Board Dismisses Petition for Failure Name All Real Parties-In-Interest

14409517_s (1)Patent Owners get frustrated when they believe a petition fails to identify all real parties-in-interest.  This is understandable, given the difficulties in obtaining additional discovery on the issue.  However, sometimes Patent Owners get that discovery, and when a Patent Owner does get the evidence it needs, it has a kill shot.  This is again reflected in Corning Optical Comm’ns RF, LLC v. PPC Broadband, Inc., IPRs2014-00440, -00441, and 00736.

There, the Board instituted review of three patents.  The petitions were filed less than a year after a lawsuit was service against Petitioner.  Patent Owner’s argument, though, was that the petition was not entitled to the original filing date because not all real parties-in-interest were named.  Rather, Patent Owner argued, a new filing date would be set only upon submission of updated mandatory notices.  Because the one-year deadline (from service of the complaint) had passed, that would mean that the petitions would be barred under § 315(b).

After institution, the Board authorized a motion for additional discovery directed to whether the Petitioner (Corning) should have identified its parent (Corning Inc.) and sister (Corning Optical Comm. LLC) companies.  The issue was whether those companies funded or controlled the IPRs.  The Board first addressed the issue of whether Patent Owner waited too long in raising the issue.  The Board decided that Patent Owner’s argument was timely, because Patent Owner only gained notice of the issue shortly before alerting the Board, based on discovery in an underlying ITC investigation.  As to the substance of the issue, the Board noted the highly fact-specific nature of the real-party-in-interest analysis.  Here, there was evidence of commingling between the three Corning entities, including because common employees of each were involved in the IPR and because Corning Inc. payed the attorneys’ fees.  As the result, the Board found that “Petitioner’s actions have blurred sufficiently the lines of corporate separation” with Corning NC, such that Corning NC ‘could have controlled the filing and participation of the IPRs.’ Zoll, Case IPR2013-00606, slip op. at 10 (Paper 13). Furthermore, we determine that evidence sufficiently establishes that Corning Inc. funded these IPR proceedings, and also exercised or could have exercised control over Petitioner’s  participation in these proceedings. Trial Practice Guide, 77 Fed. Reg. at 48,759–60; Atlanta Gas,  Case IPR2013-00453, slip op. at 8–9 (Paper 88).”

The Board then determined that the petitions could not be afforded their original filing date because of the failure to name all real parties-in-interest.  Because it was then a year past service of the complaint, any new filing date would result in a bar under § 315(b).  The Board thus dismissed the petitions.

Board Denies Petition For Failure to Identify All Real Parties-In-Interest

12104019_sMany Patent Owners have attempted to divert IPR challenges by arguing that all real parties-in-interest were not identified in the Petition. Almost all of those efforts have failed. That is what makes Paramount Home Entertainment Inc., et al. v. Nissim Corporation, (IPR2014-000962) an interesting case because the Board dismissed the Petition because Petitioner’s parent company was not named as a real-party-in-interest (“RPI”), when it should have been.

The two parties at issue were Petitioner Paramount Home Entertainment and its parent company, Paramount Pictures Corporation. In its Patent Owner Preliminary Response, Patent Owner presented arguments and evidence that supported a conclusion that Paramount Pictures was an RPI, including that:

(1) Paramount Pictures was a co-plaintiff with its subsidiary (Petitioner) in a co-pending declaratory judgment (“DJ”) lawsuit relative to the patent-in-suit;

(2) Paramount Pictures and the Petitioner shared the same counsel in the pending DJ action;

(3) Petitioner was a wholly-owned subsidiary of Paramount Pictures and both parties were listed in the “Notice of Interested Parties” filed in the DJ action and, per Patent Owner, this demonstrates that Paramount Pictures has “total financial control” over the Petitioner;

(4) Paramount Pictures has exercised control over the dispute with Patent Owner since it arose, including that:

a) Paramount Pictures responded to Patent Owner’s license offer letter without referring Patent Owner to the subsidiary (Petitioner);

b) Paramount Pictures indicated that it engaged in numerous communications with Patent Owner;

c) Paramount Pictures referred to the counsel providing representation in this proceeding and multiple declaratory judgment actions (involving same group of parties as the instant petition) as “my counsel”; and

d) Paramount Pictures traveled to the office of Patent Owner’s attorney to view Patent Owner’s settlement agreement with a third party.  Decision at 8-9.

The Board also noted that Petitioner had not taken any action regarding issues relating to this proceeding independent from its parent company, Paramount Pictures.

