As discussed in our alert from last week, the United States Patent and Trademark Office (USPTO) has recently taken measures to increase the predictability and uniformity at the Patent Trial and Appeal Board (PTAB). The USPTO has done this by designating decisions as either precedential or informative, and is doing so at a rapid pace, having now designated 11 America-Invents-Act (AIA) decisions since early March.
This alert covers three decisions designated precedential last week. All address a potentially dispositive issue: real party in interest (RPI). One decision provides guidance on RPI and privity determinations, while the other two provide guidance on how to update a petition’s RPI designation without losing the petition’s filing date.
RPI and Privity Determination
Ventex Co. Ltd. v. Columbia Sportswear North America, Inc., Case IPR2017-00651 (PTAB Jan. 24, 2019) (Paper No. 148) (precedential)
In Ventex Co. Ltd. v. Columbia Sportswear North America, Inc., the PTAB explained the RPI and privity analyses, and found that the petitioner failed to meet its burden of showing that no RPIs or privies were served with a complaint alleging infringement more than one year before Ventex filed its petition, pursuant to 35 U.S.C. § 315(b). Ventex, slip op. at 3-5. Thus, the PTAB dismissed the petition and vacated the institution decision. Id. This case concerned two patents asserted against Seirus Innovation Accessories in district court that were then challenged in this and a related inter partes review (IPR) by Ventex. The PTAB clarified that it is the petitioner that bears the burden to demonstrate that “no real parties in interest or privies were served with a complaint alleging infringement more than one year prior to the filing of Ventex’s petition….” Ventex, slip op. at 4-5 (quoting Worlds Inc. v. Bungie, Inc., 903 F.3d 1237, 1242 (Fed. Cir. 2018)). Here, Columbia alleged that Seirus was a privy to Ventex and was served with an infringement complaint more than a year before Ventex filed its petition. The PTAB addressed the RPI and privity issues separately.
The PTAB explained that “[a]s articulated by the Federal Circuit, ‘[d]etermining whether a non-party is a ‘real party in interest’ demands a flexible approach that takes into account both equitable and practical considerations, with an eye toward determining whether the non-party is a clear beneficiary that has a preexisting, established relationship with the petitioner.’” Id. at 6. The PTAB continued, stating that the “terms ‘real party in interest’ and ‘privy’ were included in § 315 to serve two related purposes: (1) to ensure that third parties who have sufficiently close relationships with IPR petitioners would be bound by the outcome of instituted IPRs under § 315(e), the related IPR estoppel provision; and (2) to safeguard patent owners from having to defend their patents against belated administrative attacks by related parties via § 315(b).’” Id.
In its rationale, the PTAB relied on a “Supplier Agreement” that required Ventex to “indemnify, defend and hold harmless Seirus…from and against any and all claims, demand, damages, liabilities, losses, costs and expenses, (including without limitation, attorney’s fees and costs), of any nature whatsoever, which arise from [Ventex’s] failure to perform its obligations.” Id. at 7. The PTAB also relied on another contract between Ventex and Seirus, entitled “Exclusive Manufacturing Agreement” that included a provision that Ventex “agrees to only manufacture Heatwave Materials for Seirus” in exchange for Seirus’s payment of an “exclusivity fee.” Id. Seirus was an alleged infringer of Columbia’s patents because its products “incorporated the Heatwave fabric made by Ventex.” Id. The PTAB found that the two agreements showed “the parties had mutual interest in the continuing commercial and financial success of each other” and both parties were incentivized to invalidate the patents at issue. Id. at 8. In fact, Ventex admitted that it filed the petitions over “concern of potential legal jeopardy for ‘its customers’ and prospective buyers.’” Id.
Ultimately, the PTAB was convinced that Seirus was an RPI of Ventex because “Seirus would not receive a merely generalized benefit from Ventex’s … Petition, but rather, the direct benefit of a finding of unpatentability of claims of the … patents for which Columbia had accused Seirus of infringing.” Id. at 10.
The PTAB considered whether Seirus and Ventex were in privity by referring to the Supreme Court’s precedent in Taylor v. Sturgell and providing a non-exhaustive list (for which any one factor can support a finding of privity) “for examining whether the legal relationship between two parties establishes that one is the privy of the other: ‘(1) an agreement between the parties to be bound; (2) pre-existing substantive legal relationships between the parties; (3) adequate representation by the named party; (4) the non-party’s control of the prior litigation; (5) where the non-party acts as a proxy for the named party to relitigate the same issues; and (6) where special statutory schemes foreclose successive litigation by the non-party (e.g., bankruptcy and probate).’” Id. at 12 (citing Applications in Internet Time, LLC v. RPX Corporation, 897 F.3d 1336 (Fed. Cir. 2018) (citing Taylor, 553 U.S. 880, 894-95 (2008)).
