Posts Tagged: "real party in interest"

As I noted in part one of my talk at the IPWatchdog Patent Masters Symposium, the validity statistics for SEPs do not look very good at first glance. Thus, according to a 2017 PricewaterhouseCoopers study, plaintiffs in U.S. courts (ignoring patent type) have on average a 33% chance of success—only a 27% chance in the case of telecommunications patents. This chance of success is probably overstated for Standard Essential Patents (SEPs), based on the easy availability of prior art. Indeed, according to RPX’s 2014 study, in the United States, SEPs are likely to be less than half as successful as non-SEPs.In my talk, I pointed to the high invalidation rates in Europe to buttress my point that, at first glance, SEPs seem particularly vulnerable to validity challenges. Thus, in Germany, a supposed nirvana for patent assertion, the authors of the study “Patent Paper Tigers” reviewed the case law of the German Federal Patent Court and the German Federal Court of Justice in nullity matters in the period from 2010 to 2013 and found that: The nullification rate of all Senates of the German Federal Patent Court is 79.08% in total; and the nullification rate at the German Federal Patent Court regarding Software and Telecom patents which are (currently) of particular relevance from an economic point of view is 88.11%. Returning to the point made in the first part of my talk, having noted that most SEP nullification comes from obviousness, and not novelty, there should be no public interest exception to my argument that: unprovoked—that is, without first having made a FRAND offer or counteroffer—serial nullification of SEPs is contrary to the duty to negotiate in good faith and should remove a party’s defense against an injunction to SEPs.

Now, there is a flaw in this theory, and that is that, in the past few years, third parties have emerged that will—for their members or other contracted entities—kill patents.

The Federal Circuit last week upheld a PTAB final written decision invalidating Mayne Pharma’s U.S. Patent 6,881,745 over its objection that the petition for inter partes review (IPR) filed by Merck Sharpe & Dohme (MSD) was fatally defective for having omitted parent corporation Merck & Co., Inc. as a real-party-in-interest. Mayne Pharma Int’l v. Merck Sharp & Dohme, Case No. 2018-1593 (Fed. Cir. June 21, 2019). Because Merck would have had to add its parent as an RPI in the proceeding after the one-year time bar had lapsed, Mayne argued the error was not correctable. The Federal Circuit rejected this view, holding that the Board has authority to make corrections to a petition that are “in the interest of justice.” This decision suggests that form will not be elevated over substance in addressing the one-year IPR time bar of Section 315(b).

Who stands to gain if Google prevails? Well, Google certainly, but so too does Alphabet, which is precisely why Alphabet is a real party-in-interest under any fair and rational interpretation of the law. In Q3 2018, Google revenue amounted to $33.6 billion. In Q3 2018, Alphabet revenue amounted to $33.74 billion. That means that 99.59% of Alphabet’s Q3 2018 revenue came from Google. Alphabet is Google, Google is Alphabet. It is time for Director Iancu and the Precedential Opinion Panel to step up to the plate and put the PTAB genie back in the bottle. Declaring what is the real, sensible and correct legal meaning for who is a real party-in-interest should be a layup, and needs to happen soon.

Before proceeding it is worth noting two things. First, that my list focuses on specific and identifiable events. Second, there are a number of stories worth mentioning, but which just missed the cut for one reason or another. The two that will probably be most glaring omissions are the Federal Circuit’s decision in Vanda Pharmaceuticals v. Westward Pharmaceuticals, 887 F.3d 1117 (Fed. Cir. 2018), and the final rules implementing the Phillips claim construction standard. With respect to Vanda, while it is a pro-patent decision, the claims found eligible are virtually indistinguishable from those held ineligible in Mayo, so it seems virtually certain a different panel of the Federal Circuit would have ruled differently. Thus, all Vanda did was seem to create uncertainty, which may be good for settlements, but likely not a repeatable decision. As for the Phillips standard, while it makes perfect sense for the PTAB to be using the same claim construction standard as used in federal district courts, many have questioned whether it will make any real difference in outcomes. Still, it is a big event and would have been 11th on my list. Had a chance to Phillips been accompanied by patent claims being presumed valid and requiring clear and convincing evidence to be declared invalid at the PTAB, that would certainly be worthy of top 10 inclusion. Alas, that would require an amendment to the statute and beyond the powers of Director Iancu. Thus, the banishment of BRI, while important, finds itself on the outside looking just in at this year’s top 10.

