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5 October 2022PatentsSarah Speight

UPDATED: Vidal reprimands OpenSky for IPR abuses

USPTO director sanctions company “to the fullest extent” of her power | Vidal accuses OpenSky of abusing IPR process and suspects counsel of committing "ethical violations" | Intel elevated to lead petitioner.

Kathi Vidal, director of the US Patent and Trademark Office ( USPTO), has sanctioned tech company OpenSky Industries for alleged abuse of the inter partes review (IPR) process in an ongoing patent dispute against VLSI Technology.

In a scathing  decision published yesterday, October 4, Vidal said that OpenSky filed the IPR in an opportunistic attempt to extract payment from VLSI as well as from  Intel, which was joined as a petitioner by the  Patent Trial and Appeal Board (PTAB) in June.

Vidal sanctioned OpenSky by barring it from the IPR proceedings, relegating it to a “silent understudy” role, “temporarily elevating” Intel to lead petitioner.

She has ordered OpenSky to prove why it should not be ordered to pay compensatory damages to VLSI, and has remanded to the PTAB for further proceedings to determine whether the petition presents a “compelling, meritorious challenge”.

Vidal said: “OpenSky’s behaviour in this proceeding is entirely distinguishable from conventional settlement negotiations that take place in an adversarial proceeding.”

Vidal: sanctions necessary to ‘deter others’

The director found that the firm “engaged in abuse of process and unethical conduct by offering to undermine and/or not vigorously pursue this matter in exchange for a monetary payment”.

“Each aspect of OpenSky’s conduct—discovery misconduct, violation of an express order, abuse of the IPR process, and unethical conduct—taken alone, constitutes sanctionable conduct,” she went on.

“Taken together, the behaviour warrants sanctions to the fullest extent of my power. Not only are such sanctions proportional to the conduct here, but they are necessary to deter such conduct by OpenSky or others in the future.”

Vidal also suggested that OpenSky’s counsel had acted unethically. “The conduct of the individual attorneys in this case might also rise to the level of an ethical violation under the rules of their respective bars.”

The director has precluded OpenSky from filing further papers or presenting further argument or evidence in the underlying proceedings or on director review “unless expressly instructed to do so by me or the board”.

Data-processing tech

Vidal’s statement is the latest in a long and complex patent dispute, which began with VLSI’s complaint in April 2019 against Intel alleging infringement of its US patent 7,725,759 ('759) concerning data-processing technology.

California-based Intel subsequently filed two petitions for IPR, challenging the claims of the ’759 patent, which the PTAB denied having considered the precedential decision in Apple v Fintiv (from March 2020).

Intel requested a Precedential Opinion Panel (POP) review of the PTAB’s decisions, which the board denied.

The ensuing trial, in the Western District of Texas in March 2021, resulted in a jury verdict finding of infringement and  Intel was hit with a record $2.18 billion in damages.

Open Sky Industries formed after the verdict, and then brought a validity challenge to the ‘759 patent at the PTAB.

Vidal subsequently  stepped in to scrutinise the validity of the VLSI tech patent. She pointed out that in June 2021, OpenSky filed the petition for an IPR in the current case, challenging various claims of the ’759 patent and another patent, which “copied extensively from Intel’s two earlier petitions”.

Abuse 'loophole'

In a statement to the press, VLSI said it appreciates the director’s review and fully agrees with her finding that OpenSky engaged in “abuse of process", “violation of an express order", “discovery misconduct” and other “unethical conduct".

The company said it further agrees with Vidal’s finding that the “totality” of that conduct “evinces a singular focus on using an AIA [America Invents Act] proceeding to extort money".

"However, VLSI is deeply concerned that the director’s ruling will perpetuate the harm caused to VLSI by that attempted extortion, and will reward Intel as a result of the same," it added.

"Although the director held that this 'behaviour warrants sanctions to the fullest extent of [her] power', which plainly includes termination of the improper IPR, her ruling allows the IPR to continue with Intel taking the helm—long after a federal district court entered final judgment against Intel on its failed invalidity challenge at trial, and more than two years after Intel was statutorily barred from petitioning for inter partes review.

"Put simply, Intel’s opportunity to relitigate the validity of VLSI’s patent would not have been possible without OpenSky’s abusive conduct. This outcome as to Intel is inconsistent with the letter and spirit of the America Invents Act and, rather than deter future bad actors, creates a loophole that will encourage further abuse of the IPR system."

OpenSky-style petitions 'should not be tolerated'

Nick Matich, a principal in McKool Smith’s IP practice, largely agreed with Vidal’s objection to OpenSky’s petition.

“There’s been widespread agreement in the IP world that the OpenSky petition is abusive and should not be tolerated,” he told WIPR. “What there’s less consensus on is precisely what made it so offensive.”

Matich added that he’s not entirely in agreement with Vidal’s decision.

“Vidal takes the view that the problem with the petition was Open Sky’s motives, that Open Sky never intended to litigate to conclusion and just wanted a payment from Intel or VLSI.

“She’s right that initiating a legal proceeding on false pretences is bad, but I think she misses the larger picture. Allowing anyone or everyone to challenge a patent destabilises the patent system.”

He added that the result of this case is a good example.

“Vidal is letting Intel take over the petition, even though Intel couldn’t itself file one and already had the chance to challenge the patent—once in court and once previously at the PTAB.

“Now Intel gets a third chance. That’s unfair and is the kind of outcome that disincentivises inventors from trusting the patent system with their inventions.”

WIPR has also contacted attorneys for OpenSky and Intel for comment.

USPTO’s request for comment

Meanwhile, the USPTO  announced yesterday, October 4, that it is seeking public comment on patent practice initiatives, “to ensure the robustness and reliability of patent rights”.

The request for comments, stated the USPTO, will address a variety of topics, including prior art searching, support for claimed subject matter, and request for continued examination (RCE) practice.

The office also seeks comments on questions set out in a letter to the USPTO  on July 6, 2022, from the six US senators.

This article was updated later on the day of publication to incorporate comment from VLSI.

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