The PTAB recently denied a request for discovery into the indemnification activities of a Petitioner in an IPR where a district court verdict had been obtained against Petitioner’s customers, thus answering, at least for now, how the PTAB will look at petitions filed by suppliers where the supplier’s customers have been served with a complaint. Specifically, in Broadcom Corp. v. Telefonaktiebolaget LM Ericsson (PUBL), IPR2013-00601, Paper 23 (Jan. 24, 2014), Broadcom Corp. v. Telefonaktiebolaget LM Ericsson (PUBL), IPR2013-00602, Paper 21 (Jan. 24, 2014), and Broadcom Corp. v. Telefonaktiebolaget LM Ericsson (PUBL), IPR2013-00636, Paper 20 (Jan. 24, 2014), Patent Owner sought additional discovery into the issue of privity including “indemnity agreements, defense agreements, payments, and email, or other communications between [Petitioner] and defendants” in a litigation resulting in a jury verdict of infringement against those defendants. The jury in that litigation found that certain defendants infringed “due partly to their use of Broadcom’s WiFi complaint products.” Patent Owner “maintains that the requested discovery will show that” Petitioner is in privity with at least one defendant from that litigation, resulting in the petition being barred under 35 U.S.C. § 315(b). The Board denied the motion.
Patent Owner’s evidence “does not amount to more than a ‘mere allegation that something useful will be found’ to show privity, as is required by the first Garmin factor.” Instead, Patent Owner must show that Petitioner would be bound by the outcome of the litigation. “To be bound, in normal situations, [Petitioner] must have had control over the Texas Litigation. According to long-standing precedent, Bros., Inc. v. W.E. Grace Mfg. Co., 261 F.2d 428, 429 (5th Cir. 1958), when a patent holder sues a dealer, seller, or distribut[o]r of an accused product, as is the case at hand, indemnity payments and minor participation in a trial are not sufficient to establish privity between the non-party manufacturer of the accused device and the defendant parties:
While the mere payment of counsel fees or participation in a trial by one not a named party to it would not alone be sufficient, c.f., I.T.S. Rubber Co. v. Essex Co., 272 U.S. 429  . . . , the extent and nature of that participation may completely alter the consequences. This is particularly so in patent infringement cases, in which, from tactical or strategic considerations relating to venue, desirability of a particular forum and the like, such cases are so often filed and tried against a dealer, a seller, a distributor, or a user of the accused device manufactured by another. If the manufacturer stands aloof, he risks judgment adverse to his interest resulting perhaps from inadequate or incomplete defense by one who has a secondary interest. Such judgment, to be sure, would normall[y] not be binding by estoppel or res judicata, but it would take its place in the jurisprudence where Is practical effect as stare decisis might be as decisive. The alternative, of course, is to jump in and give the case full and active defense as though the manufacturer was the real named party. This assures that the issues will be presented and contested in a way deemed most effective by the nominally remote, but practically immediate, party at interest.
“261 F.2d at 429 . . . Bros, Inc. relies on a long line of precedent to support the normal rule that privity requires a finding of active control of the trial . . .” Thus, the Board explained that “[c]ontrol of the litigation, or some sort of representation, constitutes a ‘crucial’ factor.” Merely “[p]aying for trial expenses pursuant to indemnity normally does not establish privity or control.” Because the Board determined that Patent Owner had not shown that such a degree of control was exercised by Petitioner in the prior litigation, the Board found that “[t]his Garmin factor weighs heavily against [Patent Owner],” and that determining whether privity exists “especially without some evidence of actual control of a trial, typically spirals into what amounts to a separate trial that involves a myriad of considerations.” Thus, the motion for additional discovery was denied.