USPTO Leadership Sides With Patent Owner, Ruling Even Deficient Complaints Trigger Time-Bar

USPTO Director Andrei Iancu

On August 23, the Patent Trial and Appeal Board’s (PTAB’s) Precedential Opinion Panel (POP) issued a decision granting patent owner 360Heros’ request for rehearing of an earlier PTAB decision to institute an inter partes review (IPR) requested by GoPro and also denied institution of that IPR under the one-year time-bar codified in 35 U.S.C. § 315(b). The PTAB agreed with 360Heros that the one-year time-bar began tolling from the filing date of a counterclaim alleging patent infringement that was dismissed by the district court for lack of standing. The POP panel included U.S. Patent and Trademark Office (USPTO) Director Andrei Iancu, Commissioner for Patents Drew Hirshfeld and PTAB Chief Administrative Patent Judge Scott Boalick.

The Dispute

As IPWatchdog Founder Gene Quinn noted last week, this case stems from an action for declaratory judgment of, among other things, non-infringement of the patent in question filed by GoPro in April 2016. 360Heros filed a counterclaim alleging patent infringement in August 2016, two months before the patent-at-issue was formally assigned to the entity. The district court later dismissed the counterclaim for lack of standing on a motion for summary judgment. GoPro filed for IPR proceedings to challenge the validity of U.S. Patent No. 9,152,019 in September 2018, within one year of a District of Delaware patent infringement complaint filed by 360Heros, which argued that the dismissed counterclaim, filed in the Northern District of California, should instead be considered the original complaint for patent infringement served, starting the Section 315(b) time-bar.

In the original institution decision, the PTAB found that the California filing didn’t trigger the Section 315(b) time-bar. The PTAB disagreed with 360Heros that the Federal Circuit’s 2018 en banc decision in Click-to-Call Technologies v. Ingenio didn’t apply to this case because the standing issue present here wasn’t considered in that decision. Further, the Board found that 360Heros ignored other PTAB cases where ownership of a patent at the time of filing a complaint or counterclaim for infringement was required to start the Section 315(b) time-bar running.

360Heros filed a request for rehearing of the time-bar issue by the PTAB POP and an oral hearing on the issues  was conducted in late July. Megan Chung of Kilpatrick Townsend argued on behalf of GoPro and Robert Greenspoon of Flachsbart & Greenspoon argued on behalf of 360Heros.

GoPro to POP: Complaint Must Be “Proper” to Trigger Time-Bar

Chung began oral arguments by offering three reasons why a plaintiff’s counterclaim for patent infringement when that plaintiff lacks standing doesn’t start the Section 315(b) time-bar: 1) without standing, there is no proper complaint or service of the complaint; 2) the statute and its legislative history confirms that only a patent owner or a successor in interest can serve a proper complaint; and 3) the Federal Circuit’s decision in Hamilton Beach Brands v. f’real Foods confirmed that Click-to-Call didn’t consider whether standing affected the Section 315(b) time-bar. Director Iancu asked where standing was referenced in the statute:

But there can be many deficiencies in any complaint, right? So, it doesn’t specify that it’s got to be a complaint, a proper complaint, a fully… ironclad complaint. It doesn’t say it’s a complaint with standing… The various requirements you are alluding to don’t seem to be in the statute per se, are they?

While the statute itself doesn’t include the world “proper,” Chung argued that the ordinary meaning of the statute’s wording would require proper official service. Responding to Commissioner Hirshfeld, Chung said that the statute was ambiguous and that other factors, such as the statute’s title, indicated that the statute must refer to the patent owner whose district court action must include a proper “complaint,” which GoPro used interchangeably with “counterclaim” throughout the hearing. Chief Judge Boalick asked Chung how she reconciled her view on the statute’s ambiguity with Click-to-Call, which held that there was no ambiguity in the statutory language. Chung said that the Federal Circuit did end up interpreting service as official service complying with rules of the civil action. Because 360Heros’ complaint wasn’t proper, Chung argued that the service couldn’t be considered proper either.

Chief Judge Boalick inquired as to why GoPro’s nullification argument should hold any more weight than the nullification argument which failed in Click-to-Call. Chung answered that, while Click-to-Call involved a civil case dismissed without prejudice, the standing issues in the present case were more similar to issues decided by the Supreme Court in Lujan v. Defenders of Wildlife (1992), where standing was determined at the time that the lawsuit was initiated. Director Iancu asked if it made a difference that GoPro started the civil action by filing the declaratory judgment action against the entity which it mistakenly believed owned the patent in question:

[F]rom the Petitioner’s point of view, you were aware of the issues. In fact, you initiated the lawsuit. So, you could have at the same time or shortly thereafter, filed a petition for IPR. As far as you are concerned, you were on notice about this particular patent.

Chung responded that, under the statute, it wasn’t notice that was required to begin the one-year time-bar but, rather, official service of the complaint.

360Heros: Section 315(b) is a Bright-Line Test

Greenspoon began his argument by stating that Congress had enacted an administrable bright-line test to determine when the Section 315(b) was to begin and that this test was agnostic as to who files the complaint or whether that filing was proper. Greenspoon pointed out that the language of Section 315(b), which starts the time-bar when the “petitioner is served with a complaint,” is in the passive voice, whereas Section 315(a)(1), which bars IPR if the petitioner “filed a civil action” challenging validity, is in the active voice. Such a difference in the language of adjacent statutes had to be meaningful as noted by the Supreme Court in 2014’s Loughrin v. U.S. “[W]hat that all means to me, and it has from the very first time I read this statute to this moment, is that it just doesn’t matter how proper is the complaint or who filed it,” Greenspoon said.

