On November 10, 2016, the Intellectual Property Owners Association (IPO) hosted a panel discussion entitled Ethics in AIA Post-Grant Proceedings at the PTAB with the Honorable Thomas Giannetti, Lead Administrative Patent Judge of the PTAB.

The main topic of the discussion was guidance on motions for sanctions. The rules relating to trial practice before the PTAB allow the Board to impose an appropriate sanction on any attorney, registered practitioner or party that violates the PTAB’s rules after the offending party has had an opportunity to respond. 35 C.F.R. §42.11(d)(1). The Board has the authority to sanction parties or a party may file a motion for the Board to impose sanctions. The motion must be made separately from any other motion and must describe the specific conduct that allegedly violates the rules. The Board must authorize the motion before it may be filed. 35 C.F.R. §42.11(d)(1). The panel indicated that timing of the request to motion for sanctions is very important and Judge Giannetti advised to seek relief immediately after the alleged misconduct occurs. For example, if the misconduct occurs during a deposition, he advised to object during the deposition, then to call the Board to request authorization to file a motion immediately after the deposition.

The Board is reluctant to impose sanctions unless a pattern of bad behavior occurs after a warning. In most cases, the Board will not authorize a motion for sanctions unless the offending activity violates a clear instruction from the Board.

The denial of the request to motion for sanctions in Square Inc. v. REM Holdings 3, LLC, IPR2014-00312, Paper 59 (PTAB) illustrates that the request must be made very soon after the alleged misconduct. In this case, the Petitioner requested authorization to file a motion for sanctions related to alleged misconduct that occurred during the oral hearing. However, the Petitioner requested authorization two weeks after the Board issued a final written decision. The Board stated that the Petitioner’s request was untimely because the Petitioner waited more than four months after the alleged misconduct and two weeks after the final decision was issued.

Turning to the factors for granting motions for sanctions, the PTAB has identified them as follows:

  1. whether the moving party has performed conduct that warrants sanctions;
  2. whether the moving party has suffered harm from the conduct; and
  3. whether the sanctions requested are proportionate to the harm suffered by the moving party.

Square Inc. v. Think Computer Corp., CBM2014-00159, Paper 48 (PTAB 2015) citing Ecclesiastes 9:10-11-12, Inc. v. LMC Holding Co., 497 F3d 1135, 1142 (10th Circuit, 2007).

The Board is reluctant to impose sanctions unless a pattern of bad behavior occurs after a warning. In most cases, the Board will not authorize a motion for sanctions unless the offending activity violates a clear instruction from the Board. For example, the Board did not authorized a motion for sanctions where the petitioner filed two IPR petitions that involved the same parties and the same patent and presented overlapping arguments. Chums Inc. v. Cablz, Inc., IPR2015-00602, Paper 9 (PTAB 2015), Iron Dome LLC v. Chinook Licensing DE, LLC, IPR2014-00674, Paper 9 (PTAB 2014). The Board also did not authorize a motion for sanctions where a party filed multiple overlapping IPR petitions (25 petitions on 6 patents). Ford Motor Co. v. Paice LLC, IPR2014-00571, Paper 37 (PTAB 2015). In addition, the Board did not authorize a motion for sanctions where a party filed an IPR petition with grounds that overlapped grounds in another party’s petition that was subsequently denied. Unified Patents, Inc. v. Custom Media Tech., LLC, IPR2015-00516, Paper 12 (PTAB 2015).

Sanctions During Discovery

Many requests for sanctions arise from alleged misconduct during depositions, but in most cases the Board does not authorize the filing of such motions. For example, the Board did not authorize a motion for sanctions where a Petitioner failed to meet and confer adequately after Patent Owner asked for bases regarding Petitioner’s request to depose the inventor. In this case, the Board stated it was troubled by Petitioner’s failure to cooperate, but stated that it was not the Board’s job to micromanage all disputes between the parties. Westlake Servs. LLC v. Credit Acceptance Corp., CBM2014-00176, Paper 29 (PTAB 2015). In another case, the Board did not authorize a motion for sanctions when one party canceled a deposition after its scheduled start time. Inline Packaging LLC v. Graphic Packaging Intl. Inc., IPR2015-01609, Paper 27 (PTAB 2016). In yet another case, the Board did not authorize a motion for sanctions where a party cross-examined a declarant beyond the scope of his declaration because the Board stated that these questions could have been objected to during the deposition. Westlake Serv. LLC v. Credit Acceptance Corp., CBM2014-00008, Paper 48, (PTAB 2014).

In BioDelivery Scis. Intl., Inc, v. Monosol Rx, LLC, IPR2015-00165, Paper 20 (PTAB 2015), the Patent Owner requested leave to move for sanctions for numerous improper leading questions during the Petitioner’s re-direct examination of its own expert. These leading questions allegedly frustrated the Patent Owner’s fair cross examination of the Petitioner’s expert. The Patent Owner made the request to motion for sanctions several weeks after the deposition. The Patent Office Trial Practice Guide requires that the party must promptly initiate a conference call with the Board to discuss the proposed motion for sanctions. In this case, the Patent Owner had more than one opportunity to initiate a conference call and allowed seven weeks to pass between the deposition and the request for authorization. Thus, the Board denied the Petitioner’s request.

Sanctions for Improper Ex Parte Contact

The Board has authorized motions for sanctions for improper ex parte contact, which can include entry of an adverse judgment. The Patent Office Trial Practice Guide states “All substantive communications with the Board regarding a proceeding must include all parties to the proceeding, except as otherwise authorized.” 77 Fed. Reg. 48756, 48758 (Aug. 14, 2012) and 37 C.F.R. § 42.5(d).

