Control Over District Court Litigation is Required for Time Bar Under 35 U.S.C. § 315(b)

Wi-Fi One, LLC v. Broadcom Corp., No. 2015-1944, 2018 (Fed. Cir. Apr. 20, 2018) (Before Dyk, Bryson, and Reyna, J.) (Opinion for the court, Bryson, J.) (Dissenting opinion, Reyna, J.)

Wi-Fi’s predecessors, Ericsson, Inc. and Telefonaktiebolaget LM Ericsson (collectively, “Ericsson”) filed suit against D-Link Systems, Inc. and other defendants. The jury found infringement of Ericsson’s -215, -625, and -568 patents. Broadcom, which manufactured two chips that formed the basis of the infringement case, petitioned for inter partes review of the Ericsson patents. The IPR of the -215 patent is the only proceeding at issue in this appeal.

The Board instituted review of the ‘215 patent, based on alleged anticipation by U.S. Patent No. 6,581,176 to Seo. The patent is for a method of improving the efficiency of sending messages in a telecommunications system and to advise the sender that there are errors in a particular message.

Wi-Fi argued that Broadcom’s IPR petition was time-barred by the D-Link litigation, under 35 U.S.C. § 315(b). Broadcom was allegedly in privity with D-Link in the district court case, and D-Link was the real party in interest in the IPR. Section 315(b) provides that an IPR may not be instituted if the petition is filed more than one year after the date on which the petitioner, a real party in interest, or a party in privity with the petitioner, is served with a complaint alleging patent infringement. Broadcom’s IPR petition was not filed within one year of the date that D-Link was served with the district court complaint. Wi-Fi argued that, because of privity between Broadcom and D-Link, Broadcom’s petition should be barred.

The Board rejected these arguments and found that the ?215 patent was anticipated by Seo. Wi-Fi appealed, and the Federal Circuit summarily affirmed. However, the Court convened en banc, vacated the prior judgment regarding appealability of the Board’s time-bar determination under § 315(b), and directed a panel of the Court to address the Board’s anticipation finding and the merits of the time-bar arguments.

Wi-Fi renewed its argument that Broadcom’s petition was barred because one or more of the D-Link defendants in the district court case was in privity with Broadcom or was a real party in interest in the IPR. Wi-Fi argued that the Board: (1) applied the wrong legal standard when it determined that no district court defendant was in privity with Broadcom or was a real party in interest in the IPR, (2) improperly denied Wi-Fi’s requests for discovery to establish privity or the real parties in interest, and (3) failed to adequately explain its time-bar ruling, which was not supported by substantial evidence.

The Board conducted a “flexible analysis” that “seeks to determine whether the relationship between the purported ‘privy’ and the relevant other party is sufficiently close such that both should be bound by the trial outcome and related estoppels.” For real parties in interest, the Board determines whether a party other than the petitioner is the “party or parties at whose behest the petition has been filed.”A party that “funds and directs and controls an IPR” is a real party in interest even if that party is not a privy of the petitioner.

First, Wi-Fi argued that the Board required “a hard and absolute requirement that Broadcom must have had the right to control the District Court litigation.” The Federal Circuit disagreed. The Board recognized several circumstances in which privity might be found, only one of which is control of a district court litigation. The Board’s focus on control came from Wi-Fi’s arguments, not a misunderstanding of the legal standard. The Court agreed with the Board that indemnity payments and minor participation in a trial are not sufficient to establish privity. Additionally, the fact that a petitioner filed an amicus brief in an appeal from the district court litigation and showed an interest in the outcome does not show control amounting to privity.

Second, Wi-Fi argued that the Board improperly denied its request for additional discovery, which was “in the interests of justice.” Wi-Fi requested indemnity agreements, joint defense agreements, or other agreements related to cooperation between Broadcom and the district court defendants. Wi-Fi also sought correspondence between Broadcom and the defendants relating to (1) Broadcom’s filing of the petition, (2) possible intervention by Broadcom in the district court litigation, (3) claim construction in the litigation, and (4) the validity or invalidity of the patents in the litigation. The Board found that that none of the requested evidence would be sufficient to establish privity or control and the discovery was not “in the interests of justice.” The Federal Circuit agreed and found no abuse of discretion in the Board’s denial of additional discovery.

Third, Wi-Fi argued that the Board failed to provide adequately explain its final ruling. The Board explained that Wi-Fi’s arguments were no different from its motion for additional discovery, which the Board denied. The Board further addressed the issue in response to Wi-Fi’s request for rehearing. In light of the Board’s “multiple and detailed discussions of the section 315(b) issue,” the Court found that the Board adequately explained its decision. The decision was supported because there was “essentially no evidence before the Board that any of the [district court] defendants was a real party in interest in the inter partes review proceeding.” The fact that Broadcom had an interest in the outcome of the district court litigation and had indemnity agreements with at least two of the district court defendants was not sufficient. Additionally, Wi-Fi presented no evidence that Broadcom was acting at the behest or on behalf of the district court defendants in the IPR.

Wi-Fi also challenged the Board’s finding that the ?215 patent was anticipated by Seo. Specifically, Wi-Fi argued that (1) Seo does not disclose a type-identifier field”, (2) Seo does not disclose a “type identifier field within a message field”, and (3) the Board misconstrued the term “type identifier field.” The Court rejected each of these arguments and upheld the Board’s anticipation decision.

Judge Reyna dissented, arguing that the majority adopted too narrow a definition of privity under § 315(b). Control over the prior district court litigation is only one way that privity may be established. Privity can also be established where (1) there is an agreement between a named party and a non-party in litigation to be bound by the outcome; (2) there is a pre-existing substantive legal relationship between the parties; (3) the non-party had adequate representation in the litigation by the named party; (4) the non-party exercised control over the litigation; (5) the non-party acts as a proxy for the named party to relitigate the same issues; and (6) there are special statutory schemes that foreclose successive litigation by the non-party. The majority opinion “impermissibly cabins the privity inquiry into only one factor—control over prior litigation—and ignores other relevant factors.”

Take Away

An IPR petition is not time-barred for reasons of privity with a district court defendant in a prior litigation when no evidence shows that the petitioner controlled the litigation and would be bound by its outcome, or was in privity with a litigant for other reasons. It is not enough for the petitioner to indemnify litigants or have an interest in the outcome. Similarly, for a district court defendant to be a real party in interest in an IPR, the petitioner must have filed the petition at the behest or on behalf of the defendant. Finally, it was not an abuse of discretion to deny Patent Owner’s motion for additional discovery, when the requested discovery would not prove privity on the grounds alleged in the motion.

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