Recently, the U.S. Patent Trial and Appeal Board allowed a member-based organization that challenges the validity of patents through IPR proceedings to challenge the validity of patents without identifying or binding its members as real-parties-in-interest because the member-based organization made all the decisions and paid all the costs in the IPR proceedings without member input.
Since September 2012, inter partes review (IPR) proceedings have been available at the U.S. Patent Office to challenge the validity of patents. Such proceedings, conducted by the Patent Trial and Appeal Board (PTAB), provide a quick and less expensive alternative to traditional District Court litigation for determining the validity of issued U.S. patents.
Recently, in Unified Patents Inc. v. American Vehicular Sciences, LLC, the patent owner, American Vehicular Sciences, asked the Patent Office to deny Unified Patents' petition for IPR, arguing that it was deficient for failing to identify certain of Unified Patents’ members as real-parties-in-interest who exercise or could exercise control over the petitioner's participation in an IPR. The Patent Office disagreed with the patent owner and instituted IPR proceedings, finding that the petitioner's members were not real-parties-in-interest because Unified Patents made all the decisions and bore all the costs regarding the IPR without member input.
Unified Patents is an organization that challenges patents owned by non-practicing entities (NPEs) through IPRs and other post-grant patent challenges at the Patent Office. While Unified Patents has various companies as dues-paying members, including companies who are sued for patent infringement by NPEs, it prepares and files petitions for post-grant proceedings without direction from its members.
After American Vehicular Sciences, Inc. (AVS) asserted a patent directed to vehicle airbag systems against several well-known car manufacturers, including Hyundai, Nissan, Toyota, and Honda, Unified Patents filed a petition for IPR in the U.S. Patent Office, challenging the validity of that patent and identifying itself as the sole real-party-in-interest in its petition. AVS filed a response asking the Patent Office to deny the IPR Petition, claiming that Unified Patents' petition was deficient for failing to disclose its members as real-parties-in-interest.
The Unified Patents Decision
AVS argued that all funding for Unified Patents' IPR activity comes from members who pay Unified Patents to challenge patents at the Patent Office, and as a result, Unified Patents' members were real-parties-in-interest. AVS further contended that because all of Unified Patents' revenues come from its members' fees, the money used to pay for IPR activity necessarily comes from its members. Moreover, according to AVS, Unified Patents' members at least suggest and identify patents that Unified Patents should challenge at the Patent Office.
Anticipating AVS's arguments, Unified Patents submitted voluntary interrogatory responses along with its petition, stating that it alone decides whether to contest patents at the Patent Office.
The Patent Office rejected AVS's argument, and found that Unified Patents' members were not real-parties-in-interest. The Patent Office reasoned that the just because Unified Patents' members pay Unified Patents does not show that the members funded the IPR. In addition, the evidence, which primarily included Unified Patents' voluntary interrogatory responses and excerpts from Unified Patents' website, did not show that member payments obligated Unified Patents to file IPRs on behalf of any member, or that the members had any control on when and how Unified Patents spent revenue received from its members.
Because the evidence showed that Unified Patents made all decisions regarding the instant IPR and paid all costs without member input, there was no evidence that the members were controlling or providing direct financing for the specific IPR. In short, the evidence did not show that the members were real-parties-in-interest. The Patent Office thus granted Unified Patents' request for IPR, and instituted trial.
Strategy and Conclusion
This case illustrates that a company that merely pays dues or makes a financial contribution to an organization that challenges patent validity may not need to be identified or be bound by the outcome of the IPR patent validity challenge. And it illustrates that patent owners seeking to identify and bind such member companies would need to show a stronger link between a financial contribution to a petitioner and the petitioner’s decision to bring or otherwise conduct an IPR before the Patent Office before the Patent Office would require such member companies to be identified in and be bound by the outcome of the proceedings.