Inland Diamond Prods. Co. v. Cherry Optical Inc
Authored by: Jeremy J. Gustrowsky
In a significant decision for patent owners and challengers alike, the Federal Circuit in Inland Diamond Products Co. v. Cherry Optical Inc. clarified that findings from Patent Trial and Appeal Board (PTAB) inter partes review (IPR) proceedings do not automatically carry over to invalidate patent claims in district court. The case involved U.S. Patent No. 8,636,360 and U.S. Patent No. 9,405,130, where certain claims had survived IPR challenges but were later found invalid by a district court based on issue preclusion from the IPRs.
The district court had reasoned that because the IPRs had already found some claims unpatentable under a “preponderance of the evidence” standard, it could rely on those findings to invalidate related dependent claims in the infringement suit, without requiring the challenger to prove invalidity again. However, the Federal Circuit disagreed, emphasizing that district courts must use a higher “clear and convincing evidence” standard to find a patent invalid. Since the standards of proof are different, the court held that fact findings from IPRs cannot be used to preclude relitigation of those facts in district court.
The Federal Circuit also noted that claim constructions made by the PTAB under the “broadest reasonable interpretation” standard (used in IPRs filed before November 13, 2018) do not have preclusive effect in district court, where the narrower Phillips standard applies. This means that both the facts and the way patent claims are interpreted in IPRs cannot automatically bind a district court in later proceedings.
Ultimately, the Federal Circuit vacated the district court’s judgment and sent the case back, instructing that any invalidity finding must be based on evidence and arguments presented in court, not just on what the PTAB decided in the IPR. This decision reinforces the importance of the different legal standards in IPRs and district court and ensures that patent owners get the full benefit of expensive and time consuming litigation.