PTAB Says Collateral Agreements Must Be Filed in Decision Designated Precedential

On June 11, the U.S. Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB) designated DTN, LLC v. Farms Technology, LLC as precedential. The case involved the parties’ joint motions to terminate two inter partes review (IPR) proceedings following a settlement agreement. The Board held that 35 U.S.C. § 317(b) mandated the filing of collateral agreements referred to in the settlement agreement even though the patent owner and the petitioner were not both parties to the collateral agreements and the collateral agreements did not relate to the termination of the IPRs.

PTAB: Collateral Agreements Must Be Filed

The parties filed a Joint Motion to Terminate in each of Case IPR2018-01412 (Patent 7,991,685 B2) and Case IPR2018-01525 (Patent 7,742,979 B2) based on a settlement reached by the parties. In accordance with 35 U.S.C. § 317(b), the parties also filed a copy of the Settlement Agreement along with joint requests that the settlement agreement be treated as business confidential information.

Upon review of the Settlement Agreement, the Board contacted the parties, noting that the Settlement Agreement referenced other agreements (the Collateral Agreements) “which may be subject to the mandatory filing requirement of § 317(b). Counsel for the parties argued that the Collateral Agreements were not subject to the mandatory filing requirement, but the Board concluded that “based upon the facts presented here, the two [Collateral Agreements] referenced in the Settlement Agreement must be filed before the proceedings may be terminated via settlement under 35 U.S.C. § 317.” Counsel for both parties maintained that the Collateral Agreements were not subject to the filing requirements of 35 U.S.C. § 317(b), but noted that they would “file the Collateral Agreements for the Board’s consideration in that regard, along with Requests to treat the Collateral Agreements as business confidential information, and Motions to Expunge the Collateral Agreements.”

The Board considered the parties’ Joint Motions to Expunge the Collateral Agreements, wherein the parties argued that the Collateral Agreements did not fall within the scope of 35 U.S.C. § 317 and 37 C.F.R. § 42.74 because 1.) the Collateral Agreements were not “between the patent owner and a petitioner”, and 2.) the Collateral Agreements were not “made in connection with, or in contemplation of, the termination of” the IPR Proceedings.  The Board considered the language of § 317(b), which stated:

Any agreement or understanding between the patent owner and a petitioner, including any collateral agreements referred to in such agreement or understanding, made in connection with, or in contemplation of, the termination of an inter partes review under this section shall be in writing and a true copy of such agreement or understanding shall be filed in the Office before the termination of the inter partes review as between the parties.

Collateral Agreements Not Limited to Those Between Patent Owner and Petitioner

The Board initially considered the parties’ contentions that the Collateral Agreements were not subject to the filing requirement because the Collateral Agreements were not “between the patent owner and a petitioner” in accordance with 35 U.S.C. § 317 or “between the parties” in accordance with 37 C.F.R. § 42.74. In particular, the parties contended that the patent owner, Farms Technology, LLC, was not a party to either of the two Collateral Agreements and, therefore, the Collateral Agreements were not subject to the filing requirement. Despite the parties’ arguments that the term “including”, in the phrase “[a]ny agreement or understanding between the patent owner and a petitioner, including any collateral agreements” (emphasis added) supported their interpretation that only the filing of collateral agreements between the parties was required, the Board reasoned that 35 U.S.C. § 317(b) clearly requires the filing of the Settlement Agreement including “any collateral agreements referred to”(emphasis added) and “‘any’ means ‘any’”.  Thus, the Board stated that “the statutory language of § 317(b) does not limit the ‘collateral agreements’ to agreements that are between the patent owner and a petitioner.”

The Board also noted that 37 C.F.R. § 42.74, is consistent with its interpretation of 35 U.S.C. § 317(b), since 37 C.F.R. § 42.74 only refers to the agreement “between the parties” and does not mention anything about collateral agreements. Noting that 37 C.F.R. § 42.74 is “not particularly pertinent to the statutory construction presented”, the Board declined to adopt the parties’ interpretation of the regulation as “setting forth Office policy on the correct interpretation of the ‘collateral agreements’ clause in 35 U.S.C. § 317(b).”

The Board explained that the parties’ interpretation of § 317(b), as requiring the filing of only collateral agreements between the parties, would “allow parties to IPR proceedings to circumvent the statute’s filing requirement easily, thereby frustrating the purpose of the statute.” For example, the Board noted that the parties could enter into a short agreement between themselves and therein refer to a separate agreement between related but different corporate entities that control or are controlled by the parties, wherein the separate agreement contained all of the terms the parties wished to insulate from review.   Thus, the Board concluded that 35 U.S.C. § 317(b) required the filing of the Collateral Agreements referred to in the Settlement Agreement regardless of whether the patent owner and petitioner were parties to the Collateral Agreements.

Only Settlement Agreements Required to Be Made In Connection with IPR Proceedings

With respect to the parties’ arguments that the Collateral Agreements were not “made in connection with, or in contemplation of, the termination of” the IPR proceedings, the Board explained that there is no such requirement of the Collateral Agreements in 35 C.F.R. § 317(b). Rather, the Board noted, the regulation only requires that the Settlement Agreement itself be “made in connection with, or in contemplation of, the termination of a proceeding.” The Board concluded that the only requirement regarding collateral agreements forth in 35 C.F.R. § 317(b) is that they are “referred to”, which the Board held that they “indisputably” were.

In conclusion, the Board denied the Joint Motions to Expunge the Collateral Agreements but granted the Joint Requests to treat the Settlement Agreement, and the two Collateral Agreements, as business confidential, and the Joint Motions to Terminate the proceedings.