Under that test, the PTAB determined that Seirus and Ventex had a preexisting substantive legal relationship in the form of two contracts—a Supplier Agreement with an obligation to indemnify and defend and an Exclusive Manufacturing Agreement”—and those agreements “directly related to the product accused of infringing the patent at issue in this proceeding because they governed the contracts between the parties that resulted in Ventex’s sale of fabric to Seirus.” Id.
The PTAB also pointed to payments made under the Exclusive Manufacturing Agreement, which it concluded supported a finding that “Ventex is serving as a proxy for Seirus and that Seirus was, in effect, funding the inter partes reviews, whether wittingly or unwittingly.” Id. at 13. This conclusion was supported by evidence showing that Seirus and Ventex entered into that agreement a “few months prior” to the filing of the petition along with an “internal email” that “further links the surcharge fees from Seirus as necessary to cover the attorneys’ fees” in these IPRs. Id. The PTAB further concluded that agreement “may have been a cover for Seirus” to fund these IPRs “without leaving a paper trail establishing Ventex’s awareness” that petition would be barred under § 315(b). Id. at 13-15. The PTAB thus found that Seirus was in privity with Ventex.
After finding that Seirus is an unnamed RPI and that Ventex and Seirus are privies, the PTAB held that the petition was time barred under 35 U.S.C. § 315(b).
Updating RPI Designation Without Losing the Petition’s Filing Date
Proppant Express Investments, LLC v. Oren Techs., LLC, Case IPR2017-01917 (PTAB Feb. 13, 2019) (Paper No. 86) (precedential)
Proppant Express Investments, LLC v. Oren Techs., LLC addresses whether a petitioner can update its RPI designation without losing its filing date under 35 U.S.C. § 312(a)(2), which states that “a petition ‘may only be considered’ if the petition ‘identifies all real parties in interest.’” Proppant Express, slip op. at 6 (quoting portions of § 312(a)(2)). The PTAB stated that failure to comply with the requirements of § 312(a)(2) is not considered jurisdictional. As such, a petitioner may amend its “identification of real parties in interest while maintaining the original filing date,” based on the following factors: “whether there have been: (1) attempts to circumvent the [35 U.S.C.] § 315(b) bar or estoppel rules, (2) bad faith by the petitioner, (3) prejudice to the patent owner caused by the delay, or (4) gamesmanship by the petitioner.” Id. at 6-7.
Applying these factors to the case’s facts, the PTAB found that had the petitioner named the proposed RPIs in the original petition, the time bar would not have been implicated. Also, the PTAB found no bad faith on the part of the petitioner, the patent owner was not prejudiced by allowing the petitioner to update its RPI designation without losing its filing date, and the petitioner did not engage in any gamesmanship. For these reasons, the PTAB allowed the petitioner to update its RPI designations without losing its filing date.
Adello Biologics, LLC v. Amgen, Inc., Case PGR2019-00001 (PTAB Feb. 14, 2019) (Paper No. 11) (precedential)
In Adello Biologics, LLC v. Amgen, Inc., the PTAB also allowed the petitioner to update its RPI designation without losing its filing date. The PTAB was satisfied with petitioner’s representation that it did not act in bad faith and was convinced that there would be no prejudice to the patent owner if the petitioner was allowed to update its RPI designation without losing its filing date. The PTAB thus exercised its discretion per 37 C.F.R. § 42.5(b) to allow the petitioner to update its RPI designation without losing its filing date, stating “[a]llowing Petitioners to update the mandatory notices while maintaining the original filing date promotes the core functions of RPI disclosures and secures a ‘just, speedy, and inexpensive resolution’ of this proceeding.” Adello, slip op. at 5.
RPI and privity are critical issues that can doom a petition. The PTAB has now provided precedential guidance for practitioners to analyze these issues as well as to fix an incorrect RPI designation where there was no mal-intent. Hopefully, the USPTO will continue its designation of decisions on critical issues.
1 The time-bar under § 315(b) follows: “An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”