I will be presenting at PLI’s “USPTO Post-Grant Patent Trials 2014″ CLE Program on April 28th with a number of other post-grant practitioners. Please join us there or attend via webinar! — Timothy Bianchi
USPTO Statistics Show Inter Partes Patent Reviews are Frequently Settled Before Final Board DecisionFebruary 17th, 2014
The U.S. Patent Office regularly posts statistics on post-grant proceedings such as inter partes review and covered business method patent review. An excerpt of PTAB statistics for February 13, 2014 is found below. The acronyms “FWD” and “RAJ” stand for “Final Written Decision on the merits” and “Request for Adverse Judgment.” The “Other” category includes terminations due to dismissal.
The number of trials with a final written decision on the merits (FWD) remains relatively small because IPR proceedings take roughly about a year and a half from filing of a petition to conclusion, and the AIA provision allowing IPRs is only about 17 months old.
Interestingly, the data shows a relatively high number of settled IPR proceedings. These settlements can occur any time after the filing of the petition and before a final written decision on the merits. Therefore, these settlements are made within months of the Petition filing rather than years. Of course, all settlements are not equal. Some result in the termination of both the Patent Office proceeding and the concurrent District Court litigation. Others may only terminate the Patent Office proceeding. And, as discussed in earlier posts, some settlements may dismiss the Petitioner from the Patent Office proceeding but maintain the proceeding against the Patent Owner. Regardless, early settlements often favor the Petitioner and provide a “win” for the Petitioner. And even if that is not the case, settlements executed before a final decision on the merits provide another opportunity for early discussion and resolution of patent disputes.
It should be noted that IPRs are responsible for more settlements than can be provided by these statistics, because many disputes are resolved by settlements achieved prior to any filing of IPR petitions (i.e., in cases where the Patent Owner is afforded an opportunity to settle before an IPR petition is filed).
It will be some time before more accurate statistics on IPRs will be available, however these settlement statistics show that parties can achieve some resolution of patent disputes very early in post-grant proceedings, and likely much earlier than in traditional litigation time frames.
A petition for covered business method review, inter partes review, or post-grant review may be filed on behalf of of several different parties and real parties in interest. Typically, such filings involve one, two, or three named persons (e.g., companies) as the petitioner. However, the Board’s rules do not state a limit on the number of persons that may sign a single petition. On October 15, 2013, thirty-five (35) companies were named in a Petition for a Covered Business Method Patent Review of U.S. Patent 8,146,077. Agilysys, Inc. et al v. Ameranth, Inc., CBM2014-00014. The companies named in the Petition include:
The Patent Trial and Appeal Board (PTAB or Board) used this Petition to clarify its position on petitions naming several parties and real parties in interest. Id., Paper 11 (February 11, 2014). The Board clarified that the Petition may name several companies, but that each cannot separately appear and independently participate:
On February 7, 2014, the Board initiated a conference call with the parties, to inform the parties that although thirty-five companies are identified in the petition as “Petitioners” and real parties-in-interest, the thirty-five companies collectively constitute only a single party in this proceeding before the Board. Consequently, the designation in the petition of fifteen pairs of lead and backup counsel, one pair for each of fifteen groupings of the thirty-five companies, is unacceptable. As a single party before the Board, all thirty-five companies must speak with a uniform voice, whether in writing or orally in a conference call, hearing, or deposition.
Counsel for Petitioner proposed that the thirty-five companies would file a single paper, sharing the pages among themselves, and in the event of differences in the positions of the different companies, there would be one or more separate sections in the paper to articulate the differences. Counsel for Patent Owner objected to this approach. The Board agreed with Patent Owner:
The manner of conducting this proceeding, as proposed by [Counsel for Petitioner], is not in accordance with the rules governing trial practice and procedure before the Board. The thirty-five companies collectively filed a single petition, and thus, are recognized as a single party, as Petitioner, before the Board. According to 37 C.F.R. § 42.2, “Petitioner” means “the party filing a petition requesting that a trial be instituted.” In circumstances not involving a motion for joinder or consolidation of separate proceedings, for each “petition” there is but a single party filing the petition, no matter how many companies are listed as petitioner or petitioners and how many companies are identified as real parties-in-interest. Even though the separate companies regard and identify themselves as “Petitioners,” before the Board they constitute and stand in the shoes of a single “Petitioner.”
