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Privity And Strategic Considerations In PTAB Trials
Law360, New York (March 28, 2014, 12:41 PM ET) -- The creation of the Patent Trial and Appeal Board
within the U.S. Patent and Trademark Office as a forum for hearing challenges to the validity of issued
patents has attracted significant interest from litigants and patent practitioners. In the first 16 months of
the availability of this forum, the PTAB has received over 950 petitions seeking to initiate patent
invalidation proceedings.[1] However, proceeding in this new forum can pose somewhat-hidden
challenges to parties associated with patent litigation.
Each of the new PTAB trial proceedings relating to patent validity challenges — inter partes review, postgrant review and covered business method review — has associated with it provisions that may: (1)
estop parties from later raising particular challenges to the validity of the asserted patent and/or (2) bar
parties from requesting or maintaining PTAB trials before the PTO.
These estoppel and bar provisions may apply not only to entities that are directly involved in adversarial
proceedings in the various U.S. district courts, the U.S. International Trade Commission or in the PTAB
itself, but also to those who are in privity with those entities. As a result, the availability of these new
PTAB proceedings has made it important that entities in close relationships with other parties involved
in the litigation of patent validity and/or infringement carefully scrutinize their interactions with those
other parties to avoid any unforeseen estoppels or bars.
Framework of the Relevant Bar and Estoppel Provisions
A party is barred from petitioning for an IPR if (1) before the date on which the petition is filed, the party
or the party’s real party-in-interest[2] has filed a civil action challenging validity of a claim of the
patent;[3] or (2) more than one year has passed since the party, the party’s real party in interest,[4] or a
privy of the party is served[5] with a complaint (which includes either a complaint or counterclaim)[6]
alleging infringement of a patent.[7] A limited exception to the one-year bar exists. In particular, a party
may still join another party’s IPR by requesting joinder within one month of its institution.[8]
A party may not petition for a CBM unless (1) the party, the party’s real party in interest, or a privy of
the party (2) “has been charged with infringement under that patent,” which includes situations where
the petitioner was sued for infringement or would have standing to bring a declaratory judgment in
Federal court.[9]
As with IPRs, a petitioner is barred from filing a PGR petition if that petitioner or its real party in interest
filed a civil action challenging the patent’s validity before the date of the petition.[10]
In addition to the bars against filing petitions, a petitioner is estopped before the PTAB from requesting
or maintaining a proceeding with respect to a claim for which that petitioner, or the petitioner’s real
party-in-interest, or a privy of the petitioner has obtained a final decision on patentability in a PTAB
trial.[11] That estoppel applies to any ground that the party raised or reasonably could have raised
before the PTAB.[12]
A party is similarly estopped from raising issues in a district court litigation or ITC litigation when that
issue was raised or could have been raised in a prior, completed IPR or PGR filed by that party, a privy of
that party, or the real party in interest.[13] If the proceeding at issue is a CBM proceeding, however, the
litigation estoppel applies only to the petitioner, and is limited to grounds actually raised in the
PTAB.[14]
Accordingly, the following events involving one party can trigger PTAB bars, PTAB and litigation
estoppel, or create PTAB standing that applies to other entities in privy with that party:
Strategic Implications Related to Privity
Because of these statutory bar and estoppel provisions, it is important for market participants to
understand whether they are in privity with other parties who are involved in patent litigation or PTAB
proceedings. In the patent context, there are a few particularly common situations that may raise
potential questions of privity: joint-defense groups, manufacturer-customer relationships and
parent/subsidiary relationships (including relationships created as a result of merger or acquisition
activity).
