IOENGINE v. Ingenico, decided May 7, 2025

PRECEDENTIAL Case: INGENICO INC. v. IOENGINE, LLC (United States Court of Appeals for the Federal Circuit, Case No. 2023-1367) Decision Date: May 7, 2025 Appeal From: United States District Court for the District of Delaware (No. 1:18-cv-00826-WCB) Judges: DYK, PROST, and HUGHES (Circuit Judge HUGHES authored the opinion)

Summary:

This is an appeal by IOENGINE, LLC from a District of Delaware jury verdict finding certain claims of U.S. Patent Nos. 9,059,969 and 9,774,703 invalid as anticipated and obvious by the prior art. IOENGINE also appealed the district court's denial of its motions for judgment as a matter of law (JMOL) or a new trial, challenging jury instructions and the admission of prior art evidence due to IPR estoppel. The Federal Circuit affirmed the district court's judgment, finding substantial evidence supported the jury's verdict and that the district court did not abuse its discretion in denying a new trial.

Key Patents-at-Issue:

• U.S. Patent No. 9,059,969

• U.S. Patent No. 9,774,703

These patents are directed to a portable device, such as a USB thumb drive, with a processor that sends communications to a network server based on user interaction with an interface on a terminal.

Procedural History:

1. March 23, 2018: IOENGINE filed an infringement action against PayPal Holdings, Inc. in the District of Delaware.

2. June 1, 2018: Ingenico (as a supplier of PayPal's accused products) filed a declaratory judgment action against IOENGINE in the District of Delaware.

3. Prior to Trial: Ingenico filed IPR petitions challenging asserted claims of the '969 and '703 patents, resulting in final written decisions holding most challenged claims unpatentable.

4. Summary Judgment: IOENGINE moved to preclude Ingenico from using "documentation related to DiskOnKey Upgrade software" under 35 U.S.C. § 315(e)(2) (IPR estoppel). The district court ruled that Ingenico was estopped from using these documents unless they formed part of a substantively different combination of references that could not reasonably have been raised in the IPRs.

5. July 11, 2022: A five-day jury trial began. Ingenico introduced evidence of the DiskOnKey System (manufactured by M-Systems Flash Disk Pioneers Ltd. in the early 2000s), including the DiskOnKey Device and Firmware Upgrader software, as prior art under 35 U.S.C. §§ 102(a) (pre-AIA) or 102(b) (pre-AIA).

6. Jury Verdict: The jury returned a general verdict finding the asserted claims infringed but invalid as anticipated and obvious based on the prior art.

7. Post-Trial Motions: IOENGINE filed renewed motions for JMOL and a new trial, which were denied by the district court.

8. Appeal: IOENGINE appealed the judgment and the denial of its post-trial motions to the Federal Circuit.

Main Themes and Key Ideas:

1. Invalidity Based on Prior Art: The core issue on appeal is whether the jury's finding that the asserted claims were invalid based on the DiskOnKey System was supported by substantial evidence. IOENGINE did not challenge that the DiskOnKey System invalidates the claims if it is prior art, but rather challenged the jury's implicit finding that the Firmware Upgrader portion of the system qualified as prior art under pre-AIA 35 U.S.C. §§ 102(a) ("known or used by others") or 102(b) ("on sale" or "in public use").

2. Public Use as Prior Art (Pre-AIA § 102(b)): A significant portion of the opinion focuses on whether there was substantial evidence to support the jury's finding that the Firmware Upgrader was "in public use" more than one year prior to the patent application date.

3. Standard for Public Use: Pre-AIA § 102(b) requires the invention to be in public use and ready for patenting before the critical date. "The 'in public use' element... is met if the invention 'was accessible to the public or was commercially exploited' by the inventor."

4. Evidence Presented by Ingenico: Ingenico presented circumstantial evidence including:

5. A July 2002 email from M-Systems to employees announcing the launch of the Firmware Upgrader, encouraging them to share information with partners, customers, reps, and distributors, and stating the application and user guide could be downloaded from the DiskOnKey website starting July 10, 2002.

6. A July 11, 2002 press release from M-Systems promoting the Firmware Upgrader.

7. An archived M-Systems website page from 2002 where the Firmware Upgrader was available for download.

8. Expert testimony stating that many users would download and use the Firmware Upgrader and Readme file.

9. IOENGINE's Argument: IOENGINE argued this evidence only showed availability for download, not actual use by someone in the U.S., which they contended was required for public use.

10. Federal Circuit's Holding: The court found that while public use requires actual use, circumstantial evidence is sufficient to prove it. The court distinguished IOENGINE's reliance on 3M v. Chemque, noting that in 3M there was a lack of evidence that the product was used in a way that met the claim requirements. Here, the evidence showed the Firmware Upgrader was available for download, accompanied by a user guide explaining its functionality, and customers were encouraged to download and use it. The court stated, "And it is not in dispute that a single download of the Firmware Upgrader results in a system that meets the patents-at-issue’s claim requirements. Thus, there is substantial evidence to support the jury’s finding that the DiskOnKey System, including the Firmware Upgrader, was in public use."

