Are NPE Judgments Under Attack?
The primary business distinctions between the USPTO Patent Trial & Appeal Board (PTAB) proceedings and traditional court based patent invalidity proceedings are the vast improvements in cost, predictability, effectiveness, and speed of PTAB proceedings— but it is the speed and effectiveness that is the most disruptive to the patent litigation landscape.
As was made very recently apparent in Fresenius USA v. Baxter Int’l. (Fed. Cir. 2013), a damage judgment is not necessarily safe from collateral attack unless and until it is actually satisfied by the putative infringer.
Since Fresenius, most patentees have taken solace in the fact that such a patent reexamination based fact pattern is exceedingly rare. Yet, if you are one of the many plaintiffs sitting on a large verdict, you will have a new worry in the months ahead—the PTAB troll.
Inter Partes Review (IPR), will conclude within 18 months of filing of the petition, in typical cases. This is a huge difference from the 4-5 year pendency of many patent reexaminations. However, defendants subject to a significant damage award cannot avail themselves of IPR. This is because an IPR must be pursued within a limited window by accused infringers. 35 U.S.C. § 315(b). This statute precludes IPR on any patent once 12 months have elapsed after service of a complaint alleging infringement of that patent.
So, any patentee that is sitting on a sizable verdict would, by definition, be 12 months from service of the complaint. With patent reexamination being too slow to matter in most cases, and the 12 month window precluding IPR from the accused infringers, it would seem that a damage verdict would be relatively safe from collateral attack. Not so.
The PTAB troll is an uninterested party. An uninterested party (i.e., one not in the lawsuit) is not outside the 12 month window, and just like in Fresenius, could simply repackage the very same art used in court for the forum with more favorable odds, the PTAB. The PTAB troll business model works like this:
Identify a high value damage award in which the prior art presented appears strong, and there are no pending USPTO challenges. Such cases are not uncommon now, as IPR was not possible 2-3 years ago when such cases were first filed.
File an IPR with the same art. Approach patent troll for a quick settlement (e.g., few hundred thousand) before the PTAB Trial Order. Meanwhile, defendants wait on the sidelines, or copy the PTAB troll petition and file it together with a motion for joinder awaiting an outcome. (Remember, that joinder is covered by 35 U.S.C. § 315(c), and is the only exception to the 12 month window of 315(b)). Since joinder is not possible until the trial is ordered, there is a 4-6 month window for the PTAB troll to negotiate a settlement and unplug the opportunity for the defendants.
Of course, the IPR filing would need be pursued entirely by the PTAB troll so that the filing is not attacked as a straw man tactic of the defendants.
Settle. Repeat with next case.
Over the past few months the PTAB has seen a handful of filings that appear to be directed to this business model.