A small number of rule changes were published yesterday which affect all involved in post-grant trials at the USPTO. The fixes make the rules more specific and make for more uniform proceedings. They are effective May 19, 2015. A copy of the Federal Register notice can be found here.
I saw a bumper sticker that said: “Change is inevitable, but growth is optional.” This is true in many facets of life, and it is true for patent practice. The changes of the past few years are numerous and far-reaching. Is your patent portfolio strategy growing with these changes?
One Simple Exercise
If you are responsible for your company’s patent portfolio, try this simple exercise: look at your patent procurement guidelines to find out when they were last updated. If they were last revised over two years ago, chances are they do not contemplate options like:
- Track One filings in the USPTO for faster patent examination,
- steps to use the USPTO’s After Final Consideration Pilot (AFCP) program to rapidly resolve pending prosecution, and
- procedures to improve your future patent filings in order to survive claim challenges from IPRs, CBMs, and PGRs under the America Invents Act.
All of these options provide tools that can issue more meaningful and robust patents for your company and trim your patent portfolio’s bottom line.
Why Are These Tools Important?
Each of these tools can provide strategic advantages for your portfolio, depending on your goals. For example:
- Track One filings may be used in a campaign of patent filing to rapidly assemble issued patent rights in a strategic area, to bolster an ongoing enforcement campaign, or to offset expected or pending AIA patent challenges.
- The after final consideration pilot program (AFCP) can be used to avoid needless and expensive RCE practice and to accelerate issue of valuable claims.
- Drafting measures that enhance your patents’ ability to survive (or even avoid) AIA patent trials will become increasingly important–especially if Congress passes legislation to moderate post-grant review estoppel. Your company saves hundreds of thousands of dollars each time your patents avoid an AIA patent trial — not to mention the potential recoveries that the patent brings when it is clear to the challenger that it is valid and infringed.
Of course, there are many more tools for your procurement guidelines and the ones listed above are only some examples. Every business requires different tools and approaches to match the patent practices and opportunities of that industry.
It takes time to assemble a good set of guidelines. Even after the guidelines are complete, know that procedures to generate better patents can take time to implement.
When asked to audit patent filings for various companies, I was surprised by a pattern of reluctance to adopt new filing practices observed with preparation and prosecution counsel. I heard various excuses to resist change, such as “we have been drafting claims like this for years.” That was undoubtedly true prior to the AIA; however, the scrutiny that patents receive in AIA patent trials is substantially different than prior reexamination and litigation proceedings.
AIA post-grant proceedings are not going away any time in the foreseeable future. Therefore, we are in a new patent enforcement paradigm and patent procurement practices have to change to adapt to this new enforcement paradigm. Make sure that your patent prosecution practices are updated to generate the most effective rights possible.
[Editor's Note: Additional installments on patent preparation and prosecution in light of the AIA will be posted in the future. Subscribe for updates.]
Those watching decisions from the Patent Trial and Appeal Board (PTAB or Board) have observed a trend where a patent owner challenges an IPR petition based on alleged defects in the petition’s identification of real parties in interest (RPI) to the petitioner. As seen in earlier posts, improper identification of RPIs can result in denial of the petition, and the one-year bar imposed by 35 U.S.C. § 315(b) can preclude submission of a corrected IPR petition, resulting in a loss of the right to IPR for that petitioner. (See my earlier post on First Data Corporation v. Cardsoft, LLC, IPR2014-00715, Paper 9, October 17, 2014.)
Identify RPIs Early in the Proceedings
The prompt identification of RPIs in post-grant proceedings is important as a mandatory notice for a number of added reasons. An RPI that is barred under § 315(b) would bar a petitioner from institution. (35 U.S.C. § 315(b): “An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent. . . .”) The Board does not want to invest time and energy in petitions that are legally barred from institution, nor does it want to impose responses to them on patent owners.
Another reason to properly name RPIs is that any estoppel that may attach to a petitioner of the proceeding will likewise attach to the RPI as well. 35 U.S.C. § 315(e) states (underlining for emphasis):
(1) PROCEEDINGS BEFORE THE OFFICE.—The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.
(2) CIVIL ACTIONS AND OTHER PROCEEDINGS.—The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any H. R. 1249—19 ground that the petitioner raised or reasonably could have raised during that inter partes review.
The proper naming of RPIs becomes more complicated when a petitioner receives compensation, prior art, suggestions, and/or instructions from others. The analysis is especially important for petitioners that challenge patents for others, such as in the case of a trade industry association that challenges patents on behalf of its membership. Those petitioners must carefully follow the Board’s determinations of what constitutes an RPI. The stakes for petitioners representing a group are high because they represent a number of interested parties. Therefore, one petition fail is a failure for each party.
