Takeaway: The Board cannot institute an inter partes review where the petitioner had the opportunity to substantially control another party’s defense against a complaint alleging infringement of the challenged patent if the complaint was served more than one year before the petition was filed.

In its Decision, the Board denied Petitioner’s request to institute an inter partes review of claims 1-27 of U.S. Patent No. 6,462,713.

The Board began its analysis by considering Patent Owner’s argument that inter partesreview is barred by 35 U.S.C. § 315(b), which provides that an inter partes review may not be instituted based on a petition “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.”

The Petition in this proceeding was filed on Sept. 16, 2014. More than a year earlier, Plaintiff served a complaint alleging infringement of the ’713 patent to Oklahoma Gas & Electric Co. (“OG&E”). The Board therefore considered whether privity exists between Petitioner and OG&E.

As explained in the Office Trial Practice Guide,

Privity is essentially a shorthand statement that collateral estoppel is to be applied in a given case. . . . The concept refers to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is sufficiently close so as to justify application of the doctrine of collateral estoppel.

77 Fed. Reg. 48,756, 48,759 (Aug. 14, 2012) (quoting 154 Cong. Rec. S9987 (daily ed. Sep. 27, 2008) (statement of Sen. Kyl)). Accordingly, the issue for the Board to decide here is whether Petitioner could be bound by the judgment in the Oklahoma case as a matter of collateral estoppel.

Under the applicable law, a nonparty to a prior action is bound by the judgment in that action if the non-party controlled—or had the opportunity to exercise control over—the defense of that action. A nonparty has control where it has “effective choice as to the legal theories and proofs to be advanced in behalf of the party to the action,” as well as “control over the opportunity to obtain review.”

The Board concluded that Petitioner “had the opportunity to exercise control over OG&E’s defense in the Oklahoma lawsuit” because “Petitioner and OG&E entered into a letter agreement on December 30, 2011, stating that Petitioner would ‘provide a full and unqualified defense to OG&E’ and that Petitioner would ‘direct and control the litigation, provided that [Petitioner] and its counsel will keep OG&E timely informed of all material activity in the case and will solicit OG&E’s input and assent on all material decisions in the case.’” Petitioner argued that its right to control under this agreement was “less than total,” but the Board determined that substantial, though not complete, control was sufficient to establish privity. The Board also concluded that an earlier purchase agreement between Petitioner and OG&E required OG&E “to give Petitioner ‘sole authority . . . to direct and control all defense, settlement, and compromise negotiations,’” and this “opportunity [to control] was unfettered by the requirements of the December 2011 agreement that Petitioner solicit OG&E’s input and assent.” Accordingly, the Board concluded that Petitioner was in privity with OG&E with respect to the Oklahoma litigation.

The Board then considered Petitioner’s argument that privity with respect to the Oklahoma litigation is not relevant to the application of the § 315(b) bar and that the Board should focus solely on privity with respect to the present IPR proceeding. The Board was not persuaded by this argument.

Thus, the Board concluded that a privy of Petitioner was served with a complaint alleging infringement of the ’713 patent more than one year before the Petition was filed in this proceeding. As a result, pursuant to 35 U.S.C. § 315(b), the Board concluded that it could not institute inter partes review.

General Electric Co. v. Transdata, Inc., IPR2014-01505

Paper 27: Decision Denying Institution of Inter Partes Review

Dated: April 15, 2015

Before: Lynne E. Pettigrew, Frances L. Ippolito, and Christopher M. Kaiser

Written by: Kaiser

Patent: 6,462,713 C1

Related Proceedings: In re TransData Inc. Smart Meters Patent Litigation, No. 5:12-ml-2309 (W.D. Okla.) (the “MDL proceeding”); TransData Inc. v. Oklahoma Gas & Electric Company, No. 5-11-cv-01032 (W.D. Okla.) (the “Oklahoma litigation”); IPR2014-01380; IPR2014-01559