Federal Circuit vacates PTAB over error in determining real party in interest in RPX petition

By Steve Brachmann
July 24, 2018

Wooden gavel with a brass band resting on a plinth used by a judge or auctioneer and conceptual of justice and judgements with backlit highlight and copyspaceOn July 9th, the Court of Appeals for the Federal Circuit issued a decision in Applications in Internet Time v. RPX Corporation which vacated a series of final written decisions issued by the Patent Trial and Appeal Board (PTAB) which invalidated patent claims held by Applications in Internet Time (AIT). The Federal Circuit panel of Circuit Judges Kathleen O’Malley, Todd Hughes and Jimmie Reyna found that the PTAB applied an unduly restrictive test in determining the statutory meaning of real party in interest for the purposes of instituting inter partes review (IPR) proceedings petitioned by RPX on patents asserted against RPX’s client Salesforce.

The patents at issue in this case include two patents asserted in district court by AIT against Salesforce in November 2013. Salesforce petitioned the PTAB for covered business method (CBM) review of the asserted patents in August 2014 but those reviews were denied institution by the PTAB in February 2015 after the Board determined that Salesforce failed to prove that the challenged patents were CBM patents. RPX then filed IPR petitions against the AIT patents in August 2015, identifying itself as the “sole real party-in-interest” in each of those petitions.

AIT filed discovery requests seeking documentation that RPX was the agent of Salesforce, which would have time-barred RPX’s IPR petitions under 35 U.S.C. § 315(b), the statute preventing the institution of IPR proceedings if the petition is filed more than one year after the date on which a real party in interest is served with a complaint for patent infringement. Among the relevant documents produced during discovery are included an RPX best practices guide for identifying patents to challenge, a declaration from RPX’s Vice President of Client Relations which identified conversations between RPX and Salesforce on the AIT patents and a history of payments from Salesforce to RPX which showed that Salesforce made a significant payment before RPX filed the IPRs against AIT’s patents.

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The PTAB, however, instituted RPX’s IPRs despite AIT’s time-bar claims. The PTAB dismissed AIT’s arguments that RPX has a history of acting as a proxy at the PTAB for other firms and that RPX operates with willful blindness in which it intentionally operates in such a manner that allows it to circumvent real party in interest case law. The Board found that, although RPX and Salesforce did discuss the AIT litigation and the related CBM petitions, the two hadn’t specifically discussed the subject of the IPRs filed by RPX. The PTAB again rejected AIT’s real party in interest arguments at the final written decision phase when the Board also determined that all challenged claims of AIT’s patents were invalid as obvious or anticipated.

As the Federal Circuit notes in discussion, the appellate court has lacked the opportunity to review the real party in interest language in the context of Section 315(b) until this year’s decision in Wi-Fi One v. Broadcom where the Federal Circuit held that the PTAB’s time-bar determinations were reviewable. Thus, this case marks the Federal Circuit’s first chance to determine a real party in interest in the context of IPRs. In interpreting Section 315(b), O’Malley explained, Congress chose to use terms like privy of the petitioner to plan for a broader application of the provision. Congress used language bars petitions where privies of the petitioner would benefit from the IPR institution, contemplating that there could be multiple real parties in interest.

Among the PTAB’s errors highlighted by the Federal Circuit include the making of certain factual findings that weren’t supported by substantial evidence and failing to adhere to the expansive formulation of real party in interest as dictated by the language. The Federal Circuit found that the PTAB didn’t meaningfully examine Salesforce’s relationship with RPX and the nature of RPX as an entity that helps its clients extricate themselves from patent litigation. Both of those factors are ones which are contemplated by the PTAB’s Trial Practice Guide, according to the Federal Circuit:

“We conclude that the Board’s consideration of the evidence was impermissibly shallow, both under the Trial Practice Guide and the common law it incorporates. The evidence of record reveals that RPX, unlike a traditional trade association, is a for-profit company whose clients pay for its portfolio of “patent risk solutions.”… Yet the Board did not consider these facts, which, taken together, imply that RPX can and does file IPRs to serve its clients’ financial interests, and that a key reason clients pay RPX is to benefit from this practice in the event they are sued by an NPE.”

In a concurring opinion, Judge Reyna further concluded that the PTAB had erred by failing to fully address the question of whether RPX’s IPR petitions were time barred under the privity provision of Section 315(b).

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

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 5 Comments comments. Join the discussion.

  1. Anon July 24, 2018 10:48 am

    the nature of RPX as an entity that helps its clients extricate themselves from patent litigation

    I’ve seen that line before…

    In fact, that is a sales pitch for certain someones (cough cough, Shawn Ambwani) that like to denigrate patents here.

  2. Bemused July 24, 2018 1:10 pm

    If this ruling helps sink the garbage Unified Patents business model then I might almost be able to forgive the CAFC for some of their other/idiotic interpretations of the AIA (emphasis on “almost”).

  3. xtian July 24, 2018 1:38 pm

    I am surprised on the limited comments to this article, particularly when, if I understand the facts, a CBM was denied, but the later IPR found the patents invalid. How does this happen?

    Anyone care to comment on how such disparate results occurred?

  4. Scott McQuarrie July 24, 2018 1:48 pm

    Glad to see at least some CAFC judges willing to expose PTAB abuse by the efficient infringers. RPX is but one device that arose from the carefully constructed AIA that facilitates a never-ending assault on patent holders by well-funded infringers. Other cases are in the pipeline that will further highlight the extent to which infringers and some PTAB tribunals will go in an effort to conceal infringers’ efforts to circumvent the section 315(b) one year time bar or to get multiple bites at the Apple. The ethical compromises made in pursuit of further profits are astounding and shameful.

  5. Anon July 24, 2018 4:18 pm

    xtain,

    CBM being denied may entirely be consistent with an IPR revoking challenged claims.

    This is not as disparate as a first glance may indicate.

    Denial of institution of a CBM may happen without review of merit of the validity of the claims at hand – further, an IPR may or may not challenge the same claims (and may have different arguments provided in a challenge).

    Without looking into the actual details, I will have to leave my comment at this high level.

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