Preemptive Declaratory Judgment Invalidity Counterclaims Trigger Statutory Bar

by | Oct 11, 2019 | Time Limits

By Sue Gerber and Matt Johnson

Last year, this blog discussed various strategic considerations for litigants seeking declarations of invalidity in district court actions to avoid being precluded from also seeking inter partes or other post-grant review before the PTAB.  See Have Cake, Eat Cake:  Declaratory Judgment Strategy For Accused Infringers.  A recent PTAB decision adds a new wrinkle to these strategic considerations with its interpretation of Sections 315(a)(1) and 315(a)(3).

Section 315(a) controls when a request for PTAB review will be barred by the accused infringer’s challenging validity in a civil action. 35 U.S.C. § 315(a).  Section 315(a)(1) bars institution of an inter partes review “if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.”  Id.  Section 315(a)(3) creates an exception, however, “[a] counterclaim challenging the validity of a claim of a patent does not constitute a civil action challenging the validity of a claim of a patent for purposes of this subsection.”  Id. (emphasis added).  As we previously explained in our blog, if an accused infringer brings a declaratory judgment complaint in district court, but limits its claims to seeking a declaration of noninfringement, the statutory bar on institution of a post-grant proceeding is not triggered, and the accused infringer may file an IPR or PGR petition challenging the validity of the patent.  This is true because the declaratory judgment plaintiff has not “filed a civil action challenging the validity of a claim.”  Moreover, if the declaratory judgment defendant (i.e., the Patent Owner) responds by asserting counterclaims for infringement, the declaratory judgment plaintiff may then assert responsive counterclaims for invalidity, which the PTAB has held in this procedural situation “meets the literal terms” of a “counterclaim” under § 315(a)(3), and therefore a petition is not barred by § 315(a)(1).  See Canfield Scientific, Inc. v. Melanoscan, LLC, IPR2017-02125, Paper No. 15 at p. 4 (Mar. 30, 2018).

The PTAB’s decision expands upon the holding in Canfield.  In that case, the Patent Owner sued Mylan Pharmaceuticals, Inc. (“Mylan”) for infringement of five patents.  Mylan asserted counterclaims seeking a declaratory of invalidity for the five asserted patents and added an additional declaratory judgment “counterclaim” seeking a declaration that a previously unasserted patent, No. 9,200,698 (“the ‘698 patent”) was also invalid.  Petitioners later petitioned with Mylan for inter partes review of the ‘698, being left as the only petitioner upon Mylan’s settlement.  The PTAB denied the petition, finding it was barred by Section 315(a)(1).  Petitioner sought rehearing, which the PTAB also denied.  IPR2017-01995, Paper 77 at 2.)

Petitioner argued that Mylan’s declaratory judgment claim before the district court was properly captioned as a “counterclaim” and thus exempted from the bar by Section 315(a)(3).  The PTAB disagreed.  It concluded that regardless of the claims relating to the ‘698 patent being captioned as “Counterclaim—Declaratory Judgment, ” Mylan had elected to introduce the ’698 patent into the district court litigation.  The claims were, therefore, not compulsory counterclaims, but rather, were in fact “declaratory judgment actions for invalidity and infringement.”  (Id. at 6.)  As a result, the PTAB held that Petitioner “cannot shelter Mylan’s declaratory judgment actions against the ’698 patent under § 315(a)(3) by characterizing the actions as counterclaims.  Section 315(a)(3) does not exempt Mylan’s declaratory judgment actions against the ’698 patent.”  (Id.)

Thus, a word to the wise.  Asserting a declaratory judgment claim seeking invalidity of a patent that has not been previously asserted—regardless of the procedural posture and regardless of how the claim is characterized in the district court pleadings—will be treated as “fil[ing] a civil action challenging the validity of a claim of the patent” that is subject to the Section 315(a)(1) bar.

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Matthew Johnson

Partner at Jones Day
Matt Johnson is one of the Firm's primary contacts on practice before the PTAB. Currently co-chairing the Firm's PTAB subpractice and involved in proceedings at the Board since the first day of their availability in September 2012, Matt regularly represents clients as both petitioners and patent owners at the Board. He further works as an advocate for clients in appeals from Board proceedings at the Federal Circuit.