Wasica v. Schrader: IPR estoppel can include system prior art – key takeaways

Abstract lights

Intellectual Property and Technology Alert

By:

Under 35 U.S.C. § 315(e), a petitioner, real party in interest, or privy of the petitioner in an IPR that results in a final written decision may not assert in a district court litigation that a claim is invalid on any ground that the petitioner “raised or reasonably could have raised” in the IPR. Since the inception of § 315(e), courts have disagreed on the scope of “raised or reasonably could have raised.” For example, district courts are split on even the basic issue of whether prior art that was not included in an IPR can satisfy the “reasonably could have been raised” test.

In Wasica Finance GmbH  v. Schrader Int’l, Inc., C.A. No. 13-1353-LPS, D.I. 193 (D. Del. Jan. 21, 2020 (unsealed)), the United States District Court for the District of Delaware addressed the scope of estoppel under 35 U.S.C. § 315(e), ruling that such estoppel can include prior art systems, despite the fact that patentability challenges in an IPR can only be based on patents and printed publications, not systems.    

In response to a patent complaint filed by plaintiff Wasica Finance in the District of Delaware, the Schrader defendants filed IPR petitions attacking the asserted patent. The Delaware case was stayed pending the IPRs. Claim 6 of the asserted patent survived final written decision. When the district court litigation resumed, Schrader challenged claim 6 in view of prior art ZR-1 Sensors (ie, systems) found on Chevrolet Corvettes, in combination with patents and printed publications which either were raised or could have been raised in the IPR. 

The court found Schrader was estopped from relying on the prior art ZR-1 Sensors, whether standing alone or in combination with one or more of the patents and printed publications, because an article (a printed publication) disclosed each aspect of the ZR-1 Sensors that were relied on to show invalidity of the claim being challenged in the district court. The article was therefore found to be a “materially identical (ie, discloses the same claim elements)” prior art publication.  Op. at 7. 

Chief Judge Leonard P. Stark began by reading “reasonably could have raised” broadly to “include ‘any references that were known to the petitioner or that could reasonably have been discovered by a skilled searcher conducting a diligent search.’” Op. at 4. The court noted that while “[p]hysical products cannot be raised during IPR proceedings…patents or printed publications that relate to and describe a physical product can, like other patents and printed publications, be raised in an IPR.” Id. Because § 315(e) applies to “grounds” and not “evidence,” the court found that estoppel barred a challenge based on ZR-1 Sensors (as evidence) because the “materially identical” prior art publication was available as a ground that could have been raised in the IPR. The court expressed concern that, if it did not find estoppel, “defendants will simply swap out publications that were available through a diligent search with the same prior art, only in a slightly different format or in a version that could not have been found in a search,” which would “gut the estoppel provision entirely.”  Op. at 7, n.7. 

Interesting points for patent litigations and IPRs

This case raises a few interesting points for practitioners and companies involved in patent litigations and IPRs. 

Wasica suggests that when developing an IPR strategy, an accused infringer should also search for printed publications corresponding to system prior art that was planned for a district court case if an IPR failed, and should also carefully consider whether that system prior art discloses claim limitations in some materially different way as compared to a patent or printed publication − a potentially significant undertaking. For example, access to source code for such a system may provide an argument that the source code more clearly discloses one or more claim elements, and thus the system is materially different from the patent or printed publication. The ability to disassemble and inspect/measure internal components of the system may provide similar opportunities. 

In contrast, a patent owner facing a system-based invalidity challenge to a patent claim that has survived an IPR should similarly search for manuals, articles, and other documents for that system to determine whether an argument can be made that there is no material difference between the document and the system prior art.   

Learn more about the implications of this finding by contacting any of the authors.