Federal Circuit Reverses IPR Estoppel Ruling Against Valve, Finds Insufficient Search Evidence and Hindsight Bias

The U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision today in Ironburg Inventions Ltd. v. Valve Corporation, reversing a district court ruling that had estopped Valve Corporation from asserting two invalidity grounds at trial. The majority opinion, authored by Judge Hughes, concluded that the district court relied on insufficient evidence to estop one ground and failed to adequately account for hindsight bias in estopping the other. Judge Stark filed a concurring opinion.

Ironburg Inventions Ltd. owns U.S. Patent No. 8,641,525, directed to a handheld video game controller with additional controls on the back of the device, positioned so a user’s non-thumb fingers can operate them while the thumb and forefinger rest on the top and front. Ironburg filed a lawsuit against Valve in 2015, alleging that Valve’s Steam Controller infringed claims 2, 4, 7, 9-11, and 18 of the ‘525 patent. In April 2016, Valve filed an inter partes review (IPR) petition, IPR2016-00948. The Patent Trial and Appeal Board (PTAB) partially instituted the petition, and the IPR concluded in a final written decision in September 2017. A jury later returned a verdict for Ironburg in February 2021, finding willful infringement and awarding $4,029,533.93 in damages.

A third party, Collective Minds Gaming Co. Ltd. (CMG), also filed an IPR petition raising two new obviousness grounds, one based on U.S. Published Patent Application No. 2010/0298053 (Kotkin), and another based on a combination of U.S. Patent No. 6,760,013 (Willner), Japanese Patent Application No. JP-A H10-020951 (Koji), and U.S. Patent No. 5,773,769 (Raymond). Valve then amended its invalidity contentions in the district court litigation to raise the CMG grounds, and Ironburg moved for IPR estoppel under 35 U.S.C. Section 315(e)(2).

Valve appealed, and in Ironburg I, the CAFC vacated and remanded. It held that the burden of proof to establish estoppel rests with Ironburg, not Valve, and that the district court had improperly placed that burden on Valve. The CAFC also found that CMG’s IPR petition, standing alone, was insufficient to support a finding of estoppel because no record evidence addressed CMG’s diligence in its pre-petition search. On remand, the district court permitted limited additional discovery and, in May 2024, again granted Ironburg’s renewed motion for estoppel. In doing so, it relied on Valve’s pre-petition prior art search records from Landon IP and searches conducted by Cardinal IP, and Valve appealed again.

The Federal Circuit found that the district court’s conclusion rested on insufficient evidence. Landon IP had run classification searches prior to the filing of Valve’s petition, and the district court found Kotkin was reasonably discoverable because the classifications containing Kotkin were included in those searches. The Landon IP search strings showed that those classification searches returned 26,333 references from the Japanese-language database. The court held that “something more is required for estoppel when a classification search alone returns an unreviewable number of search results.” The district court acknowledged that Landon IP performed 45 keyword searches but did not incorporate that into its Kotkin analysis, and the record evidence indicated that keyword and citation searches are conventionally used to narrow results after an initial classification search. Since the evidence was insufficient, the Federal Circuit reversed the Kotkin ground of estoppel.

Furthermore, Cardinal IP search professional Seth Greenia conducted an initial search in 2023 using classification and citation queries. The district court struck search string number 34 because it was a forward-and-backward citation search that would have returned patents issued after Valve’s 2016 petition, implicating hindsight. Valve argued on appeal that hindsight infected Greenia’s search from an earlier point.

The CAFC agreed, finding that search string number 3, an early query in Greenia’s initial search, used forward-and-backward citation searching without date restrictions and therefore would have returned later-arising patents and publications citing Kotkin, Koji, and Raymond. Based on those sources, Greenia then selected keywords and additional classifications to guide his subsequent searches. The court held that “the district court’s finding that Mr. Greenia’s searches were not infected with hindsight bias – based on his mere testimony that he had not been shown the references before searching – was error.”

Project manager Brian Hameder submitted a second declaration applying date filters, but it addressed only the string the district court had already struck. Since the earlier citation search also incorporated hindsight, the CAFC found that Hameder’s corrections were “too little too late” and that Greenia’s initial search was not probative of what a skilled searcher would have discovered at the time of Valve’s petition.

The court also addressed Greenia’s supplemental classification search, offered as an additional basis for finding Raymond discoverable. Hameder’s deposition testimony confirmed the supplemental search was conducted only “because there was another reference that had not yet been found.” The CAFC concluded that Ironburg had not provided sufficient reasoning to excuse that admission and that the supplemental search was not probative of Raymond’s discoverability at the relevant time. The CAFC reversed the estoppel of the Willner-Koji-Raymond ground, and on remand, the district court must consider the ‘525 patent’s validity in light of both invalidity grounds.

Ultimately, the CAFC reversed the district court’s finding of estoppel on both the Kotkin and Willner-Koji-Raymond invalidity grounds and remanded for further proceedings.

Concurrence

Stark’s concurring opinion noted that, while the majority opinion does not “fill in all the details of IPR estoppel,” it makes “several important contributions to the ongoing development of the skilled searcher test,” which he highlighted.

Stark noted that, post-Ingenico Inc. v. IOENGINE, LLC, “for purposes of the skilled searcher test, the patentee’s burden to show discoverability of invalidity grounds is not automatically satisfied by proving the findability of the prior art reference(s) on which the invalidity ground is based.”

Thus, a patentee relying on the skilled searcher test to estop a challenger must prove at least one of the following, said Stark:

“(i) the prior art reference(s) at issue were findable by a skilled searcher conducting a diligent search and

(ii) the skilled searcher also reasonably would have been expected to discover, based on the reference(s) found, the invalidity ground the challenger seeks to assert in court.”

The present case addressed the first step of the analysis, and held that “in at least some circumstances, ‘something more’ than proving the mere accessibility of a prior art reference is required in order to establish a skilled searcher performing a diligent search would have found the reference.” This is a fact and context-dependent analysis and must be left to be developed by the district courts and Board, Stark concluded.