On Tuesday, November 27th, the Patent Trial and Appeal Board (PTAB) issued a redacted version of a decision to institute an inter partes review (IPR) proceeding petitioned by Unified Patents to challenge the validity of patent claims that have been asserted in district court against at least one of Unified’s subscribing members. The PTAB panel of administrative patent judges (APJs) decided to institute the IPR despite the patent owners’ assertion that the petition should be denied because Unified didn’t identify all real parties in interest (RPIs) including members of Unified’s Content Zone. The charade that Unified is the only real party in interest and simply acts in uncoordinated ways and not at the behest of those who pay for them to challenge patents continues, at least at the PTAB.

The Alliance of U.S. Startups and Inventors for Jobs (USIJ) recently released a report detailing the organization’s research into serial attacks on high quality patents at the Patent Trial and Appeal Board (PTAB). The USIJ’s research shows that, far from being a cheaper alternative venue for small businesses to challenge the validity of weak patents being asserted against them as was originally intended, the administrative tribunal has instead become a tool for rich, sophisticated companies who are able to harass owners of valuable patents with duplicative petitions filed either by themselves or by profiteering entities which weren’t envisioned when the Leahy-Smith America Invents Act (AIA) of 2011 was passed into law.

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.

If an APJ making decisions in a case within 18 months of having represented a former client complies with whatever USPTO conflict rules or guidelines apply to PTAB judges, the USPTO conflict rules or guidelines are too lenient and must be changed. PTAB just should not be deciding cases involving post grant petitions filed by former defense clients, and under no circumstances is 18 months long enough to alleviate any concerns of bias or take away the appearance of impropriety… If identification of the real party-in-interest is so important perhaps that transparency should be a two-way street. Perhaps there should be a public Code of Conduct for PTAB judges, and perhaps the USPTO should give stakeholders the opportunity to be heard on whether 2 years is an appropriate length of time to wash away a conflict of interest, or the appearance of impropriety that exists when deciding cases dealing with former clients. My guess is most patent owners would be adamantly opposed to PTAB judges deciding petitions challenging patents brought by their former clients.

Clinton’s proposal for accomplishing this goal would be twofold: (1) to reduce excessive patent litigation through additional patent reform; and (2) strengthening the operational capacity of the USPTO by allowing the USPTO to keep and spend all the fees it collects. “You are looking at a 14-page detailed document. There is a lot of thought put behind this agenda,” explained Todd Dickinson, former Director of the United States Patent and Trademark Office under President Bill Clinton who was reached by telephone for comment. Not surprisingly, Dickinson has has been an advisor to the campaign regarding intellectual property matters. “Other campaigns will be hard pressed to match the depth and thoughtfulness of these proposals.”

The PTAB has seen more than triple the number of inter partes review (IPR) petitions—now the preferred way for a company accused of infringement in court to challenge a patent’s validity—than it projected when the challenge first became available in 2012. But the fact that proceedings can run simultaneously presents challenges.

This bill has elements that can be part of an ultimate solution, however it cannot escape being a rubber stamp for a viewpoint that sees intellectual property rights as nuisance rather than a principal cog in the American invention machine. Unfortunately, if the Congress moves forward and ratifies this bill in the form proposed, it will create more problems than the one it is solving.

There is no doubt that the Obama position will be loved by Google and other Silicon Valley technology giants that despise the patent system. Given the revolving door between the Obama Administration and Google, the long-term close relationship between President Obama and Google (see here, here and here), and the fact that patent issues don’t resonate with John Q. Public, it seems likely that the President stepping in now to allow him to tout that he is engaged with issues of importance in the minds of tech giants who will be asked for large checks later this week.