Federal Circuit Summary

Before Wallach, Chen, and Hughes. Appeal from the Patent Trial and Appeal Board.

Summary: A party may not be time-barred from instituting an IPR despite having a business relationship with a defendant in an earlier filed infringement suit, where the party was not in privity with that defendant.

WesternGeco (WG) asserted numerous patents in an infringement suit against ION Geophysical Corp. (ION). In 2012, a jury found the patents infringed and not invalid. WG next asserted its patents against Petroleum Geo-Services (PGS). PGS filed an IPR and the Board instituted review. ION was allowed to join the proceedings under “spectator status,” over both WG and PGS’s objections. The Board ultimately found that various claims in WG’s patents were either anticipated by or obvious over several prior art references. WG appealed the Board’s decisions to the Federal Circuit, arguing that PGS’s IPR should have been time-barred pursuant to U.S.C. § 315(b) because ION, who was served with a patent infringement complaint well over a year before the IPR petitions were filed, was a “real party in interest,” or “privy” of PGS.

The Federal Circuit affirmed the Board’s decision. To determine whether two parties are in privity within the context of U.S.C. § 315(b), the Federal Circuit stated that the inquiry is “highly fact-dependent,” and that the Board ought to engage in a “flexible analysis on a case-by-case basis.” Here, the Federal Circuit found that there was substantial evidence to support the Board’s finding that ION was not in privity with PGS, including: (i) no evidence that ION directed, funded, or controlled PGS’s IPR petitions; (ii) ION and PGS are distinct and unrelated corporate entities; (iii) customer-manufacturer relationship alone is not sufficient warrant finding ION and PGS in privity; and, (iv) the non-specific indemnity provision between PGS and ION did not warrant finding of privity. Thus, because ION and PGS were not in privity, PGS’s IPR petitions were not time-barred under U.S.C. § 315(b).

Having decided that PGS’s IPR petitions were not barred, the Federal Circuit went on to review the Board’s determinations of anticipation and obviousness. The Federal Circuit affirmed the Board’s determinations finding that substantial evidence supports the Board’s unpatentability findings.