Jury Instructions: IOENGINE challenged several jury instructions as legally erroneous.

• Conception and Diligence: IOENGINE argued the instruction on conception and diligence incorrectly shifted the burden of proof. The court found no error, noting the district court clearly and consistently instructed the jury that Ingenico had the burden of proving invalidity and that the prior art predated the claimed invention by clear and convincing evidence.

• Public Use Instruction: IOENGINE argued the instruction failed to distinguish between prior use by the inventor and a third party. The court disagreed, stating the instruction correctly reflected the standard that public use occurs when an invention is "shown to or used by an individual other than the inventor under no limitation, restriction, or obligation of confidentiality," or accessible to the public or commercially exploited.

• On Sale Instruction: IOENGINE argued the instruction was erroneous for not including their proposed language about what constitutes a binding offer for sale. The court found no error, agreeing with the district court that the issue of validity turned on whether the devices sold contained the relevant capabilities, not the specific nature of the offer, and that the proposed instructions could have confused the jury.

• Presumption of Validity: IOENGINE argued the district court erred by not instructing the jury on the presumption of validity. The court held that failing to instruct on the presumption is not reversible error if the jury is properly instructed on the clear and convincing evidence standard for proving invalidity, which the district court did here.

IPR Estoppel (35 U.S.C. § 315(e)(2)): A key part of the Federal Circuit's opinion is its interpretation of "ground" as used in the IPR estoppel statute. IOENGINE argued that IPR estoppel should have prevented Ingenico from using the Firmware Upgrader at trial because it was cumulative of printed publications (the Readme instructions and screenshots) that could have been raised in the IPRs.

• Statutory Interpretation of "Ground": The court performed a de novo review of the meaning of "ground" in 35 U.S.C. § 315(e)(2).

• Relationship between "Ground" and Prior Art: The court concluded that "grounds are the theories of invalidity available to challenge a claim under §§ 102 and 103." In IPRs, these grounds are limited to challenges based on "prior art consisting of patents or printed publications" (35 U.S.C. § 311(b)). Challenges based on "known or used by others," "on sale," or "in public use" are deliberately excluded from IPRs but are available in post-grant reviews (PGRs) and district court litigation.

• "Ground" vs. "Prior Art": Crucially, the court held that a ground is not the same as the prior art itself. Prior art (like patents or printed publications) is evidence that supports a ground (like anticipation or obviousness based on a printed publication). Congress precluded petitioners from asserting grounds raised or reasonably could have been raised in an IPR, not from using the same prior art evidence to support different grounds that could not be raised in an IPR.

• Holding on IPR Estoppel: "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)." It "does not preclude a petitioner from asserting that a claimed invention was known or used by others, on sale, or in public use in district court. These are different grounds that could not be raised during an IPR."

• Application to this Case: Ingenico challenged the claims based on "known or used by others," "on sale," and "in public use." These were grounds that could not be raised in the IPR. Ingenico used the DiskOnKey System (including the Firmware Upgrader) and related printed publications (like the Readme file) as evidence to support these grounds. Even if the Readme file could have been used in the IPR to support a printed publication ground, its use here to support "known or used," "on sale," or "public use" grounds, which were unavailable in the IPR, is not estopped.

• Conclusion on Estoppel: The court found that IPR estoppel did not preclude Ingenico from relying on the DiskOnKey System with related printed publications to prove the claimed invention was known or used by others, on sale, or in public use at trial.

Most Important Facts/Ideas:

• The Federal Circuit affirmed the invalidity judgment based on prior art (DiskOnKey System) found by the jury.

• Substantial circumstantial evidence, including emails, press releases, and archived website availability for download, was sufficient to support the jury's finding of public use of the Firmware Upgrader under pre-AIA § 102(b). Actual use can be proven by circumstantial evidence.

• The district court's jury instructions on conception, diligence, public use, and on sale were upheld. The court also upheld the denial of a jury instruction on the presumption of validity because the clear and convincing evidence standard was properly instructed.

• The court provided a definitive interpretation of "ground" in 35 U.S.C. § 315(e)(2) (IPR estoppel). A "ground" refers to the theory of invalidity under § 102 or § 103. Prior art is evidence supporting a ground.

• Crucially, IPR estoppel only applies to anticipation or obviousness grounds based on patents or printed publications (the only grounds available in IPRs). It does not estop a party from asserting anticipation or obviousness based on "known or used by others," "on sale," or "in public use" in district court, even if the same prior art evidence (like printed publications) was or could have been used in the IPR, because these are different grounds that could not be raised in the IPR. This is a significant point of law regarding the scope of IPR estoppel.

Conclusion:

The Federal Circuit found no legal error in the district court's proceedings or jury instructions and determined that the jury's verdict of invalidity was supported by substantial evidence, particularly regarding the public use of the DiskOnKey Firmware Upgrader as prior art. The court also clarified the scope of IPR estoppel under 35 U.S.C. § 315(e)(2), holding that it does not bar a party in district court from pursuing invalidity grounds (like public use or on sale) that were unavailable in the prior IPR, even if some of the same prior art evidence is used to support those grounds. The judgment of invalidity was affirmed.