Wi-Fi One: PTAB’s Time-Bar Determinations are Reviewable; Achates Overruled

The tide continues to turn for Patent Owners in IPR proceedings. Wi-Fi One v. Broadcom Corp. is their latest victory — an en banc reversal of the 2015 decision in Apple v. Achates, opening the door for judicial review of PTAB decisions to institute, at least with regard to the time-bar provisions of 35 USC § 315(b).

The Wi-Fi One and Achates decisions relate, in general, to 35 USC § 314(d), which states that “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” In the Achates decision, and others like it, the Federal Circuit took the position that § 314(d) should be interpreted to mean that issues contained in the PTAB’s decision to institute shall not be subject to judicial review, even if the merits of that determination were reconsidered during the IPR trial. Wi-Fi One, at 9.

Subsequent to Achates, the Supreme Court’s decision in Cuozzo was issued, in the context of compliance with § 312(a)(3) (whether the petition contains the particulars required to be successful). On the issue of judicial review, the Court explained that the presumption of judicial review may be overcome by clear and convincing indications from the legislative history that Congress intended to bar review. In Cuozzo, the Court held that the presumption in favor of judicial review was overcome because  the dispute was seen as “an ordinary dispute” over an institution decision. The Court’s decision left open the possibility for judicial review of institution decisions in other contexts.

Turning to the Wi-Fi One decision, the time-bar issue arose given that numerous defendants were originally sued for infringing the patents-at-issue. Specifically, Wi-Fi One argued that Petitioner, Broadcom, was barred from pursuing the IPR petitions because Broadcom was in privity with other defendants that were served with a complaint alleging patent infringement more than one year prior to the Broadcom petitions. The Board ultimately issued Final Written Decisions finding all challenged claims of the three patents at issue unpatentable, including a finding that Wi-Fi One had failed to prove that Broadcom was in privity with the other defendants.

In analyzing the judicial review aspect of the case, the Federal Circuit found no clear and convincing indication that would demonstrate Congress’s intent to bar judicial review of time-bar determinations under § 315(b). More specifically, the Court held that “[t]he time-bar determination…is not akin to either the non-initiation or preliminary-only merits determinations for which unreviewability is common in the law…” Wi-Fi One, at 17.

In theory, time-bar determinations under § 315(b) can go against either party, so this decision may be considered to be neutral in the overall IPR scheme. But, in reality, it is more likely than not that it will be Patent Owners who will be appealing unfavorable time-bar determinations, making Wi-Fi One another small victory for Patent Owners in IPR proceedings.


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).

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.

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.