Dual Attacks Permitted: How the Federal Circuit's "Two Bites at the Apple" Ingenico Decision Undermines Patent Protection and IPR Estoppel

Introduction

The United States Court of Appeals for the Federal Circuit recently issued a decision in Ingenico Inc. v. IOENGINE, LLC that warrants careful analysis by patent owners and practitioners. This May 7, 2025 opinion addresses important questions regarding prior art invalidity grounds and the scope of Inter Partes Review (IPR) estoppel under 35 U.S.C. § 315(e)(2). The decision has significant implications for patent enforcement strategies, particularly regarding how patent owners defend against invalidity challenges following IPR proceedings.

The Ingenico case concerned patents directed to portable devices, such as USB thumb drives, with processors that facilitate communications between a terminal and a network server. After IOENGINE asserted these patents against PayPal, Ingenico (a supplier of accused products to PayPal) filed a declaratory judgment action and subsequently challenged IOENGINE's patents through both IPR petitions and district court litigation. The Federal Circuit's decision upholds a jury verdict invalidating IOENGINE's patent claims based on prior art that was not raised in the IPR proceedings, interpreting the IPR estoppel provision in a manner that may significantly disadvantage patent owners.

This decision merits attention because it appears to create additional avenues for accused infringers to challenge patent validity, even after participating in IPR proceedings, by drawing fine distinctions between "grounds" that could have been raised in an IPR and those reserved for district court litigation. The court's interpretation of "ground" in the IPR estoppel statute potentially weakens the intended protective effect of estoppel provisions, which were designed to prevent patent owners from having to repeatedly defend their patents against similar invalidity challenges in different forums.

Background of the Case

IOENGINE owned U.S. Patent Nos. 9,059,969 and 9,774,703, directed to portable devices that facilitate communications between terminals and network servers. After IOENGINE asserted these patents against PayPal, Ingenico filed a declaratory judgment action and subsequently filed IPR petitions challenging the validity of IOENGINE's patent claims. The Patent Trial and Appeal Board (PTAB) issued final written decisions finding most of the challenged claims unpatentable.

In parallel district court proceedings, Ingenico introduced evidence of a prior art USB device known as the DiskOnKey Device, manufactured and sold by M-Systems Flash Disk Pioneers Ltd. in the early 2000s. This device was offered with various software applications, including a Firmware Upgrader, and was equipped with capabilities described in a Software Development Kit (collectively referred to as the "DiskOnKey System"). Ingenico argued that this system rendered the asserted claims invalid as anticipated or obvious because it was either "on sale" or "in public use" under pre-AIA 35 U.S.C. § 102(b), or "known or used by others... before the date of the invention" under pre-AIA 35 U.S.C. § 102(a).

A jury found IOENGINE's claims to be infringed but invalid as anticipated and obvious based on the DiskOnKey System. IOENGINE moved for judgment as a matter of law (JMOL) of no invalidity or, alternatively, for a new trial, arguing in part that Ingenico should have been estopped from relying on the Firmware Upgrader under 35 U.S.C. § 315(e)(2) because Ingenico reasonably could have raised it during the IPR proceedings. The district court denied IOENGINE's motions, and IOENGINE appealed.

The Federal Circuit's Analysis of IPR Estoppel

The most consequential aspect of the Federal Circuit's decision is its interpretation of the term "ground" in the IPR estoppel statute, 35 U.S.C. § 315(e)(2). This interpretation has significant implications for patent owners' ability to limit the invalidity challenges they face after prevailing against similar challenges in IPR proceedings.

The court began by examining the statutory language, noting that the IPR estoppel provision prevents a petitioner from asserting "that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review." The court determined that "grounds" refers to theories of invalidity available to challenge a claim under 35 U.S.C. §§ 102 or 103, but crucially, that in IPR proceedings, Congress intentionally limited the scope to invalidity challenges based on "prior art consisting of patents or printed publications."

The Federal Circuit held that IPR estoppel applies only to a petitioner's assertions in district court that the claimed invention is invalid under 35 U.S.C. §§ 102 or 103 because it was patented or described in a printed publication (or would have been obvious only on the basis of prior art patents or printed publications). Importantly, the court concluded that IPR estoppel does not preclude a petitioner from asserting in district court that a claimed invention was known or used by others, on sale, or in public use, as these are different grounds that could not have been raised during an IPR.

In the case at hand, this interpretation allowed Ingenico to challenge IOENGINE's patent claims based on the DiskOnKey System being known or used by others, on sale, or in public use, even though related printed publications describing this system potentially could have been raised during the IPR proceedings.

