“If you don’t have a consistent body of law, then the PTAB just becomes a forum for abuse, and parties have no predictability regarding how a proceeding will come out.” – Dana Colarulli
On March 28, the U.S. Patent and Trademark Office’s (USPTO’s) Patent Trial and Appeal Board (PTAB) denied petitioner OpenSky Industries’ request for rehearing of an earlier decision denying institution of inter partes review (IPR) of one of two VLSI patents supporting a massive $2.2 billion infringement damages verdict in U.S. district court. The ruling is the latest chapter in a series of challenges to VLSI’s patent claims, which has forced VLSI to run a gauntlet arguably demonstrating that the PTAB fails to function as the alternative forum for speedy validity resolutions originally envisioned by Congress when it passed the America Invents Act (AIA) into law back in 2011.
OpenSky’s Only Support for Invalidity Argument was Expert Unavailable for Cross-Examination
The PTAB’s refusal to grant rehearing for OpenSky was issued by the same panel that denied institution of the IPR and found no abuse of discretion in the institution denial. OpenSky’s petition for rehearing contended that the PTAB erred in considering an expert witness, who was unavailable for cross-examination and would likely have been excluded, as the sole support for OpenSky’s obviousness arguments. However, the PTAB found that OpenSky only cited that expert’s testimony in support of its assertion that it would have been obvious to combine a pair of prior art references.
The decision also found that it wasn’t improper for the Board to rely on documents from another IPR proceeding, showing that OpenSky’s purported expert witness was exclusively retained by Patent Quality Assurance (PQA), which was challenging the same VLSI patent in separate proceedings, nor was it improper to deny OpenSky’s motion to compel testimony from the expert witness. “[A]s we noted in the Institution Decision, Petitioner created its own difficulty by relying on a prior declaration without securing [the expert’s] testimony in this proceeding,” the denial of rehearing order read.
While VLSI obtained favorable results in U.S. district court, including a jury finding that one of two asserted patents was not invalid for anticipation, the patent owner has faced a total of 39 petitions for IPR proceedings at the PTAB. While most of those petitions were filed by Intel, the defendant in the district court infringement suit, other petitions have been filed by OpenSky and PQA, both of which were incorporated after the date of the infringement verdict against Intel and have no discernable business operations beyond challenging VLSI’s patent claims. The American Intellectual Property Law Association (AIPLA) has reported that the average cost of IPR proceedings through a PTAB hearing is $300,000. Thus, if every IPR petitioned against VLSI were to reach a PTAB hearing, that’s nearly $12 million in costs just to defend against these IPRs. While a $2.2 billion infringement verdict can justify those costs, it’s very rare for the vast majority of patent owners to enjoy such prospects.
Further, VLSI has had to deal with machinations from opposing counsel representing OpenSky that flout basic concepts of legal ethics. A late February email from OpenSky’s attorneys to VLSI’s counsel and submitted as documentation in a separate IPR proceeding show that OpenSky offered to ensure that its expert witness would not appear for a scheduled deposition in exchange for cash payment, contingent upon the PTAB approving a motion for joinder filed by Patent Quality Assurance. In the words of IPWatchdog President and CEO Gene Quinn, the OpenSky proposal to VLSI “reeks of unethical manipulation of the judicial process, and in my opinion, of fraud.”
Petitioners Challenging Validity Play PTAB and U.S. District Court Against Each Other
While the OpenSky email adds a wrinkle of manipulated legal proceedings that is relatively rare in PTAB proceedings, the PTAB generally has been creating a cycle of litigation that adds more time and expense to validity disputes than the AIA intended, according to Dana Colarulli, Partner at ACG Advocacy and former Director of the USPTO’s Office of Governmental Affairs. “VLSI’s situation shows how parties are playing the two forums – the PTAB and district court – against each other to litigate issues back and forth, to the detriment of patent owners,” Colarulli said. “Petitioners are given too many opportunities to initiate proceedings at the PTAB and keep patent rights tied up for a long time, even if they lose in district court.” He added that not only was it odd that OpenSky and PQA were formed after the Intel infringement verdict and that both of those parties relied on the same expert witness, but also that OpenSky appeared to have relied on the expert witness without even contacting the expert.
Colarulli believes that restoring the PTAB to Congress’ original vision when passing the AIA will require the Board to focus more heavily on determining whether it is the appropriate forum for resolving validity disputes more quickly than district court. While conversations surrounding the NHK–Fintiv discretionary denial framework involve many knee-jerk reactions, Colarulli added that those conversations were helping to provide guidance to administrative patent judges (APJs) for creating a consistent body of law at the PTAB for determining the appropriate forum to handle validity. “If you don’t have a consistent body of law, then the PTAB just becomes a forum for abuse, and parties have no predictability regarding how a proceeding will come out,” he said. “Whether it’s NHK–Fintiv or another form, having clear guidance on the factors that APJs should be considering at the point of institution is critical.”
While Colarulli hoped that the OpenSky email was a rare case where attorneys proposed manipulating legal proceedings, he did voice concerns that many parties have employed tactics to use the PTAB to further litigation and reach a successful conclusion to infringement proceedings that have to do with legal tactics instead of the merits of a validity argument. “The VLSI case is just one of a few examples where the PTAB needs to examine how it is functioning and look for improvements that effectuate the intent of the AIA,” he said.
Of the 39 IPR proceedings challenging VLSI’s patents, 15 have reached final written decisions, one IPR petition each by OpenSky and PQA have been instituted and are pending, and another four IPR petitions, including two from Intel, are pending pre-institution. VLSI currently ranks 33rd among all patent owners for the number of AIA validity trials that it has faced at the PTAB.