The USPTO's Office Patent Trial Practice Guide (“TPG”) notes that it intends to evaluate what types of
relationships create privity in a manner consistent with the “flexible and equitable considerations
established under federal caselaw.”[16]
In particular, the TPG states that privity “refers to a relationship between the party to be estopped and
the unsuccessful party in the prior litigation which is sufficiently close so as to justify application of the
doctrine of collateral estoppel.”[17] Although the PTO will decide questions of privity on a “case-by-case
basis,”[18] the TPG indicates that relationships such as joint-defense groups and trade associations will
not give rise, by themselves, to a finding of privity.[19] But, additional facts, coupled with such
relationships, could give rise to a finding of privity.[20]
One factor the PTO has emphasized in deciding privity issues is control; specifically, whether the party
controlled or could have controlled a petitioner’s participation in a PTAB trial.[21] With respect to the
applicable one-year bar provision, the control or possibility of control must have existed at the time the
bar was triggered — i.e., on the date the litigation defendant was served with the complaint.[22]
Although the authors are not aware of any PTO or district court decision addressing the question of
when control must be present in order for the America Invents Act estoppel provisions to apply,
presumably that control must exist prior to the final written PTAB decision before a court or the PTO
would apply the estoppel provisions.
The PTAB has declined to find privity in various circumstances. Several cases in particular indicate that a
customer-manufacturer relationship by itself is insufficient for establishing privity because the property
interest on which the relationship is based is the alleged infringing product, while the property interest
at issue in PTAB trials is the patent itself. This includes relationships in which: a petitioner acquired a
defendant served with a complaint in district court litigation;[23] a defendant merged with other third
parties to form a petitioner;[24] a defendant was a customer of a petitioner manufacturer;[25] and a
defendant was a manufacturer for a customer petitioner.[26]
The characterization of these relationships as “privity of contract” have also failed to lead to a finding of
privity in the PTAB trial context.[27] The PTAB has stated within the context of the customermanufacturer relationship that neither indemnity agreements nor joint-defense groups will give rise to a
finding of privity absent some control or possibility thereof by the petitioner over the prior litigation.[28]
Further, the mere existence of such relationships is an insufficient basis for granting discovery requests
related to privity issues, even if the petitioner “had an interest in the trial,” “us[ed] some of the trial
evidence, including known prior art,” “and us[ed] an expert report [from the litigation]” in the PTAB
trial.[29]
Other factors recognized by the U.S. Supreme Court as relevant to deciding privity in the res judicata
context, which serves as the rationale for the bar and estoppel provisions,[30] include (1) agreements to
be bound;31 (2) pre-existing “substantive legal relationships;” (3) adequate representation by parties
with the same interests; (4) relitigating through proxies; and (5) special statutory schemes that
“expressly foreclose successive litigation by nonlitigants.”[32] Although the PTAB has opined on each of
these factors, it has stated that neither indemnity agreements nor joint-defense groups (together or by
themselves) are sufficient produce “substantive legal relationships.”[33]
The Takeaway: Fielding the Ability to Control Comes At a Cost
Although merely being a manufacturer or customer of an accused product, or a member of a joint
defense group, is insufficient by itself to establish privity (even with the existence of an indemnity
agreement), having the ability to control or actually controlling the actions of other parties involved in
patent litigation can come at a price: the ability to later pursue post-grant proceedings before the PTAB
or raise arguments that were or reasonably could have been raised before the PTAB, U.S. district courts
and the ITC.[34] Accordingly, parties should carefully scrutinize their agreements to determine whether
acquiring or maintaining the ability to control the decisions of others in patent litigation is worth the
potential cost.
—By Eliot D. Williams and John F. Gaustad, Baker Botts LLP
Eliot Williams is a partner and John Gaustad is an associate in Baker Botts' Palo Alto, Calif., office.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its
clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general
information purposes and is not intended to be and should not be taken as legal advice.
[1] Data compiled from here (petitions filed through 12/31/2013). Approximately 8200 patent litigations
were filed in the district courts over the same period. See here (NOS=830).
[2] In the context of inter partes review and post-grant review proceedings, “at a general level, the ‘real
party-in-interest’ is the party that desires review of the patent. ... Similar considerations apply to
[covered business method review] proceedings ... . Office Patent Trial Practice Guide; Rule, 77 Fed. Reg.
48,756, 48,759 (Aug. 14, 2012) [hereinafter “Trial Practice Guide”].
[3] 35 U.S.C. § 315(a)(1).
[4] With regard to IPR and PGR proceedings, “at a general level, the ‘real party-in-interest’ is the party
that desires review of the patent. Thus, the ‘real party-in-interest’ may be the petitioner itself, and/or it
may be the party or parties at whose behest the petition has been filed. ... Similar considerations apply
to CBM proceedings ... .” Trial Practice Guide at 48,759. Although “[t]he notion of ‘privity is more
expansive,” a common factor in evaluating privity and real party-in-interest relationships is “whether the
non-party exercised or could have exercised control over a party’s participation in a proceeding.” Id.
