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Ironburg Inventions Ltd. v. Valve Corp.

United States District Court, W.D. Washington, Seattle

November 8, 2019

IRONBURG INVENTIONS LTD.,,
v.
VALVE CORPORATION, Defendant.

          ORDER

          Thomas S. Zilly, United States District Judge.

         THIS MATTER comes before the Court on (i) plaintiff's motion regarding inter partes review estoppel, docket no. 260, and (ii) plaintiff's motion for partial summary judgment concerning inequitable conduct, docket no. 258. Having reviewed all papers filed in support of, and in opposition to, the motions, the Court enters the following order.

         Background

         Plaintiff Ironburg Inventions Ltd. (“Ironburg”), a limited company based in the United Kingdom, and defendant Valve Corporation (“Valve”), a Washington corporation, compete in the video-game controller market. See Order at 1 (docket no. 116). Ironburg licenses its patents to Scuf Gaming International, LLC and Microsoft Corporation. 2d Am. Compl. at ¶ 11 (docket no. 44). Valve produces a device known as the “Steam Controller.” Id. at ¶ 12. Ironburg alleges that Valve's Steam Controller infringes four patents, namely United States Patent No. 8, 641, 525 (the “'525 Patent”), United States Patent No. 9, 089, 770 (the “'770 Patent”), United States Patent No. 9, 289, 688 (the “'688 Patent”), and United States Patent No. 9, 352, 229 (the “'229 Patent”). Id. at Counts I-IV. In light of related matters pending before the United States Patent and Trademark Office (“PTO”) Patent Trial and Appeal Board (“PTAB”), Ironburg's claims concerning the '688 and '229 Patents have been stayed. See Minute Order at ¶ 2(b) (docket no. 148). The pending motions and this Order relate to the '525 and '770 Patents (the “patents-in-suit”).

         This litigation commenced in the Northern District of Georgia in December 2015.[1]See Compl. (docket no. 1). Sometime thereafter, Valve requested inter partes review (“IPR”) by the PTAB of all twenty claims in the '525 Patent and all twenty claims in the '770 Patent. See Exs. C & D to Becker Decl. (docket nos. 262-3 & 262-4). The PTAB instituted inter partes review on most, but not all, of the grounds set forth in Valve's IPR petitions. See Exs. E & F to Becker Decl. (docket nos. 262-5 & 262-6). In September 2017, the PTAB issued its final written decisions in the related IPR proceedings. Exs. K & L to Becker Decl. (docket nos. 262-11 & 262-12). In July 2019, the United States Court of Appeals for the Federal Circuit affirmed the PTAB's rulings. Ex. A to Joint Status Report (docket no. 302-1). Ironburg and Valve dispute the extent to which the PTAB's conclusions preclude Valve from challenging the validity of the patent claims remaining in this matter.

         A. IPR Proceedings

         In September 2016, when the PTAB instituted the IPR proceedings at issue, the United States Supreme Court had not yet decided SAS Inst. Inc. v. Iancu, 138 S.Ct. 1348 (2018), which invalidated the PTAB's former practice of instituting inter partes review as to less than all of the claims in the IPR petition. Consistent with its earlier protocol, the PTAB instituted inter partes review concerning the '525 and '770 Patents with regard to less than all of the claims and less than all of the prior art references cited in Valve's IPR petition. The following table summarizes the claims and prior art references as to which the related IPR proceedings, IPR2016-00948 and IPR2016-00949, were instituted.

Table 1: Grounds Addressed in IPR Proceedings
Patent Claims Prior Art References
’525 Patent IPR2016-00948 1, 6, 13, 14, 16, 17, 19, and 20 Tosaki [2]
1-11, 13, 16, 17, and 20 Enright [3] and Tosaki
18 Enright, Tosaki, and Oelsch [4]
’770 Patent IPR2016-00949 1, 3-12, 15-17, 19, and 20 Tosaki
1-12 and 14-20 Enright and Tosaki

See Exs. E & F to Becker Decl. (docket nos. 262-5 & 262-6).

