In SoftView v. Apple1, the U.S. Court of Appeals for the Federal Circuit (CAFC or Federal Circuit) has recently clarified an important aspect of collateral estoppel. The case concerns the U.S. Patent and Trademark Office's (USPTO or Office) authority related to the estoppel provision applicable to inter partes reexamination, 37 C.F.R. § 42.73(d)(3)(i), and whether it may be properly applied by the Office to issued patent claims as well as amended claims pending during the reexamination proceeding.
In its appeal, SoftView argued that the Patent Trial and Appeal Board (PTAB) improperly held all claims of SoftView's U.S. Patent No. 7,461,353 ("the '353 Patent") invalid under the estoppel provisions set forth in 37 C.F.R. § 42.73(d)(3)(i). Under § 42.73(d)(3)(i), a patent owner is prohibited from taking action during inter partes reexamination that inconsistent with an adverse judgment in any prior inter partes proceeding ("A patent applicant or owner is precluded from taking action inconsistent with the adverse judgment, including obtaining in any patent: (i) A claim that is not patentably distinct from a finally refused or canceled claim"). Through its analysis, the CAFC upheld the validity of 37 C.F.R. § 42.73(d)(3)(i) along with the standard adopted by the PTAB for its application. The Federal Circuit, however, agreed with SoftView that 37 C.F.R. § 42.73(d)(3)(i) estoppel applies only to new or amended claims, and not to previously issued claims.
SoftView's patent relates to displaying internet content on mobile phones. In the late 2000s, SoftView asserted its patent against various mobile phone manufacturers. The accused infringers, including Apple Inc., Motorola Mobility LLC and Kyocera Corporation, challenged the validity of SoftView's patent. In 2011, Apple filed a request for ex parte reexamination of the '353 Patent. Over the next two years, both Motorola and Apple filed additional separate requests for ex parte reexamination. In 2012, after enactment of the America Invents Act, Kyocera filed a petition for Inter Partes Review (IPR) of 18 claims of the 319 claims of the patent. The PTAB stayed all pending pre-AIA ex parte and inter partes reexamination proceedings pending the outcome of the IPR initiated by Kyocera. In its final written decision in the IPR, the PTAB found each of the 18 challenged claims of the '353 Patent unpatentable. The Federal Circuit affirmed that decision.
Note that the procedure of inter partes reexamination was abolished and replaced with Inter Partes Review by the America Invents Act in 2012. Numerous procedural and substantive issues made inter partes reexamination problematic for patent challengers, reflected in the fact that during the thirteen years of its availability, less than two thousand petitions were filed. Contrast this with 12,607 IPR petitions filed through FY2021.2 Although new proceedings were abolished after the effective date of the AIA, inter partes reexamination proceedings pending on that date continued. The fact that we are reading in 2024 about a newly-decided appeal of an inter partes reexamination that was filed before the 2012 effective date of the America Invents Act is a good illustration of one of the main problems that plagued that procedure – its extraordinarily long elapsed time from filing to completion.
Once the stay of the ex parte and inter partes reexamination proceedings was lifted, SoftView amended 107 claims of the '353 Patent by merely combining limitations from multiple cancelled claims. In the inter partes reexaminations, although the Examiner found the majority – but not all -- of the claims of the '353 Patent unpatentable under 35 U.S.C. § 103, the PTAB reversed the Examiner's decision. Instead, the PTAB rejected all pending claims of SoftView's patent based on 37 C.F.R. § 42.73(d)(3)(i) estoppel, stating that the previously issued claims are not patentably distinct from those finally found to be unpatentable in the IPR decision that was previously affirmed by the CAFC. SoftView appealed that newest PTAB decision to the Federal Circuit on the grounds that the PTO lacked statutory authority to promulgate Section 42.73(d)(3)(i) and, even if such authority existed, that the PTAB had misapplied the estoppel provision insofar as it invalidated previously issued claims not amended during the inter partes reexamination.
SoftView initially argued that the USPTO improperly interpreted the regulation in a manner that gave it broader scope than the common law rule of collateral estoppel. Specifically, SoftView challenged the PTAB's interpretation of the term "patentably distinct" as used in 37 C.F.R. § 42.73(d)(3)(i). SoftView argued that the term "not patentably distinct" should be interpreted to mean "substantially the same." Instead, though, the Board gave the term "patentably distinct" the same meaning as that term is given in obviousness-type double patenting cases and in interference proceedings, where the term "not patentably distinct" is defined in a manner analogous to a determination of obviousness. The Board found that 37 C.F.R. § 42.73(d)(3)(i) barred SoftView from obtaining claims that were not patentably distinct from, that is, would have been obvious in view of, those claims canceled in the IPR proceeding. This interpretation was upheld by the Federal Circuit. Accordingly, it is clear that 37 C.F.R. § 42.73(d)(3)(i) estoppel is broader than common law estoppel.
SoftView's second argument was that the PTO lacked statutory authority to promulgate a regulation governing the estoppel effect of IPR decisions in subsequent proceedings before the PTO. More specifically, SoftView argued that the PTO has statutory authority to issue regulations on procedural matters but not on substantive issues of patent law such as estoppel. The CAFC noted, though, that direct instruction was provided within 35 U.S.C. § 316(a)(4) authorizing the USPTO Director to proscribe regulations "establishing and governing inter partes review ... and the relationship of the review to other proceedings under this title," thus "ensuring the integrity of the proceedings before the PTO by preventing actions that would undermine the outcomes of those proceedings."
SoftView's next, and only successful, argument was that Section 42.73(d)(3)(i) does not apply to issued claims but rather only to new or amended claims. The Federal Circuit agreed, explaining that Section 42.73(d)(3)(i) prevents a patent owner from "obtaining" a claim which is not patentably distinct from a finally refused or cancelled claim, rather than preventing a patent owner from "maintaining" an existing claim. There are other procedures available for challenging issued patent claims.
The Federal Circuit vacated the PTAB's decision regarding the already-issued claims that were invalidated based on the estoppel provision and remanded the proceeding back to the PTAB for further consideration. In reexamination proceedings, unlike in IPRs, once the proceeding is instituted all claims of the patent are subject to reexamination, not merely the claims challenged in the original petition. Thus, the Examiner in the reexamination proceeding could still issue substantive obviousness rejections of all claims of SoftView's patent; the USPTO may not simply short-cut its analysis of previously issued claims through the estoppel provision, however.
The present case reminds us of the importance of proper understanding and interpretation of patent regulations including estoppel provisions, as well as the interplay between different types of administrative patent validity challenges. Additionally, this case emphasizes the importance of challenging the USPTO when its regulations have been misinterpreted or misapplied.
This decision is potentially significant in that it emphasizes the PTO's statutory authority under § 42.73(d)(3)(i). First, the PTAB was found to have correctly interpreted the scope of estoppel as broadly applying to patentably indistinct claims. The USPTO, through 35 U.S.C. § 316(a)(4), has authority to promulgate regulations governing the estoppel effect of IPR decisions on a patent owner in subsequent USPTO proceedings wherein the estoppel only applies to new or amended claims, but not to previously issued claims. The vitality of the estoppel provisions relating to inter partes reexaminations will, however, wane over time as the number of still-pending proceedings of that type decreases – eventually, we hope – to zero.
Footnotes
1 108 F.4th 1366 (Fed. Cir. 2024).
2 K.Korea, "Navigating a decade of the America Invents Act," Managing IP (Mar. 1, 2022) (https://www.managingip.com/article/2a5d0ugt52wrjolybgu80/navigating-a-decade-of-the-america-invents-act (accessed Aug. 20, 2024).
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