Can 'Loophole' In IPR Statute Lead To Resurgence Of DJ Actions?

• Published date: 01 July 2020
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Patent, Trials & Appeals & Compensation
• Law Firm: Akin Gump Strauss Hauer & Feld LLP
• Author: Mr Rubén Mu'oz, Jason Weil and Matthew G. Hartman

Declaratory judgment ("DJ") actions have fallen out of favor in patent cases in recent years. In 2011, DJ complaints made up approximately 11 percent of all patent cases filed that year.¹ Last year, they made up less than 5 percent.² But why? Claims seeking a DJ of patent invalidity have clear strategic benefits. DJ complaints can secure a favorable venue for a potential accused infringer. And a patent owner facing a claim for DJ of invalidity cannot unilaterally withdraw its patent(s) from the case if the going gets tough.³ So, what is causing this downward trend in DJ complaints?

One reason may be the inter partes review (IPR) statute. Taking effect in 2012, that statute (part of the America Invents Act) forecloses an IPR if the petitioning party (or real party-in-interest) has already filed a civil action challenging the validity of the patent'i.e., if the party has already filed a complaint seeking a DJ of invalidity. If, on the other hand, the party is sued for patent infringement, it has one year in which to file an IPR petition, regardless of whether it counterclaims for a DJ of invalidity. At least part of the decrease in DJ complaints in patent cases is likely due to potential infringers forgoing invalidity claims in a DJ action to preserve their ability to file an IPR.⁴

But what if a would-be accused infringer could file a civil action, seek declaratory relief of invalidity in district court, and yet preserve its ability to file an IPR? Some parties have leveraged what a recent district court decision described as an "apparent loophole" in the IPR statute to do just that.⁵ We explore that "loophole" and the strategic considerations it raises.

I. Congress Limited a Party's Ability to File both DJ Complaints of Invalidity and IPRs

To understand this "apparent loophole," we start with the words of the IPR statute'35 U.S.C. ' 315(a)(1) bars parties from filing IPR petitions if "before the date on which the petition for such a review is filed," the party files a "civil action challenging the validity of a claim of the patent."⁶

Patent Trial and Appeal Board decisions have generally interpreted the ' 315(a)(1) bar expansively. In Cisco Systems Inc. v. ChriMar Systems Inc., a decision recently designated precedential, the board held that filing a DJ complaint challenging validity is sufficient to trigger the ' 315(a) bar'even if the party later voluntarily dismisses that action without prejudice.⁷Furthermore, the board has rejected arguments that amending a complaint to remove invalidity challenges can cure a ' 315(a) bar.⁸

II. The Different Routes to a DJ of Invalidity

IPR statutory bars aside, there are various ways to seek a declaration of invalidity from a district court. First, a party can wait to be sued and assert counterclaims seeking a DJ of invalidity. But this approach cedes control of important early strategic decisions (like venue) to the patent owner and will require the defendant to file any IPRs challenging the asserted patents within one year of suit.

Second, a party can file a complaint seeking a DJ of invalidity'often combining it with a DJ of noninfringement. These actions have historically been a popular vehicle to prevent patent owners from forum shopping, assuming there is an actual case or controversy and the court exercises its discretion to hear the claims. But, under ' 315(a)(1), this approach forecloses subsequent IPRs for the DJ plaintiff and real parties-in-interest.

Third, a party can file a complaint seeking a DJ of noninfringement only. But how does seeking a DJ of noninfringement actually lead to a declaration of invalidity? The answer lies in Federal Rule of Civil Procedure 13. A...