Attacking a Patent at the PTO: Beware the Real Party in Interest

Eugene Perez for Corporate Counsel

January 25, 2016

Patents are critical to the success of many companies, where having a good patent portfolio can protect commercial products, keep competitors out of the market and force licensing negotiations. Given the amount of patent litigation, with the latest patent reform laws of 2011, Congress has created new ways to attack and defend patents at the Patent Trial and Appeal Board (PTAB) of the U.S. Patent & Trademark Office (PTO) instead of district court or the International Trade Commission. The idea was to create an alternative forum for contesting patent validity and to reduce the amount of patent litigation. However, around 80 percent of PTAB procedures have concurrent litigation, though sometimes a stay in the litigation is possible. These PTO procedures are called post-grant review (PGR), inter partes review (IPR) and a PGR solely for business method patents (CBM), with IPR being by far the most popular.

Identifying Real Parties in Interest

All of these are procedures start with the filing of a petition (typically by an alleged infringer), where a 3-judge panel of the PTAB oversees what is essentially a trial but with significantly less discovery allowed. Whether you are the petitioner or the patent owner (PO), a sticking point is the statutory requirement of identifying all real parties in interest before the PTAB trial even begins. But how do you define a real party in interest” (RPI)? A little history is needed first.

Before IPR, another proceeding called inter partes reexamination (reexam), which is now defunct, did not allow a completely anonymous filing. In the 2008 Troll-Busters case (PTO Control No. 95/001,045), it was discovered that the reexam requester had a business model that offered to file reexams on behalf of third parties anonymously. The requester had no actual product on the market. That reexam request was denied by the PTO.

Also in reexam there was limited estoppel in that the requester had to wait until the first reexam was completely over before filing a second request. Still, a reexam only required one or more RPIs to be identified, and not all as in required in IPR or PGR. Thus, there was always the possibility of multiple attacks against the same PO. Such a problem arose in Reexamination Control No. 95/000,166, when the patent owner alleged that the reexam request was improper, as the reexam requester Samsung did not list all RPIs, which included Micron, a codefendant in a related litigation. However, the PTO stated that identifying only one RPI was acceptable because Congress did not provide the resources to determine the accuracy of RPI identifications. Congress fixed this problem, which invited the harassment of patent owners, when it created the new PTAB trials.

According to any legal definition, the RPI means the person or entity whose rights are involved--who has the legal right under applicable substantive law to enforce the claim in question. Generally, though not always, the RPI stands to gain from the petition, proceeding or lawsuit. While RPI is defined differently in other parts of the law (e.g., trustee-beneficiary), in the patent world, RPI is a very fact-specific determination where there is no bright-line rule. It turns out funding and control (whether past, present or potential) are key factors.

Why Identify All RPIs?

The identification of all RPIs is important because the estoppel of future litigation/PTO proceedings will apply not only to the petitioner,but to any RPI of the petitioner as well. In other words, neither the petitioner nor any RPI gets “two bites at the apple,” thus meeting the Congressional intent of less patent litigation.

But how exactly do you get two bites at the apple? Take a situation where codefendants X and Y are being sued for patent infringement in district court. Only X files an IPR/PGR petition at the PTO (and tries to get the trial stayed pending the verdict in the IPR/PGR), but does not identify Y as an RPI in the petition. If X and Y are truly separate, each company perhaps selling its own product that allegedly infringes the same patent, or the interests in the trials are truly distinct (think Apple and Samsung being sued by a “troll”), then Y is not an RPI. But if the companies are contractually related, or related another way such as a parent-subsidiary corporate relationship, then determining the RPI is more fact dependent. Basically, an RPI is determined by looking at the relationship between the nonparty to the PTAB trial.

A petitioner should be aware of recent PTAB decisions indicating that funding and control are the biggest factors for RPI determinations. For control, the PTAB will ask if the non-party actually or potentially could exercise control over a party’s participation in a proceeding. Taking the above hypothetical, if nonparty Y was providing 100 percent funding to party X (for instance, a parent company funding a wholly owned subsidiary that filed the IPR petition), or Y controls the trial by stating which legal theories to advance, which patent claims to attack and when, then there is likely control and Y is an RPI. See GEA Process Eng. v. Steuben Foods (PTAB 2014) Should Y be identified as an RPI, and X and Y lose the trial, neither one could pursue those same issues in a second IPR or district court.” Still, merely participating in a related litigation to defend against infringement, such as being a member of a joint defense agreement, does not automatically qualify that entity as an RPI. See Intellectual Ventures Management v. Xilinx (PTAB 2013).

IPR Has a One-Year Time Bar, but Joinder Is Possible

The petitioner has to be aware of joinder and the one-year deadline to file an IPR (not PGR) after being sued for infringement. (PGR does not have the one-year time bar, since the PGR petition has to be filed within 9 months of patent issuance.) So if companies X and Y were sued for infringement on 1/1/2016 over claim 1 of patent X, the IPR petition has to be filed by 1/1/2017.

Even if the IPR petition is timely filed, what happens if the PO one day later, on 1/2/2017 amends the complaint to state that claim 2 of patent X is being infringed, or raises a new issue (e.g., revealing new invalidating prior art)? This is where joinder of issues and/or parties comes in. If company X is initially involved in the IPR, company Y can filed a second IPR after the amended complaint, and request joinder to merge the two IPR trials into one (Y joins X’s trial).

Still, it is within the PTO’s discretion to deny or grant the joinder request, where such discretion has led to inconsistent results. Specifically, when it comes to A joining itself in a previous trial, the PTAB in 2013 said the same party can join its own trial. See Microsoft v. Proxyconn (PTAB 2013) However, a series of PTAB decisions in 2015 showed differences in statutory interpretation that allows joinder, and it was ultimately decided that joinder of issues and by the same party are allowable. See Target Corp. v. Destination Maternity Corp. (PTAB 2015)

Thus, this should be a warning to all POs: Even if the one-year time bar passes in an IPR, amending the complaint in district court can lead to joinder in the IPR trial, whether there is joinder by the same party or a different party.


Reprinted with permission from the January 25, 2016 edition of Corporate Counsel© 2016 ALM Media Properties, LLC. All rights reserved.
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