The PTAB Trial Practice Guide provides some considerations for performing an RPI analysis. Office Patent Trial Practice Guide, 77 FR 48756 (Aug. 14, 2012) (see pp. 48759-48760). Funding of the post-grant activities is one factor. Another factor is whether a party controls the proceeding, but the Trial Practice Guide notes that there is no simple test based on control:
There are multiple factors relevant to the question of whether a non-party may be recognized as a ‘‘real party in interest’’ or ‘‘privy.’’ [. . .] A common consideration is whether the non-party exercised or could have exercised control over a party’s participation in a proceeding. See, e.g., id. at 895; see generally Wright & Miller section 4451. The concept of control generally means that ‘‘it should be enough that the nonparty has the actual measure of control or opportunity to control that might reasonably be expected between two formal coparties.’’ Wright & Miller § 4451. Courts and commentators agree, however, that there is no ‘‘bright-line test’’ for determining the necessary quantity or degree of participation to qualify as a ‘‘real party-in-interest’’ or ‘‘privy’’ based on the control concept. [Cites omitted.] Accordingly, the rules do not enumerate particular factors regarding a ‘‘control’’ theory of ‘‘real party-in-interest’’ or ‘‘privy’’ under the statute.
The Trial Practice Guide also discusses res judicata and other estoppel considerations:
Additionally, many of the same considerations that apply in the context of ‘‘res judicata’’ will likely apply in the ‘‘real party-in-interest’’ or ‘‘privy’’ contexts.
The test is fact dependent:
The Office has received requests to state whether particular facts will qualify a party as a ‘‘real party-ininterest’’ or ‘‘privy.’’ Some fact combinations will generally justify applying the ‘‘real party-in-interest’’ or ‘‘privy’’ label. For example, a party that funds and directs and controls an IPR or PGR petition or proceeding constitutes a ‘‘real party-in-interest,’’ even if that party is not a ‘‘privy’’ of the petitioner. But whether something less than complete funding and control suffices to justify similarly treating the party requires consideration of the pertinent facts. See, e.g., Cal. Physicians, 163 Cal.App.4th at 1523–25 (discussing the role of control in the ‘‘privy’’ analysis, and observing that ‘‘preclusion can apply even in the absence of such control’’). The Office will handle such questions on a case-by-case basis taking into consideration how courts have viewed the terms.
The Trial Practice Guide does recognize that mere membership in an industry association does not make a member an RPI of an association that files a petition. The facts must be considered on a case-by-case basis.
Unified Patents Inc. v. Dragon Intellectual Property, LLC
This brings us to the IPR petition that Unified Patents filed requesting review of claims 1, 2, 7, 8, 10, 13 and 14 of Dragon Intellectual Property, LLC’s (Dragon’s) U.S. Patent No. 5,930,444 (the ’444 patent). (Unified Patents Inc. v. Dragon Intellectual Property, LLC, IPR2014-01252.) The ’444 patent covers streaming media recording and playback. Unified Patents named no additional RPI in its petition, stating:
Pursuant to 37 C.F.R. § 42.8(b)(1), Petitioner certifies that Unified Patents is the real party-in-interest, and further certifies that no other party exercised control or could exercise control over Unified Patents’ participation in this proceeding, the filing of this petition, or the conduct of any ensuing trial.
Unified Patents was founded by intellectual property professionals over concerns with the increasing risk of non-practicing entities (NPEs) asserting poor quality patents against strategic technologies and industries. The founders thus created a first-of-its-kind company whose sole purpose is to deter NPE litigation by protecting technology sectors, like content delivery, the technology at issue in the ‘444 Patent. Companies in a technology sector subscribe to Unified’s technology specific deterrence, and in turn, Unified performs many NPE-deterrent activities, such as analyzing the technology sector, monitoring patent activity (including patent ownership and sales, NPE demand letters and litigation, and industry companies), conducting prior art research and invalidity analysis, providing a range of NPE advisory services to its subscribers, sometimes acquiring patents, and sometimes challenging patents at the United States Patent and Trademark Office (USPTO). Since its founding, Unified is 100% owned by its employees; subscribers have absolutely no ownership interest.
Unified has sole and absolute discretion over its decision to contest patents through the USPTO’s post-grant proceedings. Should Unified decide to challenge a patent in a post-grant proceeding, it controls every aspect of such a challenge, including controlling which patent and claims to challenge, which prior art to apply and the grounds raised in the challenge, and when to bring any challenge. Subscribers receive no prior notice of Unified’s patent challenges. After filing a post-grant proceeding, Unified retains sole and absolute discretion and control over all strategy decisions (including any decision to continue or terminate Unified’s participation). Unified is also solely responsible for paying for the preparation, filing, and prosecution of any post-grant proceeding, including any expenses associated with the proceeding.
In the instant proceeding, Unified exercised its sole discretion and control in deciding to file this petition against the ‘444 Patent, including paying for all fees and expenses. Unified shall exercise sole and absolute control and discretion of the continued prosecution of this proceeding (including any decision to terminate Unified’s participation) and shall bear all subsequent costs related to this proceeding. Unified is therefore the sole real-party-in-interest in this proceeding.
In its Patent Owner Preliminary Response (which included redacted portions), the Patent Owner asserted:
As explained below, an inter partes review proceeding should not be instituted in this matter because Unified Patents has failed to establish that it is the “real party-ininterest,” and failed to identify the real party-in-interest when it filed its petition for inter partes review.
