Nov 21

Federal Circuit Weighs in on Stay in View of Covered Business Method Review

14516149_sThe first few decisions from the Federal Circuit are starting to trickle in and are sure to bring more upheaval to Patent Office post-grant procedures. In Versata Software, Inc., et al. v. Callidus Software, Inc., the Court reversed the District of Delaware’s decision not to stay pending litigation in view of a Covered Business Method Review (CBM). A look at the Court’s analysis is instructive as a guide for successful motions to stay in CBM proceedings.

The underlying litigation was brought by Versata against Callidus on July 19, 2012, asserting infringement of three patents. Soon thereafter, Versata filed a motion to transfer and a motion to dismiss. Seven months later, in May 2013, the district court denied those motions. In response Callidus answered and counterclaimed, and also informed Versata that it would be filing a petition seeking CBM with the Patent Office. In August 2013, Callidus filed a first set of CBM petitions, challenging all of the claims of one of the patents-at-issue, and select claims of the other patents (Versata had not yet identified the asserted claims in the litigation). Simultaneously, Callidus sought a stay of the litigation.

In response, the district court ruled that it would not consider the motion until the PTAB made its decision whether to institute CBM review. In March 2014, the PTAB instituted CBM review finding all challenged claims more likely than not directed to unpatentable subject matter under 35 USC § 101. Callidus renewed its motion to stay, but the court only granted that motion relative to the one patent against which Callidus had challenged all claims, denying the petition relative to the other two patents where only select claims were challenged. Callidus filed a motion for interlocutory appeal.

The Federal Circuit began its analysis by addressing Section 18 of the AIA, wherein four factors are listed that a district court should consider in deciding whether to grant a stay:

(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
(B) whether discovery is complete and whether a trial date has been set;
(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and
(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.

The Court then noted that, while district court decisions on motions to stay are usually reviewed for an abuse of discretion, the AIA provides the Federal Circuit with authority “to conduct more searching review of decisions to stay pending CBM review.” Decision at 4. In conducting that “more searching review,” the Court considered all four factors listed above:

Simplification: The Court disagreed with the district court’s seeming categorical rule that if any asserted claims are not also challenged in the CBM, the factor weighs against a stay. It is not necessary, however, for the CBM to simplify all issues to warrant a stay. Instead, the Court held that “a proper simplification analysis would look to what would be resolved by CBM review versus what would remain.” Decision at 7.

Discovery: Given that discovery was not complete and the trial date was scheduled for seven months after the PTAB was expected to rule, the Court held that this factor “strongly favors a stay.”

Undue Prejudice: The Court quickly dispatched with the district court’s ruling that Versata would suffer undue prejudice because of Calldus’ “improper tactics.” The Court did not find a basis for a conclusion that the filing of a motion to dismiss and transfer was improper and, further, given that Callidus was willing to stay the entire litigation, including its claims against Versata, there was no undue prejudice.

Reduced Burden of Litigation: While the district court found that Callidus’ filing of preliminary motions increased the burden of litigation, the Court found that this was clear error. “The correct test is one that focuses prospectively on the impact of the stay on the litigation, not on the past actions of the parties.” Decision at 13 (emphasis in original).

In the end, the Federal Circuit reversed the decision not to stay and, at the same time, continued the early flow of valuable guidance regarding post-grant proceedings.

Nov 20

IPR Petition Time-Barred Even Where First Lawsuit “Dismissed” and Folded Into Later Lawsuit

hourglassThe PTAB has been presented, of late, several cases that call upon the Board to consider whether a complaint served on a defendant is sufficient to trigger the a time-bar pursuant to 35 U.S.C. § 315(b). For example, as discussed HERE, a complaint that is served, but then later dismissed without prejudice, does not trigger the § 315(b) time bar. In eBay, Inc. v. Advanced Auctions LLC, IPR2014-00806, the Board addressed a factual situation in which a first lawsuit is later folded into a second lawsuit, purportedly because of a defect in the patent assignment raised an issue of whether standing was appropriate. The Board determined that there was no evidence that the assignment was defective and, as such, Patent Owner had standing to file and serve the first complaint. Even though that first complaint was later “dismissed” and folded into a second lawsuit, such an occurrence does not negate service of the first complaint.

