Synopsys, Inc. v. Lee et al

Brief in Support to 37 Cross MOTION to Dismiss or Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment

E.D. Va.June 27, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION SYNOPSYS, INC., Plaintiff, v. JOSEPH MATAL,1 Acting Undersecretary of Commerce for Intellectual Property and Interim Director of the United States Patent & Trademark Office; and the UNITED STATES PATENT & TRADEMARK OFFICE, Defendants, MENTOR GRAPHICS CORP., Intervenor-Defendant. Civil Action No. 1:17-cv-517-TSE-JFA BRIEF IN OPPOSITION TO PLAINTIFF SYNOPSYS, INC.’S MOTION FOR SUMMARY JUDGMENT AND IN SUPPORT OF INTERVENOR-DEFENDANT MENTOR GRAPHICS CORP.’S CROSS-MOTION FOR DISMISSAL OR SUMMARY JUDGMENT 1 Pursuant to Fed. R. Civ. P. 25(d), Joseph Matal has been substituted for Michelle K. Lee as a Defendant in this action. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 1 of 39 PageID# 3236 ii TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION .......................................................................................................................... 1 STATEMENT OF THE CASE ....................................................................................................... 1 I. Synopsys’ Multiple Attempts to Invalidate and Avoid Liability for Infringing the ’376 Patent ....................................................................................... 1 II. The Ongoing Ex Parte Reexamination Proceeding at Issue Here .......................... 4 STATEMENT OF UNDISPUTED MATERIAL FACTS ............................................................. 7 I. Mentor’s Response to Synopsys’ Statement of Undisputed Facts .......................... 7 II. Mentor’s Statement of Undisputed Material Facts ................................................. 8 ARGUMENT .................................................................................................................................. 8 I. Synopsys Is Not Entitled to Judicial Review of the Patent Office’s Estoppel Ruling. ...................................................................................................... 8 A. Synopsys’ Suit Fails for Lack of Final Agency Action. ............................. 8 B. The Patent Act Does Not Grant Synopsys A Right to Judicial Review. ....................................................................................................... 9 II. The Patent Office’s Interpretation of Section 315(e)(1) Is Reasonable. ............... 11 A. The Patent Office’s Interpretation Is Consistent with the Text and Structure of the AIA.................................................................................. 12 B. The AIA’s Legislative History Supports the Patent Office’s Interpretation. ............................................................................................ 18 C. Synopsys Misconstrues the Federal Circuit’s Shaw and HP Decisions. .................................................................................................. 20 D. The Patent Office’s Interpretation Is Entitled to Deference. .................... 26 E. Synopsys’ Interpretation Would Defeat the Purpose of the Estoppel Under Section 315(e). ............................................................................... 27 F. Synopsys’ Remaining Arguments Also Fail. ............................................ 29 CONCLUSION ............................................................................................................................. 30 Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 2 of 39 PageID# 3237 iii TABLE OF AUTHORITIES Page(s) Cases Abraham v. CBOCS, Inc., No. 3:11-cv-182, 2011 WL 5119288 (E.D. Va. Oct. 27, 2011) ..............................................10 Allen v. Zurich Ins., 667 F.2d 1162 (4th Cir. 1982) .................................................................................................10 Auer v. Robbins, 519 U.S. 452 (1997) .................................................................................................................29 Aylus Networks, Inc. v. Apple Inc., 856 F.3d 1353 (Fed. Cir. 2017)................................................................................................17 Bennett v. Spear, 520 U.S. 154 (1997) ...............................................................................................................8, 9 Biscotti, Inc. v. Microsoft Corp., No. 2:13-cv-01015, 2017 WL 2526231 (E.D. Tex., May 11, 2017) .......................................25 Clark v. Rameker, 134 S. Ct. 2242 (2014) .............................................................................................................15 Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15-cv-21, 2017 WL 2605977 (E.D. Va. June 5, 2017) ..................................................24 Cooper Techs. Co. v. Dudas, 536 F.3d 1330 (Fed. Cir. 2008)..........................................................................................11, 26 Covert v. LVNV Funding, LLC, 779 F.3d 242 (4th Cir. 2015) ...................................................................................................29 Douglas Dynamics, LLC v. Meyer Products LLC, No. 14-cv-886, 2017 WL 1382556 (W.D. Wis., Apr. 18, 2017) .................................24, 27, 28 e-Imagedata Corp v. Digital Check Corp, No. 16-cv-576, 2017 WL 657462 (E.D. Wis. Feb. 17, 2017)..................................................24 FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000) .................................................................................................................17 Heinl v. Godici, 143 F. Supp. 2d 593 (E.D. Va. 2001) ........................................................................................9 Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 3 of 39 PageID# 3238 iv HP v. MPHJ Technology Investments, LLC, 817 F.3d 1339 (Fed. Cir. 2016)....................................................................................20, 23, 26 In re Verinata Health, Inc., No. 17-109, 2017 WL 1422489 (Fed. Cir. Mar. 9, 2017) ........................................................23 Intellectual Ventures I LLC v. Toshiba Corp., 221 F. Supp. 3d 534 (D. Del. 2016) .........................................................................................25 Joy Mfg. Co. v. National Mine Service Co., 810 F.2d 1127 (Fed. Cir. 1987)................................................................................................10 Leale v. U.S. Dist. Court, 841 F.2d 1129 (9th Cir. 1988) .................................................................................................22 Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1271 (Fed. Cir. 2017)..............................................................................................2, 4 Mentor Graphics Corp. v. EVE-USA, Inc., No. 3:10-cv-954, 2015 WL 1097317 (D. Or. Mar. 11, 2015) ...................................................3 Nat’l Am. Ins. Co. v. United States, 498 F.3d 1301 (Fed. Cir. 2007)................................................................................................22 Nat’l Cable & Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) .................................................................................................................26 Parallel Networks Licensing, LLC v. IBM Corp., No. 13-2072, 2017 WL 1045912 (D. Del. Feb. 22, 2017) .................................................25, 28 Redline Detection LLC v. Star Envirotech, Inc., 811 F.3d 435 (Fed. Cir. 2015)..................................................................................................14 Rempfer v. Sharfstein, 583 F.3d 860 (D.C. Cir. 2009) ...................................................................................................7 Russello v. United States, 464 U.S. 16 (1983) .............................................................................................................11, 16 SAS Inst., Inc. v. Complement Soft, LLC., 825 F.3d 1341 (Fed. Cir. 2016)..........................................................................................14, 18 Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293 (Fed. Cir. 2016)........................................................................................ passim Synopsys, Inc. v. Lee, No. 14-cv-674, 2014 WL 5092291 (E.D. Va. Oct. 9, 2014) ......................................................3 Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 4 of 39 PageID# 3239 v Synopsys, Inc. v. Lee, 812 F.3d 1076 (Fed. Cir. 2016)..................................................................................................3 Synopsys Inc. v. Mentor Graphics Corp, 814 F.3d 1309 (Fed. Cir. 2016)..........................................................................................2, 3, 4 Synopsys, Inc. v. Mentor Graphics Corp., No. 12-cv-5025, ECF 1 (N.D. Cal. Sept. 27, 2012) ...................................................................2 Syntex (U.S.A.) Inc. v. U.S. Patent & Trademark Office 882 F.2d 1570 (Fed. Cir. 1989)..................................................................................................9 Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994) .................................................................................................................11 United States v. Mead Corp., 533 U.S. 218 (2001) ...........................................................................................................26, 27 Verinata Health, Inc. v. Ariosa Diagnostics, Inc., No. 12-cv-05501, 2017 WL 235048 (N.D. Cal. Jan. 19, 2017) .........................................23, 25 Water Quality Ins. Syndicate v. United States, 225 F. Supp. 3d 41, 2016 WL 7410549 (D.D.C. 2016) .............................................................7 Patent Trial and Appeal Board Decisions Amerigen Pharma Ltd. v. Janssen Oncology, Inc., IPR2016-00286, Paper 14 (PTAB May 31, 2016) .............................................................14, 18 Apotex Inc. v. Wyeth, LLC, IPR2015-00873, 2015 WL 5523393 (PTAB Sept. 16, 2015) ..................................................27 