Concerns for Patent Owners

1. Narrowing of IPR Estoppel Protection

The Federal Circuit's interpretation of "ground" in the IPR estoppel statute significantly narrows the protection that estoppel provisions were intended to provide to patent owners. By drawing a distinction between different theories of invalidity under §§ 102 and 103, the court has created a pathway for accused infringers to make multiple validity challenges based on similar or related prior art references, simply by framing these challenges under different statutory provisions.

Patent owners had reasonably understood that once an IPR petitioner had the opportunity to challenge a patent based on prior art, they would be estopped from raising similar challenges in district court, regardless of the specific statutory basis. The Federal Circuit's interpretation frustrates this expectation and requires patent owners to defend against multiple rounds of invalidity challenges, increasing the cost and burden of patent enforcement.

2. Artificial Distinction Between Prior Art Categories

The distinction drawn by the court between invalidity grounds based on "patented or described in a printed publication" versus "known or used by others, on sale, or in public use" creates an artificial separation that may not reflect the reality of prior art references. In many cases, including the Ingenico case, the same underlying technology or product may be described in printed publications (which could be raised in an IPR) and also may have been on sale or in public use (which could be raised in district court).

This artificial distinction allows accused infringers to have "two bites at the apple" by challenging patent validity first in an IPR based on printed publications and then in district court based on related products or systems, even though both challenges essentially target the same inventive subject matter.

3. Lowered Evidence Standard for Public Use

The Federal Circuit's decision also raises concerns regarding the evidentiary standard for establishing "public use" of prior art. The court affirmed that circumstantial evidence is sufficient to establish public use, stating that such evidence "may also be more certain, satisfying and persuasive than direct evidence."

In this case, the court determined that substantial circumstantial evidence supported the jury's finding that the DiskOnKey System, including the Firmware Upgrader, was in public use based on evidence that M-Systems' employees were encouraged to inform customers about the Firmware Upgrader, that customers had access to a user guide, and that customers were encouraged to download the Firmware Upgrader.

This relatively low evidentiary threshold for establishing public use creates an additional challenge for patent owners, as it allows accused infringers to invalidate patents based on prior art that may not have been widely available or well-documented.

4. Increased Litigation Complexity and Cost

The Federal Circuit's interpretation of IPR estoppel increases the complexity and cost of patent litigation for patent owners. Following an IPR, patent owners must now anticipate and prepare defenses against a broader range of invalidity challenges in district court, even if similar prior art references were or could have been addressed in the IPR proceedings.

This increased complexity and cost may disproportionately burden smaller patent owners with limited resources, potentially discouraging them from asserting their patents against larger entities that can afford to pursue multiple invalidity challenges across different forums.

5. Undermining the Intent of the AIA

The America Invents Act (AIA) established IPR proceedings as an efficient alternative to district court litigation for resolving certain patent validity disputes. The estoppel provisions of 35 U.S.C. § 315(e) were intended to prevent duplicative challenges and to provide some measure of finality to IPR decisions.

By narrowly interpreting these estoppel provisions, the Federal Circuit may be undermining the intent of Congress to streamline patent validity disputes and to prevent harassment of patent owners through repeated challenges to the same patent.

Guidance for Patent Owners

In light of the Ingenico decision, patent owners should consider the following strategies to protect their patent rights:

1. Comprehensive Prior Art Searches

Patent owners should conduct thorough prior art searches before asserting their patents, paying particular attention to potential on-sale or public use prior art that might not be reflected in patent or printed publication databases. Understanding the full landscape of potential prior art will help patent owners assess the strength of their patents and anticipate potential invalidity challenges.

2. Strategic Consideration of Forum

Patent owners should carefully consider the pros and cons of different forums for patent enforcement. While IPR proceedings offer certain advantages, such as a more favorable claim construction standard, they also trigger estoppel provisions that may have limited effect in subsequent district court litigation, as demonstrated by the Ingenico decision.

In some cases, patent owners might prefer to proceed directly to district court litigation, particularly if they anticipate that potential infringers will rely on non-printed publication prior art.