On February 13, 2013, Petitioner was served with a first complaint for infringement, resulting in a first district court action. Thereafter, Patent Owner executed an assignment of the patent rights and, on July 11, 2013, Petitioner was served with a second complaint for infringement, resulting in a second district court action.  On May 23, 2014, more than one year after the first complaint was served, but within one year from when the second complaint was served, Petitioner filed the Petition at issue. On July 14, 2014, the court granted a motion to dismiss the first litigation, and effectively folded that action into the second action, allowing work from the first action to carry over to the second action.  Decision at 3. Because the IPR Petition was filed more than one year after service of the first complaint, if service of the first complaint was effective, such service would result in a time-bar of the instant petition under 35 U.S.C. § 315(b).  Id. at 4.

Petitioner argued that Patent Owner did not have rights in the ‘000 patent as of the filing and service of the first action as a result of a late and defective assignment. As such, per Petitioner, Patent Owner lacked standing to assert the subject patent, the first action had no legal effect, and the time-bar of 35 U.S.C. § 315(b) did not apply.

The Board disagreed, finding that Petitioner failed to identify any specific defects in the assignment documents or provide further explanation why the assignments were defective. Id. at 5. As proof that the assignment was defective, Petitioner relied solely on the fact that Patent Owner executed a second assignment after Petitioner had raised the standing issue in the first action. Patent Owner responded that the second assignment was initiated in response to an unrelated case and further that the second assignment expressly stated the belief that the first assignments were valid.  Id. at 6.

With Petitioner pointing out no specific defects in the assignment and the Board finding none, the Board rejected Petitioner’s argument that Patent Owner lacked standing. The Board agreed with Patent Owner, stating that the mere existence of a second assignment was not enough to convince the Board that the first assignment was defective.  Id. at 6. Accordingly, the Board found that Patent Owner did have standing in the first action, service was effectuated, and the instant Petition was time-barred. Further, despite the fact that the first action was “dismissed” as part of a procedural move to fold it into the second action, because the work from the first action carried over to the second action, this situation is not akin to a dismissal without prejudice, wherein the parties were left in the same legal position as if the underlying complaint had never been served. Order at 6-7. Thus, with the complaint in the first action served more than a year prior to the filing date of the instant petition, the Board denied the petition as time-barred under 35 U.S.C. § 315(b).

Nov 19

Proving Real-Party-In-Interest in IPR Remains Elusive

Concept - businessman who has failedOn difficult-to-prove issues in IPR proceedings, it is interesting to watch parties adapt to PTAB decisions, in the hopes of overcoming the long odds of success. One such issue is proving that a third party, whose involvement in the IPR would result in a time bar, is in privity with a petitioner. Few such motions have been granted, but Patent Owners are getting closer. In Sipnet EU S.R.O v. Straight Path IP Group, Inc., IPR2013-00246, involving US Pat. No. 6,108,704, Patent Owner came close, but failed in its attempt to tie a barred-third party to Petitioner.

Patent Owner’s strategy was to argue that third party, Stalker Software, Inc., was a real-party-in-interest that was not named in the Petition. If Stalker were indeed a real-party-in-interest, the petition would have been time-barred, because Stalker was served with a complaint alleging infringement of the ‘704 patent more than one year prior to Patent Challenger filing the petition. Order at 10. In its attempt to prove privity, Patent Owner argued that Petitioner was a reseller of Stalker’s software and that Stalker provided Petitioner with one of the references relied upon in the IPR.  Patent Owner asserted that these acts meant that Stalker exercised control over the proceeding, qualifying Stalker as a real-party under the precedent of In re Guan, Inter Partes Reexamination Proceeding, Control No. 95/001,045, Decision Vacating Filing Date (Aug. 25, 2008). Id. at 10-11

Specifically, Patent Owner presented two types of evidence to bolster its argument Stalker was a real-party-in-interest (Order at 11):

  • testimony of two witnesses regarding a reference relied upon that allegedly have connections to Software (that was not disclosed in the Petition); and
  • the fact that Petitioner maintains no presence in the US and refused Patent Owner’s offer of a license of the ʼ704 patent to expand in to the U.S. market.