Because the thirty-five companies constitute, collectively, a single party, they must speak with a single voice, both in writing and oral representation. [Counsel for Petitioner's] proposal transforms the “Petitioner” under 37 C.F.R. § 42.2 from a single party into thirty-five different parties. That is not only contrary to 37 C.F.R. § 42.2, which defines “Petitioner” as a single party by referring to “the party filing a petition,” but also prejudicial to Patent Owner, who potentially would have to respond to thirty-five different, possibly inconsistent, positions on every issue. Nor would the Board’s interests in the speedy and efficient resolution of post-grant proceedings be served by permitting the presentation of inconsistent positions based on the filing of a single petition.
The original Petition named fifteen pairs of lead and backup counsel. Based on the “single petitioner” concept articulated by the Board, the Petitioner was ordered to file a paper to re-designate lead and backup counsel “by regarding itself as a single party” in accordance with 37 C.F.R. § 42.10(a) within a week of the Order entered February 11, 2014.
I am speaking at “Best Practices in Patent Monetization” in San Francisco on March 6 & 7. Attendees will learn tips and strategies to maximize the strategic and financial value from their portfolios, manage the buying and selling process, conduct due diligence, manage risks and participate successfully in the market-making process. Don’t miss this valuable opportunity to hear strategies and practice tips for monetizing your patents.
Here’s the program link: http://www.lawseminars.com/seminars/14PATSCA.php
Please let me know if you plan to attend. I hope to see you there.
Board Proposes Solution for Petitioner if Expert Witness Not Available for Deposition in Patent Office TrialJanuary 26th, 2014
In current post-grant practice, most petitions are accompanied by an expert declaration to support the assertions made by the petitioner. If the petitioner successfully obtains institution of a patent office trial (inter partes review, covered business method patent review, or post-grant review), each declarant making a declaration for the petition must be made available for deposition. But what happens if the declarant is not available? One example is provided in Corning Gilbert Inc. v. PPC Broadband, Inc., IPR2013-00347.
In the Corning IPR, the Petitioner’s expert, Dr. Mroczkowski, signed a declaration that was submitted to support the IPR petition. After institution of the IPR, the Board was informed that Dr. Mroczkowski had become ill with cancer and had to undergo surgery. He was also undergoing weekly chemotherapy and daily radiation treatment during late December and scheduled for therapy up to early February. Counsel for Petitioner requested a twelve week extension in order for Dr. Mroczkowski to recover and be available for deposition, noting that 35 U.S.C. § 316(a)(11) provides an additional time (up to 6 months) to complete the IPR.
The Board declined a twelve week extension, and instead suggested that Petitioner attempt to locate another expert who would be willing to present the same testimony as Dr. Mroczkowski:
The Board considers reasonable an extension of approximately five weeks for Petitioner to locate and substitute, for Dr. Mroczkowski, another expert witness who would be willing to execute the same declaration executed by Dr. Mroczkowski, excluding the credentials and qualifications of Dr. Mroczkowski. Counsel for Petitioner expressed that obtaining another expert at this time would add to Petitioner’s cost, perhaps unnecessarily, because Dr. Mroczkowski may recover in time to be cross-examined.
The Board explained that five weeks will be provided to Petitioner to make an effort to resolve the difficulty presented by the illness of Petitioner’s original expert witness. Petitioner is free to forego that opportunity, and to depend on Dr. Mroczkowski’s getting well enough to be cross-examined at an appropriate time according to a revised schedule including the five-week extension. In that case, however, Petitioner will have made a litigation choice, and assumed the risk of events not proceeding according to plan.
(IPR2013-00347, Paper 18 at p. 3, December 23, 2013.)
The Board provided more guidance in its next order (Paper 20, January 2, 2014). Counsel for Petitioner suggested that it file a declaration by a second expert “simply declaring that the second expert agrees with the opinions set forth in Dr. Mroczkowski’s declaration.” The Board indicated that the proposed approach would still ultimately rely on the testimony of Dr. Mroczkowksi, “which is inappropriate if he cannot be cross-examined.” (Paper 20 at p. 2.) The Board offered another approach:
The Board inquired why the new expert could not execute a declaration literally having the same wording as in Dr. Mroczkowski’s declaration. Counsel for Corning replied that because the two experts will have different qualifications, paragraph numbers as referenced in Corning’s petition, directed to Dr. Mroczkowski’s declaration, likely will not match paragraph numbers in the declaration executed by the second expert witness.