Other ex parte contacts may lead to sanctions. In Square Inc. v. Think Computer Corp., CBM2014-00159, Paper 48 (PTAB 2015), Patent Owner’s officer threatened to publicly shame Petitioner’s expert witness by filing a baseless legal action. In this case, however, the Board concluded that the unauthorized ex parte contact with the expert did not affect his testimony; and therefore, denied to the motion for sanctions.

Ignoring the Board’s instructions may also invite sanctions. In Shire Develop. LLC v. Lucerne Biosci, LLC, IPR2014-00739, Paper 33(PTAB 2015), after the Board ordered that all papers be signed by Patent Owner’s counsel of record, the Patent Owner sent an email directly to the Board stating that their counsel was not authorized to represent it in any matter. In response, the Board authorized the Patent Owner’s counsel to withdraw and ordered the Patent Owner to update its mandatory notice designating new counsel within five days. The Patent Owner failed to comply, and the Board determined that the party abandoned the contest and entered an adverse judgment.

Sanctions for Violation of Protective Orders

The Board has granted sanctions for violation of protective orders. In RPX Corp. v. Applications in Internet Time, LLC, IPR2015-01750, Paper 58 (PTAB 2016), the Board determined that disclosures to Patent Owner’s counsel in related litigation and to the Patent Owner’s president violated the protective order in place. The sanctions granted required the Patent Owner to compel the unauthorized recipients of the confidential information to declare that the information was destroyed, explain its use and to swear not to use it, protect the confidential information going forward and to compensate the attorney’s fees for addressing the violation. The Board also modified the protective order to exclude the Patent Owner’s corporate officers from receiving the Petitioner’s confidential information. However, the Board has also denied sanctions for violations of protective orders where the APJs determine the requester has suffered no harm. See, e.g., Snap-On Inc. v. Milwaukee Elec. Tool Corp., IPR2015-01242, Paper 70 (Sept. 20, 2016). The Board suggested that parties seeking to use discovery received under a protective order should instead consider if it is otherwise obtainable by routine or additional discovery, or alternatively seek modification of the protective order. Barring that, the Board counseled parties to rely on public information whenever possible.

Sanctions for Failing to Disclose Relating Proceedings and Real Parties-in- Interest

The duty to report related proceedings is set out in 37 C.F.R. 42.8(b)(2), which requires a notice identifying any other judicial or administrative matter that would affect or be affected by a decision in the proceeding. The mandatory notice must identify the real party-in-interest and related matters. If there is a change, the information must be updated within twenty-one days of the change. 37 C.F.R. 42.8(a)(2). The rule also requires parties in a parallel District Court proceeding to notify that Court of any related post-grant and reexam proceedings. The purpose of this rule is to avoid conflicting outcomes in a co-pending review proceeding, reexamination, reissue or pending patent application.

The Board has authorized a motion for sanctions for petitioner’s failure to update mandatory notice following a change in real party-in-interest due to a corporate merger that occurred after the hearing but before the final written decision was issued. During trial in Atlanta Gas Light Co. v. Bennett Regulator Guards Inc., IPR2015-00826, Paper 39 (PTAB 2016), the Petitioner (Atlanta Gas Light Co.) became a wholly owned subsidiary of The Southern Company, but failed to timely file an updated mandatory notice. Failing to disclose the corporate merger before the final decision was issued, was viewed as an attempt to preserve the ability to file another IPR petition as the Southern Company, if the final decision produced an unfavorable result. Further, the possibility existed that the Board could reverse or modify its decision; and therefore, prudent steps needed to be taken to ensure the estoppel provisions would be correctly applied. The Board awarded costs and fees incurred in association with this proceeding from the time after the issuance of the Final Written Decision to the decision on the motion for sanctions.

The Board is more concerned about avoiding conflicting outcomes in co-pending proceedings to the same patent than in a co-pending patent application. For example, the Board did not sanction a patent owner for failing to disclose its divisional application because the petitioner did not show it was prejudiced. Dynamic Drinkware LLC v. National Graphics, Inc., IPR2013-00131, Paper 31 (PTAB 2014). In addition, the Board declined to suspend prosecution of progeny applications based on patent owner estoppel because no claim in the applications was patentably indistinct from claims being reviewed. Chi Mei Innolux Corp. v. Patent of Semiconductor Energy Lab. Co., Ltd., IPR2013-00028, Paper 9 (PTAB 2012).

District Courts have also sanctioned parties for failing to notify the court of proceedings before the Patent Office. In Allflex USA, Inc. v. Avid Identification Sys. Inc., No. 06-1109, Paper450 (C.D. Cal. 2009), the court sanctioned the defendant and its counsel for failing to inform the court about a reexamination proceeding. Two years after the reexam was filed, the court learned of the proceeding, stayed the case and sanctioned the defendant. In a case before the Eastern District of Virginia, the court noted it should have been notified as soon as an IPR petition was filed. While the court complained that counsel failed to comply with a duty of candor and good faith, the court chose not to impose formal sanctions. See Virginia Innovation Sci., Inc. v. Samsung Elecs. Co., 983 F. Supp. 2d 713, 760 (E.D. Va. 2014).

Based on the decisions identified above, the Board appears hesitant to authorize motions for sanctions and when it does authorize such a motion, the motions typically have been denied. Timeliness of the request for leave to move for sanctions is a major factor; and therefore, it is very important to contact the Board immediately after the alleged misconduct occurs. Moreover, the Board is more likely to grant sanctions if the activity clearly violated instructions from the Board, or if a pattern of bad behavior occurs after a warning. The panel advised it is unlikely the Board will impose sanctions and it is important not to rely sole on this potential remedy.