One factor in favor of post grant proceeding instead of patent litigation

The America Invents Act (aka AIA) expands your options to challenge a patent after a patent has been granted.  For example, post grant review, inter-partes review and ex parte reexamination are all mechanisms available to you to challenge the validity of a patent at the USPTO level.  However, one factor in deciding not to challenge validity before the USPTO is that the AIA prevents you from raising an argument during litigation if that argument could have been raised during the proceeding at the USPTO.  If you don’t raise the argument in the post grant proceeding before the PTO but could have, then you are barred from raising the argument during litigation in federal court.  In other words, the Patent Office wants the best arguments presented.  Otherwise, you won’t get a second bite at the apple in court.

The following case illustrates one narrow instance where one might decide to challenge validity before the USPTO through one of the post grant proceedings instead of bringing an action in court.

In Redline v. Star (PTAB August 27, 2013), the Board held that assignor estoppel is not available as a defense during an inter partes reexamination at the USPTO.

Assignor estoppel is a doctrine raised by a patent owner (i.e., buyer) against a seller of the patent preventing the seller from attacking the validity of the patent in a subsequent patent infringement litigation case.  To explain, a company that owns patent rights may sell the patent rights to a different company.  The seller may later compete with the buyer.  The buyer of the patent may sue the seller (i.e., assignor) for patent infringement based on the patent that the seller sold.  In return, the seller will attack the validity of the patent since the seller may have intimate knowledge of information that could invalidate the patent.  This seems inherently unfair that the seller would receive money or other consideration from the buyer only to turn around and invalidate the patent.  As such, the courts prevent (i.e., estop) the seller making such invalidity arguments in a patent infringement case.

The Redline case held that the seller will not be estopped from attacking the validity of patent that he/she just sold to the buyer in proceedings at the Patent Trial and Appeal Board (PTAB) of the USPTO.  According to the PTAB, the AIA statute allows anyone to institute a post grant proceeding.  Also, since the post grant proceedings of the AIA relate to validity and not infringement, Assignor estoppel is not available to the buyer.  Assignor estoppel according to the PTAB is solely directed to infringement issues and not validity issues.  The post grant proceedings at the USPTO relate solely to invalidity, not infringement.  Hence, assignor estoppel is not available to the buyer at the USPTO.

The bottom line is that the seller can attack the validity of the patent before the Patent Trial and Appeal Board of the USPTO but the seller is still estopped at federal court from attacking the validity of the patent in a patent infringement case.  Accordingly, if the seller believes that invalidity is a significant argument in the case, then the seller should strongly consider the inability of the buyer from raising assignor estoppel before the PTAB of the USPTO when deciding whether to proceed before the PTAB of the USPTO or in federal courts.

I invite you to contact me with your patent questions at (949) 433-0900 or [email protected] Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego and surrounding cities.