To maintain the same paragraph numbers in the second declaration, however, Corning may present qualifications of its second expert witness in a separate exhibit or in later paragraphs, and then use blank spaces to occupy the paragraphs which, in the first expert declaration, express the qualifications of Dr. Mroczkowski. If such a substitute expert declaration is filed, however, Corning also should file a substitute petition that refers to the declaration by the substitute expert witness, and not the declaration of Dr. Mroczkowski.
The Board asked the parties to try to reach agreement as to the various specifics about Corning’s potentially filing of a substitute declaration from another expert witness, to replace that of Dr. Mroczkowski, before contacting the Board with a proposal.
The parties appear to have agreed to new dates, as set forth in a Notice of Stipulation to Extend Due Dates 1-3 (Paper 21, January 14, 2014). However, there is nothing further in the record to reflect whether agreement was reached as to the possible filing of a substitute declaration as of the date of this post.
It remains to be seen if this approach is employed in other contested proceedings, since it is inevitable that an expert witness will occasionally be unable to testify after institution of a proceeding.
[Editor's Note: All of us who have had friends or family touched by cancer empathize with Dr. Mroczkowski's situation, and we wish him a full and speedy recovery.]
In earlier posts, I described the $391 million patent infringement judgment awarded to Versata for SAP’s alleged infringement of US Pat. 6,553,350. I also detailed SAP’s attempts to avoid the judgment by challenging the ’350 patent in the first covered business method patent review conducted by the Patent Office under the America Invents Act. (SAP v. Versata, CBM2012-00001) SAP prevailed in the CBM proceeding in June 2013, but that was well after the district court judgment and about a month after a decision by the Federal Circuit upholding the damages portion of the judgment. About two weeks before the CBM decision, SAP had filed a request for rehearing and a request for rehearing en banc in an effort to have the Federal Circuit reconsider its decision.
In light of the CBM decision finding the ’350 patent claims unpatentable, SAP motioned the Federal Circuit to stay the litigation pending a final decision in the CBM proceeding. The Federal Circuit denied SAP’s the rehearing requests. On December 12, 2013, SAP petitioned for a writ of certiorari to the Supreme Court. In its petition, SAP argued that the district court judgment action should have been stayed by the Federal Circuit in view of the unpatentability of Versata’s patent as determined by the Patent Office in the CBM review.
On Tuesday, January 21, 2014, the Supreme Court denied certiorari of SAP’s petition. The case will return to the district court for its consideration of the vacation of the injunction by the Federal Circuit. It remains to be seen how the district court will modify the injunction given the CBM decision and whether Versata will be able to collect its $391 million judgment against SAP in view of the Supreme Court’s refusal to take the matter.
In my last post, we explored the interplay of the one-year bar under 35 U.S.C. § 315(b) and joinder in inter partes review (IPR) proceedings. That case involved a Petitioner who could not have filed an IPR petition prior to the 315(b) bar date because the bar triggered prior to the date that the America Invents Act (AIA) authorized filing of IPR petitions. That Petitioner was barred from joining another set of IPRs when those IPRs were terminated early (before decision on institution).
Consider the situation where a prospective petitioner could file an IPR under the AIA, but observes another Petitioner has already filed an IPR petition, so the prospective petitioner hesitates to file pending the results of the earlier-filed IPR petition. Shouldn’t that prospective petitioner just wait to see if the first petition is successful in obtaining institution of trial, and then join if the first petitioner is granted? If so, the prospective petitioner could file its petition with a request for joinder to join the first IPR under 35 U.S.C. § 315(c) and 37 C.F.R. § 42.122(b), correct? Perhaps, but what happens if the first Petitioner settles with Patent Owner before the Board’s institution decision? If the prospective petitioner files its petition after it is barred under 315(b), and the first IPR terminates before institution of trial, the prospective petitioner will have lost its right to join the earlier-filed IPR and its late petition will be dismissed. That’s precisely what recently happened in IPR2014-00244:
The Board agrees with Patent Owner that Fifth Third Bank should not have delayed in filing its petition until after it learned of the settlement, allowing the one-year period under 35 U.S.C. § 315(b) to lapse. By doing so, Fifth Third Bank took a risk that the inter partes review proceeding would terminate prior to a decision on institution, as 35 U.S.C. § 315(c) only permits joinder to a previously instituted case. See 35 U.S.C. § 315(c) (“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 . . .”). We do not find persuasive Fifth Third Bank’s arguments of prejudice. Fifth Third Bank made a litigation choice, and now must face the consequences.
