The US Court of Appeals for the Federal Circuit affirmed a district court judgment that the owner of a patent with claims declared unpatentable by the Patent Trial and Appeal Board (PTAB) in an inter partes review (IPR) may not challenge ir collaterally attack the decision in district court. The Federal Circuit concluded that the district court lacked jurisdiction to hear a collateral challenge attacking the validity of a PTAB final written decision. Personal Audio, LLC v. CBS Corporation, Case No. 18-2256 (Fed. Cir. Jan. 10, 2020) (Taranto, J).
Non-practicing entity Personal Audio sued CBS in 2013 for infringing claims of a patent covering a system for organizing and scheduling audio segments. In September 2014, Personal Audio was awarded $1.3 million in damages in a jury trial against CBS. While Personal Audio was trying its case against CBS in district court, a third party, Electronic Frontier Foundation, was prosecuting its instituted IPR at the PTAB involving the same patent. In April 2015, the PTAB issued a final written decision in the IPR proceeding, finding that the claims at issue in the district court litigation were unpatentable.
Personal Audio and CBS agreed to await resolution of the IPR before proceeding further in the district court case, where CBS had raised estoppel. Ultimately, the Federal Circuit affirmed the PTAB, and the Supreme Court of the United States thereafter denied certiorari. With the invalidation of the claims-at-issue final, CBS sought preclusive effect in the district court. Personal Audio argued, unsuccessfully, that the Seventh Amendment prohibited a later-issued IPR decision from overturning a jury verdict. The Federal Circuit appeal followed.
Personal Audio raised multiple constitutional challenges and other attacks on the propriety of the district court’s entry of judgment, but the Federal Circuit found that Personal Audio had forfeited almost all of these arguments. Regarding the Seventh Amendment issue, the Court concluded that it could not reach the merits because “the district court did not have jurisdiction to consider challenges to the legality of the Board decision.”
The Court considered whether the statutory scheme in the America Invents Act (AIA) demonstrated a congressional intent to preclude district court jurisdiction of PTAB decisions, and concluded that it did. The Federal Circuit analogized an appeal of a PTAB final written decision to an appeal of a Merit Systems Protection Board (MSPB) decision—both of which Congress funneled directly to the Federal Circuit. The Court cited the 2012 Supreme Court decision in Elgin that MSPB decisions could not be challenged through collateral proceedings in district court. Specifically, the Federal Circuit concluded that judicial review of PTAB final written decisions was limited to an appeal to the Federal Circuit by the various AIA provisions governing appeals. These provisions include § 318, which provides that appeal lies “only” with the Federal Circuit, and the consistent mention in §§ 142–144 of the Federal Circuit and no other court. Thus, the Court concluded, “Congress’s affirmative grant of an exclusive direct-review procedure for final written decisions deprives the district court of jurisdiction to hear” a “collateral attack.”
Practice Note: The result in Personal Audio, a jury verdict overturned by an IPR decision, could have been avoided had the district court instituted a stay of the case pending IPR. But there are often countervailing interests in multidimensional patent disputes that counsel otherwise, such as the ability to obtain favorable settlement positioning. This case serves as a reminder to weigh the benefits and costs of proceeding with district court litigation while an IPR remains outstanding.
