In a matter of first impression, the U.S. Court of Appeals for the Federal Circuit revived the defendant’s invalidity case finding that the estoppel provision governing inter partes reexamination is triggered not when the reexamination is completed, but only after all appeal rights have been exhausted.  Bettcher Indus., Inc. v. Bunzl USA, Inc. et al., Case Nos. 10-1038, -1046 (Fed. Cir., Oct. 3, 2011) (Linn, J.).

Bettcher filed a patent infringement action against Bunzl alleging infringement of a patent directed to a power-operated knife used principally in the meat packing and other commercial food-processing industries.  After Bettcher filed suit, and while the proceedings were pending before the district court, Bunzl requested inter partes reexamination of the asserted patent in the U. S. Patent and Trademark Office (USPTO).  In due course, the reexamination was initiated; the examiner ultimately declined to adopt the grounds of rejection proposed by Bunzl and issued a Right of Appeal Notice.  Bunzl appealed to the Board of Patent Appeals and Interferences (Board).

When the examiner issued the Right of Appeal Notice, Bettcher requested the district court exclude certain invalidity references under the estoppel provision of 35 U.S.C. § 315(c).  Under § 315(c):

A third-party requester whose request for an inter partes reexamination results in an order under § 313 is estopped from asserting at a later time, in any civil action [under the United States patent laws] the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings.

Bettcher argued that Bunzl was estopped from asserting these references in the district court  because the examiner had determined that the references did not invalidate the claims of the asserted patent.  Bettcher argued that the estoppel provision took effect as soon as the examiner finished the reexamination and issued the Right of Appeal Notice.  The district court agreed and found that the issuance of a Right of Notice of Appeal “finally determined” the claims to be valid thereby triggering the estoppel provision.  As a result, the district court granted Bettcher’s request to exclude the references at trial.  Bettcher appealed.

On appeal, Bettcher argued that the district court wrongly interpreted the estoppel provision by holding it applies at the conclusion of examination when the examiner issued the Right of Appeal Notice.  Recognizing that when the estoppel provision attaches is a question of first impression, the Federal Circuit noted that the parties’ arguments require the Court to decide the meaning of “finally determined” in § 315(c) in view of the statute, the legislative framework, the related regulations and the legislative history.

Turning first to the language of the statute, the Court noted that § 315(a) and (b) allow patent owners and third-party requesters to appeal the examiner’s decision to the Board and the Federal Circuit.  The estoppel provision of subsection (c) falls directly after sections (a) and (b).  The Court found that the placement of the estoppel provision immediately after subsections (a) and (b) strongly suggests that the phrase “finally determined” refers to the stage of the proceedings after the events contemplated by subsections (a) and (b) have run their course.  Because subsections (a) and (b) each state that the parties may appeal to the Board and to Federal Circuit, the Court found that the plain language of the statute implies that estoppel requires exhaustion of all appeal rights.

Next, the Court analyzed the framework of reexamination proceedings.  During an appeal, the Board can assert new grounds of rejection provided that the patent owner has an opportunity to respond.  The Court found that because the addition of new grounds of rejection on appeal entitles the patent owner to continue prosecution before the examiner, the structure of the reexamination proceeding suggests that reexamination is not final prior to exhaustion of all appeal rights.

The Court then turned to Bettchers’s argument that regulations discussing the Right of Appeal Notice establish that the phrase “final determination” in § 315 refers to the Right of Appeal Notice.  Bettcher argued that because 37 C.F.R. § 1.953 and 41.61(a)(2) treat the Right of Appeal Notice as a “final action” and “final decision,” the phrase “finally determined” in § 315 must refer to the Right of Appeal Notice.  The Court summarily rejected this argument, finding 37 C.F.R. § 1.953 and 41.61(a)(2) in no way address the application of any estoppel and do not purport to interpret or define the statutory language of § 315.

Finally, the Court reviewed the legislative history.  The legislative history of an uncodified “fact” estoppel notes that “estoppel arises after a final decision in the inter partes reexamination or a final decision in any appeal of such reexamination.”  Bettcher argued that this language from the legislative history distinguishes final decisions from reexaminations from final decisions in any appeal of such reexaminations, such that the estoppel provision of § 315(c) should be read to apply as soon as there is a final decision in a reexamination (i.e., Right of Appeal Notice).  The Court rejected this argument, going as far as to say it was at a loss to understand how this argument helps Bettcher.  Instead, the Court found that the legislative history of the uncodified “fact” estoppel proves that it applies only after all appeals are exhausted and, if anything, it suggests that that the estoppel provision of § 315(c) also applies after all appeals are exhausted.