Federal Circuit Starts to Clarify Section 325(e)(2) Estoppel

In Olaplex, Inc. v L’Oréal USA, Inc.i the Federal Circuit addressed, among other issues, PGR estoppel in subsequent district court litigation. Here, the Court addressed the timing to raise estoppel regarding written description and obviousness after a Board’s final written decision (FWD).

Olaplex raised Section 325(e)(2) estoppel in a letter to the Federal Circuit during appeal. Olaplex, Inc. v L’Oréal USA, Inc., Case No. 2020-1282, Slip Op. at 23-25 (Fed. Cir. May 6, 2021). The Board issued its FWD July 30, 2019, but Olaplex waited to raise estoppel until March 10, 2021 after the Federal Circuit affirmed the Board’s FWD. Id.; see L’Oréal USA, Inc. v. Olaplex, Inc., 844 F. App’x 308, 311-312 (Fed. Cir. 2021). L’Oréal argued waiver and untimeliness. Olaplex, at 23. The Court held that Congress did not set forth a requirement for when to raise estoppel in litigation and prior decisions did not address waiver in this context, e.g., where further fact finding was not necessary to render a decision. Id. at 23-25. Although estoppel could have been raised earlier, the Court concluded Olaplex did not waive estoppel, the estoppel issue did not require additional fact finding, and the delay did not prejudice L’Oréal. Id.

With regards to written description, the Federal Circuit noted L’Oréal chose a post grant review (PGR), which allows for these types of challenges. Olaplex, at 26; see also id. at 24 (distinguishing Network-1 Techs., Inc. v. Hewlett-Packard Co., 981 F.3d 1015 (Fed. Cir. 2020) which held 35 U.S.C. § 315(e)(2) did not bar Hewlett-Packard from raising challenges in court where it could not have raised those challenges in the inter partes review it had joined). L’Oréal argued that estoppel did not apply because the district court issued a claim construction after the PGR petition was filed. Id. at 26. The Court disagreed because the claim construction did not affect the written description to warrant L’Oréal raising written description during litigation and not in its PGR petition. Id. The Court held that L’Oréal was well aware of the possibility of different constructions between forums, and Congress would have contemplated that possibility but did not address that in the statute as an exception to estoppel. Id. Nothing prevented L’Oréal from raising the written-description challenge in its PGR petition.

Finally, with regards to obviousness, L’Oréal argued it used different prior art in the PGR and district court. Id. The Court found, just like claim construction, use of different prior art was inherent in the two-forum problem and Congress would have known that. Id. at 26-27. Thus, just because L’Oréal used different art that alone should not justify an exception to the estoppel provision without severely weakening its effect. Id. L’Oréal was estopped because the additional obviousness grounds raised in the district court could have reasonably been raised in the PGR. Id. at 27.

[i] Cases 2020-1382, 2020-1422, 2020-1689, and 2020-1690 (Fed. Cir. May 6, 2021) (non-precedential).