(citing Taylor v. Sturgell, 553 U.S. 880, 895 (2008); 18A CHARLES ALAN WRIGHT ET AL., FEDERAL
PRACTICE & PROCEDURE § 4451 (2d ed. 2011)). The PTO has indicated, however, that there may be
situations in which a party is not in privity with a petitioner but is a real party-in-interest. See id. at
48,760 (“For example, a party that funds and directs and controls an IPR or PGR petition or proceeding
constitutes a ‘real party-in-interest,’ even if that party is not a ‘privy’ of the petitioner.”). Although this
article focuses on determining whether one party is in privity with another, whether the party is a real
party-in-interest is an important and closely-related consideration.
[5] The PTAB has strictly interpreted the statutory language of the “filed” provision applicable to
defendants and the “served” provision applying to patent owners. See Anova Food, LLC v. Sandau, Case
IPR2013-00114, Paper No. 17, at *5-6 (P.T.A.B. Sept. 13, 2013) (Decision, Denying Inter Partes Review).
Dismissal of the original district court action without prejudice, however, resets the bar provision.
Compare BAE Sys. Info. v. Cheetah Omni, LLC, Case IPR2013-00175, Paper No. 15, at *3 (P.T.A.B. July 3,
2013) (Decision, Institution of Inter Partes Review) (“[A] voluntary dismissal of an infringement action
nullifies the effect of the alleged service of the complaint on the petitioner.” (citations omitted)), with
Universal Remote Control, Inc. v. Universal Electronics, Inc., Case IPR2013-00168, Paper No. 9, at *5-6
(P.T.A.B. Aug. 26, 2013) (Decision, Denying Inter Partes Review) (denying review because a complaint
served on the petitioner more than one year before the filing date of the petition had been dismissed
with prejudice, despite service of a second, pending complaint).
[6] St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., Case IPR2013-00258, Paper 29, at *3 (P.T.A.B.
Oct. 16, 2013) (Decision, Denying Institution of Inter Partes Review).
[7] 35 U.S.C. § 315(b).
[8] 35 U.S.C. § 315(b); 37 C.F.R. 42.122(b); see also Apple, Inc. v. Grobler, Case IPR2014-00061, Paper No.
10 (P.T.A.B. Oct. 29, 2013) (denying petitioner’s motion for joinder after the one month window had
passed).
[9] See America Invents Act of 2011, Pub. L. 112-29 (hereinafter “AIA”) § 18(a)(1)(B); 37 C.F.R. § 42.302.
[10] See 35 U.S.C. § 325(a)(1). The party is also barred from filing a PGR petition if the party’s real partyin-interest, or privy of the party “is estopped from challenging the claims on the grounds identified in
the petition.” 37 C.F.R. § 42.201(b).
[11] 35 U.S.C. § 315(e)(1) (IPR); 35 U.S.C. § 325(e)(1) (PGR); AIA § 18(a)(1) (CBM); 37 C.F.R. § 42.73(d)(1)
(estoppel before the Patent Office). However, “estoppel shall not apply to a petitioner, or to the real
party in interest or privy of the petitioner who has settled under 35 U.S.C. 317 or 327.” 37 C.F.R. §
42.73(d)(1). The PTAB has declined to review some asserted grounds of invalidity as cumulative, despite
arguments that this could result in future estoppel against the petitioning party. See Amkor Tech., Inc. v.
Tessera, Inc., Case IPR2013-00242, Paper 82, at *4 (P.T.A.B. Jan. 10, 2014) (Decision, Request for
Rehearing).
[12] Id.
[13] 35 U.S.C. § 315(e)(2) (inter partes review); id. § 325(e)(2) (post-grant review).
[14] See AIA § 18(a)(1)(D).