Unified Patents is an organization formed in 2012 for the purpose of filing and conducting inter partes review proceedings on behalf of its members so that the members can seek to avoid the estoppel provisions of 35 U.S.C. § 315. The primary value offered by Unified Patents’ to its members is the challenging through inter partes review and similar proceedings of patents asserted in litigation by non-practicing entities against Unified Patents’ members. Indeed, Unified Patents [text redacted]. Since its founding less than three years ago, Unified Patents has collected [redacted] from its members.
As a non-practicing entity itself, Unified Patents has no independent reason to challenge any patents in inter partes review, outside of Unified Patents’ interest in providing litigation “deterrence” services to members. [redacted]
Unified Patents [redacted] which include challenging patents in inter partes review proceedings. There can be no dispute that the money used to prepare and file the Petition, and the money that will be used to pay for prosecution of this proceeding, is sourced from [redacted]. Unified Patents has not identified the real parties-in-interest to this proceeding in its Petition, as it failed to identify the parties who provided the funding for Unified Patents to file this proceeding. The Board should not permit Unified Patents and its members the ‘”second bite at the apple”‘ the real party-in-interest requirement is intended to guard against. The Petition should be denied, and no trial should be instituted on the Unified Patents Petition.
(Patent Owner Preliminary Response, Paper 14, pp. 1-2.)
In its institution order, the Board rejected the Patent Owner’s challenge of the named RPIs:
Patent Owner is correct that the inquiry regarding real parties-ininterest is not limited to determining who directed or controlled a proceeding. On the record at this stage of the proceeding, however, we are not persuaded by Patent Owner’s contention that one or more other organizations paid Petitioner to file the Petition in this IPR. Patent Owner does not allege to have any direct evidence of any organization giving funds to Petitioner for the purpose of filing the Petition in this case. Additionally, even if we assume to be accurate all of Patent Owner’s allegations about circumstances related to the conduct of Petitioner’s business and the filing of the Petition in this case, they do not demonstrate that another entity paid Petitioner for the purpose of conducting this IPR proceeding. For example, even if we accept Patent Owner’s allegations that Petitioner engages in no activity of practical significance other than filing IPR petitions with money received from its members, this does not demonstrate that any member paid, directed, or suggested to Petitioner to challenge the ’444 patent, specifically. See, e.g., Prelim. Resp. 10. Nor do Patent Owner’s other circumstantial allegations, even if accurate, demonstrate as much.
(Decision on Institution of Inter Partes Review, Paper 37, p. 12.)
The Board then distinguished the present case over a collection of earlier proceedings between RPX and VirnetX that Patent Owner asserted (RPX Corp. v. VirnetX Inc.: IPR2014-00171, IPR2014-00172, IPR2014-00173, IPR2014- 00174, IPR2014-00175, IPR2014-00176, and IPR2014-00177 (“the RPX cases”)):
By contrast, in the RPX cases, the evidence demonstrated that the actions of RPX and Apple were like certain prohibited behavior discussed in In re Guan, Reexamination Control No. 95/001,045 (Aug. 25, 2008) (Decision Vacating Filing Date), which stated that
[a]n entity named as the sole real party in interest may not receive a suggestion from another party that a particular patent should be the subject of a request for inter partes reexamination and be compensated by that party for the filing of the request for inter partes reexamination of that patent without naming the party [as a real party-in-interest] who suggested and compensated the entity for the filing of a request for inter partes reexamination of the patent.
Guan at 7–8 (emphasis added); see, e.g., IPR2014-00171, Paper 57, 7. Here, the present record does not demonstrate that any of Petitioner’s members suggested or compensated Petitioner for the filing of the Petition challenging the ’444 patent.
Given this, the alleged similarities between RPX and Petitioner do not persuade us that the result here should be the same as in the RPX cases. That Petitioner likens itself to a trade association does not persuade us that its members constitute real parties-in-interest. As the Office Trial Practice Guide (“Practice Guide”) explains, membership in a trade association does not make an entity automatically a real party-in-interest to a petition filed by the trade association. 77 Fed. Reg. 48,756, 48,760 (Aug. 14, 2012); see also Paper 20, 4. Additionally, without more compelling accompanying allegations, Patent Owner’s assertion that Petitioner faces no risk of having the ’444 patent asserted against it is unremarkable, as the filing of or threat of a lawsuit is not a prerequisite for a Petition for an IPR proceeding. See 77 Fed. Reg. at 47,459.
For the foregoing reasons, on this record, we are persuaded that Petitioner did not fail to name all real parties-in-interest in the Petition. We note, however, that this Decision does not foreclose Patent Owner from continuing to argue the real party-in-interest issue in the Patent Owner Response. If the record should evolve in favor of Patent Owner on this issue, we would take appropriate action at that time.
(Decision on Institution of Inter Partes Review, Paper 37, pp. 12-14.)
In its analysis, the Board applied In re Guan to clarify that RPX v. VirnetX involved suggestion of the review proceeding and compensation to the petitioner by the RPI. The Board found that Dragon failed to show that the members of Unified Patents suggested an IPR to Unified Patents and compensated Unified Patents for the IPR. However, the Board did not prevent Dragon from arguing the RPI issue in its Patent Owner Response.
