Expanded Panel at Odds Over Statutory Interpretation of § 315(c)

Yesterday, the Patent Trial & Appeal Board (PTAB) issued a rare expanded panel Order in Target Corp. v. Destination Maternity Corp., (IPR2014-00508) (here). In the Order, a divided panel denied issue joinder under 35 U.S.C. § 315(c) as a matter of law (i.e., the joining of two petitions of a same petitioning party). The decision is especially surprising given the fact that 315(c) has been interpreted by the PTAB as permitting such joinder practices to date.

The Order is not designated precedential, or even informative — for this reason, it is especially troubling. Such a deeply divided panel of well respected APJs potentially tarnishes the Board's reputation with the public as a predictable and consistent forum. This is because it may foster the perception that panel assignment may be outcome determinative. Moreover, if the majority view is adopted it could increase litigation gamemanship known to frustrate the ability of patent challengers to effectively utilize the PTAB.

At the heart of the debate is simple statutory construction, and primarily, what is meant by "any person."

(c) Joinder.— If the Director institutes an inter partes review, the Director, in his or her discretion, may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.

In this case, Target, filed a second petition outside of their 12-month window to attack a claim that was excluded from the Trial Order of an earlier, timely filed petition (argued as being caused by the patentee's failure to provide requested materials in litigation discovery). Since joinder is a codified exception to the 12-month window, absent joinder, the claim could not be attacked with a second "stand-alone" petition. The majority denied joinder in view of their statutory construction, and found the petition to be time barred under 35 U.S.C. § 315(b).

In rationalizing the about-face, the majority focuses on the language "a person may join as a party," arguing that if a petitioner is already a party to an ongoing IPR, it cannot  "join as a party" — becasue it already is a party. The majority further notes that its read of the statute would reduce the burden on the PTAB by limiting the scope of IPRs to party-joinder only, and, reduce potential harassment of patentees by foreclosing 315(c) as a side-step to the 12-month window. The dissent, on the other hand, emphasized that such an interpretation of 315(c) reads the word "any person" out of the statute.

Without taking sides as to the debate over statutory construction, the big picture goals of the America Invents Act (AIA) are worth revisiting. The primary driver behind the creation of IPR, PGR and CBM was the need for a low-cost alternative to costly patent litigation. Post-grant PTAB patent proceedings were designed to force such disputes, especially those involving NPEs, to the expert agency.

Simply stated, petitioner's don't look to file follow-on petitions for harassment purposes. The limited number of cases in which issue joinder has occurred (5 total, others pending) bear that out. Instead, such joinder filings are necessitated by one limited circumstance:

  1. A claim is pursued in the second filing is not part of the Trial Order in the first.

The absence of the claim from the first trial occurs as a result of two fact patterns : (1) the first petition deliberately omitted a claim; or (2) the first petition was unsuccessful as to a claim.

As I emphasized eighteen months ago, the reason for excluding claims from a petition is often the result of patentee gamesmanship. For example, a complaint is filed alleging infringement of claims 1-10. After the 12 month IPR window has passed, and the IPR for claims 1-10 timely filed, the patentee (usually an NPE), files an amended complaint adding claims 11-20. When the motion to stay pending IPR is argued, the patentee emphasizes that claims 11-20 are not part of the IPR. In other words, there is no reason to wait as trial will be necessary regardless of the IPR outcome. The majority decision, if adopted, would encourage that gamesmanship, and at the same time, force petitioners to attack all claims of every patent asserted against them. If this tactic is unwittingly encouraged, the PTAB will face higher claim counts (i.e., more complex proceedings) and unnecessarily raise costs for petitioners. 

The second situation, where the first petition simply fails as to a given claim, can be analyzed on a case-by-case basis. The statute provides this discretion to deny unwarranted second-bite at the apple petitions. In that discretion, the PTAB has all the power necessary to guard against patentee harassment. It is also worth noting that other statutory controls exist to preclude harrassment, statutory estoppel the most significant, and 35 USC § 325 (d) being another (ability to deny same or substantially the same issues).   

To the extent any ambiguity exists in 315(c), I would submit that the PTAB should follow an interpretation that permits issue joinder. In dong so, the PTAB would account for current tactics of abusive litigants, and, enable petitioners to provide focused, lower-cost filings that comport with the goals and spirit of the AIA. Given the limited time for issue joinder (30 days), the experience of the PTAB that such practice is relatively uncommon, and the discretion provided by the statute to deny joinder where factually warranted, such an interpretation of 315(c) would be the more mission oriented path.