Because Fifth Third Bank delayed its filing, and IPR2013-00341 has been terminated, the joinder statute’s prerequisite of an instituted review cannot be met. Fifth Third Bank’s request for joinder is, therefore, denied.
Fifth Third Bank v. Leon Stambler, IPR2014-00244, Paper 4 (December 17, 2013) at p. 5.
Under the statute, joinder is available if institution occurs. But since settlement and termination can occur before institution of trial, a prospective petitioner must be careful not to allow the 315(b) bar to block its filing if that can be avoided.
In mid-2013 Apple filed seven inter partes review petitions to challenge four VirnetX patents. Recently, the Patent Trial and Appeal Board (the Board) denied all seven inter partes review (IPR) petitions. This outcome demonstrates the Board’s current interpretation of the one-year bar applied in IPR proceedings and its position on joinder of petitions.
Apple’s Interpretation of the One Year Bar
Apple disclosed that its petitions were filed more than a year after service of a complaint asserting infringement of the subject patents, and understood that the petitions might be challenged depending on the Board’s interpretation of 35 U.S.C. § 315(b) (the statute barring IPR petitions filed after certain assertions of infringement):
Petitioner notes it was previously served with a complaint asserting infringement of the ’135 patent in August of 2010, which led to Civil Action No: 6:10-cv-417. During that action, the District Court established an additional civil action, Civil Action No. 6:13-cv-00211-LED, on February 26, 2013 (also pending in the Eastern District of Texas). The August 2010 complaint does not foreclose the present petition, as Patent Owner served a new complaint on Petitioner asserting infringement of the ’135 patent in December of 2012.
Apple Inc. v. VirnetX, Inc., et al., IPR2013-00348, Paper 1 (June 12, 2013), at p. 1 (emphasis in original). Similar disclosures can be found in the other six related petitions: IPR2013-00349, -354, 393, -394, -397, and -398.
Apple anticipated that the 2010 complaint service might cause a concern and argued that the 315(b) bar should not apply:
Petitioner submits this conclusion [that the petitions are not barred] is compelled by the plain language of § 315(b). Notably, § 315(b) does not specify a one-year deadline that runs from the date of the first complaint served on a petitioner. Rather, it states “[a]n 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.” Thus, a petition filed within 1 year of the date any complaint alleging infringement of the patent is served on a petitioner is timely under the plain statutory language of § 315(b). This is also the only reading of § 315(b) consistent with the statutory design. Congress designed the IPR authority to be option to contest validity of a patent concurrently with district court proceedings involving the same patent. A timely filed IPR proceeding in any action a patent owner elects to commence is perfectly consistent with this statutory design.
Reading § 315(b) in this manner also is the only way to effectively foreclose gaming of the system by a Patent Owner. Indeed, if § 315(b) were read to foreclose IPR proceedings in a second, independent action for infringement a patent owner elected to commence, it would unfairly foreclose use of the IPR system. For example, a patent owner could assert irrelevant claims in a first action, wait a year, and then assert different claims in a new action that do present risks to a third party. In this scenario, the patent owner would foreclose legitimate use of an IPR to contest validity of the patent claims asserted in the second action based on the third party’s reasonable business decision to not dispute validity of irrelevant claims in the first action. Rather than attempting to decipher which scenarios would be improper, the Board should follow the plain meaning of § 315(b), and find a petition timely if it is filed within 1 year of the date any complaint alleging infringement of the patent is served on a Petitioner.
