The newly passed America Invents Act (AIA) raised fears among co-defendants in patent infringement lawsuits about the potentially broad scope of the estoppel provisions for the new inter partes review (IPR) procedure. Specifically, under 35 U.S.C. §§ 315(e) and 325(e), estoppel may apply in future proceedings before the U.S. Patent and Trademark Office (USPTO) and in related litigations not only to the petitioner, but also to any "real party in interest or privy of the petitioner." Unfortunately, the AIA does not clearly define a "real party in interest." And according to Chief Judge James Donald Smith of the Patent Trials and Appeals Board (PTAB), the question remains open: "Who constitutes a real party in interest or privy is a highly fact-dependent question, especially on the issue of whether a party who is not a named participant in a given proceeding nonetheless constitutes a 'real party in interest' or 'privy' to that proceeding . . . there is no 'bright-line test' for determining the necessary quantity or degree of participation to qualify as a 'real party in interest' or 'privy.'" This article analyzes the scope of estoppel under the AIA in light of a recent USPTO decision providing guidance on what constitutes a "real party in interest" or "privy."
The passage of the AIA provided various new ways to challenge a patent's validity but brought with it uncertainty about the potential risks of using these tools. Specifically, the AIA created two new procedures for challenging a patent after issuance, post-grant review (PGR) and inter partes review (IPR),1 which supplanted the inter partes reexamination practice in place under the old regime. But these procedures potentially represented a double-edged sword, as the AIA attached seemingly broad estoppel provisions to both PGR and IPR. With a broad stroke, it prescribed that estoppel may apply in future proceedings before the USPTO, and in related litigations, not only to the petitioner but also to any "real party in interest or privy of the petitioner."2 Additionally, the scope of the estoppel provisions for both PGR and IPR, once they apply, are also broadly constructed. They bar petitioners and their privies from requesting or maintaining an action before the USPTO. They also prevent the assertion that a patent claim is invalid in a district court or ITC proceeding on any ground that the petitioner raised or reasonably could have raised during the PGR or IPR.3 By contrast, estoppel provisions under the old inter partes reexamination procedure applied only to the petitioners themselves in district court, and they did not necessarily apply at all to ITC investigations.4 Moreover, under the AIA, "a petition . . . may only be considered if . . . the petition identifies all real parties in interest," placing the onus on petitioners to affirmatively identify any potential real parties in interest in the petition itself.5 Confusing this already difficult task, the AIA failed to clearly define "real party in interest," leaving petitioners to wonder whom they needed to identify—from corporate subsidiaries to unrelated co-defendants to potential players in the relevant industry—knowing that estoppel provisions would likely attach to whomever they named in their petition.
Thus, the AIA's estoppel provisions pose two significant questions. First, for defendants in patent litigations and, indeed, any party who might benefit from a challenge to a patent's validity, what is the risk of being estopped from making invalidity arguments in the future if a co-defendant, a member of a joint defense group, or any other interested party challenges a patent under the new PGR or IPR proceedings? And, second, for would-be petitioners, which entities need to be identified as "real parties in interest" and subjected to the AIA's estoppel provisions so that a petition for PGR or IPR complies with the AIA's disclosure rules? These issues left petitioners who would have willingly challenged a patent under the old scheme gun-shy and threw defendants into a panic that they would be estopped from taking invalidity positions that some other entity made or could have made in a PGR or IPR proceeding.
The USPTO, for its part, indicated that it would determine "real parties in interest" or "privies" on a case-by-case basis under the new rules. Chief Judge James Donald Smith of the Patent Trials and Appeals Board (PTAB) commented: "Who constitutes a real party in interest or privy is a highly fact-dependent question, especially on the issue of whether a party who is not a named participant in a given proceeding nonetheless constitutes a 'real party in interest' or 'privy' to that proceeding . . . there is no 'bright-line test' for determining the necessary quantity or degree of participation to qualify as a 'real party in interest' or 'privy.'"6
On August 14, 2012, the USPTO published a "Patent Trial Practice Guide" to advise the public on the new post-grant proceedings in the USPTO. As an initial matter, the Guide confirmed that the application of estoppel in the context of the old inter partes reexamination practice remained relevant. Otherwise, the Guide largely echoed Chief Judge Smith's comments but offered additional instruction that seemingly contemplated a broad application of the AIA's estoppel provisions to "real parties in interest" and "privies."7 For example, the Guide noted that a "'real party in interest' may be the petitioner itself and/or the party or parties at whose behest the petition has been filed." It continued: "[T]he notion of 'privity' is more expansive, encompassing parties that do not necessarily need to be identified in the petition as a 'real party-in-interest.'" A party may be a privy, the Guide cautioned, if it exercised or could have exercised control over the petition. On the other hand, "a party that funds and directs and controls an IPR or PGR petition or proceeding constitutes a 'real party-in-interest,' even if that party is not a 'privy' of the petitioner." Finally, the Guide instructed that, without more, mere membership in a trade organization or joint defense group with a petitioner does not automatically elevate an otherwise-unrelated entity to a "real party in interest" or "privy" of the petitioner.
While Chief Judge Smith's comments and the Guide did provide some context, they hardly assuaged all the concerns of weary defendants that they would be unwillingly subjected to the AIA's estoppel provisions if a joint-defendant petitioned for PGR or IPR. Indeed, would-be petitioners remained hesitant to request PGR or IPR for fear of ensnaring unsuspecting entities in the AIA's estoppel provisions, and cautious co-defendants remained opposed to any petitions at all until the USPTO clarified where exactly it planned to draw the line.