Petitioner countered by arguing that the parent, Paramount Pictures, could not have hypothetically infringed the ‘547 and therefore was not a RPI. The Board rejected this argument, noting that standard for whether an entity is an RPI is whether the entity exercises control over a party’s participation in the proceeding, not whether the entity could have hypothetically infringed.  Id. at 10.  Petitioner also argued that Paramount Pictures is already estopped from filing further petitions for IPR under 35 U.S.C. § 315(a)(1).  The Board also rejected this argument, noting that Section 312(a)(2) requires identification of all RPIs, not only ones not estopped from filing petitions. Id. at 10.

Concluding its analysis, the Board determined that substantial evidence supported a conclusion that Paramount Pictures was an RPI. Because Paramount Pictures was an RPI not identified in the Petition, the Petition was deemed non-compliant under 35 U.S.C. § 315(a)(2) (requiring identification of all RPIs) and denied. Id. at 11.

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.

Late Addition of a Real-Party-in-Interest Allowed in Inter Partes Review

white puzzle with one piece missing, on blueWhat if you come up short in naming all of the real-parties-in-interest to an inter partes review proceeding?  Will the Board allow you to amend your petition? Four related IPR proceedings required the Board to address this issue in Petroleum Geo-Services Inc., v. WesternGeco LLC (IPR2014-00678, IPR2014-00687, IPR2014-00688, and IPR2014-00689).

Just prior to the date when Patent Owner’s preliminary response was due, Petitioner set up a conference call with the Board to inquire about adding an additional real-party-in-interest (RPI) to its petition.  Petitioner argued that, pursuant to the Board’s ruling in ZOLL v. Philips, IPR2013-00609, Paper 15 (March 20, 2014), because adding additional RPIs would not affect any statutory bar, the Board should allow such addition via an updated mandatory notice and assign the petition a new filing date consistent with the mandatory notice filing.  Further, Petitioner argued, because Patent Owner had already prepared its preliminary response when Petitioner proposed the addition of more RPIs, Petitioner argued that a shortened period of 6 weeks should be given for the Patent Owner to submit the preliminary response.

Patent Owner disagreed, citing 35 U.S.C. § 312(a), which requires that a petition for inter partes review be considered only if all RPIs are identified. Accordingly, per Patent Owner, the petitions at issue should be denied entirely and Petitioner should be forced to re-file.  Additionally, Patent Owner argued that it should be given a full three months to file a preliminary response, because it needed time for adequate discovery with the addition of the new RPI.

The Board noted that since the additional RPI was not omitted from the original petition due to clerical error, the petition was incomplete.  However, the Board allowed the new RPI to be put on-record with an updated mandatory notice.  Accordingly, the petitions were assigned new filing dates of the date of filing of the updated mandatory notice. The Board noted that time was needed for Patent Owner to make appropriate changes to its preliminary amendment and also its motion to seal with the addition of more RPIs.  However, the Board noted that Patent Owner’s preliminary response was likely substantively complete and only needed minor amendment.  Therefore, Patent Challenger’s proposed six-week time limit was appropriate.

49 for 54: Successful Rehash of Old Arguments in Grant of 2 IPR Trials

Innolux’s decision to spread a challenge to a Semiconductor Energy Laboratory patent over two separate IPR cases paid off, as they successfully forced all 33 challenged claims into two trials in cases styled as Innolux Corp. v. Semiconductor Energy Lab. Co., Ltd. (IPR2013-00064 and IPR2013-00065), involving US Pat. No. 7,923,311. Trial was instituted for all 10 challenged claims in the IPR2013-00064 case and all 23 challenged claims in the IPR2013-00065 case.

[pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”]35 U.S.C. § 325(d) — “…during the pendency of any post-grant review under this chapter, if another proceeding or matter involving the patent is before the Office, the Director may determine the manner in which the post-grant review or other proceeding or matter may proceed, including providing for the stay, transfer, consolidation, or termination of any such matter or proceeding. In determining whether to institute or order a proceeding under this chapter…the Director may take into account whether, and reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office.”[/pullquote]The ‘311 patent describes a thin film transistor (TFT) and a method for forming the transistor. The patent described numerous problems associated with prior art methods of crystalizing amorphous silicon layers used in devices. The patent went on to claim that layer crystallization by laser irradiation of semiconductor materials in the channel region and the activation of the ohmic contact region of the source and drain provides improvements in electrical conductivity and avoids the prior art problems.