Corning Inc. v. DSM IP Assets B.V., IPR 2013-00052, Paper 88 (PTAB May 1, 2014) ....................................................................14 Great West Cas. Co. v. Intellectual Ventures II LLC, IPR2015-01534, Paper 13 (PTAB Feb. 15, 2017) .............................................................26, 27 Synopsys, Inc. v. Mentor Graphics Corp., IPR2012-00042, 2014 WL 722009 (PTAB Feb. 19, 2014) .......................................................2 Statutes and Regulations 5 U.S.C. § 704 ............................................................................................................................8, 11 Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 5 of 39 PageID# 3240 vi 35 U.S.C. § 2 ..................................................................................................................................26 35 U.S.C. § 304 ..............................................................................................................................10 35 U.S.C. § 306 ................................................................................................................................9 35 U.S.C. § 314 ........................................................................................................................16, 20 35 U.S.C. § 315 ...................................................................................................................... passim 35 U.S.C. § 316 ........................................................................................................................26, 29 35 U.S.C. § 317 ..............................................................................................................................17 35 U.S.C. § 319 ..............................................................................................................................11 America Invents Act (AIA) ...........................................................................................5, 12, 15, 16 Administrative Procedure Act (APA) ..................................................................1, 3, 7, 8, 9, 10, 11 37 C.F.R. § 1.510 .........................................................................................................................4, 6 37 C.F.R. § 42.23 .....................................................................................................................14, 15 37 C.F.R. § 42.73 ...........................................................................................................................29 37 C.F.R. § 42.74 ...........................................................................................................................17 37 C.F.R. § 42.104 ...................................................................................................................14, 18 37 C.F.R. § 42.108 ...................................................................................................................14, 16 37 C.F.R. § 42.120 .........................................................................................................................14 37 C.F.R. § 42.123 .........................................................................................................................14 Other Authorities 157 Cong. Rec. S1360 (statement of Sen. Grassley) .....................................................................18 157 Cong. Rec. S1375 (statement of Sen. Kyl) .............................................................................20 157 Cong. Rec. S1376 (statement of Sen. Kyl) .......................................................................14, 18 157 Cong. Rec. S952 (statement of Sen. Grassley) .......................................................................19 America Invents Act: Hearing on H.R. 1249 Before the House Comm. on the Judiciary, 112th Cong. 52-53 (2011) .......................................................................................19 Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 6 of 39 PageID# 3241 vii Hearing Before the Senate Comm. on the Judiciary, 110th Cong. 13 (2007) ...............................18 S. Rep. No. 110-259 .......................................................................................................................19 S. Rep. No. 111-18 .........................................................................................................................19 U.S. Patent No. 6,240,376...................................................................................................... passim Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 7 of 39 PageID# 3242 –1– INTRODUCTION This case is the latest attempt by Synopsys, Inc. to avoid liability for its infringement of a Mentor Graphics patent.2 Over the past five years, Synopsys has instigated proceedings in the Patent Trial and Appeal Board (the “Board”), litigated in district courts in California, Oregon, and Virginia, and filed multiple appeals in the Federal Circuit—all relating to Mentor’s ’376 patent. In the decision at issue here, the Patent and Trademark Office (the “Patent Office”) ruled that Synopsys had finally gone too far by requesting ex parte reexamination of two claims in the ’376 patent despite being statutorily estopped from making such a request by its prior challenge to those very claims through inter partes review. The Patent Office was correct. Congress designed the Patent Act’s estoppel provisions to preclude precisely the sort of serial challenges that Synopsys is attempting here. Synopsys’ challenge also fails because the Patent Office’s interlocutory estoppel decision is not “final agency action” under the Administrative Procedure Act (APA). Even if the decision were final, Synopsys still would not be properly before this Court, because the Patent Act does not provide third-party requesters with a right to judicial review of decisions terminating ex parte reexamination proceedings. Accordingly, the Court should deny Synopsys’ motion for summary judgment and grant Mentor’s cross-motion for dismissal or, in the alternative, summary judgment. STATEMENT OF THE CASE I. Synopsys’ Multiple Attempts to Invalidate and Avoid Liability for Infringing the ’376 Patent Synopsys and Mentor Graphics are competitors in the market for integrated circuit simulation and verification technologies, which provide a means for ensuring that designs for 2 U.S. Patent No. 6,240,376. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 8 of 39 PageID# 3243 –2– computer chips will perform as intended. Mentor’s ’376 patent improves chip designers’ ability to “debug” design problems. See Synopsys Inc. v. Mentor Graphics Corp, 814 F.3d 1309, 1311- 12 (Fed. Cir. 2016) (Synopsys III). As the Federal Circuit recently observed, there is “a complicated litigation history” involving Synopsys, Mentor, and two other companies—EVE-USA, Inc., and Emulation and Verification Engineering, S.A. (collectively, “EVE”)—that Synopsys acquired in 2012. Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1271, 1280 (Fed. Cir. 2017) (Synopsys V). Synopsys began its campaign against the ’376 patent in September 2012 by petitioning the Board for inter partes review of claims 1-15 and 20-33 of the ’376 patent. Synopsys III, 814 F.3d at 1312. In its petition, Synopsys asserted that these claims are invalid in light of five prior art references. See Synopsys, Inc. v. Mentor Graphics Corp., IPR2012-00042, 2014 WL 722009, at *1 (PTAB Feb. 19, 2014) (Institution Decision). The following day, Synopsys and EVE jointly filed a declaratory judgment action seeking to invalidate all claims of the ’376 patent. See Complaint, Synopsys, Inc. v. Mentor Graphics Corp., No. 12-cv-5025, ECF 1 (N.D. Cal. Sept. 27, 2012). That case was transferred to the District of Oregon and consolidated with ongoing litigation concerning Mentor’s patents. In February 2013, the Board granted in part and denied in part Synopsys’ petition for inter partes review of the ’376 patent. The Board instituted review for claims 1-9, 11, 28, and 29, limited to the issue of anticipation by only one of the cited references, U.S. Patent No. 6,132,109 (“Gregory”). Institution Decision, 2013 WL 8149395, at *19–20. The Board declined to institute review for claims 10, 12-15, 20-27, and 30-33, and likewise declined to institute review on the four other prior art references raised in Synopsys’ petition or any other ground of invalidity. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 9 of 39 PageID# 3244 –3– The Board issued a final written decision in the inter partes review in February 2014. Synopsys, Inc. v. Mentor Graphics Corp., IPR2012-00042, 2014 WL 722009 (PTAB Feb. 19, 2014) (Final Written Decision). The Board cancelled claims 5, 8, and 9, but ruled that Synopsys had failed to show that claims 1-4, 6, 7, 11, 28, and 29 were anticipated by Gregory. Id. at *2. Synopsys appealed the Board’s decision to the Federal Circuit, arguing that claims 1 and 28 are anticipated by Gregory. See Synopsys III, 814 F.3d at 1313. The Federal Circuit affirmed, finding “no error” in the Board’s analysis. Id. at 1322, 1324. In addition to appealing the Board’s decision, Synopsys filed suit in June 2014 in this Court against the Patent Office, asserting claims under the APA. See Synopsys, Inc. v. Lee, No. 14-cv-674, 2014 WL 5092291, at *2 (E.D. Va. Oct. 9, 2014) (Synopsys I), vacated, Synopsys, Inc. v. Lee, 812 F.3d 1076 (Fed. Cir. 2016) (Synopsys IV). Synopsys argued that the Patent Office exceeded its authority by granting Synopsys’ petition for inter partes review only in part, without instituting review on every claim and ground asserted. Synopsys I, 2014 WL 5092291, at *2. This Court (Cacheris, J.) dismissed Synopsys’ APA suit based on lack of jurisdiction. Id. at *4. Although Synopsys appealed that dismissal, the Federal Circuit rejected Synopsys’s argument on the merits in Synopsys III, 814 F.3d at 1311, and held that Synopsys’ APA appeal was moot in light of that merits ruling, Synopsys IV, 812 F.3d at 1077–78. On October 10, 2014—after the Board’s final written decision in the inter partes review, but