         In IPR2016-00948, the PTAB concluded that Claims 1, 6, 13, 14, 16, 17, 19, and 20 of the '525 Patent were anticipated by Tosaki and that Claim 20 of the '525 Patent was obvious over Enright and Tosaki. Ex. K to Becker Decl. (docket no. 262-11). In IPR2016-00949, the PTAB determined that Claims 1, 3-12, 15-17, 19, and 20 of the '770 Patent were anticipated by Tosaki and that Claims 1-12, 15-18, and 20 of the '770 Patent were obvious over Enright. Ex. L to Becker Decl. (docket no. 262-12). The PTAB rejected Valve's other invalidity contentions, including its reliance on Oelsch in combination with Enright and Tosaki. See Exs. K & L to Becker Decl. The claims surviving inter partes review and still pending in this matter are Claims 2-5, 7-12, 15, and 18 of the '525 Patent and Claims 13 and 14 of the '770 Patent, all of which are dependent claims.

         With regard to these remaining patent claims, Valve had sought inter partes review in reliance on the following prior art references:

Table 2: Grounds Rejected by PTAB
Patent Claims Prior Art References
’525 Patent 15 Enright, Tosaki, and Ono[5]
2, 4, 5, 7, 8, 12, and 15 Tosaki and Jimakos[6]
’770 Patent 13 Enright, Tosaki, and Ono
13 and 14 Tosaki and Jimakos

See Exs. C and D to Becker Decl. (docket nos. 262-3 & 262-4). The PTAB concluded, however, that Valve had not demonstrated a “reasonable likelihood” of prevailing on its contentions that the claims listed in Table 2 are unpatentable as obvious over the prior art references identified. See Exs. E and F to Becker Decl. (docket nos. 262-5 & 262-6). In defending against the infringement allegations in this litigation, Valve continues to rely on the combinations of (i) Enright, Tosaki, and Ono, and (ii) Tosaki and Jimakos (collectively, the “non-instituted grounds”) to challenge the validity of most of the remaining patent claims.

         Valve also asserts that the following prior art references, which were not raised in the IPR proceedings (collectively, the “non-petitioned grounds”), render most of the remaining patent claims obvious:

Table 3: Grounds Not Raised in IPR Petitions
Patent Claims Prior Art References
’525 Patent 2-3, 5, 9-11, and 18 Kotkin[7]
2, 4, 5, and 7-11 Willner,[8] Koji,[9] and Raymond[10]
’770 Patent 13 and 14 Willner and Koji

         See Def.'s Resp. at 1 (docket no. 276).[11] In its motion regarding IPR estoppel, Ironburg contends that Valve should be estopped from pursuing invalidity defenses on the grounds set forth in Tables 2 and 3, the non-instituted grounds and the non-petitioned grounds, respectively.

         B. Accusation of Inequitable Conduct

         In its separate motion for partial summary judgment, Ironburg seeks to prevent Valve from asserting inequitable conduct as an affirmative defense or counterclaim. In answering Ironburg's Second Amended Complaint, docket no. 44, Valve alleged that, during the prosecution of the '525 and '770 Patents, Ironburg failed to disclose a prior art reference, namely website posts titled “Rapid Fire Mod for Wireless Xbox 360 Controller, Step by Step Tutorial with Pictures, ” which Valve has denominated as the “Mod document, ” but which the PTAB abbreviated as “Jimakos” in connection with Valve's IPR petitions. See Def.'s Answer, Affirmative Defenses & Counterclaims at ¶¶ 59-98 (docket no. 49); see also Exs. E (at 17 n.5) & F (at 11 n.3) to Becker Decl. (docket nos. 262-5 & 262-6).

         Valve's fifth affirmative defense and ninth (declaratory judgment) counterclaim rely solely on Jimakos (or the Mod document) as a basis to deem the '525 and '770 Patents unenforceable as a result of inequitable conduct committed before the PTO during the patent application process.[12] In moving to strike the affirmative defense and dismiss the counterclaim, Ironburg contends that Jimakos does not have the requisite “materiality” to support a finding of inequitable conduct, citing the PTAB's refusal to institute inter partes review as to the combination of Tosaki and Jimakos. Ironburg also asserts that Jimakos was, in fact, disclosed to the patent examiner.

