Estoppel Applies if Prior Art Could Be Found; Patent Owner Must Prove Unreasonable Search

In Ironburg Inventions Ltd. v. Valve Corp.,¹ the U.S. Court of Appeals, Federal Circuit, held the proper test for inter partes review (IPR) estoppel is what a skilled searcher conducting a diligent search of prior art reasonably could have been expected to find where the petitioner was unaware of the prior art being asserted at the time of filing the petition. The court also indicated if extraordinary measures to find prior art references were used but the reference was not found in the search, then there might be no estoppel. And the court held that the burden lies with the patent owner to prove estoppel.

Ironburg Inventions Ltd. owned U.S. Patent No. 8,641,525 (’525 patent), titled “Controller for Video Game Console,” related to a handheld controller for a video game console that employed controls placed on the back of the controller to be used by the user’s fingers. Claim 1 recited the following:

A hand held controller for a game console comprising:

an outer case comprising a front, a back, a top edge, and a bottom edge, wherein the back of the controller is opposite the front of the controller and the top edge is opposite the bottom edge; and

a front control located on the front of the controller;

wherein the controller is shaped to be held in the hand of a user such that the user’s thumb is positioned to operate the front control; and

a first back control and a second back control, each back control being located on the back of the controller and each back control including an elongate member that extends substantially the full distance between the top edge and the bottom edge and is inherently resilient and flexible.²

Ironburg sued Valve Corporation for infringement of the ’525 patent by selling its Steam Controller, a video game controller used in PC gaming and Valve responded by filing an IPR with the United States Patent and Trademark Office. The Patent Trial and Appeal Board (Board) instituted the IPR on three grounds of unpatentability but refused to institute on two other grounds (Non-Instituted Grounds). The Board subsequently issued its final written decision canceling some of the claims, i.e., claims 1, 6, 13, 14, 16, 17, 19 and 20 of the ’525 patent.

Before trial, Ironburg requested, under 35 U.S.C. § 315(e)(2), that IPR estoppel be applied to the Non-Instituted Grounds and the invalidity grounds Valve submitted from a third party’s IPR petition that was filed after Valve’s own IPR petition (Non-Petitioned Grounds). The district court approved the estoppel motion for both assertions. The jury found that Valve willfully infringed claims 2, 4, 7, 9, 10 and 11 of the ’525 patent.

On appeal, Valve argued it should not have been estopped from using any of the prior art invalidity grounds against the ’525 patent.Specifically, Valve asserted four grounds of invalidity, all of which the district court held Valve was estopped from petitioning. Valve asserted that it could not reasonably have brought both the Non-Instituted Grounds and the Non-Petitioned Grounds in the IPR. The court noted that the statute regarding IPR estoppel provides the following:

(2) Civil actions and other proceedings. The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.³

The court explained that “[t]o give effect to the language ‘reasonably could have raised,’” as used in § 315(e)(2), “estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all grounds not stated in the petition but which reasonably could have been asserted against the claims included in the petition.”⁴ The petition delineates the boundaries of the IPR. The court reasoned that the Non-Instituted Grounds were explicitly contained in the petition and, therefore, they were raised during the IPR under 35 U.S.C. § 315(e)(2). “Thus, Valve is estopped from litigating the Non-Instituted Grounds,” the court ruled.⁵ Therefore, the court affirmed the district court’s estoppel holding in connection with the Non-Instituted Grounds.

With regard to the district court’s determination to estop Valve from maintaining the Non-Petitioned Grounds, the Federal Circuit acknowledged that the rule to determine estoppel for non-presented invalidity grounds under § 315(e)(2) was not fully addressed. The district court determined that an IPR petition “reasonably could have raised” any grounds that “a skilled searcher conducting a diligent search reasonably could have been expected to discover.”⁶ The court agreed because the “skilled searcher” standard was consistent with the statute that required a petitioner be estopped from alleging any unpatentability ground that reasonably could have been raised during the IPR. Accordingly, the court held “that, provided the other conditions of the statute are satisfied, § 315(e)(2) estops a petitioner as to invalidity grounds a skilled searcher conducting a diligent search reasonably could have been expected to discover, as these are grounds that the petitioner ‘reasonably could have raised’ in its petition.”⁷

The Federal Circuit observed that the district court did not clearly determine who had the burden to show what a skilled searcher reasonably would have been expected to find when performing a diligent prior art search. The district court implied, however, that the burden rested on the petitioner, as the party contesting the patent’s validity. The Federal Circuit disagreed.