before the Federal Circuit’s decision on appeal—a jury in the District of Oregon entered a verdict finding Synopsys liable for infringement of the ’376 patent. See Mentor Graphics Corp. v. EVE-USA, Inc., No. 3:10-cv-954, 2015 WL 1097317, at *1 (D. Or. Mar. 11, 2015) (Synopsys II). The Oregon district court awarded Mentor Graphics $36.6 million in damages, id., and enjoined Synopsys from engaging in further acts of infringement, see Permanent Injunction, Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 10 of 39 PageID# 3245 –4– Mentor Graphics Corp. v. EVE-USA, Inc., No. 3:10-cv-954, ECF 665 (D. Or. Mar. 17, 2015). Synopsys appealed that decision as well—its third appeal overall concerning the ’376 patent. On March 16, 2017, the Federal Circuit affirmed the Oregon district court’s infringement verdict and damages award. See Synopsys V, 851 F.3d at 1280.3 This complex litigation history is summarized in the graphic below. II. The Ongoing Ex Parte Reexamination Proceeding at Issue Here On September 30, 2016—long after Synopsys’ other validity challenges failed— Synopsys launched yet another challenge to the ’376 patent. Administrative Record (“A.”) 1, 3. This time, Synopsys requested ex parte reexamination of claims 1, 24, and 26-28 of the ’376 patent. A9. Synopsys argued that those claims are invalid over two prior art references—U.S. Patent Nos. 6,182,247 (“Herrmann”) and 6,317,860 (“Heile”). A9-10. As part of its request, Synopsys filed a certification pursuant to 37 C.F.R. § 1.510(b)(6), attesting “that the statutory estoppel provisions of 35 U.S.C. 315(e)(l) . . . do not prohibit the requester from filing the ex parte reexamination request.”4 A68. 3 The permanent injunction remains in effect. 4 37 C.F.R. § 1.510(b)(6) provides that a “request for reexamination must include . . . [a] certification by the third party requester that the statutory estoppel provisions of 35 U.S.C. 315(e)(1) … do not prohibit the requester from filing the ex parte reexamination request.” Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 11 of 39 PageID# 3246 –5– On November 1, 2016, Mentor petitioned the Patent Office, objecting to Synopsys’ certification regarding claims 1 and 28 of the ’376 patent. A1586-94. Mentor explained that Synopsys is estopped from pursuing reexamination of those claims under 35 U.S.C. § 315(e)(1) because Synopsys previously obtained inter partes review of those claims and “reasonably could have raised” (but nevertheless failed to raise) the Herrmann and Heile references in the inter partes review proceeding. See A1589-92. On November 8, 2016, while Mentor’s petition was pending, the Patent Office instituted ex parte reexamination of claims 1, 24, and 26-28 of the ’376 patent. A1598-1600. But on December 15, 2016, the Patent Office granted Mentor’s petition and conditionally vacated the order instituting the reexamination proceeding. A1662-90. In a detailed, 27-page decision, the Patent Office set out and applied the four elements of estoppel under 35 U.S.C. § 315(e)(1): 1. Whether the third party requester of the ex parte reexamination proceeding was a petitioner in the inter partes review, or was a real party in interest or a privy of the petitioner; 2. Whether the claim(s) of the patent under inter partes review are also requested to be reexamined in the ex parte reexamination proceeding; 3. Whether the inter partes review has resulted in a final written decision pursuant to 35 U.S.C. 318(a); 4. Whether the ground(s) raised in the ex parte reexamination proceeding are the same ground(s) that were raised or reasonably could have been raised by the requester during the inter partes review. A1673. The Patent Office found, and Synopsys did not dispute, that the first three elements of estoppel are satisfied here. Synopsys previously petitioned for inter partes review of the ’376 patent; claims 1 and 28 were addressed in the inter partes review proceeding; and the Board issued a final written decision in the inter partes review regarding those claims. A1674. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 12 of 39 PageID# 3247 –6– The Patent Office also found that the final element for estoppel is satisfied. A1675-78. Relying on the text and history of the America Invents Act (AIA), the Patent Office held that prior art which “reasonably could have been raised” in an inter partes review is “prior art which a skilled searcher conducting a diligent search reasonably could have been expected to discover.” A1675. A prior art reference qualifies under this standard if, among other things, (i) it “is sufficiently accessible so that a skilled searcher could reasonably have been expected to discover it”; and (ii) “the reference and the patent under reexamination are analogous art.” A1676. A U.S. patent is considered to be sufficiently accessible to a skilled searcher, so if it is also analogous art, “then a skilled searcher could reasonably be expected to discover it during a diligent search.” A1676. Synopsys argued in its request for ex parte reexamination that claims of the ’376 patent are invalid over two U.S. patents, Herrmann and Heile, neither of which was included in Synopsys’ petition for inter partes review. A1676-77 n.11. Yet Synopsys’ request demonstrated that both of these U.S. patents were analogous art, such that “a skilled searcher conducting a diligent search reasonably could have been expected to discover the[m].” A1677-78. The Patent Office found that “the ground(s) raised in the reexamination proceeding with respect to claims 1 and 28 of the ’376 patent are the same ground(s) that reasonably could have been raised by [Synopsys] during the inter partes review.” A1678. Thus, the Patent Office concluded that “the estoppel provisions of 35 U.S.C. 315(e)(1) apply with respect to claims 1 and 28 of the ’376 patent,” such that Synopsys’ “certification pursuant to 37 CFR 1.510(b)(6) is improper.” A1678; see also A1677-84 (considering and rejecting Synopsys’ contrary arguments). Having determined that Synopsys’ request contained an improper certification pursuant to 37 C.F.R. § 1.510(b)(6), the Patent Office conditionally vacated the order granting ex parte Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 13 of 39 PageID# 3248 –7– reexamination of the ’376 patent, and pursuant to 37 C.F.R. § l.510(c), authorized Synopsys to file a corrected request (including a corrected certification). A1684-89. Synopsys did so on December 29, 2016, limiting its request to claims to which estoppel does not apply. See A1691- 99. The Patent Office granted Synopsys’ corrected request on February 10, 2017—using the same control number and docket as its prior order—and re-instituted the previously vacated ex parte reexamination, but now limited to claims 24, 26, and 27 of the ’376 patent based on the Herrmann reference. See A2551-53. The reexamination proceeding remains ongoing. On May 2, 2017, with the reexamination proceeding underway, Synopsys filed this APA suit challenging the Patent Office’s interlocutory order vacating its original institution decision. STATEMENT OF UNDISPUTED MATERIAL FACTS I. Mentor’s Response to Synopsys’ Statement of Undisputed Facts The portion of Rule 56 concerning disputed issues of material fact does not apply in APA cases because “the district judge sits as an appellate tribunal” and “the entire case on review is a question of law.” Rempfer v. Sharfstein, 583 F.3d 860, 865 (D.C. Cir. 2009); see also Water Quality Ins. Syndicate v. United States, 225 F. Supp. 3d 41, 2016 WL 7410549, at *12 (D.D.C. 2016). However, pursuant to this Court’s rules, Mentor states as follows: 1. Mentor disputes paragraphs 9 and 16 of Synopsys’ statement because they contain conclusions of law, not statements of fact. Regardless, Mentor disputes these paragraphs because they do not accurately recite the law: the Patent Office’s interlocutory decision under review is not final agency action, and Synopsys reasonably could have raised the Herrmann and Heile references in the prior inter partes review. See A1674-89; Argument Part I.A, infra. 2. Mentor disputes Synopsys’ characterization (paragraph 13) of its certification of compliance with the estoppel provisions of 35 U.S.C. § 315(e)(1). Contrary to its characterization, Synopsys certified only that: “Herrmann was not used to challenge Claim 1 or Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 14 of 39 PageID# 3249 –8– 28 in that proceeding.” A68. 3. Mentor disputes that the Patent Office has a policy of estopping inter partes review petitioners “from seeking ex parte reexamination based on new prior art references that were never raised (nor reasonably could have been raised) in the petition for inter partes review.” See A1674-89 (estoppel based on references Synopsys reasonably could have raised). 4. For the limited purpose of this proceeding, and without waiving its right outside of this proceeding to dispute any of Synopsys’ statements in its Memorandum, Mentor does not dispute the remaining Synopsys statements alleged to be undisputed facts. II. Mentor’s Statement of Undisputed Material Facts 1. “[A] skilled searcher conducting a diligent search reasonably could have been expected to discover the Herrmann and Heile references.” A1678. 2. Before the Patent Office, Synopsys did not dispute that “it was aware of” those references “at the time it filed its petition for inter partes review,” and likewise did not dispute “that a skilled searcher conducting a diligent search could reasonably have been expected to discover” the Herrmann and Heile references. A1679-80. 3. Synopsys filed a corrected request for ex parte reexamination on December 29, 2016. A1691-93. This request omitted claims 1 and 28 of the ’376 patent. A1699. The Patent Office granted that request and instituted reexamination, which is ongoing. See A2551-53. ARGUMENT I. Synopsys Is Not Entitled to Judicial Review of the Patent Office’s Estoppel Ruling. A. Synopsys’ Suit Fails for Lack of Final Agency Action. The APA provides a cause of action only with respect to “final agency action.” 