         Discussion

         A. Inter Partes Review Estoppel

         The Supreme Court's decision in SAS significantly altered the jurisprudential landscape with regard to IPR estoppel. Prior to SAS, in interpreting the relevant provision of the Leahy-Smith America Invents Act, [13] the Federal Circuit held that, when the PTAB instituted IPR proceedings on some, but not all, grounds set forth in an IPR petition, estoppel did not attach to the grounds on which the PTAB declined to institute inter partes review. See Shaw Indus. Grp., Inc. v. Automated Creel Sys., Inc., 817 F.3d 1293, 1300 (Fed. Cir. 2016). Since SAS was issued, other district courts have addressed the continued viability of Shaw in two contexts, namely with respect to (i) “non-instituted” grounds, i.e., grounds contained in the IPR petition that did not survive the PTAB's former triage process, and (ii) “non-petitioned” grounds, i.e., grounds not raised in the IPR petition. See Trustees of Columbia Univ. v. Symantec Corp., 390 F.Supp.3d 665 (E.D. Va. 2019) (involving only non-petitioned grounds); Palomar Techs., Inc. v. MRSI Sys., LLC, 373 F.Supp.3d 322 (D. Mass. 2019) (involving non-petitioned grounds); Am. Tech. Ceramics Corp. v. Presidio Components, Inc., 2019 WL 365709 (E.D.N.Y. Jan. 30, 2019) (involving non-petitioned grounds); Cal. Inst. of Tech. v. Broadcom Ltd., 2018 WL 7456042 (C.D. Cal. Dec. 28, 2018) (involving both non-instituted and non-petitioned grounds); SiOnyx, LLC v. Hamamatsu Photonics K.K., 330 F.Supp.3d 574 (D. Mass. 2018) (involving both non-instituted and non-petitioned grounds).

         In this matter, Valve asserts that the remaining claims of the patents-in-suit are invalid on the basis of non-instituted and/or non-petitioned grounds. With regard to the non-instituted grounds, Ironburg seeks to preclude Valve from relitigating the PTAB's decision that such invalidity defenses lack merit. As to the non-petitioned grounds, Ironburg argues that Valve should be estopped from raising such challenges in this litigation because it could have but failed to do so in the prior IPR proceedings. The Court agrees with Ironburg with respect to both categories of invalidity contentions.

         1. Non-Instituted Grounds

         To rule on Ironburg's motion for IPR estoppel with respect to non-instituted grounds, the Court must analyze the legal effect of the PTAB's pre-SAS institution of IPR proceedings on some, but not all, grounds stated in the IPR petition. In SiOnyx, a case with a procedural posture similar to the one here, the district court concluded that § 315(e)(2) estoppel applied to the non-instituted grounds. See 330 F.Supp.3d at 601. Like Valve in this case, the IPR petitioner in SiOnyx, Hamamatsu Corporation, had the opportunity to but did not request any SAS-based relief. See Id. at 601 & n.18; see also Google LLC v. Lee, 759 Fed. App'x 998 (Fed. Cir. 2019) (remanding to the PTAB to address non-instituted grounds). The SiOnyx Court ruled that, because Hamamatsu Corporation “reasonably could have raised” the non-instituted grounds by seeking a post-SAS remand to the PTAB, but failed to do so, it was estopped from further pursuing those contentions. 330 F.Supp.3d at 601.

         The Court is persuaded that SiOnyx reached the correct result. See also Cal. Inst. of Tech., 2018 WL 7456042 at *8. The Court is aware that two previous district court cases determined, in light of Shaw, that § 315(e)(2) estoppel did not attach to non-instituted grounds, but both of those opinions were issued before SAS. See Milwaukee Elec. Tool Corp. v. Snap-On Inc.,271 F.Supp.3d 990 (E.D. Wis. 2017); Oil-Dri Corp. of Am. v. Nestlé Purina Petcare Co., 2017 WL 3278915 (N.D.Ill. Aug. 2, 2017). SAS rendered unnecessary the adherence to Shaw that formed the basis of the decisions in Milwaukee Electric and ...


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