Federal Circuit Clarifies Scope of § 42.73(d)(3)(i) Estoppel in Interrelated USPTO Proceedings

In Softview LLC v. Apple Inc., the U.S. Court of Appeals for the Federal Circuit clarified the scope of estoppel under 37 C.F.R. § 42.73(d)(3)(i) concerning interrelated proceedings at the U.S. Patent and Trademark Office (USPTO), vacating and remanding the lower decisions of the Patent Trial and Appeal Board (PTAB).

Softbank appealed PTAB’s decisions to reject all claims in multiple parallel reexamination proceedings regarding U.S. Patent No. 7,461,353 (the ’353 patent) concerning mobile device displays. Importantly, 18 claims (out of 319) of the ‘353 patent had been invalidated in a parallel inter partes review (IPR) proceeding. The PTAB’s decisions on Softbank’s reexamination appeal relied directly on the IPR invalidity decision.

More specifically, the PTAB reversed the reexamination examiner’s obviousness rejections to the claims, but entered a new rejection holding that § 42.73(d)(3)(i) estoppel applied to the issued claims as well as the amended claims within the reexaminations.

On appeal, the Federal Circuit addressed three of Softbank’s core arguments: (i) the permissible scope of § 42.73(d)(3)(i) estoppel, (ii) whether the USPTO has statutory authority to promulgate estoppel rules concerning USPTO proceedings, and (iii) whether § 42.73(d)(3)(i) estoppel applies to issued claims compared to new or amended claims at reexamination.

The court ultimately defended the scope of PTAB’s reading of § 42.73(d)(3)(i) and USPTO authority to issue rules concerning estoppel in subsequent proceedings. It also confirmed the PTAB’s correct process of applying § 42.73(d)(3)(i) estoppel to claims newly added or amended at reexamination, but agreed with Softbank that previously issued claims were beyond the scope of § 42.73(d)(3)(i) which states, “A patent applicant or owner is precluded from [. . .] obtaining in any patent: (i) A claim that is not patentably distinct from a finally refused or canceled claim.”

Permissible Scope of Estoppel Under § 42.73(d)(3)(i)

Softbank argued at appeal that the PTAB’s interpretation of the term “patentably distinct” within § 42.73(d)(3)(i) improperly extended beyond common law collateral estoppel that was intended by the rule. The Federal Circuit ultimately declined Softbank’s positions that another meaning for “patentably distinct” was warranted. The court also reasoned that the PTAB’s comparison between the reexamination claims the invalidated claims from IPR “paralleled the analysis under common law collateral estoppel.” It further noted Softbank’s desire for comparison of its reexamination claims only to prior art, rather than to the invalidated claims, was clearly denied by the plain language of the regulation.

USPTO Estoppel Rulemaking Authority

Softbank argued that the USPTO lacks the authority to promulgate rules on substantive issues of patent law such as estoppel under § 42.73(d)(3)(i). Because § 42.73(d)(3)(i) estoppel would render claims unpatentable without direct prior art analysis, Softbank argued that the USPTO exceeded its statutory authority. However, the court noted the direct instruction within 35 U.S.C. § 316(a)(4) authorizing the USPTO director to proscribe regulations “establishing and governing inter partes review [. . .] and the relationship of the review to other proceedings under this title.”

The court also acknowledged earlier decisions determined that 35 U.S.C. § 2(b)(2)(A) did not authorize substantive rulemaking. However, the court distinguished the broad extent of § 316(a)(4) authorization from § 2(b)(2)(A), and the U.S. Supreme Court similarly distinguished on that issue in Cuozzo Speed Techs., LLC v. Lee.

Issued v. New Claims

The Federal Circuit opinion wasted no time in adopting Softbank’s arguments shielding previously issued claims against § 42.73(d)(3)(i) estoppel. The court distinguished the prohibition on “obtaining” a new or amended claim from merely “maintaining” a previously issued claim. Further, as a policy matter, the court noted that retrospectively “obtaining” a new or amended claim could serve as a means to circumvent a prior adverse judgement, while previously issued claims would not face that circumvention issue for subsequent decisions on related claims.

Reversing and remanding in part, the court resolved the present appellate questions to substantive issues of § 42.73(d)(3)(i) estoppel on the plain text of the USPTO rule itself.

Key Takeaways

Amid an era of ever-challenged agency authority, the Federal Circuit’s rejection of statutory challenges could foreshadow the USPTO’s upcoming tests. Yet, issued claims retain some strength in the distinction under § 42.73(d)(3)(i) compared with new and amended claims. 

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