A magistrate judge in the Eastern District of Texas recommended in Biscotti, Inc. v. Microsoft Corp., No. 2:13-CV-01015, DI 191 (E.D. Tex. May 11, 2017) that Microsoft should be estopped from asserting invalidity grounds that Microsoft raised or reasonably could have raised during IPR proceedings.

On November 26, 2013, Biscotti filed suit against Microsoft, alleging infringement of U.S. Patent No. 8,144,182 (“the ’182 patent”).  In September, 2014, Microsoft filed three IPR petitions, which collectively resulted in the PTAB instituting review of 31 of the ’182 patent’s 53 total claims.  The district court then stayed the lawsuit pending resolution of the IPRs.  On May 17, 2016, the PTAB upheld the patentability of each challenged claim of the ’182 patent, and the court lifted the stay.

The magistrate judge recommended that the court narrowly interpret recent Federal Circuit decisions in Shaw Industries Group, In. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016) and HP Inc. v. MPHJ Technology Inv. LLC, 817 F.3d 1339 (Fed. Cir. 2016) to find that “only grounds raised in a petition but not instituted for procedural reasons (such as redundancy) are exempt from estoppel.”  In view of this narrow reading, the magistrate judge recommended that Microsoft be estopped from asserting invalidity arguments based on “a subset of the grounds” assessed and rejected by the PTAB, reasoning that Microsoft raised or could have raised these grounds during IPR proceedings.  In particular, the magistrate judge recommended that Microsoft should be estopped from asserting the exact combination of prior art references denied by the PTAB, as well as other combinations of these references.    

Shaw and HP have been interpreted in different ways by the district courts, although this and other recent district court decisions suggest that some courts may be limiting Shaw and HP to their respective facts (i.e., references not instituted for redundancy may be used again in court).  These recent decisions suggest that the district courts may be wary that a broad reading of Shaw and HP (hence, a narrow estoppel provision) would protract litigation over patent validity, contrary to the purpose of IPRs to provide fast and efficient means for determining validity.