The Federal Circuit was recently asked to review the interplay of real-parties-in-interest and the inter partes review (“IPR”) time-bar. Acoustic Technology, Inc., Appellant v. Itron Networked Solutions, Inc., Nos. 2019-1059, 2019-1060 (Fed. Cir. Feb. 13, 2020) (opinion available here). The facts raised an interesting question of how business mergers can affect IPR and litigation strategies, but ultimately, the court found the issue was waived, since it was not raised until the appeal.
The case arose out of Acoustic Technology Inc.’s (“Acoustic”) enforcement of its U.S. Patent No. 8,986,574 (“the ’574 patent”) related to communications systems for utility providers to remotely monitor groups of utility meters. Acoustic sued Itron in March 2010. Acoustic and Itron reached a settlement agreement that provided a license of the ’574 patent to Itron. Years later, Acoustic sued Silver Spring Networks, Inc. (“Silver Spring”) for infringement of the same patent. On March 3, 2017, Silver Spring timely filed two IPR petitions, IPR2017-01030 and IPR2017-01031, challenging the validity of the ’574 patent.
Beginning in the weeks before the filing of the IPR petitions, executives of Itron and Silver Spring discussed a potential merger of the two companies. The discussions continued, even after the Patent Trial and Appeal Board (“the Board”) instituted the IPRs on September 8, 2017. On September 17, 2017, the two companies agreed to merge. After the merger completed in January, Silver Spring filed updated mandatory notices to include Itron as a real-party-in-interest. Several months later, the Board issued its final written decisions finding the challenged claims unpatentable. Acoustic appealed.
One of the grounds Acoustic raised in its appeal was that the petitions were time-barred because Itron was a real-party-in-interest. The Federal Circuit noted that its decision in Power Integrations, Inc. v. Semiconductor Components Industries. LLC, 926 F.3d 1306 (Fed. Circ. 2019) held that the real-party-in-interest determination includes all relationships that arise before institution, including those arising after the filing of the petition (but prior to institution). The court also noted that Power Integrations declined to address whether the board must reevaluate the § 315(b) time-bar in view of a new real-party-in-interest arising after institution.
Acoustic presented two justifications for applying the time-bar. First, Acoustic argued that Itron was in fact a real-party-in-interest before the IPR institution because of the merger discussions, related due diligence, and prepared merger agreements, all of which pre-dated institution. Second, Acoustic argued that the Board must be able to assess § 315(b) after institution to avoid an end-run around the time-bar where parties deliberately delay corporate deals until shortly after institution.
The Federal Circuit did not provide a ruling on Acoustic’s theories because it found the arguments were waived. Acoustic did not raise either of the time-bar arguments before the Board, even though it was aware of the merger more than seven months before the Board’s final written decision. The court rejected Acoustic’s attempt to excuse its waiver by characterizing the time-bar as a jurisdictional issue that may be raised at any time. The Federal Circuit distinguished challenges to an agency’s jurisdiction and a federal court’s jurisdiction, holding that time-bar challenges under § 315(b) are not immune from waiver.
Ultimately, the Federal Circuit did not address the merits of Acoustic’s time-bar argument, but it noted the concerns about the concealed involvement of interested, time-barred parties. Perhaps, a future decision will address the issues left unresolved here and in Power Integrations about the scope of § 315(b) time-bar when applied to a new real-party-in-interest.