May/June 2013
IP Litigator
Lauren J. Dreyer, Lionel M. Lavenue, and Andrew G. Strickland
The recently passed America Invents Act (AIA) created the Inter Partes Review proceeding (IPR), a new, adversarial, administrative proceeding to invalidate patents. An IPR allows a party to petition the U.S. Patent and Trademark Office (USPTO) to invalidate a patent because of prior art that discloses the claims of the patent. In effect, it replaces the previous inter partes reexamination proceeding, which the AIA eliminated. While a petition for an inter partes reexamination could be filed at any time, the AIA placed two important limitations on the filing of an IPR petition. First, under 35 U.S.C. § 315(b), a party cannot file an IPR petition more than one year after "the petitioner is served with a complaint alleging infringement of the patent"1 at issue in the petition (the One Year Rule). Second, under 35 U.S.C. § 315(a)(1), a party cannot file an IPR petition if it first brought a declaratory-judgment action for invalidity on the same patent at issue in the petition2 (the Declaratory Judgment Rule). Although the plain language of Section 315(a)(1) and Section 315(b) indicates a straightforward application of these statutes to IPR petitions, in reality their application is more nuanced.
A recent decision of the Patent Trials and Appeals Board (PTAB)3 revealed some of the gray areas. Applying the One Year Rule to an IPR petition in Macauto U.S.A. v. BOS Gmbh & KG, the PTAB identified at least two situations under which a petitioner may file the petition more than one year after being served with a complaint: (1) when the complaint filed against the petitioner was voluntarily dismissed, and (2) when a waiver of service of the complaint was not properly filed with the court. Even though the PTAB answered some questions about the application of the One Year Rule, it left others unanswered, specifically: When does the One Year Rule apply to a "real party-in-interest, or privy of the petitioner."4 In addition, when the Macauto decision identified two situations dictating a result contrary to the plain language of Section 315(b), it opened the door for questions about whether the Declaratory Judgment Rule applies in cases when the declaratory judgment action was dismissed. By exploring the reasoning of the PTAB in Macauto, and the legislative intent of Sections 315(a)(1) and 315(b), this article identifies likely answers to those questions and provides some guidance to parties who contemplate filing an IPR petition and patent holders who may be responding to one. First, this article discusses the plain language of Section 315(b) and the Macauto decision, and answers the questions left open about the One Year Rule. Second, it discusses the potential impact of the Macauto decision on the Declaratory Judgment Rule. Finally, it concludes with some guidance for petitioners and patent holders.
At first blush, the plain language of Section 315(b) appears to bar a petitioner, in all circumstances, from filing an IPR more than one year after being first served with a complaint: "An inter partes review may not be instituted if the petition requesting the proceeding is filed more than one year after the date on which the petitioner, real party-in-interest, or privy of the petitioner is served with a complaint alleging infringement of the patent." The statute provides for only one explicit exception to the one-year time limitation, namely, that it does not apply to those situations when a party petitions to join a currently pending IPR proceeding.5 Other than this single explicit exception, Section 315(b), on its face, provides no other exceptions to the One Year Rule. Thus, if the petitioner, real party-in-interest, or privy of the petitioner is served with a complaint for patent infringement, the one-year clock starts ticking.
By adding a statute of limitations for IPRs, Congress sought to reduce the duplicative efforts of parallel USPTO administrative proceedings and district-court proceedings and to reduce costs to litigants arising from these parallel proceedings.6 For example, before the AIA, defendants in some cases waited years to file an inter partes reexamination (the precursor to the IPR), at times even waiting until after receiving a jury verdict to file the request.7 The AIA sought to avoid these types of parallel proceedings via Section 315(b). By requiring parties to initiate administrative procedures (such as IPRs) early in litigation, the USPTO could resolve invalidity issues early, thereby saving resources and money for litigants and reducing the waste of judicial resources.
In light of this motivation, a strict reading of Section 315(b) does not comport with the policy backing it, and in some cases acts contrary to that policy. For example, consider a scenario in which a patent holder voluntarily dismisses a patent-infringement action within one year of serving a defendant. Although the action is no longer pending, the defendant may feel compelled to file an IPR petition under a strict interpretation of Section 315(b) in fear of losing the right to file one later (if, e.g., the patent holder files a new complaint alleging infringement of the same patent in the future—outside the one year time limitation). Here, the defendant might end up expending more resources because its petition may unnecessarily continue the dispute out of an abundance of caution for future litigation, which may never occur, simply to preserve the defendant's right to use the IPR proceeding for challenging the validity of the patent.
