Takeaway: The Board may deny institution of a petition that does not name all the real parties-in-interest where affording a new filing date would be futile for being past the one-year bar date.

In its Decision, the Board denied institution of inter partes review for failing to specify all real parties-in-interest in the Petition. In its Preliminary Response, Patent Owner “alleged that Yankon Industries, Inc. (‘Yankon-US’), as well as Lowe’s Companies, Inc. and Lowe’s Home Centers, LLC (collectively, ‘Lowe’s’) should have been identified as real parties-in-interest in the Petition, pursuant to 35 U.S.C. § 312(a)(2).” The Board sua sponte authorized Yankon- China to submit briefing and evidence addressing the real party-in-interest issues. Upon consideration of the “totality of the circumstances,” the Board was “persuaded that Yankon-China should have identified Yankon-US as a real party-in-interest in the Petition.”

The Board first provided a factual background. Yankon-China manufactures and sells recessed lighting fixtures, directly to customers in the U.S. and through Yankon-US, a wholly owned subsidiary doing business as Energetic Lighting. Yankon-US “has participated in patent licensing and sales negotiations related to the ’204 patent and products accused of infringing that patent” and Michael Dellatorre, Energetic Lighting’s general sales manager, “was responsible for ‘reach[ing] out to Cordelia to see if there was a way of working with Cordelia with [the ’204] patent.’” During deposition, “Mr. Dellatorre indicated that he also discussed the ’204 patent telephonically with Cordelia.”

The Board noted that “Yankon-US and Yankon-China also exhibit operational and personnel overlap” and that the “Yankon entities have acted in unity throughout the district court and appellate actions,” collectively filing “an answer and counterclaims to Cordelia’s complaint.” Moreover, both entities are “represented by the same law firm, . . . and share the same lead counsel in the district court and appellate actions,” who also represents Yankon-China in the instant inter partes review. In contrast, “Lowe’s bears no direct corporate relationship to the Yankon entities,” but “is an indemnitee of Yankon-China.” Moreover, “Lowe’s was not named as a defendant in Cordelia’s original complaint,” but does “share litigation counsel with the Yankon entities.” However, “Lowe’s itself is not subject to [the] injunction, and is not party to the appellate proceedings concerning that injunction.”

The Board then turned to its analysis, summing up the applicable inquiry: “Where, as here, a patent owner presents evidence that reasonably brings into question the accuracy of a petitioner’s identification of the real parties-in-interest, the petitioner alone bears the burden of establishing that it has complied with the statutory requirement to identify all the real parties-in-interest.” The Board further stated:

The framework described in Taylor v. Sturgell, 553 U.S. 880 (2008), informs this determination. Id. In Taylor, the Supreme Court identified six categories of exceptions to the common law rule forbidding non-party preclusion in litigation: (1) whether the non-party agrees to be bound by the determination of issues in the proceeding; (2) whether a pre-existing substantive legal relationship with the party named in the proceeding justifies binding the non-party; (3) “in certain limited circumstances,” whether the non-party is adequately represented by someone with the same interests; (4) whether the non-party exercised or could have exercised control over the proceeding; (5) whether the non-party is bound by a prior decision and is attempting to rehear the matter through a proxy; and (6) whether a statutory scheme forecloses successive hearing by non-parties. 553 U.S. at 893–95. The Court noted, however, that this list “is meant only to provide a framework . . ., not to establish a definitive taxonomy.” Id. at 893 n.6.

Summing up the control inquiry in (4) above, the Board explained that “the evidence, as a whole, must show that the third party possessed effective control from a practical standpoint.” “This inquiry is not based on isolated facts, but rather must consider the totality of the circumstances.”

Cordelia argued that “the corporate relationship between Yankon-China and Yankon-US has been blurred to the point that it is not possible to determine where one entity ends and the other begins” and that “Yankon-US has exercised, or could have exercised, control over this Petition.” Yankon-China, in its reply, “contends that as a subsidiary, Yankon-US lacks effective control over Yankon-China, and, therefore, is not a real party-in-interest” and that “it and Yankon-US operate as separate entities.” Specifically, “Yankon-China points out that Yankon-US purchases products from Yankon-China, collects payments from customers, and records its own profits and losses.”

The Board found that Yankon-China has not satisfied its burden of identifying all real parties-in-interest in its petition. Regarding, Yankon-US, the “relevant inquiry . . . is whether the non-party exercised or could have exercised control over the instant proceeding”; “not whether Yankon-US controls Yankon- China, but rather, the nature of Yankon-US’s relationship to this inter partes review proceeding, and the degree of control Yankon-US can exert over the proceeding.” Moreover, “the evidence of record shows that Mr. Dellatorre of Energetic Lighting was the sole point of contact for telephonic and written communications with Cordelia concerning the ’204 patent, and that he represented to Cordelia that Energetic Lighting wished to negotiate rights to that patent.” And “[n]o evidence has been presented suggesting that Mr. Dellatorre ever drew a distinction between Yankon-US or Energetic Lighting on the one hand, and Yankon-China on the other during his dealings with Cordelia. Rather, the evidence supports the conclusion that Yankon-US led discussions with Cordelia concerning the ’204 patent.” The Board further stated that Mr. Dellatorre’s designation of Yankon-China’s corporate representative witness and his testimony that he “probably know[s] as much as anybody else in the company” on patent licensing “underscores the prominent role of Yankon-US concerning the Yankon entities’ patent-related activities in general, and the ’204 patent in particular.” Finally, the “Yankon entities unified conduct with respect to the litigation over the ’204 patent also supports the conclusion that Yankon-US had the opportunity to control thisinter partes review.” Indeed, despite the Board’s invitation, “Yankon-China has not presented any evidence, such as the retention letter for the instant proceedings or invoices, to show that Yankon-China alone authorized and funded the Petition.”

As for Lowe’s, on the other hand, “the evidence of record does not support the conclusion that Lowe’s should have been identified as a real party-in-interest to the Petition. Lowe’s status as an indemnitee of Yankon-China and codefendant sharing counsel in the district court litigation for infringement of the ’204 patent, without more, is insufficient to confer status as a real party-in- interest to Yankon-China’s petition.” Similarly, “Lowe’s business interest in invalidating the ’204 patent does not establish Lowe’s as a real party-in-interest to the Petition.”

In the end, because Yankon-US was not named as a real party-in-interest, the Board denied the Petition since granting a new filing date would be futile based on timing.

Zhejiang Yankon Group, Ltd. v. Cordelia Lighting, Inc., IPR2015-01420

Paper 9: Decision Denying Institution of Inter Partes Review

Dated: November 25, 2015

Patent: 8,454,204 B1

Before: Lora M. Green, Joni Y. Chang, and Jacqueline T. Harlow

Written by: Harlow

Related proceedings: Cordelia Lighting, Inc. v. Zhejiang Yankon Group Co., Ltd. et al., No. 5:14-cv-00881-JGB-SP (C.D. Cal.); Cordelia Lighting, Inc. v. Zhejiang Yankon Group Co., Ltd., et al., No. 15-1698 (Fed. Cir.).