The creation of the Patent Trial and Appeal Board (“PTAB”) within the U.S. Patent and Trademark Office (“PTO”) as a forum for hearing challenges to the validity of issued patents has attracted significant interest from litigants and patent practitioners. In the first sixteen months of the availability of this forum, the PTAB has received over 950 petitions seeking to initiate patent invalidation proceedings.1 However, proceeding in this new forum can pose somewhat-hidden challenges to parties associated with patent litigation.

Each of the new PTAB trial proceedings relating to patent validity challenges—inter partes review (“IPR”), post-grant review (“PGR”), and covered business method review (“CBMR”)—has associated with it provisions that may: (1) estop parties from later raising particular challenges to the validity of the asserted patent and/or (2) bar parties from requesting or maintaining PTAB trials before the PTO. These estoppel and bar provisions may apply not only to entities that are directly involved in adversarial proceedings in the various U.S. District Courts, the International Trade Commission (“ITC”), or in the PTAB itself, but also to those who are in privity with those entities. As a result, the availability of these new PTAB proceedings has made it important that entities in close relationships with other parties involved in the litigation of patent validity and/or infringement carefully scrutinize their interactions with those other parties to avoid any unforeseen estoppels or bars.

Framework of the Relevant Bar and Estoppel Provisions

A party is barred from petitioning for an IPR if (1) before the date on which the petition is filed, the party or the party’s real party-in-interest2 has filed a civil action challenging validity of a claim of the patent;3 or (2) more than one year has passed since the party, the party’s real party in interest,4 or a privy of the party is served5 with a complaint (which includes either a complaint or counterclaim)6 alleging infringement of a patent.7 A limited exception to the one-year bar exists. In particular, a party may still join another party’s IPR by requesting joinder within one month of its institution.8

A party may not petition for a CBMR unless (1) the party, the party’s real party in interest, or a privy of the party (2) “has been charged with infringement under that patent,” which includes situations where the petitioner was sued for infringement or would have standing to bring a declaratory judgment in Federal court.9

As with IPRs, a petitioner is barred from filing a PGR petition if that petitioner or its real party in interest filed a civil action challenging the patent’s validity before the date of the petition.10

In addition to the bars against filing petitions, a petitioner is estopped before the PTAB from requesting or maintaining a proceeding with respect to a claim for which that petitioner, or the petitioner’s real party-in-interest, or a privy of the petitioner has obtained a final decision on patentability in a PTAB trial.11 That estoppel applies to any ground that the party raised or reasonably could have raised before the PTAB.12

A party is similarly estopped from raising issues in a district court litigation or ITC litigation when that issue was raised or could have been raised in a prior, completed IPR or PGR filed by that party, a privy of that party, or the real party in interest.13 If the proceeding at issue is a CBMR proceeding, however, the litigation estoppel applies only to the petitioner, and is limited to grounds actually raised in the PTAB.14

Accordingly, the following events involving one party can trigger PTAB bars, PTAB and litigation estoppel, or create PTAB standing that applies to other entities in privy with that party:

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Strategic Implications Related to Privity

Because of these statutory bar and estoppel provisions, it is important for market participants to understand whether they are in privity with other parties who are involved in patent litigation or PTAB proceedings. In the patent context, there are a few particularly common situations that may raise potential questions of privity: joint-defense groups; manufacturer-customer relationships; and parent/subsidiary relationships (including relationships created as a result of merger or acquisition activity).

The USPTO’S Office Patent Trial Practice Guide (“TPG”) notes that it intends to evaluate what types of relationships create privity in a manner consistent with the “flexible and equitable considerations established under federal caselaw.”16 In particular, the TPG states that privity “refers to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is sufficiently close so as to justify application of the doctrine of collateral estoppel.”17 Although the PTO will decide questions of privity on a “case-by-case basis,”18 the TPG indicates that relationships such as joint-defense groups and trade associations will not give rise, by themselves, to a finding of privity.19 But, additional facts, coupled with such relationships, could give rise to a finding of privity.20

One factor the PTO has emphasized in deciding privity issues is control; specifically, whether the party controlled or could have controlled a petitioner’s participation in a PTAB trial.21 With respect to the applicable one-year bar provision, the control or possibility of control must have existed at the time the bar was triggered—i.e., on the date the litigation defendant was served with the complaint.22 Although the authors are not aware of any PTO or district court decision addressing the question of when control must be present in order for the AIA estoppel provisions to apply, presumably that control must exist prior to the final written PTAB decision before a court or the PTO would apply the estoppel provisions.

The PTAB has declined to find privity in various circumstances. Several cases in particular indicate that a customer-manufacturer relationship by itself is insufficient for establishing privity because the property interest on which the relationship is based is the alleged infringing product, while the property interest at issue in PTAB trials is the patent itself. This includes relationships in which: a petitioner acquired a defendant served with a complaint in district court litigation;23 a defendant merged with other third parties to form a petitioner;24 a defendant was a customer of a petitioner manufacturer;25 and a defendant was a manufacturer for a customer petitioner.26 The characterization of these relationships as “privity of contract” have also failed to lead to a finding of privity in the PTAB trial context.27 The PTAB has stated within the context of the customer-manufacturer relationship that neither indemnity agreements nor joint-defense groups will give rise to a finding of privity absent some control or possibility thereof by the petitioner over the prior litigation.28 Further, the mere existence of such relationships is an insufficient basis for granting discovery requests related to privity issues, even if the petitioner “had an interest in the trial,” “us[ed] some of the trial evidence, including known prior art,” “and us[ed] an expert report [from the litigation]” in the PTAB trial.29

Other factors recognized by the Supreme Court as relevant to deciding privity in the res judicata context, which serves as the rationale for the bar and estoppel provisions,30 include (1) agreements to be bound;31 (2) pre-existing “substantive legal relationships;” (3) adequate representation by parties with the same interests; (4) relitigating through proxies; and (5) special statutory schemes that “expressly foreclose successive litigation by nonlitigants.”32Although the PTAB has opined on each of these factors, it has stated that neither indemnity agreements nor joint-defense groups (together or by themselves) are sufficient produce “substantive legal relationships.”33

The Takeaway: Fielding the Ability to Control Comes At a Cost

Although merely being a manufacturer or customer of an accused product, or a member of a joint defense group, is insufficient by itself to establish privity (even with the existence of an indemnity agreement), having the ability to control or actually controlling the actions of other parties involved in patent litigation can come at a price: the ability to later pursue post-grant proceedings before the PTAB or raise arguments that were or reasonably could have been raised before the PTAB, U.S. District Courts, and the ITC.34 Accordingly, parties should carefully scrutinize their agreements to determine whether acquiring or maintaining the ability to control the decisions of others in patent litigation is worth the potential cost.