5 U.S.C. § 704. To be “final,” a decision must (among other things) “mark the ‘consummation’ of the agency’s decisionmaking process.” Bennett v. Spear, 520 U.S. 154, 177-78 (1997). Orders that Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 15 of 39 PageID# 3250 –9– are “merely tentative or interlocutory” do not qualify. Id. Instead, such orders are “subject to review on the review of the final agency action.” 5 U.S.C. § 704. The estoppel decision targeted by Synopsys’ suit is interlocutory rather than final, and hence is not subject to immediate review. As noted above, the decision did not terminate the reexamination proceeding, but instead held it open and provided Synopsys an opportunity to re- file. A1686-89. Synopsys filed a corrected request, which the Patent Office granted in a second institution decision on the same docket. See A1691-93, A2551-53. Because the reexamination proceeding remains ongoing, the decisions issued to date do not “mark the ‘consummation’ of the [Patent Office’s] decisionmaking process,” Bennett, 520 U.S. at 177-78, and Synopsys lacks a cause of action under the APA, see, e.g., Heinl v. Godici, 143 F. Supp. 2d 593, 597-98 (E.D. Va. 2001) (Ellis, J.) (holding that an order instituting ex parte reexamination proceedings was not final agency action). B. The Patent Act Does Not Grant Synopsys A Right to Judicial Review. As a third-party requester, Synopsys does not have a right to seek review of decisions terminating an ex parte reexamination proceeding. Section 306 of the Act grants the patent owner a right to judicial review of an adverse decision rendered at the conclusion of a reexamination proceeding, but does not grant a corresponding right to the third-party requester. See 35 U.S.C. § 306. Nor does any other provision of the Act fill that void. Accordingly, the question is whether Synopsys is entitled to review under some other statute. The Federal Circuit addressed that question in Syntex (U.S.A.) Inc. v. U.S. Patent & Trademark Office, holding that “a third-party requester” is not entitled to review of “the PTO’s final decision . . . in instances where it is alleged that the reexamination proceeding was not conducted in accordance with PTO regulations and established procedures.” 882 F.2d 1570, 1572 (Fed. Cir. 1989). Syntex requested ex parte reexamination of a patent owned by Alfa Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 16 of 39 PageID# 3251 –10– Chemicals. Id. at 1571. The Patent Office granted that request, conducted a reexamination, and canceled some (but not all) of Alfa’s patent claims. Id. at 1571-72. Unsatisfied, Syntex sued the Patent Office under the APA, arguing that procedural irregularities violated its right to “a ‘proper’ reexamination.” Id. at 1572. For relief, Syntex sought an order requiring the Patent Office to reopen the examination and “complete” the proceeding “in accord with PTO regulations.” Id. This Court (Hilton, J.) dismissed Syntex’s complaint, concluding that “Syntex had no right to challenge how the PTO conducts a reexamination.” Id. The Federal Circuit affirmed, reasoning that the Patent Act’s “clear, comprehensive statutory scheme” shows “that Congress intended to limit appeals from final reexamination decisions to those initiated by patent owners seeking to reverse an unfavorable decision.” Id. at 1573-74. The court also relied on the Act’s legislative history, including Commissioner Diamond’s statement that the Act’s “right of appeal . . . belongs only to the patent owner.” Id. at 1574 (citation and quotation marks omitted). Together, this evidence demonstrated that a right of review for ex parte requesters “would be unprecedented” and “cannot be inferred.” Id. at 1574-75. This suit mirrors Syntex in every respect that matters. As in Syntex, Synopsys seeks to litigate perceived procedural errors in a decision that (if final) would terminate an ex parte reexamination proceeding.5 And as in Syntex, Synopsys seeks to litigate those claims under the APA. Accordingly, the result should be the same as in Syntex: dismissal of Synopsys’ suit. The nature of ex parte reexamination further supports this result. As the name indicates, the requester’s role in ex parte proceedings is limited, involving only the filing of an initial 5 Judicial estoppel is procedural in nature, see, e.g., Allen v. Zurich Ins., 667 F .2d 1162, 1167 n.4 (4th Cir.1982); Abraham v. CBOCS, Inc., No. 3:11-cv-182, 2011 WL 5119288, at *5 (E.D. Va. Oct. 27, 2011), and there is no basis for treating section 315(e)(1) estoppel differently. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 17 of 39 PageID# 3252 –11– request and, in some cases, a reply to the patent owner’s statement. See 35 U.S.C. § 304. Once those steps are completed, the requester “has no future role to play in the ex parte proceeding.” Joy Mfg. Co. v. National Mine Service Co., 810 F.2d 1127, 1130 (Fed. Cir. 1987). This narrow role contrasts with the requester’s prominent role in inter partes review proceedings, where Congress expressly granted petitioners a right to appeal adverse agency decisions. See 35 U.S.C. § 319; Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1332 (Fed. Cir. 2008). Congress’s allowance of requester appeals in inter partes reviews but not in ex parte proceedings demonstrates that Congress did not intend to allow suits like the one brought by Synopsys here. See Russello v. United States, 464 U.S. 16, 23 (1983). Established principles of administrative law also support the conclusion that Synopsys lacks a right to judicial review. The APA provides a default cause of action only when “there is no other adequate remedy” for the plaintiff’s claims. 5 U.S.C. § 704. Although courts apply a presumption of reviewability, that presumption is overcome when, as here, Congress intended to “channe[l]” particular types of claims into “a single review process.” Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 212, 216 (1994). While Synopsys’ present claims focus on the Patent Office’s estoppel determination, the basis for those claims is Synopsys’ underlying objection to Mentor’s ’376 patent. The Patent Act channels that objection into other processes—including inter partes review and Federal Circuit appeals—and thus provides Synopsys with “other adequate remed[ies],” 5 U.S.C. § 704. Accordingly, there is no basis to override Congress’s choice not to grant Synopsys, as an ex parte reexamination requester, another bite at the apple. II. The Patent Office’s Interpretation of Section 315(e)(1) Is Reasonable. Synopsys’ claims also fail on the merits. The sole issue presented is one of statutory interpretation: whether the phrase “any ground that the petitioner . . . reasonably could have raised during [the] inter partes review,” 35 U.S.C. § 315(e)(1), encompasses grounds that the Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 18 of 39 PageID# 3253 –12– petitioner could have included in its petition through ordinary diligence, as the Patent Office held, or instead covers only grounds on which the Board institutes review, as Synopsys claims. As discussed below, the Patent Office’s interpretation is reasonable and should be upheld. Under the statute’s plain text, a party such as Synopsys that petitions for and obtains inter partes review of a patent claim cannot later obtain ex parte reexamination of the same claim on grounds that the requester “reasonably could have raised” in its inter partes review petition. Moreover, precluding parties from holding invalidity grounds in reserve—either intentionally or through a lack of diligence—is fully consistent with the AIA’s text, structure, and history. The Patent Office’s interpretation is also supported by a growing body of judicial precedent. In contrast, Synopsys overlooks key distinctions between the cases it relies on and the facts presented here, fails to account for the deference owed to the Patent Office, and relies on a crabbed interpretation that would defeat the purpose of estoppel under section 315(e). Indeed, Synopsys’ proposed rule would effectively read the phrase “reasonably could have raised” out of the statute. For all of these reasons, the Court should deny Synopsys’ motion for summary judgment and grant Mentor’s cross-motion for summary judgment. A. The Patent Office’s Interpretation Is Consistent with the Text and Structure of the AIA. Section 315(e)(1), the statutory provision at issue here, provides: The petitioner in an inter partes review of a claim under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review. 35 U.S.C. § 315(e)(1).6 6 Congress enacted a virtually identical estoppel provision that applies to civil actions in federal district courts or before the U.S. International Trade Commission. See 35 U.S.C. § 315(e)(2). Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 19 of 39 PageID# 3254 –13– The Patent Office found, and Synopsys does not dispute, that most of the requirements of section 315(e)(1) are satisfied. First, Synopsys was “the petitioner in an inter partes review” of Claims 1 and 28 of the ’376 patent. A1674. Second, that inter partes review “result[ed] in a final written decision” by the Board upholding each of these patent claims. A1674; see also Final Written Decision, 2014 WL 722009 (Feb. 19, 2014). Third, Synopsys subsequently “request[ed] . . . a proceeding before the Office with respect to” the very same claims of the ’376 patent. A1674. But Synopsys did not raise the Herrmann or Heile references in its petition for inter partes review. A1676-77. Thus, the question is whether those references are grounds that Synopsys “reasonably could have raised during th[e] inter partes review.” 