United States: The Interplay Of IPRs And Litigation: Leveraging Inequitable Conduct Claims To Raise Prior Art In Litigation Despite IPR Estoppel Preventing Assertion Of The Same Prior Art In Invalidity Grounds

Plaintiff Cellwitch, Inc. ("Cellwitch"), filed a suit alleging that Defendant Tile, Inc. ("Tile") infringes U.S. Pat. No. 8,872,655 (the "'655 Patent"). Tile filed a petition for inter partes review ("IPR") against the '655 patent and the district court granted Tile's motion to stay the litigation pending the IPR.

The Patent Trial and Appeal Board's ("PTAB's") Final Written Decision found nearly half the challenged claims unpatentable but upheld the remaining challenged claims as patentable. Once this decision issued, IPR estoppel attached and prohibited Tile from asserting invalidity grounds against the '655 patent in litigation based on prior art that it "raised or reasonably could have raised during the IPR." This includes prior art that a skilled searcher conducting a diligent search reasonably could have been expected to discover.

Subsequently, the litigation stay was lifted. Tile then moved to amend its answer to add an inequitable conduct counterclaim. The basis of this claim was that Cellwitch failed to disclose a prior art reference, U.S. Pat. No. 6,624,752 (the "Klitsgaard reference"), that Tile argued was material to the patentability of the '655 patent and that Cellwitch had knowledge of the reference and its materiality. In response to Tile's motion, Cellwitch argued that Tile was only trying to add an inequitable conduct claim to "skirt IPR estoppel by presenting the Court with yet more invalidity theories in the guise of an inequitable conduct claim." Specifically, Cellwitch argued that if the Court permitted Tile to assert this claim, then Tile could continue developing and asserting an argument that the Klitsgaard reference was material because it anticipated or rendered obvious the '655 patent. Thus, despite Tile facing IPR estoppel that would prevent it from arguing that Klitsgaard anticipates or renders obvious the '655 patent under 35 U.S.C. § 102 and under 35 U.S.C. § 103, Cellwitch argued that Tile was impermissibly presenting similar arguments under its inequitable conduct claim.

The Court disagreed and granted Tile's motion.¹ The Court mentioned that it had no knowledge of any authority applying IPR estoppel to prevent a party from bringing an inequitable conduct claim against a specific prior art reference. On this point, the Court first underscored the differences between IPR estoppel—which aims to prevent district court defendants from challenging a patent on grounds that were previously raised or could have been raised in an IPR—and inequitable conduct—which aims to maintain the public interest by preventing inventors from deceiving the patent office for the purpose of obtaining a patent. The Court also emphasized that a successful inequitable conduct claim renders a patent unenforceable because the patentee is deemed to have "inflicted damage" on "the public" and "the patent examining system [by] obtaining a statutory period of exclusivity by improper means." Due to the differences in the purpose and policy between IPR estoppel and inequitable conduct and the lack of contrary case law, the Court determined that a party has the right to raise a plausible theory of inequitable conduct based on a prior art reference, even when IPR estoppel prohibits the party from raising the reference in § 102 or § 103 invalidity theories.

Takeaways

Potential inequitable conduct counterclaims may present a unique opportunity for defendants facing IPR estoppel from PTAB decisions upholding one or more asserted claims. While IPR estoppel may prevent a defendant from raising many invalidity theories under § 102 or § 103, defendants in this situation may still be able to raise arguments that a certain reference is material to patentability because it anticipates or renders obvious the asserted claim(s) as a basis for the inequitable conduct claim. While proving all elements of inequitable conduct is a tall task, the materiality arguments that a reference anticipates or renders obvious the asserted claims may bolster the defendant's overall theme or story.

Footnote

1. Cellwitch Inc. v. Tile, Inc., No. 19-cv-01315-JSW (N.D. Cal. Nov. 2, 2023).Cellwitch then filed a motion "to enforce IPR estoppel pursuant to 35 U.S.C § 315(e)(2)." Cellwitch argued that Tile should not be allowed to rely on combinations of system art and patents/printed publications, nor should it be allowed to rely on the system art, which was "cloak[ed]" prior art Tile could have raised in the IPR. The Court denied the motion. Cellwitch Inc. v. Tile, Inc., No. 19-cv-01315-JSW (N.D. Cal. Dec. 20, 2023).

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