January 24, 2018

Disclaimer in IPR Raises Patent Owner Estoppel

By Matthew L. Cutler, Principal

A fairly niche Inter Partes Review issue, relating to the effect of a claim disclaimer in an IPR proceeding, was decided by the Federal Circuit in Arthrex, Inc. v. Smith & Nephew, Inc., 2017-1239 (Fed. Cir. January 24, 2018).

The Patent Owner in Arthrex disclaimed the 9 patent claims that were subject of an IPR Petition filed against the patent-at-issue prior to the due date of the Patent Owner preliminary response.  Then, as a preliminary response, Patent Owner stated that an IPR should not be instituted because no IPR can be instituted based on disclaimed claims.

Patent Owner also expressly stated that it was not requesting an adverse judgment.  After further briefing, the Board entered adverse judgment against Patent Owner, pursuant to 37 CFR § 42.73, and the appeal arose from that decision.

Why, you may ask, does this even matter?  The entry of an adverse judgment causes patent owner estoppel to attach, as set forth in 37 CFR § 42.73(d)(3)(i), which precludes a patent owner “from taking action inconsistent with the adverse judgment, including obtaining in any patent … [a] claim that is not patentably distinct from a finally refused or canceled claim.”

Whether or not this section applied was very important to Patent Owner because, at the time of the adverse judgment, it had two pending continuation applications that the patent owner estoppel provision would impact.

As a threshold issue, the Court held that this sort of adverse judgment, even though it was prior to a final written decision from the Board, is a decision that allows for an appeal: “… a final decision that disposes of an IPR proceeding in the form of an adverse judgment is a ‘decision’ from the Board with respect to IPRs under title 35 and that §1295 provides a right to appeal a final adverse judgment.”

Turning to the estoppel issue, Patent Owner argued two points:

  1. It expressly was not requesting adverse judgment
  2. The regulations should be construed so as to not allow for adverse judgment before a trial is instituted

As to the first issue, the Court found that, although Patent Owner was not trying to request adverse judgment, the Board’s authority to enter an adverse judgment does not turn on the patentee’s characterization of its own request.  Instead, § 42.73 gives the Board the authority to construe a patent owner’s actions as a request for adverse judgment or not.

Turning to the second issue, after further exploration of the regulatory underpinnings, the Court ultimately found that it did not make sense to apply the estoppel only if the disclaimer occurred after the trial began.   There is no time limitation in that section of § 42.73 and, further, other provisions of § 42.73 also do not turn on when in the proceeding the request is made.

In short, a Patent Owner needs to have its eyes wide open before disclaiming any claims in an IPR proceeding.  An adverse judgment is likely to follow and, as such, patent owner estoppel will attach.