Finally, reading §315(b) to foreclose this petition based on the August 2010 complaint would be particularly unjust in this case. The 1-year period following service of the August 2010 complaint expired before it was possible to submit an IPR petition – petitions could only be filed on or after September 16, 2012.
Id., Paper 1 at pp. 2-3 (emphasis in original).
But Apple had one more card to play that could avoid the entire issue of the 315(b) bar: a request for joinder with another IPR proceeding challenging the same patent.
Apple’s Joinder Request
Apple knew that if it could successfully join another IPR proceeding, such joinder under 35 U.S.C. § 315(c) (and 37 C.F.R. § 42.122(b)) would not be subject to the one year bar under the last sentence of 35 U.S.C. § 315(b). Apple filed its Motion for Joinder on August 21, 2013, requesting joinder to IPR proceedings by New Bay Capital, LLC challenging the VirnetX patents:
Pursuant to the authorization granted by the Panel on August 14, 2013 in Paper No. 6, Petitioner Apple Inc. (“Petitioner” or Apple) moves to have the Board join IPR proceedings IPR2013-00348 & -00349 to each other and with IPR proceeding IPR2013-00375 filed by New Bay Capital, LLC (“NBC”), each of which concerns U.S. Patent No. 6,502,135.
Id., Paper 7 at p. 1.
Apple submits that joinder of the proceedings is fully warranted. See IPR2013-00004, Paper 15 at 4; Dell v. Network-1 Security Solutions, Inc., IPR2013-00385, Paper 17 at 2-3. Joinder is proper under the statutory design of inter partes review, will simplify and reduce the number of issues before the Board and will enable streamlined proceedings (i.e., one coordinated proceeding instead of three separate proceedings). In addition, the Board can manage the joined proceeding in a way that does not impact scheduling or conduct of the proceedings. See Motorola Mobility LLC v. Softview, LLC, IPR2013-00256, Paper 10 at 2-3.
Id., Paper 7 at p. 3.
So, it seemed like Apple had two independent avenues for potential institution of IPR: (1) an interpretation of 315(b) that would result in no bar of the petitions, and (2) joinder with ongoing IPR proceedings filed by New Bay Capital, regardless of any potential 315(b) bar.
New Bay Capital Terminates its IPRs
On November 6, 2013, New Bay Capital filed unopposed motions to terminate its IPRs (IPR2013-00375, -376, -377, and -378):
Pursuant to 37 C.F.R. §42.73(b)(4) and the Board’s Order of November 1, 2013, Petitioner New Bay Capital, LLC (“New Bay”) moves to terminate the present inter partes review proceeding. Termination is appropriate because New Bay is abandoning this contest, VirnetX does not oppose and a trial has not been instituted.
The Board granted New Bay Capital’s motions and terminated those IPR proceedings on November 12, 2013.
Apple’s IPR Petitions Denied
The Board reviewed the facts of the complaints served on Apple in the past and decided that the 2010 complaint served on Apple barred its IPR petition under 315(b). The Board also dismissed Apple’s joinder request because the Board had recently terminated the New Bay Capital IPRs:
The timeliness limitation of 35 U.S.C. § 315(b) does not apply to a request for joinder. As such, Petitioner filed a motion to join the instant proceeding with another proceeding, IPR2013-00375, pursuant to 35 U.S.C. 315(c). See Paper 7 (“Petitioner’s Motion for Joinder of Proceedings”). Granting the motion would obviate the time bar under 35 U.S.C. § 315 (b). The IPR2013-00375 proceeding, however, has been terminated. New Bay Capital, LLC v. Virnetx, Inc., IPR2013-00375, Paper 16 (PTAB Nov. 12, 2013). Accordingly, Petitioner’s motion for joinder is dismissed.
Id., Paper 14 at p. 5.
So both of Apple’s avenues for institution of trial in these seven IPR petitions were blocked by the Board.
Reconsideration Still an Option
Even though Apple’s seven IPR petitions were denied, Apple still has the right to request reconsideration and it remains to be seen if it will file requests for rehearing. Such requests have historically proved to be unlikely to be granted. Other Petitioners have sought additional avenues for institution that will be discussed in a future post.
One of the advantages of patent reviews under the America Invents Act is that the parties may settle before completion of the proceedings and file a joint motion to terminate these proceedings. The Patent Trial and Appeal Board (PTAB or Board) may consider the joint motion and terminate the entire proceeding. It has done so in several instances.
