Addressing whether either of two previously filed district court actions precluded institution of an inter partes review (IPR) proceeding under the one-year time bar of 35 USC § 315(b), the Patent Trial and Appeal Board (PTAB) held that the bar does not apply to voluntary dismissals without prejudice under Fed. R. Civ. P. 41(a) because such a dismissal effectively nullifies the very existence of the prior action. Superior Comms., Inc. v. Volstar Tech., Inc., Case No. IPR2017-00067 (PTAB, Apr. 20, 2018) (Zado, APJ).
During an IPR proceeding, the patent owner, Volstar Technologies, asserted that the PTAB should have denied institution under § 315(b) because the petitions were filed more than one year after the petitioner (Superior Communications), the real party-in-interest or the petitioner’s privy was served with a patent infringement complaint. Volstar identified two prior district court actions asserting infringement of the challenged patent that it contended gave rise to a time bar: a 2012 case against AT&T, in which AT&T was a privy to Superior, according to Volstar, and a case against Superior filed in 2013. Both cases were pending for more than one year and were ultimately dismissed without prejudice pursuant to Fed. R. Civ. P. 41(a).
In finding the IPR petition timely, the PTAB noted that the voluntary dismissal of both actions without prejudice under Rule 41(a) nullified the existence of those prior actions, relying on US Court of Appeals for the Federal Circuit precedent holding that Rule 41(a) dismissals leave the parties “as though the action had never been brought.” The PTAB reasoned that the nullified prior litigation cannot form the basis of a bar under § 315(b).
Volstar attempted to distinguish the present case from the Federal Circuit rule, relying on a Tolling Agreement entered into by the parties to the prior litigation, which it argued should be viewed in conjunction with the dismissal of the prior actions as effectively creating a dismissal with prejudice. In support, Volstar argued that the Tolling Agreement prevented Superior from seeking damages it would otherwise have been entitled to seek. The PTAB disagreed, explaining that the Tolling Agreement cannot change the de jure legal effect of the dismissal, and distinguished cases cited by Volstar where only some claims were dismissed without prejudice and where a “without prejudice” dismissal led to consolidation of an action with a related case where the claims were continually litigated. Accordingly, the PTAB found that the IPR petition here was not subject to a § 315(b) bar because Volstar failed to rebut that the dismissals of the prior cases without prejudice rendered those cases a nullity for purposes of the § 315(b) one-year rule.
Practice Note: Patent owners should exercise caution when dismissing under Rule 41(a), because if an action is dismissed without prejudice, the PTAB will not consider how long the underlying action was pending in terms of determining whether an IPR petition is barred. Petitioners should be aware that where a prior action is dismissed without prejudice under Rule 41(a), IPR petitions may still be filed more than one year after the petitioner is served with the complaint, regardless of the duration of pendency of the prior action.