Parties Agreement to Settle Issues Does Not Extinguish Board’s Ability to Determine Patentability

By Hyunseok Park
July 9, 2017

Inter partes review (“IPR”) has been popularly adopted and used as a strategy for invalidating patent claims due to its compact and expedited process.  The Board is required to render an institution decision within 3 months of preliminary briefings on issues of claim patentability and a final decision within 12 months of any instituted proceeding.  Such a time frame allows both a petitioner and a patent owner to understand its relative strength of argument, leading to a settlement, within a relatively short period of time as compared to a proceeding before federal district courts, thereby saving time and expense in the patent dispute.

The legal authority making the above to be possible is a settlement provision, codified at 35 U.S.C. § 317.  Section 317 indicates that an instituted IPR shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed.  In addition, this section indicates that by such a termination, no estoppel shall attach to the petitioner, real party in interest or privy of the petitioner on the basis of that petitioner’s institution of that IPR.  The section gives reasonable motivation for a petitioner to terminate an IPR proceeding via a settlement.

However, what if the Board refuses to terminate an IPR despite a joint request by both parties based on a settlement and proceeds to a final written decision?  As indicated in Section 317, a joint request for termination may not be granted if the Office has decided the merits of the proceeding before the request for termination is filed.  Although the section does not specifically list or explain the criteria for determining the merits of the proceeding to a final written decision, there are cases providing us with a number of considerations.

For instance, in Google Inc. And Yahoo! Inc. v. Createads LLC, IPR2014-00200, Petitioners, Google Inc. and Yahoo! Inc. filed a petition for IPR of the patent at issue, and the Board instituted trial on May 9, 2014.  On October 15, 2014, Google, one of the petitioners and patent owner filed a joint motion to terminate as to Google.  The motion indicated that the parties agree that termination of the proceeding as to Google is appropriate because Google and the patent owner have resolved their dispute concerning the patent at issue.  In particular, the motion indicated that Google and the patent owner had entered into a written agreement that memorialized the understanding between the parties and terminated the underlying district court litigation between them.  The Google motion further indicated that its motion to terminate as to Google did not affect Yahoo!, which intended to continue the proceeding as the district court litigation between Yahoo! and the patent Owner remained pending.  The patent at issue was also the subject of 28 additional cases, which remained pending.  The Board granted Google’s Motion.  On February 16, 2015, the remaining Petitioner, Yahoo! and the patent owner filed a joint motion to terminate proceeding indicating that the parties had settled their disputes with respect to the patent at issue, and filed a motion, seeking termination of the proceeding.  The Board granted the joint motion as to the request to terminate the proceeding with respect to petitioner, Yahoo! Inc., but still proceeded to final decision on the merits of the patent claims in dispute.    The Board reasoned that although the parties to an IPR may agree to settle their issues related to the challenged patent, the Board is not a party to the settlement and may determine independently any question of patentability. 37 C.F.R. § 42.74(a).  In addition, the Board explained that the trial issues had been fully briefed and argued at the time the parties moved to terminate this proceeding and there are over 10 other cases asserting the patent at issue against other entities currently stayed in the Delaware District Courts.  The Board indicated that in view of the advanced stage of the proceeding and the number of existing district court cases involving the patent at issue, they will proceed to a final written decision. 35 U.S.C. § 317(a).  The Board ultimately found many of the dispute claims unpatentable.

In Blackberry Corp. v. Mobilemedia Ideas LLC, IPR2013-00016, on March 18, 2013, the Board instituted an IPR upon petition by Blackberry against Mobilemedia’s patent.  Instead of filing a patent owner response, the patent owner filed a motion to amend canceling several of the challenged claims and proposing substitute claims for the cancelled claims.  The petitioner filed an opposition to the patent owner’s motion to amend claims, and the patent owner filed a reply to the petitioner’s opposition.  An oral hearing was scheduled for October 18, 2013, but in response to the parties’ joint request to cancel the oral hearing, the Board cancelled the oral hearing.  The petitioner and the patent owner also filed a joint motion to terminate the instant proceeding, and a true copy of their written settlement agreement. With the parties’ briefings on the motion to amend, the Board considered that the trial issues had been briefed fully at the time the parties moved to terminate the proceeding.    Thus, the Board indicated that it would proceed to a final written decision in view of the advanced stage of the proceeding, rather than terminate the proceeding.  Ultimately, the Board cancelled the claims as requested by patent owner Mobilemedia.  Although Multimedia had also moved to substitute claims in place of the cancelled claims, the Board found that Multimedia did not show how the claims were amended to address issues of patentability raised in the petition.  Thus, none of the substitute claims were entered in the patent.

From the cases above, it can be seen that even when the Board terminates an IPR as to a petitioner, it may nevertheless proceed to a final written decision when the trial issues have been fully briefed and argued at the time the parties move to terminate an IPR.  The Board may also proceed to a decision on the merits when there is a large number of existing district court cases involving the patent at issue.