[15] Assignor estoppel, which “‘prohibits an assignor of a patent or patent application, or one in privity
with [the assignor], from attacking the validity of that patent when [the assignor] is sued for
infringement by the assignee[,]’” is not a defense to inter partes review. Redline Detection, LLC v. Star
Envirotech, Inc., Case IPR2013-00106, Paper 31, at *4 (P.T.A.B. Aug. 27, 2013) (Decision, Motion for
Additional Discovery) (quoting Semiconductor Energy Lab. Co. v. Nagata, 706 F.3d 1365, 1369 (Fed. Cir.
2013)).
[16] Trial Practice Guide at 48,759. Although the PTAB looks to Federal caselaw in deciding whether
parties are in privity, it looks to state law to decide issues of successor liability. See Anova Food, LLC v.
Sandau, Case IPR2013-00114, Paper No. 17, at *7 (P.T.A.B. Sept. 13, 2013) (Decision, Denying Inter
Partes Review).
[17] Id. (citing 154 CONG. REC. S9987 (daily ed. Sept. 27, 2008) (statement of Sen. Kyl)).
[18] Id. (citing Taylor v. Sturgell, 553 U.S. 880, 893-95 & n.6 (2008)).
[19] Id. at 48,760.
[20] Id. These facts include a party’s “relationship with the petitioner; [a party’s] relationship to the
petition itself, including the nature and/or degree of involvement in the filing; and the nature of the
entity filing the petition.” Id.
[21] Id. at 48,759 (citing Taylor, 553 U.S. at 893-95; 18A CHARLES ALAN WRIGHT ET AL., FEDERAL
PRACTICE & PROCEDURE § 4451 (2d ed. 2011)).
[22] See, e.g., Innolux Corp. v. Semiconductor Energy Lab. Co., IPR2013-00028, Paper 27, at *4 (P.T.A.B.
Apr. 30, 2013) (Decision, Request for Rehearing) (noting that, in response to a patent owner’s argument
that the one-year bar applied to a petitioner, the patent owner had failed to establish privity “on the
date of service of the complaint”); Synopsys, Inc. v. Mentor Graphics Corp., Case IPR2012-00042, Paper
16, at *16 (P.T.A.B. Feb. 22, 2013) (Decision, Institution of Inter Partes Review) (noting that the
petitioner had not acquired a defendant in prior district court litigation at the time the complaint was
served and that there was insufficient evidence demonstrating the one-year bar applied to the
petitioner); Atlanta Gas Light Co. v. Bennett Regulator Guards, Inc., Case IPR2013-00453, Paper 31, at
*15 (P.T.A.B. Jan 22, 2014) (Decision, Institution of Inter Partes Review) (refusing to reach the question
of control because the petitioner’s basis for privity, “provisions of [a] supply agreement, did not go into
effect until service was effected on Petitioner[.]”).
[23] See Synopsys, Case IPR2012-00042, Paper 16, at *17 (citing Int’l Nutrition Co. v. Horphag Research,
Ltd., 220 F.3d 1325, 1329) (Fed. Cir. 2000)).
[24] See Chi Mei Innolux Corp. v. Semiconductor Energy Lab. Co., Case IPR2013-00028, Paper No. 14, at
*6-7 (P.T.A.B. Mar. 21, 2013) (Decision, Institution of Inter Partes Review); see also Innolux Corp, Case
IPR2013-00028, Paper No. 27, at *4-5 (citing Int’l Nutrition, 220 F.3d at 1329).
[25] See BAE Info. & Electr. Sys. Integration, Inc. v. Cheetah Omni, LLC, Case IPR2013-00175, Paper 15, at
*5 (P.T.A.B. July 3, 2013) (Decision, Institution of Inter Partes Review) (citing Int’l Nutrition, 220 F.3d
1325 at 1329; Shamrock Techs., Inc. v. Med. Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir.
1990)); Broadcom Corp. v. Telefonaktiebolaget LM Ericsson (PUBL), Cases IPR2013-00601, IPR201300602, IPR2013-00636, Paper 23, at *7-8 (P.T.A.B. Jan. 24, 2014) (Decision, Ericsson’s Motion for
Additional Discovery) (citing Bros, Inc. v. W.E. Grace Mfg. Co., 261 F.2d 428, 429 (5th Cir. 1958)).
[26] See Hewlett-Packard Co. v. MCM Portfolio, LLC, Case IPR2013-00217, Paper 10, at *8 (P.T.A.B. Sept.
