The PTAB has been reluctant to find that an unnamed party is a real party-in-interest in an AIA review or in privity with the named party. Usually a patent owner attempting to establish that a real party-in-interest has not been named has had to establish that the unnamed party exerted control or could have exerted control over the petition. See, e.g., Unified Patents v. Qurio Holdings, IPR2015-01940 (PTAB Apr. 13, 2016); Sipnet EU S.R.O. v. Innovative Communictions Techs., IPR2013-00246 (PTAB May 23, 2016); AMX, LLC v. Chrimar Holding Co., IPRs2016-00569, -00572 (PTAB May 19, 2016). The fact that a third party has indemnified the petitioner has not been sufficient to render the third party a real party-in-interest or a privy unless the indemnification agreement indicated control over the petition. See, e.g., AMC, LLC, IPRs2016-00569, -00572. Merely a financial interest in the review has been held not sufficient. E.g., Enovate Medical, LLC v InterMetro Indus., IPR2015-00301 (PTAB May 11, 2016).
So, why has the PTAB seldom found that an unnamed party is a real party-in-interest or a privy? Recently, the PTAB has shed light on the answer to this question in Petition for Inter Partes Review by The United States Department of Justice, IPR2016-00497 (PTAB July 25, 2016, Order). In its Order, the PTAB stated: “[W]hile Patent Owner’s argument that the United States ‘directed and controlled the allegedly infringing activity’ is not without relevance, it does not bear directly on the categories identified by the Supreme Court” in Taylor v. Sturgell, 553 U.S. 880 (2008). According to the PTAB, the “Board has applied [the Taylor categories] in considering whether third parties are real parties in interest ….”
Taylor v. Sturgell is not a patent case and does not discuss real party in interest or privy issues. Rather it is a case about the dismissal of a FOIA suit based on claim preclusion due to an earlier suit by a friend. The Supreme Court reversed the court of appeals’ dismissal of the suit criticizing the lower court’s application of the doctrine of preclusion by “virtual representation.” According to the Court, the general rule is that “’one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.’” Id. at 893. The Court then continues: “the rule against nonparty preclusion is subject to exceptions.” Id. It then “groups” those exceptions into “six categories.” Id. Those exceptions are:
- When a nonparty agrees to be bound by the determination in an action;
- When there are pre-existing substantive legal relationships, such as assignee and assignor, “sometimes referred to as ‘privity’” (a term the Court expressly states it is not using in the opinion);
- In “limited circumstances,” when a nonparty “was ‘adequately represented by someone with the same interests who [was] a party’ to the suit’;
- If the nonparty “’assume[d] control’ over the litigation in which … judgment was rendered”;
- “[W]hen a person who did not participate in a litigation later brings suit as the designated representative of a person who was a party to the prior adjudication”; and
- In “certain circumstances a special statutory scheme may ‘expressly foreclose[e] successive litigation by nonlitigants … if the scheme is otherwise consistent with due process.’” at 893-95.
While one might question the applicability of Taylor to PTAB real party-in-interest determinations, in light of the PTAB’s consideration of these six categories, those determinations begin to make sense. While other exceptions may apply in a given case, exception (4) is the one the PTAB has routinely referenced. The PTAB also has referenced exception (2) but has struggled with what “pre-existing legal relationships” are sufficient to apply this exception. A vendor-reseller relationship is not sufficient, even when the nonparty pays counsel fees and participates in the trial. See Sipnet, IPR2013-00246. Likewise, a majority owner of the petitioner was found not to be a real party-in-interest because the patent owner had not demonstrated the majority owner had a legal interest in the review and a financial interest by itself was not sufficient. Enovate Medical, IPR2015-00301, at 12. It is predicted that few patent owners will be able to establish that a nonparty is a real party-in-interest, given the PTAB’s present approach.