Trade associations and other associations desiring to petition for review of patents will be monitoring this case closely in the months to come to learn more about how the Board handles real party in interest issues.
Last fall, the Patent Trial and Appeal Board (PTAB or Board) interpreted the IPR joinder provision, 35 U.S.C. § 315(c), to require joinder requests by a non-party to an ongoing proceeding. (Target Corp. v. Destination Maternity Corp., IPR2014-00508 and IPR2014-00509.) Prior to that decision, the Board had interpreted § 315(c) to allow for issue joinder by the petitioner of the original proceeding (see, for example Microsoft v. Proxyconn, IPR2013- 00109). Of course, joinder was decided on a case-by-case basis, but had not previously been denied because the request was made by the petitioner of the original proceeding.
Target Corp. filed rehearing requests in both affected IPR proceedings in an effort to have the Board reconsider its interpretation of 35 U.S.C. § 315(c) with an expanded panel. Target’s arguments are quite clearly stated in its Motion for Rehearing. The Board granted Target’s rehearing request. In a 4:3 decision, the majority agreed that § 315(c) had been overly narrowly interpreted in the prior decision:
Turning now to the merits of the Request for Rehearing, the contention at the heart of Petitioner’s request for rehearing is that the denial of its Motion for Joinder was “based on an erroneously narrow interpretation of 35 U.S.C. § 315(c).” Paper 22, 1. We agree with Petitioner.
The majority read § 315(c)’s reference to “any person who properly files a petition under section 311” in conjunction with § 311′s requirement that the petition filer not be the patent owner, to broadly interpret § 315(c) to include any person except the patent owner. This interpretation is at odds with the dissent’s analysis, which reads § 315(c)’s reference to “may join as a party” to literally require a new party for joinder:
The statute under which Petitioner seeks relief provides:
(c) JOINDER.—If the Director institutes an inter partes review, the Director, in his or her discretion, may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.
35 U.S.C. § 315(c) (emphasis added). The statute does not refer to the joining of a petition or new patentability challenges presented therein. Rather, it refers to the joining of a petitioner (i.e., “any person who properly files a petition”). Id. Further, it refers to the joining of that petitioner “as a party to [the instituted] inter partes review.” Id. Because Target is already a party to the proceeding in IPR2013-00531, Target cannot be joined to IPR2013-00531.
While the majority decision does align with panel decisions on joinder prior to Target, one must ask whether this issue is finally resolved by this expanded panel decision. For example, what happens if another panel does not follow this interpretation § 315(c)? Or suppose this decision is appealed; would the Federal Circuit reverse a Board decision on joinder as it relates to institution given its recent interpretation of 35 U.S.C. § 314(d) in In re Cuozzo Speed Technologies? (“We conclude that § 314(d) prohibits review of the decision to institute IPR even after a final decision. . . . Section 314(d) provides that the decision is both ‘nonappealable’ and ‘final,’ i.e., not subject to further review. 35 U.S.C. § 314(d).”) Would a Federal Circuit appeal have to be in the form of a petition for writ of mandamus? If so, how would that square with the mandamus decisions in In re Dominion Dealer Solutions, LLC, 749 F.3d 1379, 1381 (Fed. Cir. 2014)(mandamus relief not available to challenge the denial of a petition for IPR) and in In re Proctor & Gamble Co., 749 F.3d 1376, 1378–79 (Fed. Cir. 2014)(mandamus relief not available to provide immediate review of a decision to institute IPR)?
In re Cuozzo Speed Technologies: Federal Circuit Affirms Board Finding of Unpatentability in First IPRFebruary 5th, 2015
The Federal Circuit affirmed the final determination of the Board in the first inter partes review under the Leahy-Smith America Invents Act (AIA). Garmin petitioned for IPR of claims 10, 14 and 17 of U.S. Patent No. 6,778,074 owned by Cuozzo Speed Technologies. The Board found these claims obvious and denied Cuozzo’s motion to amend the ’074 patent by substituting new claims 21, 22, and 23 for issued claims 10, 14, and 17. The Federal Circuit affirmed the Board’s final determination of obviousness, upheld the Board’s application of the broadest reasonable interpretation standard (BRI), and the Board’s denial of Cuozzo’s motion to amend.
One irony of this case is that Cuozzo challenges the Board’s adoption of BRI as an interpretive standard, yet Cuozzo asserts a construction of the phrase “integrally attached” that is broader than the definition adopted by the Board in the IPR:
Claim 10 includes the following limitation: “a speedometer integrally attached to said colored display.” ’074 patent col. 7 l. 10. Cuozzo argues that the board improper-ly construed the phrase “integrally attached.” The Board construed “integrally attached” as meaning “discrete parts physically joined together as a unit without each part losing its own separate identity.” J.A. 9. Cuozzo contends that the correct construction of “integrally attached” should be broader—“joined or combined to work as a complete unit.” Appellant’s Br. 33. Before the Board, Cuozzo stated that its construction would cover “a display that both functionally and structurally integrates the speedometer and the colored display, such that there only is a single display.” J.A. 10. Cuozzo argues that the Board’s claim construction improperly excludes a single-LCD embodiment of the invention wherein the speedometer and the speed limit indicator are on the same LCD.
