VLSI Requests Open Sky Rehearing

PTAB discretionary practices under 314(a) have been the subject of significant controversy and unpredictability. Perhaps the most noteworthy example of the fallout from this practice has been the dispute between VLSI and Intel. When Intel challenged VLSI’s patents at the PTAB via IPR, due to the proximity of the Texas trial date, the IPRs were denied by the PTAB as a matter of 314(a) discretion. Thereafter, a $2+ Billion judgment was entered by the Texas court.

It wasn’t long after the big verdict before profiteers formed — with no competing trial date or interest in the patents aside from a potential pay day. Refiling the very same Intel arguments and evidence with the PTAB, at least one filer, Open Sky Industries, succeeded where Intel failed. Presumably, hoping that the IPR institution leverage (or threat thereof) would lead to a quick settlement with VLSI.

Now the agency has a public relations mess on its hands.

After the verdict, unable to dismiss the very same IPR challenge on discretionary grounds, the PTAB now indicates that at least one patent that led to a $2+ billion dollar judgment is reasonably likely to be found unpatentable. That is, one of the most successful U.S. chipmakers is now subject to billions of dollars of damages based upon the assessment of a non-technical, Texas jury pool rather than the expert agency that is tasked with issuing patents. The latter of which now indicates at least one patent is likely to fail expert scrutiny.

VLSI now seeks rehearing of the institution by the Precedential Opinion Panel (POP), pointing out (here):

The Board should not permit entities formed after the verdict and facing no infringement threat to treat these proceedings as leverage to extract ransom payments in exchange for withdrawing abusive attacks. This type of harassment has already begun: two such entities formed after VLSI’s jury verdict against Intel and filed three “copycat” versions of previously rejected Intel petitions. The ID allowed one of these new attacks to proceed, and another is pending, disregarding the public policy implications raised by the patent owner.

No public interest is served, and the patent system will be profoundly damaged, if opportunists are encouraged to harass patent owners and transform IPR proceedings into betting games against Article III jury verdicts.

The real “policy” problem here was denying Intel’s challenges in the first instance based on an administrative overreach of 314(a). Now those very same IPR challenges are in the hands of fly-by-night organizations with nothing but a pecuniary interest.

This situation has caught the attention of Congress within a week of IPR institution. Last week, Senator Tillis, in endorsing USPTO Director nominee Katherine Vidal, stated:

[Ms. Vidal] realizes that, absent the continuation of [prior] reforms, bad actors like OpenSky Industries will use the PTAB as a form of strategic litigation to attack competitors.

(emphasis added)

Of course, it is the prior “reforms” that created this mess in the first place.

Congress decides policy of the patent system as to concurrent PTAB and litigation proceedings. In fact, it did just that with respect to this exact question with 35 U.S.C. § 315. Once the PTAB went down the road of unraveling that statute, it created an environment of unpredictability that led us here.

Director Vidal will have her hands full in a few weeks (nomination should be passed to the floor this Thursday after last week’s postponement)