Fortunately, for petitioners and defendants alike, the USPTO clarified the scope of "real parties in interest" or "privies" in a recent inter partes reexamination, providing direction on how the AIA's estoppel provisions will apply. The issue arose when, on December 13, 2011, Volkswagen Group of America ("VWGoA") filed a petition for an inter partes reexamination of U.S. Patent. No. 6,374,180 ("the "'180 patent") owned by Beacon Navigation GmbH ("Beacon").8 Under 37 C.F.R. § 1.915(b)(8), VWGoA identified itself as the real party in interest in the reexamination, additionally noting that VWGoA is a subsidiary of Volkswagen AG. Although it was not obligated to do so under the patent rules, VWGoA also informed the USPTO that Beacon had asserted the '180 patent in three related proceedings: (1) Beacon v. VWGoA, Case No. 1:11-cv-00958-GMS (D. Del.) (the "VWGoA case"); (2) Beacon v. Audi AG, Case No. 1:11-cv-00929-GMS (D. Del.); and (3) Certain Automotive GPS Navigation Systems, Components Thereof, And Products Containing Same, United States International Trade Commission ("ITC") Inv. No. 337-TA-814 (the "ITC investigation").
VWGoA did not explicitly inform the USPTO, however, that Beacon had also asserted the '180 patent against nearly fifty other foreign and domestic automobile manufacturer-related entities, including General Motors, Chrysler, BMW, Mercedes, and Toyota, in the ITC investigation. Further, it had filed more than a dozen additional lawsuits in the District of Delaware asserting the '180 patent against most of the same parties.9 Thus, although the petition for reexamination listed only VWGoA as a "real party in interest," dozens of other parties obviously had an interest in the outcome of the reexamination. But it was unclear which, if any, of these co-defendants would be subject to the estoppel provisions as "real parties in interest" because, as Chief Judge Smith instructed, "there is no 'bright-line test' for determining the necessary quantity or degree of participation to qualify as a 'real party in interest' or 'privy.'"
For its part, Beacon certainly thought that VWGoA's petition improperly omitted several "real parties in interest." After the USPTO mailed an Action Closing Prosecution for the reexamination of the '180 patent on May 17, 2012, Beacon filed a petition on June 8, 2012 to vacate the reexamination on that basis. In the petition, Beacon noted that VWGoA identified Audi AG, Audi of America, Inc., Volkswagen AG, and Volkswagen Group of America Chattanooga Operations, LLC as related entities in pleadings in both the VWGoA case and the ITC investigation and, further, that the same law firm represented all of those entities in the related proceedings. Accordingly, Beacon argued that these other entities were privies to the VWGoA reexamination, should have been identified as such in the reexamination petition, and should be subject to the AIA's estoppel provisions regarding any arguments made during the reexamination. As a result of VWGoA's failure to identify all related entities, Beacon concluded, the USPTO should vacate the reexamination of the '180 patent.
The USPTO, however, did not share Beacon's expansive definition of what constituted a "real party in interest." On January 23, 2013, it denied Beacon's request to vacate the '180 reexamination and provided helpful insight into the scope of the AIA's estoppel provisions in the process. "[C]ommon interest among litigation defendants seeking to invalidate or defend against enforcement of a patent," the USPTO explained, "does not translate ipso facto into each defendant being a real party in interest where a request for reexamination is filed by only one of the defendants in the litigation." Instead, the USPTO instructed, "[t]o be required to be named as a real party in interest, a party must participate in some manner in the request for reexamination" (emphasis in original). An entity can actively participate in its litigation defense, including the sharing of counsel, defenses, and counterclaims with the petitioner, without becoming a "real party in interest" in the reexamination. Indeed, even jointly searching for and reviewing prior art and preparing invalidity defenses for litigation do not establish an entity as a "real party in interest" for the purposes of the reexamination or subject it to the AIA's estoppel provisions, unless there is "[e]vidence that the activities were conducted with an intent to file an inter partes reexamination" (emphasis in original). "[S]imply benefiting from a reexamination," the USPTO concluded, "does not equate with participation in a reexamination, and thus does not transform the co-defendants into real parties in interest."
Thus, the USPTO has reined in the potentially broad scope of the estoppel provisions under the AIA10 by making clear that an entity must actively participate in preparing a post-grant challenge to a patent's validity before it becomes a "real party in interest" to the proceedings. While no "bright-line test" may yet exist for determining when estoppel provisions apply, co-defendants in patent litigation may rest assured they will not be unfairly bound by any arguments or positions another party may make before the USPTO, even if they participate in finding the prior art and preparing the positions in the context of litigation that ultimately become the basis for the other party's separate PGR or IPR petition. Moreover, the USPTO's guidance informs would-be petitioners that they need to identify only those entities that actively assisted in preparing the petition as "real parties in interest." They need not broadly identify any entity that may benefit from the amendment or cancellation of patent claims asserted against them for their petition to comply with the AIA's filing guidelines. Accordingly, the USPTO's recent decision supports a clear and fair rule that an entity will be estopped from making arguments made before the USPTO in a petition for PGR or IPR only if that entity actually participated in the petition itself. The decision thus provides much-needed clarity to the scope of estoppel provisions under the AIA.