Microsoft Corporation v. Parallel Networks Licensing, LLC

Addressing the standard for the 35 U.S.C. §§ 315(a)(1) and (b) statutory bars to filing an inter partes review (IPR) petition, the Patent Trial and Appeal Board (PTAB or Board) concluded that, notwithstanding by the petitioners prior filing of a declaratory judgement (DJ) action, the petition-at-issue should not be barred, since the declaratory judgement was voluntarily dismissed without prejudice. Microsoft Corporation v. Parallel Networks Licensing, LLC, IPR2015-00483 (PTAB, July 15, 2015) (Crumbley, APJ).

Microsoft filed a petition for an IPR of Patent Owner Parallel Networks Licensing’s (Parallel) patent, which relates to a system and method for managing dynamic web page generation requests and providing web pages in response to those requests. Parallel argued that Microsoft should be statutorily barred from bringing its petition under 35 U.S.C. §§ 315(a)(1) and (b). Section 315(a)(1) bars a petitioner from filing a petition for inter partes review if the petitioner had previously filed a declaratory judgment action challenging the validity of the same patent. Section 315(b) requires inter partes review petitions to be filed within one year of the petitioner being served with a complaint alleging patent infringement. Here, Microsoft filed an action for declaratory judgment of invalidity of the instant patent in 2008. Separate from the declaratory judgment action, Parallel also sued Microsoft in 2009 for infringement of the same patent. The parties settled both cases in 2012 and dismissed both actions voluntarily and without prejudice pursuant to a Dismissal Agreement.

Absent the Dismissal Agreement, Microsoft’s petition would have been time barred. Here, however, the Board cited Federal Circuit precedent, which has “interpreted the effect of such dismissals as leaving the parties as though the action had never been brought.” Parallel attempted to distinguish the present situation, arguing that the Dismissal Agreement contains provisions that give “on-going legal effect” to the dismissed actions. But the Board disagreed, explaining that even if the parties had intended to give “on-going legal effect” to the dismissed actions, from the court’s perspective, a voluntary dismissal without prejudice still renders the prior action a nullity. The Board further stated that parties to a settlement agreement may wish to prevent filing of inter partes review petitions following the dismissal of their district court actions, but should do so by including explicit prohibitions against such filings. For these reasons, the Board concluded that the previous legal actions between the parties do not give rise to statutory bars under §§ 315(a)(1) or (b).