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Presence of Harm Central to Real Party-in-Interest Issues in PTAB Precedential Decisions

On April 16, 2019, the Patent Trial and Appeal Board (“the PTAB” or “the Board”) designated three orders as precedential related to the issue of the incomplete disclosure of “real parties-in-interest” (“RPIs”) at the time of the filing of petitions for post-grant proceedings.  These three relatively recent orders—all issued since January 2019—present a range of factual scenarios and demonstrate a corresponding range of outcomes, from allowing a petitioner to amend their mandatory disclosure of the RPIs to dismissal of the proceeding.

The PTAB’s designations appear to represent an attempt to standardize treatment of the incomplete disclosure of RPIs, including describing tests and various factors to consider when deciding whether the failure is correctable.  But, at the end of the day, the decision appears to turn primarily on whether the failure to disclose by petitioner was done to provide some advantage.

RPI When the Petition Would Be Barred at Filing

Of the three orders, the first order to be issued was in Ventex Co., Ltd. v. Columbia Sportswear N. Am., Inc., Case IPR2017-00651 on January 24, 2019.  In a rather unusual procedural stance, the RPI issue came to the fore following not only institution, but after oral argument.  The Chief Administrative Patent Judge entered a relatively-rare extension to the one-year period for issuing a Final Written Decision, and the panel issued an order seeking further input from the parties regarding possible statutory bar issues in view of the Federal Circuit’s decision in Applications in Internet Time, LLC v. RPX Corporation (the “AIT decision”).

The PTAB began by noting that petitioner “bears the burden of establishing that no real parties in interest or privies were served with a complaint alleging infringement more than one year prior to the filing of Ventex’s petition.”  The PTAB then framed the issue as one of whether the non-identified company Seirus was either a real party in interest or a privy.  Seirus had been the subject of a complaint alleging infringement, which had been filed and served nearly three years prior to the filing of Ventex’s IPR petition.  As such, here, unlike the other two cases discussed below, the lapse in time left no question as to whether omitting Seirus as a party resulted in some advantage to petitioner or harm to patent owner.  Thus, the only issue became determining the nature of the relationship between the petitioner and the potential undisclosed RPI.

The PTAB found that Ventex and Seirus had worked together since 2013, and operated under the terms of a “Supplier Agreement,” which required Ventex to indemnify certain claims against Seirus.  Further, the parties had a manufacturing agreement regarding the specific products which were the subject of the infringement action.  The Board described this relationship as one in which both parties were incentivized to invalidate the same claims for their own continued commercial and financial interests, and further characterized the evidence as suggesting “that Ventex filed this action, in part, to benefit Seirus.”  Further evidence and testimony revealed that Ventex filed the petition based on concern for “its customers.”  The Board found that the evidence suggested that “Ventex filed the Petition, at least in part, on Seirus’s behalf,” and then ultimately held that Seirus was an RPI.

Having found that the Petition was time-barred, the PTAB nevertheless went on to analyze whether Seirus was in privity with Ventex.  Here, in addition to the issues of Ventex and Seirus having aligned interests, the PTAB discussed evidence that suggested that Seirus was making payments to Ventex under the auspices of its manufacturing agreement that were in actuality funding the IPR.  This included an advance under the agreement “coinciding with the first payments to counsel for Ventex for work on the inter partes reviews.”  The PTAB thus held that Ventex was operating as a proxy for Seirus, and that Seirus was in privity with Ventex.

Having determined that Seirus was both an RPI and in privity with Ventex, the panel dismissed the petition and terminated the IPR.

Post-Institution Update to RPIs

On February 13, 2019, the PTAB issued an order in Proppant Express Investments, LLC v. Oren Techs., LLC, Case IPR2017-01917, dealing with the additional disclosure of parties as RPIs both after institution and after the one-year bar had passed.

In this case, the PTAB authorized the patent owner to file a motion to terminate and a motion for additional discovery following the Federal Circuit’s AIT decision.  The panel also offered petitioner Proppant the opportunity to update its mandatory notices to include the potentially undisclosed parties, which Proppant did, noting that the parties had agreed to be bound by IPR estoppel provisions as well.

Unlike in Ventex, the issue here was not whether the parties were RPIs, but whether the late disclosure should have an effect on the filing date of the Petition, and thus on whether it was time-barred.  The panel set out 4 factors which the board looked to on this issue: “(1) attempts to circumvent the § 315(b) bar or estoppel rules, (2) bad faith by the petitioner, (3) prejudice to the patent owner caused by the delay, or (4) gamesmanship by the petitioner.”

The panel determined that at the time of the filing, there were no time-bar issues, and that there had been no allegations of circumvention of estoppel provisions.  The panel further did not find merit in any of the claims of prejudice to the patent owner, stating that contract disputes and other issues involved in district court, as well as the cost of litigating the RPI dispute, were not prejudice of the sort that requires dismissal.

On issues of bad faith and gamesmanship, the panel found that Proppant had acted promptly in updating its notices, noting that Proppant had initially prevailed in its arguments that there was no undisclosed RPI prior to the AIT decision, and that it updated its notices after becoming aware that the PTAB was reconsidering those decisions following AIT.  The panel further held that identification of the additional parties in the mandatory notices “without [admitting] they are in fact real parties-in-interest” was perfectly acceptable, as issues relating to potential conflicts or time-bars, as well as statutory estoppel provisions, were satisfied even in this manner.

After balancing the potential prejudice to petitioner versus the potential prejudice to patent owner, the PTAB allowed the mandatory notices to be updated while maintaining the filing date and denied the motion to terminate.

Pre-Institution Update to IPRs

In the most straightforward of the three precedential decisions, on February 14, 2019, the PTAB issued an order in Adello Biologics LLC v. Amgen Inc., Case PGR2019-00001, holding essentially that the ability to correct mistaken incomplete disclosures as discussed in IPRs was also applicable in PGRs.

In this case, the situation was perhaps simplified in that the omission was in failing to identify a wholly-owned subsidiary, Amneal LLC, of Amneal Inc., which had been identified.  The panel’s simple discussion of harm in these circumstances was that they “decline to infer… that the omission of Amneal LLC suggests ‘gamesmanship or bad faith.’”   The panel noted that the attempt to update the notices did not suggest an attempt to circumvent estoppel rules, and that there was ultimately no prejudice to the patent owner.

Conclusion

While the PTAB may have designated three decisions dealing with real parties-in-interest as precedential, this does not appear to be an overhaul of the law, aside from recognizing the guidance from the Federal Circuit in its AIT decision.  Instead, this appears to be an attempt to standardize RPI issues boiling down to: is there harm to the patent owner or some advantage gained by the petitioner because of the failure to identify all RPIs?