Under the America Invents Act, an inter partes review can be barred by certain prior related civil actions. Part one of this update provided patent owners with guidance on the factual circumstances under which they should file a preliminary response asserting a statutory bar (for further details see "Patent owner's preliminary response in inter partes review: statutory bars"). While part one touched on the issues of privy and joinder, they were not fully explored. This update considers a number of significant Patent Trial and Appeal Board (PTAB) decisions on these issues that may be used for guidance by a patent owner when formulating a preliminary response.
Patent owners should be aware that a civil action served on or filed by a non-party to the petition may bar the petition under Section 315(a) or 315(b) if that party can be considered a real party in interest or privy of the petitioner. Section 315(a) bars an inter partes review if a qualifying civil action is filed by the petitioner or "real party in interest", while Section 315(b) bars an inter partes review if a qualifying civil action is served on the "petitioner, real party in interest, or privy of the petitioner". Thus, patent owners should bring to the attention of the PTAB any non-parties that may be considered real parties in interest or privies of the petitioner, if those parties have had petition-barring civil actions served on them or have filed such actions.
However, there is some uncertainty regarding which parties may constitute a real party in interest or privy of the petitioner. While the America Invents Act does not specifically define the terms, the PTAB has relied heavily on the trial practice guide to define them.(1) The guide advises that whether a party can be considered a real party in interest or privy of the petitioner is a "highly fact-dependent question". The guide cites Taylor v Sturgell,(2) the Supreme Court case that provided a framework for determining when a non-party might be considered a privy to a party in an action. Taylor outlined six factors that courts should consider:
- the existence of an agreement that the non-party be bound by a determination of issues in the present action;
- the existence of a pre-existing substantive legal relationship between the non-party and the party in the action (eg, the relationship between preceding and succeeding owners of property);
- representation in an action by someone with the same interests as the non-party;
- the assumption of control over an action by the non-party;
- efforts to avoid re-litigation of issues through a proxy or an agent; and
- the existence of a special statutory scheme.
The guide, however, emphasises the fourth Taylor factor – a consideration of whether the non-party exercised or could have exercised control over the party's participation in the proceeding, including the funding and directing of the proceedings.
PTAB decisions to date appear to follow the guide's recommendation and have focused on whether there is evidence that the non-party exercised control over the proceedings. In CMI,(3) the PTAB held that co-defendants of the petitioner in a previous action were not real parties in interest of the petitioner because there was no evidence that the co-defendants had exercised control or provided funding for the petition. The PTAB found this to be true even though the same co-defendants had agreed in another more recent litigation to be bound by the estoppel provisions of the inter partes review in question. The PTAB thus appears to have ignored the first Taylor factor – the existence of an agreement that would bind the non-party – in favour of the fourth Taylor factor – the assumption of control over an action by a non-party. In Synopsys,(4) in both its decision to institute and final written decision, the PTAB found that a complaint for patent infringement served on a current subsidiary of the petitioner did not bar the petition under Section 315(b) because the two parties were separate companies – and therefore not privies – on the date the petition was filed. The PTAB found no evidence that Synopsys allowed its current subsidiary to direct or control the petition or that Synopsys had any control over the previous suit for patent infringement. The PTAB dismissed the patent owner's argument that the petitioner and its current subsidiary were in privy under the second Taylor factor as successors-in-interest of the alleged infringing product and explained that only relationships up until the time the petition is filed matter.
Patent owners should be aware that the Federal Circuit may soon weigh in on the scope of the terms 'privy' and 'real parties in interest' as it applies to the Section 315(a) and Section 315(b) statutory bars in inter partes reviews. On October 21 2013 patent owner MCM Portfolio filed a petition for a writ of mandamus with the Federal Circuit, arguing that the PTAB is "systematically misconstruing Taylor to allow late IPRs".(5) In the underlying inter partes review, Hewlett-Packard,(6) the PTAB cited Synopsys to find that a non-party to the petition was not in privy with the petitioner, even though the petitioner was a reseller of the non-party's product accused of infringing the patent in an earlier suit filed a year before the petition was filed. In its writ of mandamus, MCM Portfolio contended that the PTAB ignored the second Taylor factor – the parties' relationship as successive owners of the allegedly infringing property – and instead improperly relied solely on the fourth Taylor factor, finding no evidence that the petitioner controlled the non-party in the prior suit. If the Federal Circuit speaks on the issue, the PTAB's focus on control is likely to remain a key factor, but perhaps not to the exclusion of all others.
Patent owners have had success in proving that two parties are real parties in interest when they can be shown to operate as "one continuous entity".(7) In Anova, the PTAB determined that a predecessor of the petitioner was a real party in interest of the petitioner by applying state law to the question. The PTAB relied on Federal Circuit law, which looks to state law to determine corporate successor liability, and applied Florida law because the petitioner's principal place of business was in Florida. The PTAB found that the patent owner had provided enough evidence to show that the predecessor and the petitioner "operated as one continuous entity". For example, the patent owner's evidence showed that the two companies shared the same officers, and customers and that the companies held themselves out to the public as one continuous entity.
Patent owners should also be aware that petitioners could attempt to circumvent the Section 315(b) statutory bar by applying for joinder of otherwise time barred petitions to an earlier filed petition seeking to invalidate the same patent. 35 USC § 315(c) gives the PTAB discretion to join any party that has submitted a request for joinder to another inter partes review. The language of Section 315(b) also specifically states that the Section 315(b) bar does not apply to a request for joinder. Thus, the statute allows a party to file a petition for inter partes review – even though the party may have been served with a complaint alleging infringement of the patent over a year before the date of the petition – if it files the petition with a request for joinder to another petition.(8)
The PTAB has carefully exercised its discretion to join a party to an earlier inter partes review. In NetApp, the PTAB denied the petitioner's motion for joinder, finding that the petition presented new un-patentability analysis and substantive issues that were not before the PTAB in the earlier proceeding. The PTAB also considered the burden and impact that the joinder would have on the earlier petition, affecting the discovery and trial schedule that had already been set in the earlier proceeding. Because the petition could not be joined to the earlier proceeding, the petition on its own was barred by Section 315(b). Patent owners seeking to prevent such joinder may want to distinguish in their preliminary responses the current petition from the otherwise time-barred petition.
Additionally, petitioners have only a very short period in which they can apply for joinder to an earlier petition – one month after the institution date of the inter partes review to which joinder is sought.(9) In Apple,(10) the PTAB denied the petitioner's motion for joinder to an earlier terminated inter partes review, noting that the petitioner did not file its petition within one month of institution of the earlier proceeding. The PTAB then denied Apple's motion to reconsider the termination of the earlier inter partes review, noting that Apple had had plenty of opportunities to participate in the earlier proceeding, but had chosen not to.
As the issues of privy, real parties in interest and joinder are often highly fact dependent, those involved in providing counsel on inter partes reviews should stay apprised of PTAB and Federal Circuit decisions that speak to those issues.
For further information on this topic please contact Raymond Mandra at Fitzpatrick, Cella, Harper & Scinto's New York office? by telephone (+1 714 540 8700), fax (+1 714 540 9823) or email (firstname.lastname@example.org). Alternatively, contact Chandrika Vira at Fitzpatrick, Cella, Harper & Scinto's Washington, DC office by telephone (+1 202 530 1010), fax (+1 202 530 1055) or email (email@example.com). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.