Knobbe Martens
Feb 7, 2022

Federal Circuit Overrules Shaw And Broadens IPR Estoppel In District Court Proceedings

Created at Feb 7, 2022, 10:10am PST

California Institute of Technology v. Broadcom Inc. and Apple Inc.

Before Lourie, Linn, and Dyk (concurring/dissenting).  Appeal from the District Court for the Central District of California

Summary: IPR estoppel in district court proceedings applies to all claims and grounds which reasonably could have been included in the petition; a two-tier damage award providing a higher royalty for the same device at a different points in the supply chain was not permitted in the absence of compelling evidence.

Caltech sued Broadcom and Apple, alleging that Broadcom’s wireless chips incorporated into Apple products infringed patents relating to wireless data transmission.  In co-pending proceedings, Broadcom and Apple filed multiple petitions for inter partes review (IPR), yet failed to demonstrate that the asserted claims would have been obvious.  Before the district court, Broadcom and Apple also argued that the asserted claims would have been obvious over new combinations of prior art not asserted in the IPR proceedings.  The district court granted summary judgment of no invalidity on prior art grounds for all patents, interpreting 35 U.S.C. § 315(e)(2) and its IPR estoppel provision as precluding Broadcom’s and Apple’s prior art arguments at trial because they reasonably could have been raised in their IPR petitions.  The jury found infringement of all three patents and the district court denied Apple and Broadcom’s JMOL and new trial motions.  With respect to damages, Caltech proposed a two-tier damage theory that sought a different royalty rate against Broadcom and Apple despite liability arising from the same accused technology in the same chips.  Broadcom and Apple appealed.      

The Federal Circuit affirmed the district court’s summary judgment findings of no invalidity based on IPR estoppel.  Relying on the Supreme Court’s decision in SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018), that it is the petition and not the institution decision that defines the scope of the IPR, the Federal Circuit overruled its prior holding in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016), without en banc proceedings to clarify that “estoppel applies not just to claims and grounds asserted in the petition and instituted for consideration by the Board, but to all claims and grounds not in the IPR but which reasonably could have been included in the petition.”  The Federal Circuit reasoned that under the current regime, in which the petition defines the IPR proceeding and any institution must include all grounds of the petition, then extending the estoppel provision to include grounds not in the petition is the only plausible reading of “reasonably could have raised.”

Regarding damages and the two-tier model that Caltech presented, the Federal Circuit rejected Caltech’s argument that separate royalty rates for Broadcom and Apple regarding the same chips were proper because the chips were used at different levels of the supply chain.  The Federal Circuit reasoned that in the absence of compelling evidence, “a higher royalty is not available for the same device at a different point in the supply chain.”  The Federal Circuit further explained that there was no factual basis to conclude that Broadcom and Apple would have engaged in separate negotiations leading to vastly different royalty rates for the same chips.  Accordingly, the Federal Circuit vacated the jury’s damage award and remanded for a new trial on damages.  The Federal Circuit also, inter alia, affirmed the district court’s denial of JMOL concerning non-infringement with respect to two asserted patents, but vacated the jury verdict of infringement for a final patent and remanded for a new trial due to  the district court’s failure to properly instruct the jury regarding the construction of the claims. 

Judge Dyk disagreed with majority’s conclusions regarding literal infringement, rationalizing that expert testimony did not support infringement under the district court’s claim construction, and would have reversed the denial of JMOL for each of the patents at issue.

Editor: Paul Stewart

Written by: Hyunjin (Harry) Park and Andrew Morrell, Ph.D.