Some may be confused by a patent owner who complains of the USPTO’s use of a broader interpretative standard, but simultaneously asserts a broader construction than the USPTO for a phrase. Cuozzo needed the broader interpretation to argue that its amended claims should have been entered by the Board. Cuozzo’s amended claims were directed to a particular embodiment of the invention employing a speedometer and speed limit indicator on the same LCD; however, the Board’s interpretation of “integrally attached” excluded that particular embodiment. The Board relied on its claim construction to deny Cuozzo’s amended claims and the Federal Circuit upheld the Board’s narrower claim construction:
We see no error in the Board’s interpretation. The word “attached” must be given some meaning. As the Board explained, it would “be illogical to regard one unit as being ‘attached’ to itself.” J.A. 9. The specification further supports the Board’s construction that the speedometer and the speed limit are independent—it repeatedly refers to a speed limit indicator independent of any speedometer and states that “the present invention essen-tially comprises a speed limit indicator comprising a speed limit display and an attached speedometer.” ’074 patent col. 2 ll. 52–54. The Board did not err in its claim construction.
The majority opinion (filed by Judge Dyk, and joined by Judge Clevenger) and the dissent (by Judge Newman) reach several additional post-grant topics, which will be discussed in future posts.
When you pick up a treatise and get a lot of useful information from it, you have a valuable resource for your practice. When it is also easy to read, you have a treasure. Practicing Law Institute’s Post-Grant Proceedings Before the Patent Trial and Appeal Board is full of well organized, and useful information in a format that is easy to read. It covers post-grant proceedings from all of the important angles. It doesn’t matter if your background is prosecution or litigation–this book is a great resource that anyone active in post-grant proceedings should have at the ready.
Post-Grant Proceedings was created by several well known and respected post-grant experts at Oblon Spivak, including Steve Kunin, Scott McKeown, and Greg Gardella. It covers each stage of a Patent Office trial by chapter. Each chapter is organized by chronological order of the stages of the post-grant proceeding. That organization makes it easy for the reader to reference information based on the progress of a trial. It provides both the mechanics and strategy at the various stages of an IPR, CBM, and PGR.
Post-Grant Proceedings also includes historical background about patent reform, the history of the Board, and the interference practice origins of Patent Office trials. It also includes special chapters on appeals to the Federal Circuit and parallel litigation.
The treatise was updated in November of 2014, and the link to review it and order it can be found here.
December 29, 2014
The Patent Trial and Appeal Board (PTAB) released statistics for AIA Patent Office trials as of Dec. 18, 2014. Different commentators have recently reported that the institution rate for these proceedings has dropped to about 60-70 percent, depending on how you calculate it. Those familiar with PTAB trial practice (IPR, CBM, PGR and derivation proceedings) understand that the trial statistics are moving targets, but they do provide some insight to interesting trends.
Based on the Dec. 18, 2014 data provided by the PTAB, it appears that the rate of denied petitions is approaching the rate of party settlements. If the denial and settlement data are normalized to the number of filed trials (excluding the filings prior to decision on institution), the statistics show about a 20:20:60 percent relationship between settlements, denied proceedings, and instituted proceedings (ones that do not settle), respectively. That means for every five petition filings, approximately one proceeding will be denied, one will settle early, and three will complete their trials.
But the filing of a petition is not always required to reach settlement between parties — the threat of a petition can provide all the impetus needed for settlement between parties. This settlement effect of PTAB proceedings provides another opportunity for parties to attempt to settle their differences prior to the formal filing of an IPR, CBM, PGR or DER petition. Frequently, the petition will be prepared to posture the matter for final discussion prior to its filing. Once filed, the petition serves as valuable information for all other stakeholders interested in defeating the Patent Owner and its patent. So a Patent Owner with some concern about the patentability of its patent has an incentive to settle with the prospective Petitioner before any petition is filed.
Of course, the PTO statistics cannot account for the cases where parties settle without filing a petition (“non-filed settlements”), so if the number of non-filed settlements is significant, then the PTO statistics underestimate the overall efficacy of post-grant proceedings for settlement of disputes between parties.
If you poll attorneys actively filing these petitions about the number of non-filed settlements they have accomplished compared to the number of petitions actually filed, you will get very different anecdotal responses. Depending on that number, the impact on settlements of disputes in general (both formal proceedings and prior to formal proceedings) can be significant.
