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$1.1 Billion CalTech Infringement Win Shows Patent Board Perils

Feb. 7, 2020, 11:00 AM

A $1.1 billion jury verdict against Apple Inc. and Broadcom Inc. spotlights a potential litigation pitfall for companies accused of patent infringement.

A federal judge in California blocked the companies’ arguments that claims in CalTech’s Wi-Fi technology patents were obvious, after Apple lost an administrative challenge at a U.S. Patent and Trademark Office tribunal.

The ban may have been a factor in the size of CalTech’s award in the Jan. 29 verdict. Trial lawyers said it shows that defending an infringement lawsuit by challenging patents at the agency in an inter partes review can have its perils.

“Sometimes when an IPR is lost, it puts your infringement case at a bit of a disadvantage,” McKool Smith attorney Ted Stevenson said.

Even when an accused infringer can’t convince jurors an invention is obvious, simply making those arguments and showing them the evidence can change their perception of the technology’s value, intellectual property attorney Douglas Wilson said.

“The value goes down in the jurors’ minds when they get to see how close the prior art was,” Wilson, a founding partner of Armond Wilson LLP, said. “When you don’t present that case, it has a material impact.”

Far-Reaching Effects

Apple filed a series of challenges to CalTech’s U.S. Patent Nos. 7,116,710, 7,421,032, and 7,916,781 in IPRs at the Patent Trial and Appeal Board. The board upheld various claims in each of the patents, finding Apple hadn’t shown them to be invalid.

Once an IPR is over, patent law prevents challengers from using arguments that were raised, or reasonably could have been raised, at the board in district courts. There is a debate about what “could have raised” means in the context of the rule, known as IPR estoppel.

U.S. District Court Judge George Wu found IPR estoppel blocked Apple and Broadcom from making certain arguments about the alleged obviousness of CalTech’s patents.

Infringement and damages ended up as the only issues before the jury.

PTAB reviews have been a popular avenue for accused infringers to challenge patents. Accused infringers contemplating a challenge need to consider “the trial as a whole and what that looks like after an IPR,” Michael Ng, a trial and appellate lawyer at Kobre & Kim LLP, said.

Heading into a trial without an invalidity defense can affect the overall tenor of the trial, as well as jurors’ infringement and damages decisions, attorneys said.

Patent owners who aren’t concerned about a defendant showing jurors prior art evidence, for example, have “free rein” to describe the patent in broad terms while making an infringement case, Stevenson said.

Defendants with prior art may be able to show jurors the patent covers an incremental improvement over what was done in the past, rather than a pioneering invention. Attorneys said that can knock down the value of the patent in jurors’ minds.

“I think estoppel has far-reaching effects when the defendant can’t present prior art, just in terms of the infringement and damages verdicts,” Stevenson said.

Broad Prohibition

Apple and Broadcom have vowed to file an appeal in the case, and the district court’s IPR estoppel decision is expected to be a focus. The order followed a recent trend of district courts taking a broad view of the scope of estoppel.

The appeal may provide the U.S. Court of Appeals for the Federal Circuit a chance to wade into an area Wu said suffers from a “dearth of guidance” from the appeals court, particularly after the U.S. Supreme Court’s decision in SAS Institute v. Iancu.

The 2018 high court ruling forced the PTAB to take an all-or-nothing approach to patent reviews, and either consider all of the claims and arguments identified in the petition, or none at all. The decision has changed how some courts interpret estoppel.

Wu found estoppel applied not only to arguments the PTAB considered in the Apple-CalTech dispute, but also those that Apple could have raised in its PTAB petition, including evidence that someone could find during a “diligent search.”

“I think courts are going to be headed in that direction,” Pepper Hamilton LLP patent attorney John Isacson said. “I think they’ve taken a broad view of estoppel.”

The PTAB only considers patents and printed publications as prior art in an IPR. But Wu found estoppel could extend to invalidity arguments based on general knowledge in the field, when petitioners could have raised the supporting evidence before the PTAB.

Courts around the country have been grappling with similar questions. Last month, a federal judge in Delaware ruled estoppel applied to an argument that was based on a physical product, because the petitioner could have brought up a related patent in a previous IPR.

As courts continue to define the lines of estoppel, companies need to be aware of its potential impact, attorneys say.

“It’s something that parties need to consider very seriously,” Rubén Muñoz, an Akin Gump Strauss Hauer & Feld LLP attorney who focuses on patent litigation, said. “You’ve got to think about your IPR strategy before you bring your unpatentability challenges before the office.”

The case is The California Institute of Technology v. Broadcom Ltd. et al, C.D. Cal., No. 16-cv-03714

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com

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