3. Robust Responses to Invalidity Challenges

When faced with invalidity challenges in district court following an IPR, patent owners should develop robust responses that specifically address the public use, on-sale, or known/used by others grounds that might be raised. This may include:

• Challenging the sufficiency of evidence for establishing public use, particularly when based on circumstantial evidence

• Emphasizing the differences between the claimed invention and the alleged prior art system

• Presenting evidence of secondary considerations of non-obviousness

• Developing strong expert testimony regarding the differences between the alleged prior art and the claimed invention

  
  

4. Careful Claim Drafting and Prosecution

For patents still in prosecution, patent owners should draft claims with potential prior art challenges in mind. This may include:

• Including claim elements that distinguish the invention from potential prior art systems that might have been on sale or in public use

• Pursuing multiple claim sets with varying scope to create a diversified portfolio that is more resistant to invalidity challenges

• Considering continuation applications to maintain pending applications that can be tailored to address emerging competitive products or systems

  
  

5. Documentary Evidence of Invention Date

For patents subject to the pre-AIA first-to-invent rules (like those at issue in Ingenico), patent owners should maintain thorough documentation of conception and reduction to practice. Although the burden of proving invalidity remains with the challenger, having strong evidence of an early invention date can help rebut prior art challenges based on public use or on-sale grounds.

6. Legislative Advocacy

The patent community may wish to consider advocating for legislative changes to clarify and strengthen the IPR estoppel provisions. The current interpretation by the Federal Circuit may not align with the original intent of Congress in establishing the IPR system, and legislative action could provide clearer guidance on the scope of estoppel.

The Court's Narrow View of Circumstantial Evidence

Another concerning aspect of the Federal Circuit's decision is its treatment of circumstantial evidence in establishing public use. The court affirmed that circumstantial evidence is sufficient to establish prior public use, stating that "substantial circumstantial evidence" would allow a reasonable jury to conclude that a user downloaded and actually used the Firmware Upgrader with the DiskOnKey Device.

The court found this standard met based on evidence that M-Systems' employees were encouraged to inform customers about the Firmware Upgrader, that these customers had access to a user guide, and that they were encouraged to download the application. Notably absent was any direct evidence that anyone had actually downloaded or used the Firmware Upgrader before the critical date.

This relatively low evidentiary threshold for establishing public use creates a significant challenge for patent owners. It means that patents can be invalidated based on prior art that may not have been widely available or extensively documented, and it places patent owners at a disadvantage when defending against such challenges.

For patent owners, this aspect of the decision underscores the importance of conducting thorough prior art searches before asserting patents, and of being prepared to rebut circumstantial evidence of public use with strong evidence of the invention date (for pre-AIA patents) or with evidence challenging the public accessibility of the alleged prior art.

Impact on Burden of Proof

Although the Federal Circuit affirmed that Ingenico had the burden of proving invalidity by clear and convincing evidence, the court's decision regarding IPR estoppel and public use evidence effectively eases this burden for patent challengers.

By allowing challengers to assert invalidity based on public use or on-sale grounds that could not have been raised in an IPR, and by accepting circumstantial evidence of public use, the court has created a more favorable environment for patent challengers. This shift may make it more difficult for patent owners to successfully defend their patents against invalidity challenges, even after prevailing in IPR proceedings.

Conclusion

The Federal Circuit's decision in Ingenico Inc. v. IOENGINE, LLC represents a concerning development for patent owners. By narrowly interpreting the IPR estoppel provisions and accepting circumstantial evidence of public use, the court has created additional avenues for accused infringers to challenge patent validity, even after participating in IPR proceedings.

This decision appears to run counter to one of the fundamental objectives of the AIA, which was to provide more efficient and streamlined procedures for resolving patent validity disputes. Instead of promoting finality and reducing the burden of multiple validity challenges, the court's interpretation may lead to increased litigation, higher costs, and greater uncertainty for patent owners.

For patent owners, this decision underscores the importance of thorough prior art searches, strategic forum selection, and robust responses to invalidity challenges. Patent owners must be prepared to defend their patents against multiple rounds of validity challenges, potentially based on similar or related prior art references presented under different statutory provisions.

Looking forward, the patent community may wish to advocate for legislative changes to clarify and strengthen the IPR estoppel provisions, ensuring that they provide meaningful protection against duplicative validity challenges. Additionally, patent owners should continue to develop strategies for effectively defending against invalidity challenges based on public use, on-sale, or known/used by others grounds, particularly when supported primarily by circumstantial evidence.

The Ingenico decision reminds us that patent rights in the United States continue to face significant challenges, and that patent owners must remain vigilant and adaptable in their enforcement strategies to protect their innovative technologies and inventions. By understanding the implications of this decision and proactively addressing its challenges, patent owners can better position themselves to defend their patent rights in an increasingly complex legal landscape.