The following table shows how the settlement ratios change using different percentages of the number of matters that settle without any petition filing (percentage of non-filing settlements to that of post-filing settlements). For example, if you estimate that for every 5 filed petitions, about 1 settlement occurs without a filed petition, refer to the 20% entry in the table below to find the aggregate percentage of disputes settled (including both pre-filing and post-filing disputes). Using this 20% estimate, the aggregate percentage of disputes settled rises to roughly 33%, the percentage of denied cases drops to roughly 15%, and the percentage of matters going through full trial drops to roughly 48%. This means for every six disputes, roughly two will settle (one with and one without a petition), one will be denied, and three will complete their trials. Thus, by viewing disputes from a settlement perspective, including settlements obtained without filing a petition, the aggregate denial and institution rates necessarily fall and the efficacy of the challenges from an overall dispute perspective is enhanced, regardless of the win:loss ratio experienced by the parties at trial.
Of course, this is only a crude first approximation of settlement dynamics. More information is needed to know the magnitude of the settlement effect of patent office trials on party settlements. That information will be difficult to ascertain due to the confidential nature of such settlements, but each stakeholder can make its own approximation based on its experience. Regardless, these settlements amplify the efficacy of the PTAB proceedings and their effect can be as significant as the known settlements arising from the PTAB proceedings themselves.
October 21, 2014
In 2013, Cardsoft, LLC (Patent Owner) sued First Data Corp. (Petitioner) and First Data Merchant Services Corp. for patent infringement in the Eastern District of Texas, serving its complaint on May 2, 2013. (Cardsoft (Assignment for the Benefit of Creditors) LLC v. First Data Corp., Civil Action No. 2:13-cv-290 (E.D. Tex.).) The complaint alleged infringement of U.S. 6,934,945 and U.S. 7,302,683, relating to sending and receiving information over a network.
On April 30, 2014, Petitioner filed IPR petitions requesting review of the ’945 and ’683 patents (IPR2014-00715 and IPR2014-00720, respectively). An issue arose in the IPRs because VeriFone had a duty of indemnification to First Data Corporation. But VeriFone had been sued in 2008 by Cardsoft LLC for patent infringement of the same patents, and therefore was statutorily barred under 35 U.S.C. § 315(b). (Cardsoft, Inc. v. VeriFone Systems, Inc., Civil Action No. 2:08-cv-00098 (E.D. Tex.).)
The Mandatory Notices of the ’945 IPR Petition state:
The real party in interest is First Data Corporation . We believe that VeriFone is NOT a real party in interest. VeriFone, per an indemnity with First Data, is providing the funding for this petition. However, the sole and exclusive control over this petition rests entirely with First Data. To the extent that the VeriFone indemnity agreement provided for any ability to assume control of any litigation, VeriFone has disclaimed any right to such control (see Ex. 1011 ). First Data determined which counsel to use, and is using its normal patent counsel for this petition, not counsel for VeriFone. The prior art used in this petition was discovered from the Cardsoft v. VeriFone litigation records, but First Data decided which references to use. Copies of some prior art were obtained from VeriFone, and VeriFone counsel indicated certain references which it believed rendered the subject patent invalid, but First Data counsel exercised independent judgment in determining which prior art to use and in fact selected different prior art references than those which VeriFone believed were the strongest.
It should be noted that First Data was sued after Cardsoft obtained a jury verdict victory against VeriFone. Instead of suing VeriFone for willful infringement for post-verdict sales, Cardsoft elected to sue First Data, likely with knowledge of the indemnity which provides indemnification for some although not all of the accused devices. It would be contrary to the reasons for establishing Inter Partes Reviews to deny First Data the opportunity for an IPR challenge in such a situation.
(’945 Petition, pp. 1-2 (IPR2014-00715).) The Petition summarized different PTAB decisions which declined to find a real party in interest based on funding and sharing of prior art. It also referenced PTAB Chief Judge James Smith:
Chief Judge James Donald Smith of the BPAI explained that the Proposed Rules from February of 2012 deliberately declined to promulgate particular factors as the future Patent Trial and Appeal Board (PTAB) intends to consider each case on its specific facts. [Explanation of Real Party in Interest Requirement provided by Chief Judge James Donald Smith, Board of Patent and Appeals and interferences ("BPAI"). Available at http:/ /www.uspto.gov/aia implementation/smith-blogextravaganza. j sp#heading-2.]
(Id., p. 3.) The ’683 Petition in the -00720 proceeding includes similar Mandatory Notices.
