Since the passage of the America Invents Act in 2012, the solar industry has grappled with how best to deploy—and defend against—new inter partes review ("IPR") proceedings for challenging patentability at the Patent Trial and Appeals Board ("PTAB") of the United States Patent and Trademark Office. This article explores some of the successes and failures of solar companies at the PTAB and provides tips for those engaged in post-grant proceedings.
For context, note that a party initiates an IPR by filing a petition, describing the bases for invalidity, and the patent owner may submit a preliminary response attempting to rebut those arguments. Based on these papers, the PTAB determines whether to initiate an IPR (i.e., the PTAB determines whether to "institute" the IPR). The PTAB will only consider arguments based on prior art publications and patents, not other bases for invalidity such as prior sales or offers for sale, indefiniteness, subject-matter ineligibility, or lack of enablement or written description. Given the streamlined nature of IPRs, they proceed on a shorter timeline than most district court litigations, generally concluding within one year of institution. See 35 U.S.C. § 316(a)(11); 37 C.F.R. §42.100(c). IPRs also allow for less discovery than district court cases, resulting in substantially lower costs.
IPRs have become an essential part of a comprehensive litigation strategy. As illustrated below, companies in the solar industry have turned to these new proceedings to combat patent infringement allegations and/or to clear space to operate in the market. Patent owners pulled into IPR proceedings should balance successfully defending the validity of their patents while still maintaining meaningful patent scope, and while looking for opportunities to leverage statements made during IPRs against their competitors.
Patent Challenger's Perspective: Litigation Advantages
From the perspective of the petitioner asserting patent invalidity, IPRs may provide two key advantages in district court litigation. First, the PTAB may find the claims of the patent are invalid, and if that finding is unchallenged or upheld on appeal, the petitioner avoids having to defend against allegations of infringement of those claims in district court. Second, invalidity arguments presented during an IPR may lead the patent owner to assert narrow claim interpretations to distinguish their patent claims from the prior art, and those narrow interpretations may, at times, be leveraged in district court to show noninfringement.
By way of example, PanelClaw, Inc. successfully leveraged IPR proceedings against two patents that SunPower Corporation had asserted in district court litigation. In the district court, SunPower argued that its patents were infringed by PanelClaw's "Grizzly Bear" and "Polar Bear" products, which are used for the installation of photovoltaic energy systems on building roofs. See SunPower Corp. v. PanelClaw, Inc., Civ. A. No. 1:12-CV-01633, D.I. 1, 2012 WL 12285056 (D.Del. Dec. 3, 2012) (served Jan. 29, 2013). PanelClaw alleged that the asserted products could not possibly cover its products without also covering the prior art. Civ. A. No. 1:12-CV-01633, D.I. 27, at 2:18-20 (D.Del. Dec. 10, 2013). In other words, if the products were found to be covered by the claims, those claims should be invalid. Yet, more than one year after the complaint was filed, the court had not set a trial date or even issued a schedule for discovery. Thus, in January 2014, PanelClaw petitioned for IPR of each of SunPower's asserted patents. See PanelClaw, Inc. v. SunPower Corp., IPR2014-00386, Paper 2 (PTAB Jan. 28, 2014); PanelClaw, Inc. v. SunPower Corp., IPR2014-00388, Paper 2 (PTAB Jan. 28, 2014). The district court stayed its litigation pending resolution of the IPRs. SunPower, Civ. A. No. 1:12-CV-01633, D.I. 43, Order, at 4-5 (D.Del. May 16, 2014).
The two IPR petitions benefited PanelClaw in different ways. The first petition resulted in a final written decision at the PTAB concluding that all claims under review were invalid (IPR2014-0386). This decision should be considered a victory for PanelClaw, as the PTAB's decision, if upheld on appeal, would result in withdrawal of the patent from the patent office. However, the PTAB's decision did not resolve all issues with respect to the first patent, as other claims of that patent were not subject to the PTAB's decision, and the PTAB's decision was still subject to appeal. Thus, the parties continued litigating issues related to that patent in district court.
The second petition prompted a preliminary response from SunPower that advocated a narrow claim interpretation to distinguish its claims from the prior art. Based in part on the narrow claim interpretation advocated by SunPower, the PTAB denied institution of that proceeding (IPR2014-0388). While this petition did not result in a decision of invalidity, PanelClaw leveraged the patent owner's statements in the district court by filing a motion for summary judgment of noninfringement based on the PTAB's (and SunPower's) narrow claim interpretation. The district court found that the PTAB's claim interpretation was well-reasoned and adopted it when concluding that PanelClaw did not infringe. Civ. A. No. 1:12-CV-01633, D.I. 88, 2016 WL 1293479, *6 (D.Del. Apr. 1, 2016).