That said, policy arguments often wilt in the sunlight of the unambiguous language of a statute, and the language of Section 315(b) is straightforward: the petition cannot be "filed more than 1 year after the date on which the petitioner . . . is served with a complaint alleging infringement of the patent." Despite this unambiguous language, however, the PTAB arrived at a different outcome in Macauto U.S.A. v. BOS Gmbh & KG. In that decision, the PTAB allowed an IPR petition to move forward, even though it was filed more than one year after the petitioner was (arguably) served with the complaint.
BOS Gmbh & KG (BOS) owns U.S. Pat. No. 6,422,291 (the '291 patent), which generally relates to a roll-up blind especially designed for mounting on the rear window of an automobile.8 On April 7, 2011, BOS filed suit against Macauto Industrial Co., Ltd. (Macauto Taiwan) in the Northern District of Illinois alleging that Macauto Taiwan infringed the '291 patent. BOS claimed that it delivered the complaint to Macauto Taiwan by May 13, 2011, and Macauto Taiwan signed and returned a waiver of service under Federal Rules of Civil Procedure Rule 4(d). BOS, however, did not file the waiver with the district court. Macauto Taiwan moved to dismiss the case for lack of personal jurisdiction, and the action was voluntarily dismissed without prejudice under a stipulation between BOS and Macauto Taiwan.
On May 30, 2012, (more than one year after BOS delivered the complaint to Macauto Taiwan in the first action) BOS filed suit against Macauto Taiwan's U.S. subsidiary, Macauto USA (Macauto U.S.) in the Western District of New York, alleging infringement of the same patent (the '291 patent). Macauto U.S. filed an IPR petition on September 16, 2012, more than one year after the alleged service on Macauto Taiwan (on May 13, 2011). In its preliminary response to the IPR petition, BOS argued that Section 315(b) barred Macauto U.S. from filing the petition for two reasons: (1) Macauto Taiwan, not Macauto U.S., was the real party-in-interest in the petition and (2) a complaint alleging infringement of the '291 patent was served on Macauto Taiwan (the alleged real party-in-interest) more than one year before September 16, 2012 (the date of the petition), thereby barring the current IPR petition under Section 315(b).
The PTAB, however, disagreed with BOS and allowed the petition to proceed. It found two independent grounds for determining that Section 315(b) did not bar the present IPR petition. First, the PTAB looked to Federal Circuit law concerning the effect of voluntarily dismissing a complaint. That case law, the PTAB noted, "consistently interpreted the effect of [voluntary dismissals without prejudice] as leaving the parties as though the action had never been brought."9 Because the voluntary dismissal by BOS of the action against Macauto Taiwan left the parties in a position as if the action had never been brought, the PTAB found that the voluntary dismissal effectively nullified the service of the complaint on Macauto Taiwan. As a result, the PTAB used the date of service on Macauto U.S. from the second-filed action to calculate the one-year period under Section 315(b). Because that date, May 30, 2012, was less than a year before September 16, 2012, the IPR petition date, Macauto U.S.'s petition was not barred under Section 315(b).
The PTAB also found a second, independent ground for allowing the petition to proceed. Although Macauto Taiwan apparently signed and returned a waiver of service to BOS, BOS never filed the waiver of service with the court. To establish an effective date of service, the signed waiver must be filed with the court. As BOS did not file the waiver, it did not establish a service date for the first filed complaint against Macauto Taiwan. Without an established service date, the PTAB decided that the statute of limitations under Section 315(b) was not triggered.
The PTAB made one thing clear: the voluntary dismissal of the first complaint and the failure to file the waiver of the service with the court were "two separate, independent reasons" for allowing the petition to proceed.10 Thus, either condition would be sufficient to prevent a patent holder from using the Section 315(b) bar as a defense to an IPR petition. Thus, the Macauto decision provides two lessons for patent holders when asserting patents in district court. First, they should always file signed waivers of service with the court, as this will establish a service date. Second, a voluntary dismissal without prejudice of a patent-infringement suit will nullify any established service date. As a result, if the patent holder files another complaint against the same party more than one year later, its patents may still be the subject of an IPR.
In addition, Macauto provides guidance to accused infringers as well. Despite the plain language of Section 315(b), an accused infringer may be able to move forward with an IPR petition, filed more than one year after being served with a complaint for patent infringement, in at least two circumstances: (1) when the plaintiff voluntarily dismisses a previous complaint without prejudice and (2) when the plaintiff fails to file a waiver of service with the court.
While Macauto is the only decision on record interpreting the meaning of Section 315(b), patent holders and accused infringers can glean several other lessons for determining when Section 315(b) bars a petition for an IPR using the reasoning of the PTAB in Macauto. In particular, Section 315(b) may prohibit additional parties from bringing an IPR petition under the real party-in-interest limitation. In addition, the decision in Macauto has implications for the Declaratory Judgment Rule of Section 315(a)(1), which prohibits declaratory-judgment plaintiffs from bringing a concurrent IPR petition.
