Best practices for IPR proceedings and real party in interest

As set forth in part 1 of this article, the question of how a real party in interest (RPI) to an inter partes review (IPR) is determined has presented challenges and uncertainties for litigants. The RPI analysis is critical for both petitioners and patent owners, as a failure to identify an RPI may result in denial of institution, termination of an instituted trial, or severe estoppel consequences for a petitioner (and its RPIs and privies) in a parallel district court or International Trade Commission (ITC) litigation.

Whether a non-petitioner party is an RPI is a highly fact-dependent question and, accordingly, the RPI determination varies with the specific facts in each case. This area of the Patent Trial and Appeal Board (PTAB) law is still in its early stage and is evolving—making it difficult to discern the result the PTAB will reach.

The PTAB decisions to date have touched on different categories of entity situations, including:

1.   One co-defendant in a patent litigation is alleged to be an RPI to an IPR petition filed by one of its other co-defendants;

2.   Corporate affiliates or passive investors are alleged to be RPIs to an IPR petitioner;

3.   Members of patent “clubs” and similar patent membership organisations are alleged to be RPIs to IPR petitions filed by the club itself; and

4.   Parties in a customer/supplier or indemnitor/indemnitee relationship are alleged to be RPIs when one or the other, but not both, file IPR petitions.

Co-defendants

The PTAB has been clear that the mere fact that two parties are co-defendants in the same litigation and share some common interest does not create an RPI relationship (see Chi Mei Innolux v Semiconductor Energy Lab and Petroleum Geo-Services v WesternGeco). This is true even in situations where district courts require co-defendants to agree to a form of “forced estoppel” to get a stay of district court litigation (see Chi Mei Innolux). Additionally, participation in a joint defence group does not make a company an RPI for IPR purposes (Motorola Mobility v Softview).

Corporate affiliates

There is some inconsistency in the way corporate affiliates have been treated by the PTAB. Passive investors are generally not found to be RPIs (see Coalition for Affordable Drugs v NPS Pharmaceuticals). And a corporation that owns or is affiliated with a petitioner is not automatically a privy, either (see LG Display v Innovative Display Technologies). This is true even for parent companies whose affiliates’ financials are rolled up with their own (see TRW Automotive US v Magna Electronics).

But it is less clear where, beyond that, the line is crossed to render a corporate affiliate an RPI. Where there is evidence of control by the corporate affiliate, it is likely that the PTAB will find the corporate affiliate to be an RPI of the petitioner. The bar for control seems to be fairly low in some cases based on whether the non-petitioner entity had the “power—whether exercised or not—to call the shots” (see Galderma and Q-Med v Allergan).

The greater the control, the more likely the PTAB is to find the affiliate to be an RPI, but the mixed case law renders it hard to discern a bright-line rule. For example, a corporate affiliate of the petitioner had brought a declaratory judgment action on the patent at issue and shared the same counsel that represented the petitioner in the IPR (see Paramount Home Entertainment v Nissim Corp). The PTAB dismissed the petition for failure to name the affiliate as an RPI because the petitioner did not take any action independent from its affiliate.

By contrast, the PTAB rejected RPI arguments as “speculative” where a petitioner and its corporate affiliate shared in-house counsel who prepared the petition, and there was an allegation that the affiliate actually controlled the petition (see Petroleum Geo-Services v WesternGeco).

To take a few other examples, in a corporate sibling situation, the PTAB found that a corporate sibling of the petitioner was neither an RPI nor in privity even though both were wholly owned by the same parent (see ABB Technology v IPCO). In a different case, where a parent controlled the engagement of outside counsel for the subsidiary, the parent’s in-house counsel was the appointed contact for the legal affairs of the subsidiary and the parent paid the legal invoices of the subsidiary, the PTAB found the non-petitioner parent to be an RPI (see Corning Optical Communications v PPC Broadband). These diverging opinions make it difficult to predict how the PTAB will rule on this issue.

Patent clubs

Often, patent clubs or other patent membership groups bring an IPR petition after one or more of its members have been sued. The rulings on whether its members could be considered RPIs have been inconsistent with some panels holding that members are not RPIs because they do not control the club (see Unified Patents v Dragon Intellectual Property). PTAB trial decisions involving patent clubs often involve discovery requests from the patent owner, which are often granted.

Customers and indemnitees

Mere existence of a supplier/reseller relationship or an indemnification agreement is insufficient to establish an RPI relationship, particularly where there is no requirement that the indemnitor be able to control the petition. Where, however, an indemnitor pays for and controls the petition, the indemnitor is more likely to be found to be an RPI (see First Data Corp v CardSoft—denying the petition for failure to identify RPI). This is the case even if the indemnitor makes subsequent attempts to redefine the relationship to shift the control back to the customer(see First Data—finding an RPI even though parties executed addendum two days before the filing of a petition that gave control to the petitioner).

“Parties should exercise due care and diligence in monitoring facts related to RPIs and privies on a continuing basis during the entire patent dispute period.”

The law is murky, however, and can be unpredictable. In Broadcom Corp v Ericsson, for example, Ericsson requested additional discovery from Broadcom regarding Broadcom’s relationship with the defendants in another litigation who were time barred from filing an IPR petition. The PTAB denied the requested discovery based on a finding that Broadcom’s indemnity payments in the indemnification agreements between Broadcom and the defendants in the other litigation,  and “minor participation” in the litigation, did not constitute sufficient control over the other litigation.

2016 developments

With respect to whether it is a jurisdictional requirement to identify all RPIs under 35 USC §312(a)(2), the PTAB held in a designated precedential opinion in Lumentum Holdings v Capella Photonics that 35 USC §312(a)(2) is not a jurisdictional requirement. Citing a prior decision, Elekta v Varian Medical Systems, the PTAB stated that without a clear statement by Congress, “we see no reason to treat the RPI issue differently from the other requirements in §312(a)—or any regulatory requirement for petitions, see §312(a)(4)—when the statute makes no distinction between those issues. Our governing statutes, including §312(a), leave the board with discretion to permit correcting defects in a petition without changing the filing date”.

The holding in the Lumentum decision has been followed and applied by other PTAB panels, including Aerospace Communications Holdings v IDQ Operating, Atlanta Gas Light v Bennett Regulator Guards and Xactware Solutions v Eagle View Technologies

Practice takeaways for RPI issues