What Happens at The Board Does Not Stay at The Board: How Patent Owners Can Leverage IPR Proceedings in Litigation

“Real-party-in-interest disputes can be hotly contested before the Board in IPR. An order from the Northern District of Illinois shows that these disputes can have larger significance and impact petitioners in litigation.”

Inter Partes Review (IPR) proceedings before the Patent Trial and Appeal Board (PTAB) often occur in parallel to district court cases. Patent owners whose patent rights survive IPR may return to district court at a distinct advantage, not only by emerging with their patent rights intact, but also by capitalizing on events during the IPR and using them to their advantage in district court litigation.

Real-Party-In-Interest Findings

https://depositphotos.com/58499137/stock-photo-trading.htmlReal-party-in-interest disputes can be hotly contested before the Board. An order from the Northern District of Illinois shows that these disputes can have larger significance and impact petitioners in litigation. In that order, the Illinois federal court relied on the Board’s fact-finding from an IPR dispute over the petitioner’s identification of real-parties-in-interest to find that petitioner had waived the attorney-client privilege in the litigation. RTC Indus., Inc. v. Fasteners for Retail, Inc., No. 17-cv-03595, 2019 WL 5003681 (N.D. Ill. Oct. 8, 2019).

RTC Industries, Inc. sued Fasteners for Retail, Inc. (“FFR”) in the Northern District of Illinois for patent infringement relating to retail shelf displays. While the litigation was pending, FFR filed an IPR petition challenging one of the patents at issue. In a victory for the patent owner, the Board declined to institute IPR because FFR failed to identify a venture capital firm, Olympus Partners, as a real-party-in-interest in its petition, despite being given permission to list Olympus as a real-party-in-interest without changing the petition’s filing date. Fasteners For Retail, Inc. v. RTC Industries, Inc., No. IPR2018-00742, Paper 27 (PTAB Sept. 12, 2018). The Board found that Olympus Partners’ principal controlled filing the petition, yet petitioner failed to show that the principal acted on behalf of FFR instead of Olympus Partners. Because Olympus Partners was not a named real-party-in-interest, FFR’s petition was denied.

During the litigation, RTC and FFR disputed whether FFR had properly designated documents FFR shared with Olympus Partners as protected by the attorney-client privilege. The court found that FFR waived attorney-client privilege when it shared the documents with Olympus Partners. It based its conclusion on the Board’s prior finding that that Olympus Partners “provide[d] advisory services to” FFR’s parent corporation, and was therefore outside of FFR’s corporate family, and therefore held that FFR’s attorney-client privilege had been waived. RTC, 2019 WL 5003681, at *7.

Another case before the District of Oregon illustrates that real-party-in-interest disputes can form the basis for a cause of action against an IPR petitioner. There, the federal court relied on a real-party-in-interest finding by the Board to reject a motion to dismiss a complaint that the petitioners had fraudulently sought IPR against the patent owner’s patents. Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc., No. 19-cv-00137, 2019 WL 6467816 (D. Or. Dec. 2, 2019).

Columbia sued Seirus for patent infringement in 2015.  In 2017, shortly before trial, the third party manufacturer of Seirus’ allegedly infringing goods, Ventex, filed for inter partes review against Columbia’s patents-in-suit. The Board found Ventex had accepted payments from Seirus without which “Ventex may not have been able to fund this inter partes review,” and held that the petition was time-barred because Serius was a real-party-in-interest. Ventex Co., Ltd. v. Columbia Sportswear North America, Inc., Nos. IPR2017-00789 and IPR2017-00651, Paper 148 at 14-15 (PTAB Jan. 24, 2019).

Columbia then sued Seirus and Ventex alleging they had fraudulently filed the IPR petitions and associated motion to stay. Seirus and Ventex moved to dismiss. The district court refused to dismiss the case, repeatedly citing the Board’s real-party-in-interest determination and commenting, “[t]aking Columbia’s allegations as true, no reasonable litigant … could reasonably believe that Ventex was the sole real party in interest.” Columbia, 2019 WL 6467816, at *3, *7-9 (italics in original).

Prior Art Disclosures

IPR proceedings can also impact evidentiary disputes in district court. Courts have wrestled with whether disclosing references during a related IPR proceeding puts the other side on notice of that reference in a related district court litigation. In Sandbox Logistics LLC v. Proppant Express Investments LLC, a patent owner moved to strike amended invalidity contentions in a supplemental expert report because the contentions and references did not appear in the expert’s opening report. Nos. 16-cv-00012, 17-cv-00589, 2018 WL 6191044, at *2 (S.D. Tex. Nov. 28, 2018). The district court found the new references in the petitioner’s expert report did not “ambush” the patent owner because the petitioner had asserted the same references eight months earlier in a related IPR proceeding.

However, other courts have reached the opposite conclusion. In Huawei Technologies Co. Ltd. v. T-Mobile US, Inc., the patent owner moved to strike portions of an expert report discussing a reference that the petitioner had not previously disclosed in invalidity contentions. No. 16-cv-00055, 2017 WL 4619791, at *1-2 (E.D. Tex. Oct. 16, 2017). The petitioner argued there was no prejudice to the patent owner because the petitioner had disclosed the reference in an IPR petition months earlier.  Id. at *2. The district court granted the motion to strike, writing: “[t]his argument of course begs the question why [the petitioner] did not move to amend their invalidity contentions ten months ago.”  Id.

These cases serve as reminders that Board findings and petitioner conduct can have impact far and beyond IPR proceedings. Patent owners can leverage those proceedings to their advantage in subsequent district court cases.

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