This case thus exemplifies the two potential benefits for filing IPRs, specifically, obtaining a decision on invalidity or ammunition for noninfringement. Ultimately, the parties negotiated a settlement and the case was dismissed. Civ. A. No. 1:12-CV-01633, D.I. 157 (D.Del. Jan. 31, 2017). One would expect that the results of the IPRs provided PanelClaw with leverage in those negotiations.
Patent Challenger's Perspective: Ending Vexatious Litigation
IPRs may also provide a tool to end vexatious litigation. As an example, IPRs effectively ended the aggressive assertion of patents by independent-inventor Simon Nicholas Richmond. From 2009-2015, Richmond filed numerous complaints alleging infringement of several patents related to solar-powered garden lighting against over fifty different companies, including Jiawei Technology, Ltd., and Smart Solar, Inc. E.g., Richmond v. Ningbo Hangshun Elec. Co., Ltd., Civ. A. No. 3:13-CV-01944 (D.N.J) (consolidated case). In response to Richmond's attacks, several of the defendants together filed four IPR petitions against the asserted patents. E.g., Coleman Cable, LLC v. Simon Nicholas Richmond, IPR2014-00935, Paper 4 (PTAB Jun. 11, 2014) (instituted); Jiawei Tech. (HK) Ltd. v. Simon Nicholas Richmond, IPR2014-00936, Paper 10 (PTAB Jun. 11, 2014) (instituted); Jiawei Tech. (HK) Ltd. v. Simon Nicholas Richmond, IPR2014-00937, Paper 10 (PTAB Jun. 11, 2014) (denied); Jiawei Tech. (HK) Ltd. v. Simon Nicholas Richmond, IPR2014-00938, Paper 10 (PTAB Jun. 11, 2014) (partially instituted); see also Jiawei Tech. (HK) Ltd. v. Simon Nicholas Richmond, IPR2015-00580, Paper 10 (PTAB Jun. 11, 2014) (denied).
Perhaps fearing the result of the IPRs, Mr. Richmond settled his disputes with all the defendants just two days before the PTAB's final written decisions were expected. Civ. A. No. 3:13-CV-01944, D.I. 228, Order (D.N.J. Dec. 17, 2015). He wisely cut his losses, as the PTAB ultimately determined that many of the claims in Richmond's patents were unpatentable. See IPR2014-00935 (claims 1–7, 9, 10, 14, 17–20, 23, 28, 43, 45 and 48–50 of the challenged patent unpatentable); IPR2014-00936 (claims 1-29 of the challenged patent unpatentable); IPR2014-00938 (claims 24-30 and 35 of the challenged patent unpatentable).
Patent Challenger's Perspective: Promoting Settlement
Companies accused of infringement may file an IPR petition to gain leverage in settlement negotiations, as patent owners may wish to avoid having their claims re-analyzed by the PTAB. Statistics compiled by the USPTO show that petitions for IPR often result in settlement. Specifically, since 2014, about 12% to 16% of IPRs settled prior to institution per year, and another 22% to 40% settled after institution. Trial Statistics IPR, PGR, CBM, USPTO 10 (Aug. 31, 2018), https://www.uspto.gov/sites/default/files/documents/Trial_statistics_20180831.pdf. As of August 31, 2018, the number of IPRs that had settled totaled nearly the number that resulted in final written decisions (2,028 settled, while 2,308 resulted in final written decisions). Id. Such settlements often resolve related district court litigations.
Patent Challenger's Perspective: Freedom to Operate
Solar companies may petition for IPR of a patent that has not been asserted against it in litigation. This is another contrast to district court litigation. In particular, to seek a declaratory judgment that a patent is invalid in district court, a party must establish that a real case or controversy exists. This can be shown, for example, by establishing that the patent owner has threatened to assert the patent against the party filing the declaratory judgment action. This is not a requirement to file an IPR. A company may file an IPR challenging the validity of a patent, even when that company does not currently market a product in the same field as the challenged patent.
Such an IPR appears to have been initiated in 2018, when ArcelorMittal petitioned for review of a patent related to solar tracking equipment owned by Array Technologies, Inc. IPR2018-00801, Paper 2 (PTAB Mar. 20, 2018). It appears that ArcelorMittal did not market any products related to solar tracking equipment; however, it had acquired assets related to solar tracking equipment from Exosun S.A.S., the parent of Exosun Inc. See ArcelorMittal Expands Solar Energy Portfolio with Exosun Acquisition, ArcelorMittal (Jan. 4, 2018), available athttps://corporate.arcelormittal.com/news-and-media/news/2018/jan/04-01-2018(last visited Jan. 30, 2019). The patent owner had not asserted its patent against ArcelorMittal, although it had sued Exosun, Inc. for infringement of the patent. SeeArray Techs. , Inc. v. Exosun, Inc., Civ. A. No. 17-CV-02883, D.I. 1 (D.Ariz. Aug. 25, 2017). It thus appears that ArcelorMittal petitioned for IPR to expand its freedom to operate to include the field of solar tracking equipment, prior to entering that market. This forward-thinking may spare ArcelorMittal the added cost of having to defend itself in district court litigation. The PTAB instituted the IPR on October 3, 2018, and the proceeding is still pending. IPR2018-00801.