But the Board has made it clear that when settlement results in a joint motion to terminate, it has the power to terminate the proceedings with respect to the Petitioner and maintain the proceedings with respect to the Patent Owner. The statute governing settlement in inter partes reviews is 35 U.S.C. § 317 (a parallel one for post-grant reviews is found in 35 U.S.C. § 327):
§ 317. Settlement
(a) IN GENERAL.—An inter partes review instituted under this chapter shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed. If the inter partes review is terminated with respect to a petitioner under this section, no estoppel under section 315(e) shall attach to the petitioner, or to the real party in interest or privy of the petitioner, on the basis of that petitioner’s institution of that inter partes review. If no petitioner remains in the inter partes review, the Office may terminate the review or proceed to a final written decision under section 318(a).
(b) AGREEMENTS IN WRITING.—Any agreement or understanding between the patent owner and a petitioner, including any collateral agreements referred to in such agreement or understanding, made in connection with, or in contemplation of, the termination of an inter partes review under this section shall be in writing and a true copy of such agreement or understanding shall be filed in the Office before the termination of the inter partes review as between the parties. At the request of a party to the proceeding, the agreement or understanding shall be treated as business confidential information, shall be kept separate from the file of the involved patents, and shall be made available only to Federal Government agencies on written request, or to any person on a showing of good cause.
The emphasized language of the statute refers to termination with respect to a petitioner, and contemplates a situation where no petitioner remains in an inter partes review. The corresponding PTAB rule governing settlement is 37 C.F.R. § 42.74:
§ 42.74 Settlement.
- (a) Board role. The parties may agree to settle any issue in a proceeding, but the Board is not a party to the settlement and may independently determine any question of jurisdiction, patentability, or Office practice.
- (b) Agreements in writing. Any agreement or understanding between the parties made in connection with, or in contemplation of, the termination of a proceeding shall be in writing and a true copy shall be filed with the Board before the termination of the trial.
- (c) Request to keep separate. A party to a settlement may request that the settlement be treated as business confidential information and be kept separate from the files of an involved patent or application. The request must be filed with the settlement. If a timely request is filed, the settlement shall only be available: (1) To a Government agency on written request to the Board; or (2) To any other person upon written request to the Board to make the settlement agreement available, along with the fee specified in § 42.15(d) and on a showing of good cause.
The emphasized language of the rule is often cited in decisions to terminate where the Board maintains the proceedings with the Patent Owner.
Two recent decisions provide examples where the Board has terminated the proceedings with respect to the Petitioner, but not with the Patent Owner:
- In CBM2012-00007 the Board decided to maintain the proceedings with the Patent Owner despite terminating the Petitioner’s involvement. Interthinx, Inc. v. Corelogic Solutions, LLC, CBM2012-00007, Paper 47 (November 12, 2013). In this CBM, the matter was “fully briefed” and ready for oral hearing when the parties informed the Board of impending settlement. The Patent Owner also identified ongoing litigation.
- In IPR2013-00016 the Board terminated the Petitioner’s involvement, but maintained the proceeding with the Patent Owner. Blackberry Corp. and Blackberry Limited v. MobileMedia Ideas, LLC, IPR2013-00016, Paper 31 (December 11, 2013). In this IPR, the Patent Owner did not file a Patent Owner’s Response, but instead filed a motion to amend the challenged patent with claim amendments. The Board found that “the trial issues had been fully briefed at the time the parties moved to terminate the proceeding.”
This aspect of PTAB practice is entirely different than reexamination practice, and can be used to the advantage of both Petitioner and Patent Owner, depending on the circumstances of each case.
The America Invents Act provides us several new ways to challenge issued patents. If you are curious about what we have learned in this first
year fourteen months of patent office trials, please tune into my hour webinar tomorrow morning (Dec. 12, 2013) at 9 a.m. central. I will be co-presenting with Steve Schaefer of Fish & Richardson. The hour will provide a review of inter partes review and covered business method review, observations and trends, notable decisions, and a discussion of discovery in these PTAB proceedings.
More information and registration details can be found at: http://www.minncle.org/seminardetail.aspx?ID=120851401