35 U.S.C. § 315(e)(1). Synopsys does not dispute that a skilled researcher conducting a diligent search prior to Synopsys’ filing of its petition for inter partes review reasonably could have been expected to discover the Herrmann and Heile references. See A1676-78 (U.S. patents are sufficiently accessible that a skilled researcher could reasonably be expected to discover them, and both the Hermann and Heile references are analogous art). Thus, it is undisputed that Synopsys’ failure to raise the Herrmann and Heile references in the inter partes review proceeding was due to its own failure to exercise due diligence (or, possibly, to a strategic choice). Synopsys nevertheless argues that the Herrmann and Heile references are not grounds that it “reasonably could have raised during that inter partes review.” SJ Mem. at 12–15. In Synopsys’ view, an inter partes review proceeding begins only when the Board grants a petition for inter partes review, and a ground is not one that a petitioner “reasonably could have raised” under section 315(e)(1) unless it was a ground on which the Board instituted review. Synopsys Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 20 of 39 PageID# 3255 –14– contends that this interpretation is required by the statute’s plain language and supported by two Federal Circuit decisions. Synopsys is wrong on both counts. First, Synopsys misreads the text of the statute. By its terms, section 315(e)(1) applies to two categories of “grounds”: those that were actually “raised” during the inter partes review, and those that “reasonably could have [been] raised” during that review. Thus, for the phrase “reasonably could have [been] raised” to have independent meaning, the category of grounds that a party “reasonably could have raised” must include grounds that were not actually raised. The question then becomes: Which grounds are “raised” during inter partes review? It is clear that a ground for review is “raised” when it is included in a petition and the Board institutes review on that ground. The inter partes review is a “front loaded” proceeding in which the “petition itself must present a full affirmative case.” SAS Inst., Inc. v. Complement Soft, LLC., 825 F.3d 1341, 1355 (Fed. Cir. 2016) (Newman, J., concurring in part and dissenting in part)7; Amerigen Pharma Ltd. v. Janssen Oncology, Inc., IPR2016-00286, Paper 14 at 16-17 (PTAB May 31, 2016) (“[T]he petition is the first and last chance for a petitioner to present its case”)8; 157 Cong. Rec. S1376 (statement of Sen. Kyl) (petitioners must “front load their case” by identifying specific challenges in their petition); see also 37 C.F.R. § 42.104(b).9 At the point 7 Cert. granted sub nom. SAS Inst. Inc. v. Lee, 2017 WL 468440 (U.S. May 22, 2017). 8 Decisions issued by the Board are available online at https://www.uspto.gov/patents- application-process/patent-trial-and-appeal-board/trials/patent-trial-and-appeal-board-end.html (click PTABE2E). 9 Although “[a] petitioner may seek leave to file a reply to the [patent owner’s] preliminary response” upon “a showing of good cause,” 37 C.F.R. § 42.108(c), a petitioner’s reply “may only respond to arguments raised in the corresponding . . . patent owner preliminary response,” id. § 42.23(b)—it may not raise new grounds for review. Moreover, the Federal Circuit’s decision in Redline Detection LLC v. Star Envirotech, Inc., 811 F.3d 435, 441-48 (Fed. Cir. 2015), puts to rest any suggestion that “supplemental information” submitted pursuant to 37 C.F.R. § 42.123 can expand the scope of an inter partes review proceeding. Once a trial is instituted, a petitioner’s only remaining brief on the merits of (continued…) Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 21 of 39 PageID# 3256 –15– of institution, the petitioner cannot take any additional steps to “raise” the grounds on which review has been granted—the next step in the proceeding is the patent owner’s response to the grounds that the petitioner has “raised” in its petition. See 37 C.F.R. § 42.120. Moreover, after institution, the petitioner may not raise new grounds for review beyond what was instituted by the Board. The only document the petitioner normally is permitted to file after institution is a reply to the patent owner’s response, and Patent Office regulations provide that the reply may not raise new grounds for review, but rather “may only respond to arguments raised in the corresponding . . . patent owner response.” 37 C.F.R. § 42.23(b). Thus, grounds for review are “raised” when they are included in the petition for inter partes review and granted by the Board. As discussed above, to have independent meaning, the category of grounds that the petitioner “reasonably could have raised during th[e] inter partes review” must include grounds that were not “raised.” Hence, the category of grounds that the petitioner “reasonably could have raised during th[e] inter partes review” logically must include (and at a minimum is reasonably understood as including) grounds that were not included in the petition for inter partes review and granted by the Board. Because Synopsys’ interpretation limits this phrase to grounds that were granted by the Board, Synopsys effectively reads the phrase “reasonably could have raised” out of the statute. This violates the basic principle of statutory construction that “a statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous.” Clark v. Rameker, 134 S. Ct. 2242, 2248 (2014) (quotation marks omitted). The Patent Office’s broader interpretation—including grounds that could have been, but were not, raised in the prior petition—avoids that defect and gives effect to every word in section the patentability issues is its reply (to the patent owner response), which, the Board has explained, cannot be used to introduce new issues. See, e.g., Corning Inc. v. DSM IP Assets B.V., IPR 2013-00052, Paper 88 at 11-16 (PTAB May 1, 2014). Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 22 of 39 PageID# 3257 –16– 315(e)(1). That interpretation results in a reasonable rule that parties are responsible for conducting a diligent search and presenting a complete case in an initial inter partes review proceeding, but are not estopped when, through no fault of their own, the Board declines to institute review on a ground that the challenger includes in its petition. Other provisions of the AIA support the Patent Office’s interpretation. For example, in the uncodified provisions governing the transitional covered business method review program, Congress omitted the “reasonably could have raised” language and limited estoppel to “any ground that the petitioner raised during that transitional proceeding.” 125 Stat. 284, 329-31. The Patent Office’s reading of section 315(e)(1) accounts for this difference by giving independent meaning to the phrase “reasonably could have raised”—thus satisfying the rule that “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same Act” (as Congress did here with the term “or reasonably could have raised”), “it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” Russello, 464 U.S. at 23. Synopsys’ interpretation, in contrast, fails to account for or comply with that bedrock canon of statutory construction. Synopsys tries to give meaning to the “reasonably could have raised” language by suggesting that it refers to grounds (i) that are included in a petition for inter partes review, and (ii) on which the Board institutes review, but (iii) that the petitioner decides not to pursue after its petition has been granted. But as noted above, a ground is “raised” once the challenger includes it in its petition and the Board grants review on that ground—the patent owner must address that ground in its response. Thus, a ground that is abandoned once the inter partes review is underway is not a ground that “could have [been] raised”; it is a ground that has in fact been “raised.” Even if a ground is no longer raised by the time the Board issues its final written Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 23 of 39 PageID# 3258 –17– decision, that does not mean the ground was never raised at any stage of the inter partes review. Moreover, it is implausible that Congress intended the phrase “reasonably could have raised” to do nothing more than apply in the narrow circumstances identified by Synopsys. The Board can grant a petition for inter partes review on a particular ground only if it decides that “the petition supporting the ground would demonstrate that there is a reasonable likelihood that at least one of the claims challenged in the petition is unpatentable.” 37 C.F.R. § 42.108(c); see 35 U.S.C. § 314(a). A petitioner who has gone to the trouble of including a ground in its petition and has succeeded in getting its petition granted on that ground is unlikely to abandon it.10 Synopsys’ proposed interpretation not only gives too little attention to the phrase “reasonably could have raised,” but also places far too much weight on a single statutory word: “during.” See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (“[T]he words of a statute must be read in their context and with a view to their place in the overall statutory scheme.”). Synopsys contends that “during” can refer only to the trial stage of an inter partes review, and cannot refer to the pre-institution stage. Not so. As the Federal Circuit has recognized, “[a]n IPR proceeding is a two-step process: the Director’s decision whether to institute a proceeding, followed (if a proceeding is instituted) by the Board’s conduct of the proceeding and decision with respect to patentability.” Aylus Networks, Inc. v. Apple Inc., 856 F.3d 1353, 1361 (Fed. Cir. 2017) (quotation marks omitted). In Aylus, the court addressed which statements to the Patent Office qualify for prosecution disclaimer, and it recognized that a 10 In some cases, petitioners may decide to settle an inter partes review proceeding before the Board issues a final written decision. See 35 U.S.C. § 317(a); 37 C.F.R. § 42.74(a). Although the Board has authority to subsequently issue a final written decision, the settlement is deemed to have “terminated [the inter partes review] with respect to [the] petitioner,” and “no estoppel under section 315(e) shall attach to the petitioner . . . on the basis of that petitioner’s institution of that inter partes review.” 35 U.S.C. § 317(a). Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 24 of 39 PageID# 3259 –18– petition for inter partes review is just as much a formal statement to the Patent Office as statements made after institution of inter partes review. Id. at 1362. Here, as in Aylus, there is no good reason to distinguish between the two phases of inter partes review, especially given that the petition is the only paper in which a petitioner can raise a ground for review. Although Synopsys relies on the Federal Circuit’s statement that an inter partes review “does not begin until it is instituted,” SJ Mem. at 13 (citing Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016)), this reliance is misguided. Even if “during” could only mean “after the Board’s institution decision,” the only way a petitioner can raise a ground for review is in the petition, filed before an institution decision issues. Once the petitioner files its petition, it cannot raise additional grounds for review. See, e.g., SAS Inst., Inc., 825 F.3d at 1355 (Newman, J., concurring in part and dissenting in part); Amerigen Pharma Ltd., IPR2016-00286, Paper 14 at 16-17; 157 Cong. Rec. S1376; see also 37 C.F.R. § 42.104(b). Thus, even if the word “during” could be interpreted to limit the relevant timeframe to the post- institution period, the proper focus would remain on the grounds that were raised, or reasonably could have been raised, in the petition. Which grounds “reasonably could have been raised” in the trial phase is inextricably linked to which grounds reasonably could have been raised in the petition. In these circumstances, the best (and, at the very least, an entirely reasonable) interpretation of grounds that the petitioner “reasonably could have raised” in the inter partes review includes grounds that the petitioner reasonably could have included in its petition. B. The AIA’s Legislative History Supports the Patent Office’s Interpretation. The legislative history confirms that estoppel under section 315(e)(1) applies to grounds that could have been included in the petition for inter partes review if the petitioner had exercised reasonable diligence in searching for prior art. First, Congress intended inter partes review to function as a substitute for litigation over Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 25 of 39 PageID# 3260 –19– patent validity based on patent and printed publication prior art. See 157 Cong. Rec. S1360-94 (statement of Sen. Grassley) (“[I]f an inter partes review is instituted while litigation is pending, that review will completely substitute for at least the patents-and-printed-publications portion of the civil litigation.”); Patent Reform: The Future of American Innovation: Hearing Before the Senate Comm. on the Judiciary, 110th Cong. 13 (2007) (statement of Jon Dudas, Director, USPTO) (“The estoppel needs to be quite strong that says on the second window any issue that you raised or could have raised you can bring up no place else. That second window . . . is intended to allow . . . a complete alternative to litigation.”).11 If petitioners could withhold prior art from their inter partes review petition at will, in order to have a second (or third) chance to litigate validity based on patents and printed publications in court or in subsequent proceedings at the Patent Office, this Congressional purpose would be frustrated. See id. at 7 (statement of Director Dudas) (procedures for administrative review of issued patents must include “very real estoppel” so that parties “have a choice between litigation and post-grant review”). Second, the estoppel provision was the subject of extensive legislative consideration, including objections to the “could have raised” language. See, e.g., S. Rep. No. 111-18, at 17 (noting concerns that “could have raised” standard will cause petitioners to “lose the ability to raise later-discovered prior art against the patent if they are subsequently sued for infringement”). In response to these concerns, Congress considered limiting estoppel to grounds that actually are raised in an inter partes review proceeding. See S. Rep. No. 110-259, at 22. But Congress ultimately resolved this debate by including the stronger “reasonably could have raised” language in the statute. See 157 Cong. Rec. S952 (statement of Sen. Grassley) (bill 11 Director Dudas equated the “second window” with “post-grant review” of patents designed to serve as “a meaningful alternative to litigation.” Id. at 7. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 26 of 39 PageID# 3261 –20– includes “a strengthened estoppel standard to prevent petitioners from raising in a subsequent challenge the same patent issues that were raised or reasonably could have been raised in a prior challenge”); see also id. at S1376 (statement of Sen. Kyl) (estoppel language “effectively bars” a party “from later using inter partes review or ex parte reexamination against the same patent, since the only issues that can be raised in an inter partes review are those that could have been raised in the earlier post-grant or inter partes review”); America Invents Act: Hearing on H.R. 1249 Before the House Comm. on the Judiciary, 112th Cong. 52-53 (2011) (statement of David Kappos, Director, USPTO) (“Those estoppel provisions mean that your patent is largely unchallengeable by the same party.”). Limiting estoppel to grounds that the petitioner chooses to include in an inter partes review petition and which are granted by the Board, as urged by Synopsys, would effectively overturn Congress’s resolution of this debate. Third, Congress viewed the phrase “reasonably could have raised” as applicable to “prior art which a skilled researcher conducting a diligent search reasonably could have been expected to discover.” 157 Cong. Rec. S1375 (statement of Sen. Kyl). But on Synopsys’ view, estoppel has nothing to do with whether the petitioner exercised diligence—the only question is whether a ground was instituted by the Board. The fact that a petitioner failed to conduct a reasonably diligent search, or deliberately withheld prior art references so that it could relitigate the issues if the inter partes review did not go its way, would be irrelevant. Synopsys has no answer for this fundamental disconnect between its interpretation and Congress’s intended design. C. Synopsys Misconstrues the Federal Circuit’s Shaw and HP Decisions. Synopsys claims that its reading of section 315(e)(1) is required by the Federal Circuit’s decisions in Shaw and HP v. MPHJ Technology Investments, LLC, 817 F.3d 1339 (Fed. Cir. 2016). Those cases did not address the scenario presented here, and Synopsys reads too much into them. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 27 of 39 PageID# 3262 –21– 1. In Shaw, the Board instituted inter partes review on two of six grounds proposed in Shaw’s petition, and denied the remaining grounds as “redundant.” 817 F.3d at 1297. After the Board issued its final written decision, Shaw sought judicial review of the Board’s decision not to consider the additional grounds. Relying on 35 U.S.C. § 314(d), the Federal Circuit held that it had no authority to review the Board’s institution decision. The Federal Circuit discussed section 315(e) only in the course of denying Shaw’s alternative request for a writ of mandamus. See id. at 1299–300. The court began by noting that mandamus is a “drastic and extraordinary remedy” that can be granted only in “exceptional circumstances.” Id. at 1299 (quotation marks omitted). In support of its mandamus argument, Shaw had expressed “concern” that section 315(e) would prevent it from raising the additional, petitioned-for but non-instituted grounds in a future proceeding. The Federal Circuit agreed with the Patent Office that estoppel would not apply because “the denied ground never became part of the IPR.” Id. at 1300. “Shaw raised its Payne-based ground in its petition for IPR. But the PTO denied the petition as to that ground, thus no IPR was instituted on that ground.” Id. The court concluded, “Shaw did not raise – nor could it have reasonably raised – the Payne-based ground during the IPR. The plain language of the statute prohibits the application of estoppel under these circumstances,” and therefore “mandamus is not warranted.” Id. Shaw does not control the outcome of this case for several reasons. First, the facts in Shaw differ from those here in an important way. Unlike in Shaw, Synopsys did not include the grounds at issue in its petition for inter partes review, though it is undisputed that Synopsys could have included those grounds if it had exercised due diligence. Because Synopsys’ petition did not present the grounds in question, the Board did not (and could not) consider whether to grant review on those grounds. Thus, whereas in Shaw, the petitioner did everything it could Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 28 of 39 PageID# 3263 –22– have done to present a ground for review, here, Synopsys is responsible for failing to present the additional grounds: it could have included the Herrmann and Heile references in its petition, but it did not, and thus the Board never had a chance to consider whether to re-assess the ’376 patent based on those references. The best reading of section 315(e)(1) (and, at the very least, a reasonable interpretation) is that the provision does not estop diligent parties like the petitioner in Shaw, but does estop petitioners who fail to exercise reasonable diligence, like Synopsys here. Second, in Shaw the Federal Circuit was considering whether to grant the “drastic and extraordinary remedy” of mandamus, a remedy that is available only if the petitioner shows that it has a “clear and indisputable” right to the writ. A decision to deny a writ of mandamus, because the stringent requirements for granting that extraordinary writ have not been met, does not necessarily govern questions that arise outside the mandamus context. Cf. Leale v. U.S. Dist. Court, 841 F.2d 1129 (9th Cir. 1988) (table decision).12 Synopsys nevertheless argues that the Federal Circuit’s reasoning in Shaw requires the result it seeks in this case, and cites the Federal Circuit’s statement that “Shaw did not raise – nor could it have reasonably raised – the Payne-based ground during the IPR.” Shaw, 817 F.3d at 1300 (emphasis in original), cited in SJ Mem. 13. However, immediately following the quoted statement, the court cited its earlier acknowledgement that “IPRs proceed in two phases. In the first phase, the PTO determines whether to institute IPR. In the second phase, the Board conducts the IPR proceeding and issues a final decision.” Shaw, 817 F.3d at 1300 (quoting In re Cuozzo Speed Techs., 793 F.3d 1268, 1272 (Fed. Cir. 2015)). Thus, Shaw itself acknowledges 12 In any event, Shaw’s discussion of section 315(e) was not necessary to the court’s decision denying a writ of mandamus, given the inherently discretionary nature of that remedy, and so is not binding here. See Nat’l Am. Ins. Co. v. United States, 498 F.3d 1301, 1306 (Fed. Cir. 2007). The court confirmed the narrowness of its decision by stating that the Act “prohibits the application of estoppel under these circumstances.” Shaw, 817 F.3d at 1300 (emphasis added). Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 29 of 39 PageID# 3264 –23– that inter partes review includes a pre-institution phase. The court’s statement that “[t]he IPR does not begin until it is instituted,” id., can reasonably be understood as a shorthand reference to the inter partes review trial phase. Similarly, the court’s statement that “Shaw did not raise— nor could it have reasonably raised—the Payne-based ground during the IPR,” id., reflects the court’s recognition that, since the Payne-based ground was petitioned for but not instituted, that ground could not have reasonably been raised during the trial phase of the inter partes review. Moreover, even if Shaw were interpreted to hold that the inter partes review does not begin until the trial phase, Synopsys’ argument would fail. As explained above, the only way a petitioner can raise a ground in the trial phase is by raising the ground in its petition—it cannot raise additional grounds later in the proceeding. Thus, even if inter partes review is limited to the trial phase, the grounds that a petitioner “reasonably could have raised” in an inter partes review must include those grounds that the petitioner reasonably could have raised in its petition. Synopsys also relies on the Federal Circuit’s decision in HP, but that decision, like Shaw, does not require the result Synopsys is seeking. In HP, as in Shaw, the Board had refused to institute inter partes review on a ground included in the petition, concluding that the ground was redundant of other grounds on which review was instituted. 817 F.3d at 1343. As in Shaw, the Federal Circuit held that it had no authority to review that determination. Id. at 1344–48. And as in Shaw, the Federal Circuit agreed with the Patent Office (in dicta) that “HP is not estopped from raising the obviousness of claim 13 in a subsequent court or Board proceeding.” Id. at 1347. Thus, HP, like Shaw, addressed a distinguishable situation involving a ground of invalidity that was included in the petition but not instituted. In re Verinata Health, Inc., a more recent Federal Circuit decision, confirms the limited reach of Shaw and HP. No. 17-109, 2017 WL 1422489 (Fed. Cir. Mar. 9, 2017). In Verinata, Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 30 of 39 PageID# 3265 –24– the patentees sought a writ of mandamus based on an argument that section 315(e) estoppel applies to petitioned-for but non-instituted grounds. Rather than holding that this argument was precluded by Shaw and HP, the Federal Circuit stated only that “[t]he current state of the binding precedent does not compel a finding that the district court clearly abused its discretion.” Verinata, 2017 WL 1422489, at *2. If Shaw and HP do not compel the conclusion that there is no estoppel even when the Board declines to institute review based on a petitioned-for ground, they clearly do not compel the conclusion that there is no estoppel when a ground is omitted from a petition due to the petitioner’s failure to exercise reasonable diligence. 2. Synopsys contends that post-Shaw district court decisions support its position, but those decisions actually support the Patent Office and Mentor more than they support Synopsys. A judge of this Court recently held that section 315(e) estoppel applies to grounds that the petitioner “could have raised in the IPR petition.” Cobalt Boats, LLC v. Sea Ray Boats, Inc., No. 2:15-cv-21, 2017 WL 2605977, at *3 (E.D. Va. June 5, 2017) (Morgan, J.). The Court reasoned that Shaw “was only making observations in dicta” and “the broad reading of Shaw”— advocated by Synopsys here—would render section 315(e) “essentially meaningless because the parties may pursue two rounds of invalidity arguments as long as they carefully craft their IPR petition.” Id. The Court noted that its reading “gives effect to every word in the statute while also recognizing the effect of the USPTO’s decision on an IPR petition.” Id. Another district court observed that Synopsys’ interpretation would “undermin[e] the purported efficiency of IPR, especially if it were applied to allow post-IPR assertion of non- petitioned grounds.” Douglas Dynamics, LLC v. Meyer Products LLC, No. 14-cv-886, 2017 WL 1382556, at *4 (W.D. Wis., Apr. 18, 2017). The court noted that “a patent infringement defendant does not have to take the IPR option,” and can instead “get a full hearing of its validity Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 31 of 39 PageID# 3266 –25– challenge in district court.” Id. But “[i]f the defendant pursues the IPR option, it cannot expect to hold a second-string invalidity case in reserve in case the IPR does not go [the] defendant’s way.” Id. Indeed, “[i]n many patent cases, particularly those involving well-developed arts, there is an abundance of prior art with which to make out an invalidity case, so it would be easy to have a secondary set of invalidity contentions ready to go.” Id. Several other district court decisions have reached the same conclusion. See, e.g., e- Imagedata Corp v. Digital Check Corp, No. 16-cv-576, 2017 WL 657462, at *3 (E.D. Wis. Feb. 17, 2017) (rejecting argument that inter partes review petitioner may subsequently pursue non- petitioned-for invalidity grounds in litigation); Parallel Networks Licensing, LLC v. IBM Corp., No. 13-2072, 2017 WL 1045912, at *11 (D. Del. Feb. 22, 2017) (applying estoppel to grounds that reasonably could have been, but were not, raised in petition); Biscotti, Inc. v. Microsoft Corp., No. 2:13-cv-01015, 2017 WL 2526231, at *4-7 (E.D. Tex., May 11, 2017), adopted, ECF 260 (June 2, 2017) (applying estoppel to non-petitioned invalidity grounds and warning that a “broad reading of Shaw” would “protrac[t] litigation”). Synopsys alleges that two district court decisions have read Shaw more broadly. See SJ Mem. at 18 (citing Intellectual Ventures I LLC v. Toshiba Corp., 221 F. Supp. 3d 534, 553-54 (D. Del. 2016); Verinata Health, Inc. v. Ariosa Diagnostics, Inc., No. 12-cv-05501, 2017 WL 235048, at *3-4 (N.D. Cal. Jan. 19, 2017)). Contrary to Synopsys’ argument, Verinata did not address whether estoppel applies to grounds not raised in the petition, since the petitioner “challenge[d] the validity of the ’430 Patent only on grounds for which it petitioned IPR but the PTAB did not institute trial.” Verinata, 2017 WL 235048, at *4 (quotation marks omitted). Although the court in Intellectual Ventures felt compelled to limit estoppel to grounds raised in the petition, it questioned the wisdom and correctness of this result. In particular, it found the Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 32 of 39 PageID# 3267 –26– argument for broader estoppel under section 315(e) “perfectly plausible, in the sense that [petitioner] certainly could have raised these additional . . . grounds based on public documents at the outset of the IPR petition.” 221 F. Supp. 3d at 553. The court noted that “extending the . . . logic [of Shaw] to prior art references that were never presented to the PTAB at all (despite their public nature) confounds the very purpose of this parallel administrative proceeding.” Id. The court ruled as it did only because it could not “divine a reasoned way around the Federal Circuit’s interpretation in Shaw.” Id. But as explained above, and as other courts and the Patent Office have concluded, Shaw does not determine the result in this case. D. The Patent Office’s Interpretation Is Entitled to Deference. In Shaw and HP, the Federal Circuit agreed with the Patent Office that there was no estoppel under the circumstances presented. See Shaw, 817 F.3d at 1300; HP, 817 F.3d at 1347– 48. Here, the Patent Office (both the Board and the Office of Patent Legal Administration) has concluded that estoppel does apply to grounds that could have been included in Synopsys’ petition for inter partes review through the exercise of reasonable diligence. See A1674-85; Great West Cas. Co. v. Intellectual Ventures II LLC, IPR2015-01534, Paper 13 (PTAB Feb. 15, 2017). The views of the Patent Office, which is responsible for conducting inter partes review and ex parte reexamination proceedings and is authorized by Congress to promulgate rules governing those proceedings, see 35 U.S.C. §§ 2(b)(2), 316(a), are entitled to substantial deference, see, e.g., Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1335-36 (Fed. Cir. 2008) (applying Chevron deference to regulations that “govern the conduct of proceedings in the Office”); United States v. Mead Corp., 533 U.S. 218, 234-35 (2001) (Skidmore deference applies even when Chevron does not).13 Deference is particularly warranted here because the Office of 13 That the Patent Office has interpreted section 315(e) through adjudication rather than (continued…) Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 33 of 39 PageID# 3268 –27– Patent Legal Administration “act[ed] as the Director’s designee,” Complaint ¶ 23, and provided the Patent Office’s final word on the application of section 315(e)(1) to the facts presented. The Board’s reasoning in Great West Casualty is compelling. See No. IPR2015-01534, Paper 13 at 9-16. The Board was “unpersuaded that the words ‘reasonably could have raised during the inter partes review’ . . . should be interpreted as limited to grounds actually raised