10, 2013) (citing Synopsys, Case IPR2012-00042, Paper 16, at *17; see also Hewlett-Packard Co. v. Tech.
Props. Ltd. LLC, Case IPR 2013-00217, Paper 19, at *2-3 (P.T.A.B. Oct. 10, 2013) (Decision, Request for
Rehearing). The customer-petitioner, HP, was reselling products made by the manufacturer-defendant
Pandigital, Inc., whom the patent owner alleged was a privy of HP by virtue of that relationship. See id.
[27] See BAE Info. & Electronic Sys. Integration, Inc., Case IPR2013-00175, Paper 15, at *5 (citing Int’l
Nutrition, 220 F.3d at 1329).
[28] See Broadcom Corp., Cases IPR2013-00601, IPR 2013-00602, IPR 2013-00636, Paper 23, at *7-13.
[29] See Id. at *13. The PTAB found that these facts failed to demonstrate anything more than the
“mere possibility” of privity, which is an insufficient basis for a discovery request in PTAB trials. See id. at
*6 (citing Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, IPR2012-000001, Paper 20, at *2-3 (P.T.A.B. Jan.
24, 2014) (Order, Authorizing Motion for Additional Discovery).
[30] See generally Trial Practice Guide at 48,759.
[31] Several district courts have granted stay requests related to pending PTAB trials when the
requesting party agrees to be bound by arguments actually raised during those proceedings. See,
e.g., Comcast Cable Commc’ns, LLC v. Bear Creek Techs., Inc. (In re Bear Creek Techs. Inc.), MDL No. 12md-2344 (GMS), 2013 WL 3789471, at *4 (D. Del. Jul. 17, 2013) (order granting motion to stay); eWatch,
Inc. v. Lorex Canada, Inc., No. H-12-3314, 2013 WL 5425298, at *4 (S.D. Tex. Sept. 26, 2013) (same);
eWatch Inc. v. Avigilon Corp., No. H-13-0347, 2013 WL 6633936, at *2 (S.D. Tex. Dec. 17, 2013) (same);
AIP Acquisition LLC v. Level 3 Commc’ns, LLC, No. 12-617-GMS, at *5 (D. Del. Jan. 9, 2014) (same). At
least one district court, however, has imposed a broader estoppel provision than originally proposed by
a party requesting a stay. The party expressed a willingness to be estopped “on the same grounds and
based on the same combinations of prior art asserted by [the petitioner in a PTAB trial] and used by the
USPTO in its findings[,]” but the court estopped the requesting party from arguing any ground that the
petitioner “raised or reasonably could have raised[.]” See e-Watch, Inc. v. FLIR Sys., Inc., No. 4:13-00638,
at *2 (S.D. Tex. Aug. 8, 2013) (order granting motion to stay); see also e-Watch, Inc. v. FLIR Sys., Inc., No.
4:13-00638, at *1 (S.D. Tex. Sept. 27, 2013) (order denying motion for clarification of the order granting
the stay).
[32] See Taylor v. Sturgell, 553 U.S. 880, 893-95 (2008). These factors, however, to not “establish a
definitive taxonomy.” See id. at 893 n.6.
[33] Broadcom Corp., Cases IPR2013-00601, IPR 2013-00602, IPR 2013-00636, Paper 23, at *7-11 (PTAB
Jan. 24, 2014).
[34] Outside of the context of PTAB trials, one district court has stated that, “[t]o the [c]ourt’s
knowledge, no court has held that the existence of a joint defense agreement, as a matter of law,
establishes privity.” Universal Engraving, Inc. v. Metal Magic, Inc., No. CV-08-1944-PHX-GMS, 2010 WL
4922703, at *18 (D. Ariz. Nov. 29, 2010). That decision did note at least one other case, however, in
which privity was found where a “defendant and a third-party were parties to an Indemnification
Agreement that gave the third-party ‘ample incentive to defend their joint interest vigorously[,]” and
the defendant and third-party shared counsel. Id. (citing Asahi Glass Co v. Toledo Eng’g Co., 505 F. Supp.
2d 423, 434-35 (N.D. Ohio 2007)).
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