But in parallel Decisions dated October 17, 2014, the Board disagreed with the Petitioner and found VeriFone to be a real party in interest in both proceedings. The Board also decided that each petition was barred under 35 U.S.C. § 315(b), based on the following factors:
Petitioner’s Control and Funding:
The evidence demonstrates that VeriFone desires an inter partes review of the ’945 patent and has controlled, and/or has had an opportunity to control, the events leading up to the filing of the Petition. Petitioner acknowledges that “VeriFone, per an indemnity with [Petitioner], is providing the funding for this petition.” Corr. Pet. 1. Per the Letter Addendum, we understand this “funding” to include Petitioner’s attorney fees and at least the nearly $24,000 petition fees associated with filing the Petition. Ex. 1011, 1; Master Engagement Agreement, Section 6.1. We find that per this same indemnity agreement VeriFone had an opportunity to control all of the events leading up to the filing of the Petition. In particular, Section 6.1.3 of the Master Engagement Agreement indicates that VeriFone “shall have the right at its expense to employ counsel . . . to defend against Claims that VeriFone is responsible for . . . and to compromise, settle and otherwise dispose of such Claims.” Id., 3. The Letter Addendum indicates that “VeriFone has agreed to this associated indemnification as to the IPR.” Id., 1. Thus, up to April 28, 2014 (i.e., two days prior to the Petition being filed), VeriFone had every opportunity and right, per the indemnification agreement, to control the filing of the Petition and pursue an inter partes review of the challenged patent. That the opportunity to control ended just two days prior to filing the Petition, does not negate the control or opportunity to control the events leading up to the filing of the Petition. By Petitioner’s own admission, and during the period leading up to the filing of the Petition, counsel for VeriFone communicated with counsel for Petitioner about initiating an IPR, including discussing what prior art to assert. Corr. Pet. 2. Moreover, VeriFone agreed to, and did, pay for all costs associated with the filing of the Petition. We have considered Petitioner’s arguments that it alone decided to use different prior art for this proceeding compared to the prior art that VeriFone asserted in the 2008 Litigation. See id. Petitioner, however, does not provide sufficient evidence that would support this assertion, and in any event, even if true, that alone would not outweigh the other evidence of record that tends to show that VeriFone controlled and/or had the opportunity to control the filing of the Petition.
Decision Denying Institution, IPR2014-00715, Paper 9, Oct. 17, 2014, pp. 7-8.
VeriFone’s Current Interest in the Proceeding:
The Board found that VeriFone had an interest in the outcome of these IPR proceedings:
Moreover, we find that VeriFone has an interest in the review of the ’945 patent in this proceeding. VeriFone was found to have infringed the ’945 patent in the 2008 Litigation and was unable to invalidate the ’945 patent in that proceeding. See Ex. 1007 ¶ 8. VeriFone also must defend and indemnify Petitioner in the 2013 Litigation for Petitioner’s alleged willful infringement of the ’945 patent from the sale of VeriFone products that were found to have infringed the ’945 patent in the 2008 Litigation. Invalidity of the ’945 patent has been asserted in the 2013 Litigation that VeriFone is defending under its indemnity agreement with First Data Merchant Services. Ex. 2003, 3 (second affirmative defense). VeriFone has an interest in an inter partes review of the ’945 patent at least equal to that of Petitioner. The record evidence establishes, however, that VeriFone could not have pursued an inter partes review on its own or in conjunction with the Petitioner, because VeriFone would have been barred from doing so pursuant to 35 U.S.C. § 315(b).
Id., pp. 8-9.
Petitioner’s Failure to Name RPI Within One Year Bar
The Board also found that the Petition itself lacked a proper statement of the real parties in interest, and therefore was barred under § 315(b) because Petitioner’s correction would have occurred after the one year bar date:
Moreover, because VeriFone is a real party-in-interest, the Petition does not identify “all real parties in interest” as required by 35 U.S.C. § 312(a). As a result, the Board determines that the Petition is incomplete.
Section 42.106(b) of Title 37 of the Code of Federal Regulations provides:
(b) Incomplete petition. Where a party files an incomplete petition, no filing date will be accorded, and the Office will dismiss the petition if the deficiency in the petition is not corrected within one month from the notice of an incomplete petition.
Ordinarily, because the Petition is incomplete, the Board would give Petitioner one month from the date of this decision to correct the deficiency and list VeriFone as a real party-in-interest. In this instance, however, curing the omission of VeriFone as a real party-in-interest would be futile because, even if corrected, the earliest filing date that could be accorded to the Petition that identifies VeriFone as a real party-in-interest would not fall within the one-year period specified by 35 U.S.C. § 315(b).
Id., p. 10.
So the Board seems to have denied these IPR petitions on the grounds that: (1) a real party in interest (e.g., VeriFone) would have been barred due to the 2008 litigation, and (2) because, procedurally, any correction of the petition would also fall necessarily outside of the statutory one-year bar of the 2013 litigation. This case provides another example of how the Board interprets facts relating to real parties in interest and an example of the Board’s decision to apply the one-year IPR bar under 35 U.S.C. 315(b) to corrections of real parties in interest in IPR petitions.
October 17, 2014
Last month, the Patent Trial and Appeal Board (PTAB or Board) interpreted the IPR joinder provision, 35 U.S.C. § 315(c), to preclude joinder requests by an existing party to an ongoing proceeding. (Target Corp. v. Destination Maternity Corp., IPR2014-00508 and IPR2014-00509.) In these recent decisions, the Board decided that § 315(c) requires “party joinder” and not only “issue joinder.” Interestingly, before this interpretation was announced the Board had allowed “issue joinder” without requiring joinder of a new party to the proceeding (Microsoft v. Proxyconn, IPR2013- 00109), and after this interpretation was announced at least one panel of the Board applied an analysis that did not appear to adopt this new interpretation (Microsoft Corp. v. Enfish LLC, IPRs 2014-00574, -00575, -00576, and -00577).