Section 315(b) applies not only to the petitioner but also to the "real party-in-interest, or privy of the petitioner."11 Thus, a patent holder may use the defense offered by Section 315(b) against a petitioner if it can show that it served a complaint alleging infringement of the patent-at-issue in the petition on a party that is the "real party-in-interest" or "privy" of the petitioner, even if the petitioner itself had not been served. In fact, this is what BOS did in Macauto. BOS filed its first complaint against Macauto Taiwan, but the IPR petition was filed by Macauto Taiwan's subsidiary, Macauto U.S. BOS argued that because Macauto Taiwan was the parent company of Macauto U.S., the parent company constituted the real party-in-interest for the petition. As a result, BOS believed that the PTAB should use the service date of the first complaint against Macauto Taiwan to determine whether Macauto U.S.'s IPR petition was timely filed under Section 315(b).
Notably, in its decision, the PTAB never reached the question of whether Macauto Taiwan was in fact the real party-in-interest for the petition. It did not need to because, as discussed above, it found no effective service date due to the voluntary dismissal by BOS and its failure to file Macauto Taiwan's waiver of service.12
The simplest (and admittedly less interesting) way for determining a real party-in-interest may be to look to the mandatory notices that an IPR petitioner must provide under 37 C.F.R. § 42.8. Under this provision, a petitioner must identify each real party-in-interest as part of its IPR petition.13 If the petitioner identifies a party that was served with a complaint for infringement of the patent at issue in the petition more than one year before the filing date of the petition, the PTAB would likely dismiss the petition under both Section 315(b) and the petitioner's own admission. That said, in most cases when a patent holder uses the Section 315(b) bar as a defense, identifying the real party-in-interest will not be this straightforward. As in Macauto, the patent holder likely will argue that some other party, not identified in the petitioner's Section 42.8 disclosure, is the "true" real party-in-interest. And if the patent holder had served that party with a complaint alleging infringement of the patent at issue more than one year before the filing date of the petition, the patent holder will seek dismissal of the IPR petition under Section 315(b), even if the petitioner did not name that party.
Although the PTAB averted the issue of the real party-in-interest in Macauto, the Macauto reasoning provides clues to both patent holders and petitioners about how the PTAB might determine the issue in the future. Most notably, the PTAB cited procedural federal common law to guide its reasoning and support its position. Specifically, the PTAB relied on decisions from the Federal Circuit in deciding that a voluntary dismissal without prejudice nullified the service date of the complaint by BOS against Macauto Taiwan. In addition, the PTAB relied on Federal Rules Civil Procedure Rule 4, and its associated Advisory Committee Notes, to determine that the failure of BOS to file Macauto Taiwan's waiver of service resulted in its failure to establish an effective date of service.
Thus, when determining whether a party is a real party-in-interest or privy of a petitioner, the PTAB likely will look to federal procedural law, including advisory notes and comments. The first likely sources where the PTAB may look are the final version of the Rules of Practice for Trials before the Patent Trial and Appeal Board14 and the Official Patent Trial Practice Guide15 issued by the USPTO. Interestingly, in those documents, the USPTO does not discuss the definition of a real party-in-interest under Section 315(b). But it does provide some discussion under Section 42.8 (the rule requiring disclosure of a "real party-in-interest") and refers back to Section 315 in that discussion.16 The USPTO notes that the real party-in-interest or privy issue is a "highly fact-dependent question."17 While "many factors" can be used to determine a real party-in-interest, "actual control or the opportunity to control the previous proceeding is an important clue that such a relationship existed."18 And these factors for determining "actual control or the opportunity to control" include the "existence of a financial controlling interest in the petitioner."19 In the Practice Guide, the USPTO also comments that the "concept of control generally means that 'it should be enough that the nonparty has the actual measure of control or opportunity to control that might reasonably be expected between two formal coparties.'"20 From these comments, petitioners and patent holders can glean guidelines for determining a real party-in-interest, namely the opportunity to control the previous litigation and any financial controlling interest in the petitioner.
Under these guidelines, petitioners and patent holders should be aware of certain sensitive relationships common in patent litigation that may arguably trigger the Section 315(b) bar, such as the parent—subsidiary relationship, the supplier—customer relationship, and relationships between parties arising from a joint defense group. Each of these relationships presents unique fact patterns that may implicate the Section 315(b) bar and are discussed in more detail below.
