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2022 Patent Law Recap: IPR Argument Strategy, Artificial Intelligence, and Forum Selection Clauses

January 24, 2023
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by Shawn Leppo and Yangmo (“Harvey”) Ahn

Part 2 in McNees Wallace & Nurick’s series: 2022 Intellectual Property Year in Review

TWO GUNS, BUT ONLY ONE BULLET, OR, ONCE IN IPR, DO NOT SAVE YOUR ARGUMENTS FOR LITIGATION
A patent can be challenged in court as a defense to an infringement action or through an administrative proceeding before the U.S. Patent and Trademark Office (USPTO), such as filing an inter partes review (IPR) petition for review by the Patent Trial and Appeal Board (PTAB) which has a lower standard of proof than what is required in U.S. District Court. However, the Patent Act requires that if an IPR ends with a final written decision, the challenger is estopped from raising invalidity grounds in court that were or reasonably could have been raised during the IPR.

In 2016, the U.S. Court of Appeals for the Federal Circuit originally held in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc. that the preclusion applies only to the arguments the PTAB addressed in the final decision. It reasoned an IPR does not begin until the PTAB takes up the case, and thus applies only to the grounds the PTAB agreed to review. That rationale was called into question after 2018, when the U.S. Supreme Court made clear, while evaluating a different issue, the initial petition, not the PTAB’s institution decision, defines the scope of an IPR.

As a result, when the issue of estoppel returned to the Federal Circuit in 2022 in California Inst. of Tech. v. Broadcom Ltd. the Federal Circuit overruled its earlier decision in Shaw and clarified that estoppel applies not only to claims and grounds asserted in the petition, but also to all grounds which reasonably could have been asserted against the claims in the petition. As a result, the defendants could not raise prior art defenses in court they did not include in their IPR petition because they were aware of those references.

By expanding the scope by which a defendant might be precluded from raising certain defenses at trial, the stakes have been raised when deciding whether to seek invalidation through an IPR. Patent challengers will not be able to hold back certain arguments as a hedge in the event of a subsequent court proceeding.

AI: ARTIFICIAL INVENTOR?
The rise of artificial intelligence (AI) continues to create new questions of law in a variety of areas and patent law is no exception. Device for the Autonomous Bootstrapping of Unified Sentience (DABUS) is an AI system that has developed some renown for generating inventions. Its creator, Stephen Thaler, has described DABUS as a collection of source code or programming and a software program. Thaler has been seeking to secure patents for DABUS’ inventions in various countries, including the U.S.

In 2019, Thaler sought patent applications for two of DABUS’s putative inventions, and the USPTO concluded both applications lacked a valid inventor. Under the Patent Act, “[w]hoever invents . . . may obtain a patent therefor, subject to the conditions and requirements of this title.” In Thaler v. Vidal, Thaler argued that “whoever” in another part of the Patent Act contemplates corporations and other non-human entities, and thus should also include non-human entities when referencing the creation of the invention. However, the Federal Circuit disagreed, noting that the Patent Act defines an inventor(s) as “the individual(s)” who invented or discovered the subject matter of the invention and thus requires a natural person.

Although the days of Rosie the Maid and other Jetson-like ambitions are closer than they were, for now the notion of a robot inventor probably remains primarily of academic interest. Still, this case provides the useful reminder that not everything new, no matter how created, can be protected by patents and that businesses should be looking at IP protection holistically through a variety of mechanisms when available, including copyrights, trade secrets, contractually, and through branding.

A FUNNY THING HAPPENED ON MY WAY TO FORUM SELECTION
Forum selection clauses are commonly included in agreements to designate the court and/or location where the parties would like to have their legal dispute decided. They are a common source of disagreement during the negotiation and, based on recent activity in the Federal Circuit, apparently during the actual application of its terms as well.

Just last year in Kannuu Pty Ltd. v. Samsung Electronics. Co., the court held that parties’ forum selection clause in a non-disclosure agreement did not extend to IPRs and thus did not bar IPR proceedings on an issue of patent validity. The forum selection clause in that non-disclosure agreement read “[a]ny legal action, suit, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby must be instituted exclusively in a court . . . within the Borough of Manhattan, City of New York, State of New York and in no other jurisdiction.” It affirmed the lower court’s decision that IPR proceedings did not “relate to” nor “arise out of” the non-disclosure agreement.

However, in 2022 in Nippon Shinyaku Co. v. Sarepta Therapeutics, Inc., the Federal Circuit had occasion to clarify that, as a general principle, parties are entitled to bargain away their rights to file IPR petitions, and that the prior year’s decision was not a flat rule excluding IPRs from the reach of forum selection clauses. In this case, another dispute regarding a confidentiality agreement, the forum selection clause read “the parties agree that all Potential Actions arising under U.S. law relating to patent infringement or invalidity . . . shall be filed in the U.S. District Court for the District of Delaware.” The Federal Circuit held the plain language of the forum selection clause required filing all disputes regarding patent invalidity in the District of Delaware and bringing those disputes as an administrative proceeding in the form of an IPR petition at the PTAB contravened the forum selection clause.

Minor differences in the wording of forum selection clauses may produce major differences in interpretation. If you anticipate a patent challenge could arise in a business relationship and the option to seek administrative relief is critical, taking a second look at your boilerplate forum selection clause may be in order.


CONTACT MCNEES
McNees’ Intellectual Property team is closely watching these and other key cases in patent law. If you have questions about the case studies outlined in this article, attorneys Shawn Leppo and Yangmo (“Harvey”) Ahn are available to discuss these and other patent questions you may have. We help our clients navigate the myriad of legal issues arising from new and exciting developments in intellectual property law and offer insights on how best to obtain and maintain a competitive advantage through the use and protection of intellectual property and technology.

READ MORE
Part 1 – 2022 Trademark Law Recap: NFTs, Distinct Branding, and the First Amendment


© 2023 McNees Wallace & Nurick LLC
This article is presented with the understanding that the publisher does not render specific legal, accounting or other professional service to the reader. Due to the rapidly changing nature of the law, information contained in this publication may become outdated. Anyone using this material must always research original sources of authority and update this information to ensure accuracy and applicability to specific legal matters. In no event will the authors, the reviewers or the publisher be liable for any damage, whether direct, indirect or consequential, claimed to result from the use of this material.

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Shawn K. Leppo

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