Last week, Target Corp. filed rehearing requests in both affected IPR proceedings in an effort to have the Board reconsider its interpretation of 35 U.S.C. § 315(c) with an expanded panel. Target’s arguments are quite clearly stated in its Motion for Rehearing, some of which include:
- The AIA was implemented for broad remedial purposes to improve patent quality and to provide a more efficient system for challenging patents that should not have issued.
- These broad remedial purposes of the AIA empower the PTO to administer IPR proceedings in a way to reduce duplication of efforts and costs.
- Laws pertaining to patent quality which are “remedial in nature, based on fundamental principles of equity and fairness” can be construed liberally.
- The PTAB should interpret the joinder provision liberally to allow for consistency of prior decisions, and reduce gamesmanship in parallel district court litigation.
On that last point Target’s motion states:
Target’s Joinder Motion sets forth the unique facts of this case, which reveal that a significant prior art reference long known to the patent owner was withheld from Target in the parties’ parallel district court litigation until several weeks after Target’s one-year deadline under 35 U.S.C. § 315(b). (Paper 3, at 1-6.) Under the Board’s decision here, a patent owner in parallel litigation with a petitioner can readily subvert the purposes of the AIA, see supra Part II.A, and the IPR process by withholding any significant prior art it may be uniquely aware of, or additional asserted claims, until after the petitioner’s one-year deadline under § 315(b).
Of course, joinder motions cannot be filed any time after institution of the prior proceeding — they must be filed within a month after the date of institution of the IPR for which joinder is requested:
§ 42.122 Multiple proceedings and Joinder.
(b) Request for Joinder. Joinder may be requested by a patent owner or petitioner. Any request for joinder must be filed, as a motion under § 42.22, no later than one month after the institution date of any inter partes review for which joinder is requested. The time period set forth in § 42.101(b) shall not apply when the petition is accompanied by a request for joinder.
However, in many cases the possibility of joinder of issues to a petitioner about a year after service of the lawsuit is still quite valuable to the petitioner and has been used to assert improved grounds and to attack newly asserted claims. (Microsoft v. Proxyconn, IPR2013- 00109.)
It will be interesting to see what the PTAB decides to do in Target’s IPR proceedings. More importantly, it would be a great thing if this rehearing would result in consistent joinder practice across panels in the future.
October 1, 2014
The reader may recall that last week an expanded PTAB panel announced an interpretation of 35 U.S.C. § 315(c) that essentially ruled out a joinder request for a subsequent IPR petition made by an existing party to the instituted proceeding. Target Corp. v. Destination Maternity Corp. (IPR2014-00508 and -00509.) In Target, the Board adopted a “party joinder” interpretation of the § 315(c) IPR joinder statute that provided for new persons to join an instituted IPR, but not for joinder of new issues raised by the same petitioner.
This interpretation was a departure from an earlier interpretation of § 315(c) that allowed a party to the instituted IPR the ability to request joinder of a later-filed petition based on new issues (“issue joinder”). As noted by the Board in Target:
In other decisions, the Board has granted joinder of an additional petition or proceeding (as opposed to an additional person) to an instituted inter partes review. See Ariosa Diagnostics v. Isis Innovation Ltd., Case IPR2012-00022 (PTAB Sept. 2, 2014) (Paper 66) (“Ariosa”); Samsung Elecs. Co. v. Virgina Innovation Scis., Inc., Case IPR2014-00557 (PTAB June 13, 2014) (Paper 10) (“Samsung”); Microsoft Corp. v. Proxyconn, Inc., Case IPR2013-00109 (PTAB Feb. 25, 2013) (Paper 15); ABB Inc. v. Roy-G-Biv Corp., Case IPR2013-00286 (PTAB Aug. 9, 2013) (Paper 14); Sony Corp. v. Yissum Research Dev. Co. of the Hebrew Univ. of Jerusalem, Case IPR2013-00327 (PTAB Sept. 24, 2013) (Paper 15).
The issue joinder interpretation provided a petitioner a mechanism to attempt to “cure” a partial institution based on new grounds of unpatentability or to challenge claims newly added to the litigation since the filing of the original IPR petition. And this could be done even if the later-filed IPR petition was filed after the § 315(b) one-year bar date.
This week, the Board rejected four IPR petitions with joinder requests based on the earlier ‘issued joinder” interpretation of § 315(c). In Microsoft Corp. v. Enfish LLC (IPRs 2014-00574, -00575, -00576, and -00577), the Board denied joinder, but only after it made a full analysis of Microsoft’s joinder request based on the issues raised by Microsoft. Since Microsoft was the Petitioner in the underlying instituted proceedings, these later-filed IPR petitions and their respective joinder requests were made by the same party (Microsoft), yet the Board did not apply the “party joinder” interpretation announced in Target. Had the Board used the party joinder interpretation the decisions would have been much shorter.
Microsoft had filed these four IPRs and their respective joinder requests after the one-year IPR bar, so failure to obtain joinder resulted in each later-filed petition being denied based on the § 315(b) one-year bar.
The Target and Microsoft decisions were only four days apart. It may take more time to determine whether the Board intends to use the issue joinder or party joinder approach to decide future IPR joinder motions.