Petitioner offered two main counterarguments (Order at 11):

  • Petitioner had no contact with Stalker other than when it contacted Stalker to obtain a reference relied upon in the Petition; and
  • The vendor-seller relationship with Stalker and other evidence presented by Patent Owner were insufficient (either alone or in combination) to show that Stalker had any control over the instant proceeding.

The Board agreed with Petitioner, finding that there was not enough evidence to support Stalker being a real-party-in-interest. The Board agreed with Petitioner’s arguments, above, and further noted that minor participation by a vendor (Stalker, in this case) is not enough to constitute control over the proceeding and Patent Owner’s other assertions were unsupported by evidence. Id. at 12.

Nov 18

PTAB Orders Halt to “Speaking” Objections in Deposition


The Board continues to strongly enforce its regulations regarding the behavior of attorneys defending depositions in inter partes review proceedings. In an order entered in both Medtronic, Inc., Medtronic Vascular, Inc., and Medtronic Corevalve, LLC, v. Troy R. Norred, M.D., IPR2014-00110 and IPR2014-00111, the Board addressed improper speaking objections during a deposition by Patent Owner’s counsel.

Throughout the deposition, Patent Owner’s counsel interposed allegedly improper objections during deposition of its expert witness. Per the Office Patent Trial Practice Guide, and consistent with the Federal Rules of Civil Procedure, “speaking” objections and coaching of witnesses in proceedings before the Board are prohibited.  Cross-examination testimony should be between the lawyer and witness, with no input on questioning and answering during the testimony from other sources. Order at 2.  Further, an objection must be stated in a concise, non-suggestive manner and limited to a single word or term.  For example, proper objections in a deposition would be “Objection, form”; “Objection, hearsay”; and “Objection, relevance.” Id. at 2

Patent Challenger presented an exemplary objection by Patent Owner’s counsel which began “Objection, misleading…” and continued on to a detailed explanation that the question was misleading because it required the witness to make a conclusion based only on a portion of a patent which supposedly was taken out of context. The Board agreed with Patent Challenger that the objection was improper, as it may have helped the witness formulate an answer or otherwise coached the witness. Id. at 3.

Chatty defending attorneys beware, the Board has been clear that speaking objections will not be tolerated. In this case, the Board cautioned that further violations may warrant sanctions, including exclusion of the primary declaration testimony from the witness being deposed. Order at 3.

Nov 17

PTAB Reiterates Prohibition Against New Arguments at IPR Oral Hearing

15503338_sOne of the most litigated aspects of inter partes review proceedings is the issue of whether an argument presented in a petitioner reply or at oral hearing is “new.” This issue arose in Level 3 Communications, LLC v. AIP Acquisition LLC, IPR2013-00296, Paper 42, at 9-10, wherein the Board discussed what will and will not be allowed in terms of new arguments at oral hearing.

Patent Challenger objected to four arguments asserted by Patent Owner during oral hearing:

  • Reliance on a case not yet of record;
  • A previously-unasserted argument of unpredictable results;
  • A new argument regarding a reference of record; and
  • Reference to a specific page of reference of record.

Order at 9.

The Board began by addressing Patent Owner’s reliance on a case at oral hearing that had not been previously discussed in the trial.  Because Patent Challenger had no opportunity to address the new case, the Board sustained an objection to its use in this proceeding. Id. at 9.