Patent Owner’s primary argument was based on the fact that, during prosecution of the application leading to the ‘311 patent, the Examiner previously considered all of the same prior art references. Following a now established trend, the Board rejected Patent Owner’s arguments because they failed to show that the Examiner considered substantially the same arguments – namely that Petitioner included evidence not considered by the Examiner, such as the Petitioner’s expert declaration. Order at 7. The Board has set a very high hurdle for any Patent Owners who wish to dismiss an inter partes review by arguing that the prior art references have been previously considered.  To date, no argument based on 35 U.S.C. § 325(d) has been adopted by the Board.

Echoing an argument tried in other IPRs involving the same parties, the Board also rejected Patent Owner’s argument that Petitioner failed to identify all real parties-in-interest, arguing that other defendants in co-pending litigation joined in a motion to stay pending the outcome of the present inter partes review and agreed to be bound by its outcome. The Board found that the other defendants did not need to be listed as real parties-in-interest because they did not have any control over the proceeding. Order at 8.

As a last procedural issue, the Board considered Petitioner’s “administrative estoppel” argument, based on the fact that a sister patent was reexamined and that proceeding resulted in many invalidated and canceled claims. At this stage of the proceeding, however, the Board declined this argument, finding that Petitioner had not shown the claims to be patentably indistinct. Order at 9.

After dispensing with the above-procedural issues, the Board provided only a brief claim construction analysis, simply adopting a prior district court construction of “overetching.”  Then, in its obviousness analysis, the Board rejected Patent Owner arguments that: 1) there was no motivation to combine the underlying references (Order at 14-15); 2) as such, the reference taught away from combination (Order at 15), 3) that a combination would render a reference disabled or unfit for its intended purpose (Order at 15), 4) that there would be no need to combine because a problem was already solved (Order at 16), and 5) that the combination would be impossible to manufacture (Order at 16-17).

In the end, although the same patent was spread out over two IPR cases, the Board granted trial on all challenged claims – ignoring a prior determination at the Patent Office based on the rationale that an expert declaration provided with the Petition was new evidence that precluded the applicability of 35 U.S.C. § 325(d).

44 for 49: Innolux Continues Winning Streak With Additional Inter Partes Review Trial Initiation

iStock_000000202778XSmallInnolux Corporation (CMI), after filing a notice to drop the “Chimei” from its name, had yet another petition for inter partes review granted. CMI has had initial success in challenging nine claims of a Semiconductor Energy Laboratory (SEL) patent in a case styled as Innolux Corporation v. Semiconductor Energy Laboratory Co., Ltd. (IPR2013-00060), involving U.S. Pat. No. 7,697,102.

The ‘102 patent relates to an active matrix liquid crystal display (LCD). In more detail, the LCD has a thin-film transistor that controls voltage to pixel electrodes and extractor terminals which supply power, the latter of which are formed from the same metal layer as the pixel electrodes.

The Board began by considering Patent Owner’s contention that the review should be denied because the petition failed to identify all real parties-in-interest. SEL asserted that several other co-defendants with Patent Challenger in a pending case all agreed to be bound by inter partes review, but the petition failed to identify them as real parties-in-interest. The Board did not adopt Patent Owner’s argument, however, finding that certain statements in pleadings filed with a district court in co-pending litigation was insufficient to prove that the non-listed parties had any control over the IPR proceeding.

The Board then moved to a claim construction analysis, tackling several terms in dispute and relevant to the patentability determination.  In general, the Board based its interpretation on the specification of the ’102 patent, with a strong dose of its mandate to rely upon the “broadest reasonable interpretation” of the claim terms.

Having construed the claims, the Board then analyzed Patent Challenger’s asserted grounds of unpatentability over two combinations of prior art references. In a straightforward obviousness analysis of the first combination of references, the Board did not find Patent Owner’s arguments for nonobviousness over the prior art to be persuasive and granted the petition of Patent Challenger. The Board declined to consider the second combination, based on admitted prior art, because the Board found it to be redundant.

In summary, the Board granted the petition of Patent Challenger as to all of the challenged claims in the ‘102 patent on obviousness grounds.

30 for 31: Prior Art from Original Prosecution Used as a Basis for Institution of Inter Partes Review

iStock_000000202778XSmallThe Patent Trial and Appeal Board continued to give little or no deference to previous decisions by the Patent Office in granting an inter partes review trial in response to a petition filed by Chimei Innolux in a case styled as Chimei Innolux Corp. v. Semiconductor Energy Lab. Co., Ltd. (IPR2013-00038), involving US Pat. No. 7,956,978. Both challenged claims were put into trial based on multiple obviousness grounds.