Greenspoon also pushed back on the nullification argument by noting that Supreme Court precedent on standing affected the ability of litigants to maintain a lawsuit and not the ability to bring a suit. Further, as the Supreme Court pointed out in 2016’s Spokeo v. Robins, standing doctrine exists as a limitation on the judicial branch and not the administrative agency or the executive branch.

Director Iancu asked Greenspoon whether anyone filing a complaint, even an entity unrelated to the patent or patent owner, would trigger the Section 315(b) time-bar. Greenspoon said that such a situation, termed the “hypothetical interloper,” was addressed in 360Heros’ briefing and while such an interloper could start the time-bar, any policy issues with that situation should be addressed by Congress and any risk of gamesmanship that the PTAB could enable by siding with 360Heros was extraordinarily low. “If I, as a lawyer, were to sign a sham complaint, file it in federal court or my client pro se or with a lawyer files a sham complaint in federal court… fire and brimstone might rain down,” Greenspoon added. Further, no cases of such gamesmanship in cases brought before the PTAB had been found by either side.

Chief Judge Boalick asked Greenspoon about Hamilton Beach’s point that there were situations that weren’t considered in Click-to-Call. Greenspoon said that the Federal Circuit’s discussion on that point was “one hundred percent pure dictum” that had no bearing on the holding of that case, which was about the procedural capacity to make an argument without filing a cross-appeal. Even if that was part of the holding, Greenspoon contended that while there was no stare decisis on the issue stemming from the Federal Circuit’s decision, the way the Federal Circuit analyzed the question in Click-to-Call informed how the present standing issue could be decided.

PTAB POP Finds Click-to-Call Controlling on Standing Issue

In the decision, the PTAB POP found that the IPR was time-barred under Section 315(b) and that service of a patent infringement complaint triggers the time-bar even when the infringement plaintiff lacks standing in civil court. From the outset of its analysis, the POP found that there was no ambiguity in the statutory language “served with a complaint alleging infringement” as outlned in Click-to-Call, where the Federal Circuit looked at the plain statutory language, then to ordinary and common meanings of “served” and “complaint” and then to the statute’s legislative history. This finding precluded GoPro’s arguments that the statute’s title, “Patent Owner’s Action,” and Section 315(b)’s legislative history, both indicated that a complaint triggering the time-bar must be filed by an entity with lawful rights to enforce patents.

To support GoPro’s argument, the POP found that it would have had to graft terms into Section 315(b)’s plain language, an action which Click-to-Call cautioned against. The POP also cited to the Federal Circuit’s 2018 decision in Bennett Regulator Guards v. Atlanta Gas Light which found that the Section 315(b) time-bar “includes no exception for an involuntarily dismissed complaint.” The POP wasn’t persuaded by GoPro’s reliance on Hamilton Beach noting that, while Click-to-Call didn’t address the precise question present in this case, the court in Hamilton Beach didn’t resolve the Section 315(b) issue because it wasn’t brought up in the patent owner’s cross-appeal in that case.

Addressing GoPro’s arguments that Article III standing is determined at the moment of filing and that 360Heros’ lack of standing nullified its counterclaim, the POP found that GoPro failed to establish that “long standing federal law” treats complaints served by parties lacking standing as if they never happened. GoPro had cited to the Supreme Court’s 1998 decision in Steel Co. v. Citizens for Better Environment, which found that a lawsuit should never have existed when a plaintiff fails to establish standing in a complaint. The POP found, however, that Steel intended to prevent a court from assuming jurisdiction and then proceeding to adjudicate claims. The POP noted the Federal Circuit’s admonition against relying on authorities from “fundamentally different contexts” in determining the application of the Section 315(b) time-bar. Further, Click-to-Call also recognized that dismissed lawsuits are not a nullity for all legal matters as they could give rise to actions such as Rule 11 sanctions.

What Now?

The 360Heros decision may offer inventors an escape route from the PTAB death squad. For the first time since the America Invents Act became law, the shoe could be on the other foot. One IPWatchdog commenter last week proposed the following approach:

“Independent inventors should jointly create a list of every patent they think is or may in the future be infringed by Apple, Google, Facebook, etc. Create a shell company in the Virgin Islands – no need to assign the patents to the shell. Have the shell company file and serve a complaint alleging infringement of 10,000+ patents and dismiss the case the next day. Wait a year before filing suit on any of the listed patents.” – “Nobody of Consequence”

Subsequent commenters pointed to the inherent risks of this type of gamesmanship; however, given the options for small inventors in the current climate, any leg up may be worth considering. IPWatchdog Founder and CEO Gene Quinn added the following:

I suspect there will be patent owners who will look at this decision and seek ways to for the first time create leverage against infringers who for too long have engaged in a game of efficient infringement. These patent pirates have had the upper hand and patent owners have been a punching bag. Whether what transpires amounts to gaming, as suggested by “Nobody of Consequence”, or just sound litigation strategy will likely be in the eye of the beholder and based on the magnitude and legitimacy of the complaints served.

Emily Rapalino, a partner with Goodwin, said the decision has “created a bright line rule that’s easier for PTAB to administer.” She continued:

This kind of bright line rule helps promote the kind of consistency across PTAB panels that was one of the drivers for the establishment of the POP in the first place.

Another interesting note is that, in theory, the question presented was broader than merely whether a Complaint with a standing defect triggers the one year bar. The question applies to other defects in complaints too. In a footnote, the POP notes that, unlike Article III courts, the PTAB is not bound by ripeness considerations and can therefore articulate a broader rule applicable to other defects. It will be interesting to see what other circumstances or defects in Complaints will be deemed to trigger the bar going forward, particularly where the kind of defect at issue begins to smack of bad faith. The POP decision suggests they might revisit this rule if bad faith gamesmanship is deemed to be in play.