Second, Petitioner objected to Patent Owner’s argument that the patent-at-issue disclosed unpredictable results and a characterization of the claimed invention. Patent Owner countered that its arguments were made in response to a new argument in Patent Challenger’s reply brief and should, therefore, be allowed.  The Board sided with Petitioner, finding that there are no exceptions to the rule that new arguments may not be raised during oral hearing, even if in reply to another new argument.  Accordingly, the Board sustained these objections, as well. Id. at 9-10.

Lastly, the Board addressed the fourth objection, listed above, where Patent Owner referenced a specific page of a reference of record during oral hearing. The Board noted that the specific page of the reference was previously admitted as evidence and Petitioner had access to it.  Further, the reference citation was in support of a previously-asserted argument. Accordingly, the Board overruled this last objection.  Id. at 10.

The Board reiterated its rule that no new arguments can be presented during oral hearing, disallowing arguments which depended on new references or which were not previously advanced. However, if argument or evidence relied upon were previously presented, the Board will allow discussion of it during oral hearing.

Nov 14

Copyright Notice on Prior Art Establishes Priority Date in IPR

12111095_sThe PTAB weighed in on whether a copyright notice can be sufficient to demonstrate the priority date of a printed publication in FLIR Systems, Inc. v. Leak Surveys, Inc., IPR2014-00411, -434, -608, and -609.  In Flir, Petitioner relied in the petition upon a brochure that contained a copyright notice of 2002. Patent Owner argued that the printed publication was an “undated reference.” Order at 18. Given that the document contained the Copyright notice, however, the Board was persuaded that Petitioner had established a priority date of 2002, and allowed the document as prior art. Id. at 19.

Interestingly, the Board also considered another printed publication, a user guide, that failed to contain a publication date or copyright notice. The Board cited, however, to the testimony of a witness who stated that the user guide was distributed with a related product before the priority date of the subject patent. Further, the witness testified that the product and user guide was publicly available prior to the priority date of the patent-at-issue. Is this not an end-around the printed publication requirement by using a prior use to corroborate the publication? That is what a different PTAB panel found HERE when it decided that an undated document was not prior art because it contained no publication date and that panel decided that any testimony from a witness about a prior use of the underlying product disqualified the art as a prior use, not a printed publication.

Nov 13

PTAB Rejects End-Around the IPR Printed Publication Requirement

17502113_sPost Grant Review provides a breath of fresh air to Patent Office patentability challenge procedures by allowing prior sales and prior uses as eligible prior art. But, of course, PGR is only available for post-AIA patents and only within 9 months of their issue date. For inter partes review, only patents or printed publications can be used in patentability challenges. That has not stopped some petitioners from trying to shoehorn prior uses into the proceedings by disguising them as printed publications…without success.

For example, in A.R.M., Inc. v. Cottingham Agencies, Ltd., IPR2014-00671, involving US Pat. No. 7,666,103, in each of the challenge grounds, Petitioner relied on a prior art reference that related to the operation of an amusement park ride.  The petition and expert testimony both failed to identify the precise date of the reference and, instead, only indicated that the amusement park ride of the reference was built and operated well before the effective filing date of the ‘103 patent.  Decision at 6. The Board took issue with the Petitioner’s reliance on this testimony of “prior use” of the invention to establish a date of the printed publication.

Under 35 U.S.C. § 311(b), inter partes review is limited to challenges based only on patents or printed publications.  Prior use challenges are not available in inter partes review.  Id. at 7. In this proceeding, the Board found that Petitioner did not adequately show that the amusement park ride “reference” was in fact a printed publication, as no prior art date was asserted and the “reference” was referred to as a prior use in both the petition and expert testimony.  With all asserted grounds relying upon the disqualified reference, the Board denied the Petition across all grounds. Id. at 8.