Patent Owner's Perspective
From the patent owner's perspective, avoiding an IPR altogether would be the ideal scenario. Having to defend the validity of a patent in an IPR may delay district court proceedings, increase costs (relative to litigating only in district court), and/or add pressure on the business to resolve the dispute before a final resolution. Thus, when confronted with an IPR, it is important to seek to maximize any advantages that may be gained.
The biggest potential gains for the patent owner include highlighting weaknesses in invalidity arguments, obtaining broad statements regarding the interpretation of the claims that can be used in district court to establish infringement, and potentially narrowing the invalidity arguments available to the petitioner in district court.
As to this last point, the potential narrowing of invalidity arguments in district court generally flows from a doctrine called estoppel. The law provides that once the PTAB issues a final written decision, an IPR petitioner (and any real party in interest) may not assert in district court any ground for invalidity that the petitioner raised or reasonably could have raised during the IPR, i.e., they are "estopped" from presenting these arguments again in district court. 35 U.S.C. § 315(e). This policy promotes efficiency and is intended to protect the patent owner from repeat and burdensome attacks. In other words, if the petitioner chooses to petition for IPR and fails to establish invalidity, they should not be allowed to re-raise the same arguments in district court. Because estoppel applies only after the PTAB issues a final written decision, estoppel does not apply to arguments raised in a petition for IPR on which the PTAB declines institution. An IPR does not begin until it is instituted, and thus the petitioner "did not raise—nor could it have reasonably raised—the [rejected] ground during the IPR." Shaw Indus. Grp. Inc. v. Automated Creel Sys., 817 F.3d 1293, 1300 (Fed. Cir. 2016). Thus, petitioners cannot re-raise arguments for invalidity in district court that they presented in a petition for IPR that is instituted and results in a final written decision. Note, however, that at least one district court concluded that estoppel does not apply to petitioner for IPR that prevails at the PTAB. BTG Int'l Ltd. v. Amneal Pharm. LLC, Civ. No. 15-CV-5909, D.I. 571, 2018 WL 5734626, *15 n.13 (D.N.J. Oct. 31, 2018).
Estoppel may also apply to grounds for invalidity that were not presented during an IPR, if the petitioner "reasonably could have raised" those arguments during that IPR. However, the law remains unclear on this point. For example, some courts have narrowly applied the estoppel provision, reasoning that the Federal Circuit's decision in Shaw (discussed above) indicates that estoppel applies only to ground actually raised during an IPR (after institution). See, e.g., Intellectual Ventures II LLC v. Toshiba Corp., 211 F. Supp. 3d 534, 553-54 (D.Del. 2016); see also Verinata Health, Inc. v. Ariosa Diagnostics, Inc., Civ. A. No. 3:12-CV-05501-SI, D.I. 319, 2017 WL 235048, at *3 (N.D.Cal. Jan. 19, 2017).
In contrast, other courts have broadly applied the estoppel provision, even after Shaw. For example, some courts have indicated that estoppel extends to any prior art publications and patents that should have been discovered through reasonable diligence prior to the filing of the petition for IPR was filed, even when those publications and patents were not mentioned in the petition. See, e.g., Biscotti Inc. v. Microsoft Corp., Civ. A. No. 2:13-CV-01015-JRG-RSP, D.I. 190, 2017 WL 2526231, *6-7 (E.D.Tex. May 11, 2017); see Clearlamp, LLC v. LKQ Corp., No. 1:12-CV-02533, D.I. 193, 2016 WL 4734389, at *8-9 (N.D.Ill. Mar. 18, 2016). Courts have reasoned that a decision to forgo estoppel against non-petitioned grounds could incentivize petitioners to carefully craft IPR petitions such that they would be able to bring multiple (staged) challenges. Oil-Dri Corp. of America v. Nestle Purina Petcare Co., Civ. A. No. 1:15-CV-1067, D.I. 140, 2017 WL 2526231, at *9 (N.D.Ill. Aug. 2, 2017).
Thus, estoppel may be an important tool for patent owners faced with a final written decision. The scope of estoppel, however, will vary depending on the jurisdiction, unless and until the Federal Circuit Court of Appeals provides clarity on this issue.
As illustrated by the above examples, petitioning for IPR may be a powerful weapon to invalidate the claims of an asserted patent, narrow the potential scope of those claims, combat vexatious litigation, promote settlement, and/or establish freedom to operate in a field of interest. Patent owners should attempt to gain advantages in these proceedings, where possible, by highlighting weaknesses in invalidity arguments, leveraging any statements by the petitioner that could be used to establish infringement, and potentially narrowing the invalidity arguments available to the petitioner in district court.