The ‘978 patent describes LCD devices having two opposing substrates bonded together with a sealing material. The ‘978 patent solves a problem in the prior art by using dummy wiring sections which are nearly equal in height to the other conductive lines to render the seal and consequent gap more uniform.

The Board first addressed two statutory threshold issues. The Patent Owner argued that the petition for inter partes review was improper under section 325(d) because the PTO Examiner previously considered the same prior art references during prosecution of the application leading to the ‘978 patent. The Board rejected this argument because there was no showing of substantially the same arguments, beyond simply using the same prior art references. Order at 6. The Board noted new evidence not considered during the prior examination, including the Patent Challenger’s expert declaration. In general, therefore, a Patent Challenger’s expert declaration, alone, seems like enough to allow prior art previously considered during examination to be used as a basis for inter partes review.

The Board next addressed the Patent Owner’s contentions that the petition should be denied due to a failure to identify all real parties-in-interest, because not all co-defendants in pending litigation were listed. Despite the fact that all co-defendants represented to the district court that they all “participated in filing the instant Petition” and agreed to be bound by this inter partes review, the Board found that insufficient evidence was set forth by Patent Owner to prove that the co-defendants not listed as real parties-in-interest had control over the IPR proceeding. Order at 7.

The Board then proceed through a fairly straight-forward obviousness analysis, failing to find Patent Owner’s objections to the grounds asserted in the petition to be persuasive.  As such, the Board granted an IPR trial on two different obviousness grounds using references cited in the original examination of the application leading to the ‘978 patent, as additionally supported by Patent Challenger’s expert declaration. Maintaining a developing trend in IPR practice, the Board is providing almost no deference to the Patent Office’s previous decisions relating to the patent-in-suit, leaving open the potential for Patent Challengers to re-use prior art references from the original examination.

What is a Real Party In Interest in Inter Partes Review?

iStock_000015955172XSmallOne of the largest downsides of inter partes review for a patent challenger is, of course, the estoppel that arises upon a final written decision. That estoppel works to prevent the real party-in-interest from raising validity challenges to the patent-at-issue that were raised in the IPR, or reasonably could have been raised.  Importantly, however, that estoppel only applies to a real party-in-interest.  As such, the determination of what entities are, or are not, real parties-in-interest is sure to be subject of many future disputes.

The issue of what is a real party-in-interest arose in an Order issued in the quartet of related inter partes review proceedings styled as Intellectual Ventures Management v. Xilinx, Inc. (IPR2012-00018, -00019, -00020, and -00023).  In those cases, the patent owner, Xilinx, filed a preliminary response, arguing that IVM’s petitions should be denied or dismissed because each failed to identify ALL real parties-in-interest.  The Board denied this line of argument, finding that Xilinx had failed to establish that the real party-in-interest was incorrectly identified.

The basis for Xilinx’s argument was a certificate of interested entities that was filed pursuant to the Local Rules of the Northern District of California in related litigation.  In that filing, 63 entities were identified as having a financial interest in the controversy or who could be substantially affected by the outcome of the proceeding.  Based on this filing, Xilinx argued, IVM improperly only identified itself in the present set of inter partes reviews as the real party-in-interest.

The Board was not persuaded, however, finding that Xilinx had not sufficiently shown the relevance of the district court certificate vis-à-vis the facts of this case.  For example, Xilinx did not show how the requirements of the Northern District of California are the same, or similar, to the requirements outlined in the Trial Practice Guide regarding what a real party-in-interest is for inter partes review purposes.  77 Fed. Reg. 157 (August 14, 2012) 48759-60. The Board went on to provide guidance to future patent owners seeking to make the same argument, instructing that a patent owner must come forward with sufficient evidence to demonstrate that the real party-in-interest disclosure from a petition is inadequate – using the Trial Practice Guide as a guideline for that evidence.

A full discussion of the real party-in-interest guidelines can be found in the Trial Practice Rules at 48759-60.  While Xilinx’s argument only referenced the federal court certificate, more fact patterns will be required to enable IPR participants to understand how these guidelines will be implemented.  Indeed, the Trial Practice Guide points out that these will be fact-intensive inquiries:

“[w]hether a party who is not a named participant in a given proceeding nonetheless constitutes a ‘real party-in-interest’ or ‘privy’ to that proceeding is a highly fact-dependent question….Such questions will be handled by the Office on a case-by-case basis taking into consideration how courts have viewed the terms ‘real party-in-interest’ and ‘privy.’”

Stay tuned for future development of this high stakes question of who is a real party-in-interest.