Nov 12

A Successful Motion for Additional Discovery in an Inter Partes Review

iStock_000013492145XSmallCountless parties to inter partes review can tell you how to lose a Motion for Additional Discovery. This is especially so for discovery motions seeking evidence to prove privity between the Petitioner and a third party in an attempt to have a Petition denied as time-barred. More valuable is an analysis of the motions that were successful….because they are so rare. In Arris Group, Inc. v. C-Cation Technologies, LLC & Level 3 Communications, IPR2014-00746, the Board granted Patent Owner’s Motion for Additional Discovery relating to an indemnification agreement sought by Patent Owner to bolster a claim that the petition was time-barred.

As is the case in any decision relating to additional discovery, the analysis began with a consideration of factors laid out in seminal case of Garmin Int’l, Inc. et al. v. Cuozzo Speed Techs LLC, Case IPR2012-00001, Paper 20, at 2-3 (PTAB Feb. 14, 2013). Here, some of the factors were undisputed, but the Board was required to determine whether something useful would be found relative to the limited discovery request made by Patent Owner. To that end, Petitioner argued that, for Patent Owner to show it is entitled to the indemnification agreement, it must first prove that Petitioner exercised control over the third party for it to be deemed in privity with Petitioner. The Board determined, however, that Patent Owner was not required to prove the underlying legal point (privity) to be granted the discovery. That would be putting the cart before the horse.

Instead, the Board determined that, under Garmin, sufficient threshold evidence had been provided that supported a finding of allowing additional discovery, including:

(1)    Evidence that the indemnification agreement existed;

(2)    Evidence that the third party had made indemnification claims against Petitioner;

(3)    Evidence that Petitioner had contractual rights with the third party regarding exercising sole control of the litigation; and

(4)    Evidence that Petitioner had resolved the indemnification claims with the third party.

Of course, this type of evidence is not present in most cases (and that is why most motions for additional discovery on the privity issue fail). It is, however, worth noting what type of evidence will be successful in these motions.

Nov 11

PTAB Clarifies its Stances on § 315 on the Way to the Federal Circuit

cafc1In an apparent attempt to better explain itself prior to Federal Circuit appeal, the PTAB reiterated and further clarified its decision in Ariosa Diagnostics v. Isis Innovations, IPR2012-00022 regarding three sections of 35 U.S.C. § 315: the effect of the filing of a declaratory judgment of non-infringement, and an affirmative defense of invalidity, relative to § 315(a); the effect of a dismissal without prejudice on the time-bar of § 315(b); and the effect of joinder of IPRs between the same parties under § 315(c).

By way of refresher on the facts, Petitioner filed a declaratory judgment of non-infringement in District Court, but did not include a count seeking a declaration of invalidity. Patent Owner counterclaimed for infringement and, as an affirmative defense to that infringement claim, Petitioner alleged patent invalidity. Thereafter, the parties agreed to dismiss the civil action without prejudice. Petitioner then filed a first petition seeking inter partes review and, ultimately, a second petition seeking inter partes review and the two IPRs were joined. Of interest in this decision is that the second petition was filed more than one year after Petitioner had been served with the civil action.

35 U.S.C. § 315(a)

35 U.S.C. § 315(a)(1) states that “An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.” Patent Owner had argued that the filing of a declaratory judgment action of non-infringement, followed up by an affirmative defense of invalidity, met the definition of filing a “civil action” and the petition was barred. In its Decision to Institute Trial, the Board disagreed.

In the Final Written Decision, the Board reiterated that a claim of invalidity in a declaratory judgment complaint is different than asserting an affirmative defense, citing the Supreme Court’s decision in Cardinal Chem. Co. v. Mortion Int’l, Inc., 508 U.S. 833 (1993). Specifically, the Board stated that “it is clear from Cardinal Chem. Co. that there is a fundamental difference between an affirmative defense of invalidity and a counterclaim of invalidity.” Order at 13.

Additionally, the Board dismissed Patent Owner’s argument that to allow a Petitioner to undertake both a declaratory judgment suit and inter partes review petition thwarted the intent of Congress. The Board held that, allowing both actions did not constitute harassment of a patent owner because, to bring the declaratory judgment action, a party must still satisfy the Article III case-or-controversy requirements. Order at 15-16.

