The Software IP Report

CBM Estoppel Limited to Substantially Identical References

A district court recently held the scope of estoppel from covered-business-method (CBM) review encompasses the references used in the CBM as well as almost-identical references. (Solutran, Inc. v. U.S. Bancorp et al. (D. Minn. 2018).)

This dispute started with Solutran suing U.S. Bank for infringement of U.S. Patent No. 8,311,945. The ’945 patent covers a method of processing checks. U.S. Bank retaliated by petitioning for CBM review, claiming that the ’945 patent was obvious over admitted prior art in the patent and U.S. Patent App. No. 2005/0071283 to Randle. The Patent Trial and Appeal Board instituted review but eventually sided with Solutran. Solutran now argues that at trial, U.S. Bank cannot argue obviousness and cannot rely on a reference related to the Randle ’283 application.

The estoppel provision for CBM reviews states that the “[p]etitioner … may not assert … in a civil action … that the claim was invalid on any ground that the petitioner raised during” the CBM review. (Pub. L. 112-27, § 18(a)(1)(D), 125 Stat. 330 (2011).) The scope is ostensibly narrower than estoppel from inter partes review or post-grant review, which cover “any ground that the petitioner raised or reasonably could have raised during” the review. (35 U.S.C. §§ 315(e)(2), 325(e)(2).)

But Solutran swung for the fences, pushing for a much, much broader scope of estoppel. Solutran argued that the “ground” of invalidity is the statutory basis, in this case, obviousness; therefore, U.S. Bank is estopped from raising any obviousness arguments at trial. The court first referenced Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. (Fed. Cir. 2016), in which the Federal Circuit held that a party would not be estopped from raising a ground of invalidity on which the PTAB had not instituted review. According to Federal Circuit usage of “ground” in that case and others, a “ground” is “a discrete claim of invalidity based upon a prior art or a combination of prior art.” The court found that this usage foreclosed Solutran’s aggressive interpretation.

Solutran also argued to exclude a reference relied on by U.S. Bank’s expert, U.S. Patent App. No. 2006/0106717 to Randle. The Randle ’283 application and the Randle ’717 application are both continuations-in-part from the same three parent applications. Solutran pointed to substantial overlap between the two related applications, and U.S. Bank noted that the Randle ’717 application disclosed elements of the claims not disclosed by the Randle ’283 application. “If Randle ’717 does not provide any new disclosures or features that Defendants could not have argued from Randle ’283, then it will be estopped.” The court thought that the record was insufficient and demanded more specific evidence from U.S. Bank on the unique disclosures of the Randle ’717 application before ruling on admissibility.

Lessons for Practice

This case shows the importance of finding multiple theories of invalidity, if possible. Administrative review of patents—whether IPR, PGR, or CBM—creates the opportunity for accused infringers to have a second chance to prove invalidity. But the invalidity arguments cannot be purely recycled. An accused infringer should always try to generate more than one good story why the patent is invalid; whether the prior art cooperates is another matter.