that the PTO did not have the authority to adopt 42.73(b). This argument will come in another case.

Patent Owner estoppel stemming from adverse AIA trial results is an issue that I expect to become more pronounced going forward.

Scott A. McKeown is an author of the Patents Post Grant.