35 U.S.C. § 315(b)

This Final Written Decision also provided the Board the opportunity to expound further on its position that a complaint served more than one year prior to the filing of an inter partes review petition does not amount to a bar, under 35 U.S.C. § 315(b), if the complaint is later dismissed without prejudice. The Board determined that Federal Circuit precedent “has consistently interpreted the effect of [dismissals without prejudice] as leaving the parties as though the action had never been brought.” Id. at 17. Thus, although the second IPR petition was filed more than one year after the service of the civil action alleging infringement, the dismissal of that action without prejudice saved Petitioner here.

35 U.S.C. § 315(c)

Lastly, the Board considered Patent Owner’s argument that 35 U.S.C. § 315(c) only allows for joinder of parties, not joinder of issues. This is an issue that the Federal Circuit must weigh in on, given that the Board has issued conflicting opinions on the issue. In a rare break from its typical solid wall of consistency, certain panels of the Board have recently decided that decisions like this Ariosa case are wrong and that § 315(c) only applies to joinder between parties. This particular panel, however, stuck to its initial position on this issue, finding that § 315(c) is not limited to merely joinder of parties and joinder of issues in IPR proceedings involving the same parties is appropriate.

The issues raised here are not “new,” but interesting to note in any event because, as the case heads to the Federal Circuit, the Board has expounded on these important bar issues that arise in many IPR proceedings.

Nov 10

PTAB Grants Rare IPR “Motion to Compel”

14086935_sMany parties to inter partes review proceedings continue to have their guns pointed directly at their feet, taking erroneous actions that are consistently called out by the PTAB. In the midst of one such error, we explore the Board’s regulations relative to “compelled discovery.” In IPR2014-00041, -43, -51, -54, and -55 (styled as Geo Process Engineering, Inc. v. Steuben Foods, Inc.), an issue arose regarding an omnibus declaration by Patent Owner’s declarant that was not filed. The declarant signed an “omnibus” declaration which pertained to all five inter partes review proceedings pending between the parties. Counsel for Patent Owner then created five separate declarations that were specific to each IPR proceeding.

Oddly, though, counsel did not provide Declarant the opportunity to review the individual declarations before filing. Declarant had to acknowledge in deposition that each individual declaration was different from the others and that each declaration was different than the omnibus declaration (including some red-line edits that remained in the omnibus declaration).  Declarant did testified that the five individual declarations did not contain substantively different testimony than the testimony which Declarant authorized.

In view of these facts, Patent Challenger filed a request to compel the production of the omnibus declaration and allow for cross-examination on that declaration. Both Patent Owner and Declarant himself opposed the request, claiming the omnibus declaration was a draft and subject to work-product protection.

The Board sided with Patent Challenger, finding that the omnibus declaration was not subject to work-product protection under these facts.  The Board stated several factors which persuaded it to grant Patent Challenger’s request, including: (1) Patent Challenger has a strong interest in understanding the differences between the omnibus declaration and each of the five individual declarations in order to evaluate credibility of the declarations; (2) It’s inconsistent for Patent Owner to argue that the omnibus declaration is privileged while simultaneously allowing Declarant to review it for differences between the omnibus declaration and the individual declarations; (3) Declarant’s testimony that there is no substantive difference between the testimony of the omnibus declaration and the five declarations actually filed should not go unchallenged. In the end, the Board granted Patent Challenger’s request to compel the production of the omnibus declaration.

An interesting facet of this decision is that the Board characterized it as a motion to compel, versus the more common motion for additional discovery. The Board did not cite to, for example, 37 CFR 42.52 (“Compelling Testimony and Production”). Further, the production of a document that is in dispute between the parties has, in the past, been considered under the rubric for “additional discovery.” The general belief from commentators to date has been that “compelled discovery” relates to non-parties but there is nothing in Rule 42.52 that specifically limits compelled discovery to third partes. We will have to stay tuned and see if this is merely a vague choice of terminology by the Board, or a trend.

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