The court observed that Ironburg’s evidence comprised referencing the ’525 patent, which identified Willner as a prior art reference, and a January 3, 2018 IPR of Ironburg’s ’525 patent filed by a third party, Collective Minds. The Collective Minds petition included Willner, Koji and Raymond and, separately, Kotkin, for the invalidity grounds. In response to Ironburg’s evidence, Valve provided proof of its own prior art search, which did not find Kotkin, Koji and Raymond, and contended that its prior art search was, nonetheless, reasonably diligent.

The district court determined that Valve failed to submit proof regarding the amount of effort involved in finding the prior art references. The court then relied on this lack of evidence to estop Valve, thereby imposing the burden of proof on Valve. The Federal Circuit observed:

The district court’s estoppel conclusion rests, however, on an assumption, not yet proven on the record, that the prior art search undertaken by Collective Minds was only “reasonably” diligent and did not involve extraordinary measures. If Collective Minds employed “scorched earth” tactics to find the references making up the Non-Petitioned Grounds, then its experience may be irrelevant to a determination of what would have been discovered by an ordinarily skilled searcher acting with merely reasonable diligence.⁸

Accordingly, the Federal Circuit held:

We … now hold that the burden of proving, by a preponderance of the evidence, that a skilled searcher exercising reasonable diligence would have identified an invalidity ground rests on the patent holder, as the party asserting and seeking to benefit from the affirmative defense of IPR estoppel.⁹

Ironburg argued, however, that the patent owner should not have the burden because the petitioner may attempt to conceal its search efforts by asserting attorney-client privilege. The court responded:

[T]his would not be out of the ordinary for patent litigation and, in all events, the district court can resolve such issues and can factor such resolution into any findings that must be made with respect to estoppel. The inquiry into what a skilled and diligent searcher would reasonably have discovered is ultimately concerned with what the searcher of ordinary skill would find through reasonable diligence and not what an actual researcher in fact did find through whatever level of diligence she exercised.¹⁰

Therefore, the court held that the burden was on Ironburg to show, by a preponderance of the evidence, that a skilled searcher performing a diligent search reasonably would have been expected to find the Willner, Koji, Raymond and Kotkin prior art references to invalidate the ’525 patent claims. Since the district court placed this burden on Valve instead of Ironburg, the Federal Circuit vacated and remanded for the district court to decide whether Ironburg could satisfy this burden.

Practice Tips

This decision emphasizes the importance of performing a diligent prior art search to discover the best prior art references to assert the most persuasive invalidity grounds in the petition for IPR. The Federal Circuit embraced a “skilled searcher exercising reasonable diligence” standard to determine whether prior art grounds could have been raised in a prior IPR. The Federal Circuit also clarified that the burden of proof rests with the patent owner because the patent owner is the party pursuing the estoppel.

From a practical perspective, both parties to the IPR/litigation will need to explain why (or why not) the prior art search would have been “diligent” in view of the “skilled searcher” performing the search, regardless of which party has the burden. Patent search experts, including experienced patent lawyers and professional searchers, will be required to provide opinions on the reasonableness of the search strategy, search process and results. A variety of database search tools may have been available at the time to conduct the search, and their effectiveness and search methodology or results might be called into question. In addition, cost, number of searches and length of time searching may all be factors that can be used to determine whether the search was “diligent.”

To ensure that the petitioner will be able to describe what steps were taken during the search, it may be advisable to create and document a search procedure that is performed each time. The search procedure itself might have variable steps that are performed depending on the search results, including secondary searches that may be performed when appropriate. Clearly, how the search was conducted will be relevant and discoverable to enable the patent owner to determine whether challenging the search as not reasonable will be worthwhile. If there is no written description of the search procedure and results, the petitioner will have to respond to the patent owner’s requests based on oral testimony or written responses that purport to describe the search procedure.

Open issues include, for example, whether prior searches conducted by the petitioner not directly related to the IPR that might have put the petitioner on notice are relevant and/or discoverable and what aspects of the search might be protectable by attorney-client privilege if coordinated by an attorney versus a patent agent. Also, it is unclear the impact on the petitioner if they are unable to produce any written information about the search or if only a summary search report is produced. While the Federal Circuit acknowledged that district courts regularly evaluate privilege issues, it is unclear how the courts will resolve privilege issues and the potential impact on the petitioner or patent owner with respect to determining the scope of the estoppel.

What does all this likely mean for litigants? More briefing and discovery regarding whether the prior art search was reasonably diligent. With a bit of luck, studies will become available in the future that indicate the overall costs to litigants to assert or defend the estoppel to assist in determining the benefits and costs.

Irah Donner is a partner in Manatt’s Intellectual Property practice and the author of Patent Prosecution: Law, Practice, and Procedure, 2023 Edition, and Constructing and Deconstructing Patents, Second Edition, both published by Bloomberg Law.