February 12, 2020Client Alert

Northern District of California Declines to Expand IPR Estoppel Based on Non-Instituted Petitions

The Northern District of California recently determined that non-instituted inter partes review (IPR) petitions cannot be the basis of IPR estoppel under the statute because non-instituted IPR petitions do not result in a final written decision.

Finjan, Inc. (Finjan) sued Cisco Systems, Inc. (Cisco) in the Northern District of California alleging infringement of five of Finjan’s patents. Cisco filed IPR petitions challenging the validity of two of Finjan’s patents, but the Patent Trial and Appeal Board (PTAB) denied institution of Cisco’s petitions. Subsequently, in the lawsuit, Cisco challenged the validity of the two patents for which IPR institution was denied. Finjan moved for summary judgment as to the validity of the claims. Specifically, Finjan argued that Cisco unsuccessfully asserted what must have been its “strongest” prior art in IPRs, and the PTAB declined to institute a review of the asserted claims. Finjan reasoned that, if Cisco’s “strongest” prior art failed the PTAB’s low bar of “reasonable likelihood” standard, a reasonable jury could not find that Cisco’s “second-string” prior art (i.e., the prior art asserted in this litigation) invalidates the patents under the “clear and convincing” standard applicable in district court litigation.

 The court concluded that Finjan was seeking to invent a new estoppel when an IPR petition does not result in a final written decision. This would be contrary to the language of 35 U.S.C. § 315(e)(2), which requires an IPR to result in a final written decision to create an estoppel effect. Here, because neither of Cisco’s IPR petitions were instituted, there was no final written decision, and therefore no estoppel. The court also found that Finjan’s logic would create a false presumption that a party uses its best and strongest prior art when filing an IPR petition. The practical effect of such a presumption would preclude the party from bringing forth in district court any invalidity challenges to the petitioned patent after a non-instituted petition for IPR.

Finjan also argued that the law with respect to IPRs has evolved under SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1355-56 (2018). Finjan urged that in a post-SAS world “Cisco should not be able to revive its invalidity claim by piecemealing its prior art amongst the PTAB and this Court.” The court, however, was not persuaded that the SAS decision changed the law with respect to IPR estoppel on uninstituted petitions. The court also found that none of the recent cases cited by Finjan in support of this argument applied IPR estoppel where no final written decision was issued, and declined to expand IPR estoppel beyond the language of the statute.

Under Finjan, a defendant in a patent infringement suit can proceed with an IPR petition without fear of IPR estoppel should the PTAB decline to institute.

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