Both a petitioner and a patent owner should consider the above in deciding a strategy for the patent dispute.  A petitioner, seeking to avoid estoppel, would need to discuss settlement with a patent owner at the early stage of IPR proceeding.  Similarly, a patent owner runs a risk of unpatentability decisions if the settlement does not occur before significant briefing on central issues, in which case the Board may review patentability issues on the merits.

The Author

Hyunseok Park

Hyunseok Park is an associate in Biotechnology/Pharmaceutical Group of Sughrue Mion, PLLC. He focuses his practice on patent prosecution, litigation, and client counseling, primarily in the chemical, pharmaceutical, and biotechnology areas.

For more information or to contact Mr. Park, please visit his Firm Bio Page.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 16 Comments comments.

  1. JK July 9, 2017 6:55 pm

    Helpful article for me and other attorneys practicing in patent area.

  2. Anon July 9, 2017 7:24 pm

    The termination is to the respect of the petitioner.

    Such is not the same as a termination of the proceedings.

    Once a granted patent has had certain sticks of property rights stripped from the bundle (at the initiation decision point), the patentee no longer has all of the sticks in the bundle, and in fact, the once-granted property right remains in the clutches of the executive administrative agency until that agency relinquishes control.

  3. Eric Berend July 10, 2017 6:06 am

    @ 1., ‘anon’:

    Which it (“that agency”) never will – relinquish control, that is.

    Since endless ‘bites at the apple’ are possible during the term of a U.S. patent, ‘that agency’ PTAB at the USPTO, always has prior restraint and never cedes security of possession.

    In other words, a giant sham. U.S. inventors, are not going for it. In fact, the yearly number of independent inventor filings, is now less than 10% of what is once was.

    It’s been made into an IP pirate’s delight and behemoth corporate legal departments’ tiddlywink toy. The inherent additional complexity obscures the perception of erosion of the underlying practice domain. At some point, this area of the legal industry, must implode. Where are all the clients? When the entire IP world in U.S. patents, is shrunk down to the black hole of only AlphaGoog and its friends; then, who else will even bother?

    Working trade secrets, is undoubtedly a more limited scope of practice; certainly this does not constitute a 1:1 substitution. A massive implosion is coming, if it is not already, in its initial stages. I would expect that a great number of soon-to-be-former patent attorneys in the U.S. will abandon IP prosecution altogether and adopt other areas of practice.

  4. Edward Heller July 10, 2017 7:02 am

    In U. S. v. American Bell Telephone (1897), the Supreme Court ruled that the government had no standing to contest validity of an issued patent in a court of law. Thus when a petitioner drops out of the case and the proceedings result then a final determination adverse to the patent owner, the patent owner may appeal but there are no remaining parties or entities that have standing to oppose the patent owner in and the Federal Circuit. On motion of the patent owner, the Federal Circuit will have no other option but the vacate the decision of the PTAB.

  5. Anon July 10, 2017 8:26 am

    Mr Heller,

    Would you be willing to address the particulars of the AIA here on this forum (where comments of substance are not held up just because of ‘volume’ favors)?

    Shall I retrieve the three sections of the AIA for you, or do you remember them straight away?

  6. Anon July 10, 2017 8:27 am

    Oops, “favors” should read “factors.”

  7. Anon July 10, 2017 9:19 am

    Mr. Heller,

    To enable the conversation here, I have obtained the sections of the AIA to which your analysis is directed to:

    35 U.S. Code § 315 (a)(3): Treatment of counterclaim.—
    A counterclaim challenging the validity of a claim of a patent does not constitute a civil action challenging the validity of a claim of a patent for purposes of this subsection.

    and

    35 U.S. Code § 317(a): …If no petitioner remains in the inter partes review, the Office may terminate the review or proceed to a final written decision under section 318(a).

    and

    35 U.S. Code § 319 – Appeal: …Any party to the inter partes review shall have the right to be a party to the appeal.

    Clearly, 317 provides the “ITC-like” party status to the Office alone; 319 extends that to the Office (alone) as a defendant in an Article III court (for appeal), and 315 appears to moot the validity challenge as a civil action even requiring Article III standing.

    Mr. Heller,

    Please explicitly address these points of the AIA.

  8. Edward Heller July 10, 2017 9:34 am

    Anon, the ITC is actually against imports pursuant to specific harm alleged by petitioners. The government has standing to represent particular petitioner’s who are harmed. But if the petitioner withdraws the petition or settles out, I believe that moots the ITC action.

    Prudential standing can be authorized by statute. Case and controversy standing requires actual harm specific to the government or to specific individuals to whom the government owes a duty. The holding that the government does not have standing to pursue validity in court was based upon case and controversy standing.

    Regarding what goes on in court, every defendant has a right to raise validity as a defense or as a compulsory counterclaim infringement action. The statute you identified does not penalize the infringer for asserting necessary defenses infringement actions brought against him. Section 315(b) however does penalize the infringer for delay.

  9. Anon July 10, 2017 11:34 am

    Mr. Heller,

    Why are you answering the AIA question with an ITC answer?