during the prior completed proceedings,” because that interpretation “would render superfluous ‘reasonably could have raised.’” Id. at 12-13. Moreover, the Board saw a “substantive distinction between a ground that a petitioner attempted to raise, but was denied a trial, and a ground that a petitioner could have raised but elected not to raise in its previous petition or petitions.” Id. In the first situation, “[b]asic principles of fairness and due process dictate that the petitioner should not be estopped.” Id. But in the latter scenario, “a petitioner makes an affirmative choice to avail itself of inter partes review only on certain grounds,” and “[t]hat choice . . . comes with consequences, most prominently, that grounds petitioner elects not to raise in its petition for inter partes review may be subject to the consequences of Section 315(e)(1).” Id. The Board read Shaw as holding only that estoppel does not apply to a ground that was presented in a petition but on which the Board denied institution. Id.14 E. Synopsys’ Interpretation Would Defeat the Purpose of the Estoppel Under Section 315(e). Synopsys’ interpretation should also be rejected because it would effectively defeat the purpose of the estoppel provisions that are an integral part of inter partes review. Congress rulemaking does not disturb the agency’s entitlement to deference. See Mead, 533 U.S. at 229, 234-35. Moreover, even if Shaw and HP applied, the Patent Office’s interpretation of section 315(e) would control so long as it is reasonable—a requirement easily satisfied here. See Nat’l Cable & Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980-86 (2005). 14 The Board’s decision in Great West is consistent with its decisions predating Shaw. See, e.g., Apotex Inc. v. Wyeth, LLC, IPR2015-00873, 2015 WL 5523393, at *5 (PTAB Sept. 16, 2015). Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 34 of 39 PageID# 3269 –28– designed inter partes review to serve as a substitute for the litigation of validity based on patent and printed publication prior art. If Synopsys’ interpretation were adopted, inter partes review would seldom, if ever, prevent a party from relitigating the same issues in court—or in subsequent proceedings before the Patent Office. “In many patent cases, particularly those involving well-developed arts, there is an abundance of prior art with which to make out an arguable invalidity case, so it would be easy to have a secondary set of invalidity contentions ready to go.” Douglas Dynamics, 2017 WL 1382556, at *4. There is no reason to invite relitigation, or to assist petitioners who fail to exercise diligence in discovering relevant prior art or strategically withhold prior art from an inter partes review petition. Furthermore, allowing a petitioner to strategically withhold prior art from an inter partes review petition and later assert it in district court litigation would be inefficient and unfair: “Allowing [a petitioner] to raise arguments [in district court] that it elected not to raise during the IPR would give it a second bite at the apple and allow it to reap the benefits of the IPR without the downside of meaningful estoppel.” Parallel Networks Licensing, 2017 WL 1045912, at *12. As Douglas Dynamics noted, “a patent infringement defendant does not have to take the IPR option,” and can instead “get a full hearing of its validity challenge in district court.” 2017 WL 1382556, at *4. But “[i]f the defendant pursues the IPR option, it cannot expect to hold a second-string invalidity case in reserve in case the IPR does not go [the] defendant’s way.” Id. Synopsys argues that its rule is consistent with the idea that inter partes review should be an expedited proceeding. SJ Mem. at 18–21. In Synopsys’ view, allowing petitioners to choose the prior art they wish to assert will simplify inter partes reviews and thus make them more expeditious. But as explained above, petitioners are not required to choose inter partes review; they can choose instead to litigate all their issues in district court. Moreover, estoppel operates Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 35 of 39 PageID# 3270 –29– on a claim-by-claim basis, so petitioners can simplify inter partes reviews, without subjecting themselves to estoppel, by seeking review of only a limited number of patent claims. But allowing petitioners to pick and choose the prior art for which to create estoppel would encourage multiple proceedings and defeat the inter partes review mechanism’s purpose. If an interpretation of section 315(e) causes such proceedings to fail to meet their basic purpose, then surely it is no argument in favor of that interpretation that this failure is achieved expeditiously. In district court, of course, litigants may not pick and choose which prior art references to assert against a patent, then later bring a second suit challenging the validity of the same patent based on additional references that they withheld from the earlier litigation. Instead, litigants are generally precluded from bringing lawsuits based on arguments they raised or could have raised in prior litigation, including arguments that could have been discovered through the exercise of reasonable diligence. See Covert v. LVNV Funding, LLC, 779 F.3d 242, 247 (4th Cir. 2015). Those established rules do not cause federal courts to be inundated by “literally hundreds of pieces of prior art” in every patent case, as Synopsys claims. SJ Mem. 19. Instead, litigants generally recognize that a blunderbuss approach is unlikely to succeed, and so they select the prior art references that are most relevant. There is no reason to think that petitioners will not follow a similar approach in inter partes review proceedings.15 F. Synopsys’ Remaining Arguments Also Fail. Synopsys presents two additional arguments, neither of which withstands scrutiny. It first argues that the decision under review here is contrary to the Patent Office’s regulations. SJ 15 Synopsys argues in a footnote that the Board’s word limits on petitions for inter partes review limit the number of grounds that petitioners can raise. If that is true, the answer is to increase the word limits, not to interpret section 315(e) in a way that defeats the purpose of inter partes review. Regardless, Synopsys has not challenged the word limits, which the Patent Office adopted pursuant to an express grant of rulemaking authority. See 35 U.S.C. § 316(a). Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 36 of 39 PageID# 3271 –30– Mem. at 21. That is incorrect. The regulations provide that a party is estopped with respect to “any ground that [it] raised or reasonably could have raised during the trial” in a prior inter partes review. 37 C.F.R. § 42.73(d)(1). This language is consistent with the Patent Office’s decision terminating ex parte reexamination of Mentor’s ’376 patent, for the reasons given in Part II.A above—namely, that “raised” and “reasonably could have raised” necessarily mean different things, and even if the Board’s institution decision is the starting point for the analysis, a petitioner “reasonably could have raised” a ground by including it in its petition. The Patent Office is entitled to deference in construing its own regulation—a point Synopsys fails to acknowledge. See Auer v. Robbins, 519 U.S. 452, 461 (1997). Synopsys’ complaint also includes a separate count challenging the Patent Office’s “policy and practice” of applying section 315(e) in circumstances where a party reasonably could have, but nevertheless failed to, include prior art in an earlier petition for inter partes review. See Complaint ¶¶ 37-39. This claim fails for the same threshold reason as Synopsys’ primary claim, objecting to the Patent Office’s decision terminating the ex parte reexamination of the ’376 patent. See Part I, supra. It also fails on the merits for the same reasons as Synopsys’ primary claim. See Parts II.A-E, supra. Because it was lawful (and required) for the Patent Office to apply section 315(e) estoppel here, it necessarily is lawful for the Patent Office to carry out a “policy and practice” of doing the same in other analogous circumstances. CONCLUSION For the reasons stated above, the Court should deny Synopsys’ motion for summary judgment and grant Mentor’s cross-motion for dismissal or, alternatively, summary judgment. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 37 of 39 PageID# 3272 Dated: June 27, 2017 Respectfully submitted, /s/ Bradley Charles Wright Virginia Bar No. 37463 BANNER & WITCOFF LTD. 1100 13th St. NW Suite 1200 Washington, DC 20005-4051 Tel: 202-824-3000 Fax: 202-824-3001 Email: bwright@bannerwitcoff.com OF COUNSEL: Robert A. Long, Jr. (pro hac vice) Kevin F. King (pro hac vice) COVINGTON & BURLING LLP One CityCenter 850 Tenth Street, NW Washington, DC 20001-4956 Tel: 202-662-5612 Fax: 202-778-5612 Email: rlong@cov.com Attorneys for Intervenor-Defendant Mentor Graphics Corp. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 38 of 39 PageID# 3273 –2– CERTIFICATE OF SERVICE I hereby certify that on the 27th day of June, 2017, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system, which will send a notification of such filing to the following: Sten A. Jensen ORRICK HERRINGTON & SUTCLIFFE LLP 1152 15th Street, N.W. Washington, DC 20005-1706 Tel: 202-339-8400 Fax: 202-339-8500 Email: sjensen@orrick.com Attorney for Plaintiff Synopsys, Inc. R. Trent McCotter Assistant United States Attorney 2100 Jamieson Avenue Alexandria, Virginia 22314 Tel: (703) 299-3845 Fax: (703) 299-3983 Email: trent.mccotter@usdoj.gov Attorney for Defendants Joseph Matal, Acting Undersecretary Of Commerce For Intellectual Property And Interim Director Of The United States Patent & Trademark Office, And The United States Patent & Trademark Office /s/ Bradley Charles Wright Virginia Bar No. 37463 BANNER & WITCOFF LTD. 1100 13th St. NW Suite 1200 Washington, DC 20005-4051 Tel: 202-824-3000 Fax: 202-824-3001 Email: bwright@bannerwitcoff.com Attorney for Intervenor-Defendant Mentor Graphics Corp. Case 1:17-cv-00517-TSE-JFA Document 38 Filed 06/27/17 Page 39 of 39 PageID# 3274