The Rise of System Art: The Federal Circuit Shelters System Art From IPR Estoppel

Prior art patents and publications have long been the primary source for anticipation and obviousness assertions by defendants in IP litigation. System art—an actual system or device—is a less common source of prior art due to challenges in finding and authenticating the system. On top of those challenges, the use of system art in district court may be foreclosed if a defendant had also sought review of the asserted patent in an inter partes review (IPR) proceeding. If an IPR proceeding results in a final written decision, 35 U.S.C. § 315(e)(2) prohibits the defendant from asserting in district court that a patent claim is invalid “on any ground that the petitioner raised or reasonably could have raised during inter partes review.” Some district courts read this “estoppel” provision broadly. In their view, the estoppel provision forecloses the use of system art that is cumulative of patents and printed publications that were, or reasonably could have been, raised in the IPR. Other district courts read the estoppel provision narrowly to allow for cumulative system art that, by law, could not be raised in an IPR proceeding.

On May 7, 2025, the Federal Circuit resolved the split in Ingenico Inc. v. IOENGINE, LLC, No. 23-1367. It read the estoppel provision narrowly, opening the door for a more uninhibited use of system art in district court. The decision also lifts a cloud hanging over IPRs due to the uncertain scope of the estoppel provision. How this new-found clarity will be utilized by the Acting Director of the USPTO in considering discretionary denials of IPR proceedings and whether the estoppel provision will be tweaked with the Promoting and Respecting Economically Vital American Innovation Leadership Act (“PREVAIL Act”) in Congress remain important open questions. For now, system art is sheltered from the storm.

Background of the Case

Ingenico presents a fact scenario common in today’s patent litigation landscape. IOENGINE asserted patents against PayPal Holdings, Inc. on certain products. Ingenico, which supplied the accused products to PayPal, stepped in by filing its own declaratory judgment action against IOENGINE. Ingenico also sought inter partes review of the asserted patents. The Patent Trial and Appeal Board (PTAB) found most, but not all, of the patent claims unpatentable in final written decisions. Ingenico and IOENGINE then proceeded to trial on the surviving claims.

At trial, Ingenico argued that the patent claims were anticipated or rendered obvious by a prior art device operating a software application called the “Firmware Upgrader.” To show that the “Firmware Upgrader” was in public use before IOENGINE’s patents, Ingenico produced an email that included a “Readme” user guide that provided details about the Firmware Upgrader’s functionality. The jury found that the claims were anticipated and obvious in view of the prior art system.   

The Federal Circuit Decision

On appeal, IOENGINE raised a number of challenges, including whether Ingenico was estopped under Section 315(e)(2) from utilizing the Firmware Upgrader at trial. IOENGINE argued that the Firmware Upgrader was cumulative with the Readme user guide which reasonably could have been raised during the IPRs. 

In a precedential decision, the Court first noted that there was a split among district courts on this issue. (Ingenico, Slip Op. 11.) It cited a recent district court case—Prolitec Inc. v. ScentAir Techs., LLC, No. 20-984, 2023 WL 8697973, at *21–23 (D. Del. Dec. 13, 2023) (Bryson, J.)—that summarized the split. The Prolitec Court explained that the split turned on the meaning of “ground” in the estoppel provision of Section 315(e)(2). Some courts read “ground” broadly—and thus IPR estoppel broadly—to include “the underlying legal arguments, which incorporate patents, printed publications, and cumulative device art.” (Id. at *22.) Other courts read “ground” narrowly—and thus IPR estoppel narrowly—to refer only to the “particular patents and printed publications on which invalidity arguments are based . . . .” (Id.)

The Federal Circuit agreed with the Prolitec Court that the issue turned on interpretation of the term “ground.” (Ingenico, Slip Op. 11.) It found that the Patent Act did not expressly define “ground,” so it then turned to other sections in the Patent Act. (Slip Op. 12.) The Court found that the term “ground” was linked to “theories of invalidity,” and Congress had limited IPRs to only certain “invalidity theories,” i.e., invalidity challenges based on patents and printed publications. Other theories of invalidity, such as public use, were thus excluded. (Id. at 12-13 & n.1.) The Court also noted that Congress had chosen to use “ground” and not “prior art” in defining the scope of the estoppel. It thus held that “IPR estoppel does not preclude a petition from relying on the same patents and printed publications as evidence in asserting a ground that could not be raised during the IPR, such as the claimed invention was known or used by other others, on sale, or in public use.” (Id. at 14.) For Ingenico, that meant it could rely on the Readme user guide at trial, without fear of estoppel, because it was evidence to support public use—a ground not available in an IPR.

Impact

The Ingenico decision will be significant to both district court litigation and IPR proceedings in front of the PTAB. Defendants in district court actions will now be able to utilize system prior art, without fear that a final written decision in a co-pending IPR proceeding may foreclose that defense. This suggests greater focus on system art in district court actions going forward, subject of course to the usual challenges in finding and authenticating system art. 

The Ingenico Court’s resolution of the district court split also brings clarity to IPR practice. At first glance, a narrower estoppel provision suggests that the already popular proceeding will become even more popular. But uncertainty lies ahead due to recent developments at the USPTO and in Congress. The new USPTO administration has revived Fintiv, which allows the PTAB to deny an IPR proceeding based on a duplicative district court action. Ingenico may support such denials going forward because it allows a district court to consider art cumulative to patents and printed publications in an IPR. As for Congress, the PREVAIL Act seeks to avoid duplicative proceedings by modifying estoppel to take effect earlier and barring certain duplicative PTAB proceedings. The PREVAIL Act was recently reintroduced in Congress. Whether Ingenico will impact the Act’s estoppel provisions, which are worded differently than the existing provision, is an open question. For now, system art is safe.