    Your second paragraph still attempts to bootstrap the issue as one originating in an Article III matter, quite apart from the provided 35 USC 315(a)(3) section. You also fail to address the Congressional extension of the strictly administrative agency matter to appeals concerned with THAT administrative agency matter.

    Please do as asked and be explicit in your answer to the AIA sections provided.

    As of this date, I have seen no reply from you that is on point.

  10. Anon July 11, 2017 1:19 pm

    Mr. Heller,

    Still looking forward to a reply from you that touches upon and integrates all of the different sections of the AIA together in one answer.

    I have a feeling that you have not been responsive to this line of thought because you may realize that the combination of AIA sections defeats the notion that you want to rest on: that is, that the underlying matter that would drive a need for standing when the matter moves out of the administrative agency and into an Article III court has been inoculated much like the ITC “standing” that the administrative agency enjoys.

    The originating matter in this particular arrangement is simply NOT an Article III “fight” to which the normal standing requirements would apply.

    Instead, Congress was explicit that – through 35 U.S. Code § 315 (a)(3): the “issue” of validity is not an Article III issue. The “does not constitute a civil action” portion removes Article III as a driver.

    Next, Congress was explicit that – through 35 U.S. Code § 319 that any subsequent appearance in an Article III forum IS open to any of the parties in the non-Article III issue that is being “adjudicated” outside of the Article III controls. What this appears to do – in the ITC sense – is make it such that the item that may appear in an Article III setting is based on the administrative action itself – rather than any “traditional” Article III notion of patent validity. This is where the innoculation of 35 U.S. Code § 315 (a)(3) come back into play. This coupling removes what you have been depending on as to the action originating – or otherwise depending upon – Article III standing.

    As I have noted previously, this is not the same as “granting standing” to everyone, and it is a bit more subtle in that it is saying that standing is not necessary because the underlying item is an administrative agency procedure. The item being bumped up into the Article III courts is the administrative procedure (perhaps as a shallow proxy for validity); but none the less, an item that is explicitly outside of the normal Article III reach.

    The icing on the cake here is 35 U.S. Code § 317(a): which opens the door for the Office to be a party in the NON-Article III instigated matter.

    This all has been a detailed attempt to get around what is otherwise a clear prohibition of the Office – by their choice (in certain circumstances) effectively revoking the property aspects of a granted patent, circumventing the direct Article III path for which that direct path may very well support your “case and controversy” standing position.

    Need I remind you that ALL of this “chicanery” is enabled at an earlier (and separate) legal decision point?

    That point of course is the point at which the administrative agency engages in a taking of sticks in the bundle of property rights that a granted patent contains. Sticks such as “presumption of validity,” and “clear and convincing level of presumption” and even whether or not BRI is a proper evaluative tool – each of these are taken at the initiation decision point. Once past that point, your property is no longer the full property that you had at grant. Once past that point, your item is back in the Office at the dmimished state, and is very much being subjected to the less than Article III treatments that Congress wrote into the AIA sections that I have shared with you. At that point, your protests and desires for Article III “requirements” no longer reach because you are no longer involved in a FIRST original action IN an Article III environment. Instead, you very much are involved in the administrative agency environment and it is that originating source of the administrative agency environment – hand in hand with the AIA sections that I have provided that controls.

    I would love to see you answer these views in a detailed, point by point rebuttal (if you have one).

  11. Anon July 12, 2017 9:27 am

    Well Mr. Heller, I am waiting.

    I note that you claim that you provided a full answer “on the other blog,” but that the odd editorial controls that place many posts in limbo must have snagged your full response.

    There is no such excuse here.

    And yet, we see the conversation stall out (yet again) at a point where your desired legal position falters.

    Shall I bookmark this page so that the next time you (re)start down that same path of yours, we can skip the merry go round and return directly to this unresponded to counterpoint?

  12. Edward Heller July 12, 2017 8:15 pm

    anon, I did answer you. You mistook my answer.

  13. Anon July 12, 2017 10:11 pm

    Mr. Heller,

    I did not “mistook” your answer.

    Your answer was incomplete. If you were to rest your case with that answer, you would surely lose the case.

    Please provide a complete answer.

  14. Anon July 14, 2017 8:09 am

    Bookmark this thread it is then, Mr Heller.

    The next time you start down the path of an argument but refuse to fully address all of the pertinent counterpoints and all of the items of law that address the situation, you may be referred back to this thread on this forum where the absence of your replies screams only one thing (and that one thing is not to your liking).

  15. Edward Heller July 14, 2017 12:29 pm

    Anon, what it should go review what I posted one more time. I did answer your question. I was not referring only ITC proceedings.

  16. Anon July 14, 2017 3:15 pm

    Mr Heller,

    You simply do not address the multiple prongs of the AIA argument laid out before you.

    Please address each item individually and clearly on point.

    Your (previously supplied) answer remains lacking.

    As I mentioned, if these were arguments in court, you would be tossed without ado.