The parent-subsidiary relationship presents a common (and sensitive) situation that raises Section 315(b) issues. For example, Macauto presented a situation in which the patent holder, BOS, claimed that the real party-in-interest to an IPR petition was the corporate parent (Macauto Taiwan) of the petitioner (Macauto U.S.). While the PTAB did not decide the issue of whether Macauto Taiwan was in fact the real party-in-interest, it likely would not delineate a bright-line rule that corporate parents are necessarily always the real party-in-interest of their subsidiary corporations. Rather, the PTAB probably would recognize that what constitutes a real party-in-interest is a highly fact-dependent question.21 What the PTAB likely would have done in Macauto, and is likely to do in the future when presented with the issue, depends on whether the corporate parent has a financial controlling interest in the petitioner. The PTAB also would examine the level of control between the corporate parent and the petitioner, especially on matters of patent litigation. If the corporate parent has a financial controlling interest in the subsidiary and controls the subsidiary, then the corporate parent is likely the real party-in-interest. Conversely, in limited circumstances in which the subsidiary operates mostly independently of the corporate parent, the corporate parent is likely not the real party-in-interest.
This latter situation, in which a subsidiary operates independently of the parent, is not very likely, except in limited circumstances. For example, suppose a corporate parent that develops pharmaceuticals has a wholly owned subsidiary that develops and distributes medical devices operating independently from the parent. In particular, the subsidiary develops its own products without input from the corporate parent and manages its own legal affairs without the intervention of the corporate parent. Suppose then that a patent holder owns a patent with claims that read on an intravenously delivered drug developed by the corporate parent and on a medical device made by the subsidiary that could be used to administer the drug to a patient. The patent holder serves a complaint on the corporate parent alleging patent infringement for making the drug. More than a year later, the patent holder serves a complaint on the subsidiary, alleging patent infringement of the same patent, but for making the medical device. In this case, is the subsidiary barred under Section 315(b) from filing the IPR petition?
Given these facts, and the comments the USPTO issued with the final version of the Rules of Practice for Trials before the PTAB and the Office Patent Trial Guide, it is unlikely that the PTAB would dismiss the subsidiary's petition under Section 315(b). The USPTO stated that "actual control or the opportunity to control the previous proceeding" was just one of many factors for determining a real party-in-interest, and that "existence of a financially controlling interest of the petitioner" was but another factor.22 In other words, evidence of actual control of the litigation and a financially controlling interest in the petitioner is not dispositive. This evidence is merely a factor that the PTAB would use to determine if a parent is a real party-in-interest. When the subsidiary acts independently of the parent, as is the case in the example above, the patent holder probably would have difficulty establishing enough factors supporting a determination that the parent was the real party-in-interest, thereby barring the subsidiary from filing an IPR petition under Section 315(b).
On the other hand, if the patent holder could establish that the parent had control over, for example, the legal decisions of the subsidiary, the subsidiary might need to provide additional evidence to refute the parent's alleged control over the subsidiary for its IPR petition to proceed. Again, determinations of a real party-interest are highly fact-dependent, and patent holders and petitioners should carefully evaluate the facts underlying the relationship between a parent corporation and a subsidiary if there is a potential Section 315(b) bar issue.
Suppliers and customers present another sensitive relationship raising potential Section 315(b) issues. Often a supplier and a customer of the supplier may have an indemnity agreement in place indicating that the supplier will indemnify the customer for patent litigation. For example, in the electronics industry, a supplier (e.g., a chipset provider) that supplies components to a product manufacturer (e.g., mobile phone manufacturer) may offer the manufacturer indemnity, in limited circumstances, for patent infringement due to claims that might arise from the manufacturer's use of the component in its products. These indemnity agreements sometimes include a clause requiring the customer to relinquish control of the litigation to the supplier. If a customer does in fact relinquish control of the litigation to the supplier, and the supplier controls the litigation on behalf of the customer, its control arguably triggers the Section 315(b) bar when the supplier is first sued for patent infringement. Thus, if the patent holder later sues the customer and the customer files a petition requesting an IPR more than a year from the service date of the supplier, the patent holder may attempt to argue that Section 315(b) bars the petition because the supplier is the real party-in-interest of the customer.
Of course, a supplier must have the actual opportunity to control the litigation. Otherwise, the application of Section 315(b) to a customer could effectively rob it of its day in court (i.e., by taking away its opportunity to conduct an IPR proceeding before the PTAB). Therefore, patent holders likely will have to establish facts proving that the supplier actually controls, or had the unquestionable opportunity to control, the customer's litigation involving the patent at issue.23 It is important to keep in mind that the determination of a real party-in-interest is "highly fact dependent"24 and there is no bright-line rule.25 In some cases, several facts may weigh against applying the supplier's service date to the customer for Section 315(b) purposes. For example, the supplier may have refused to indemnify the customer, especially after the customer files an IPR petition. In this case, denying the customer the opportunity to proceed with an IPR may run afoul of due process.
In short, when a supplier-customer relationship is present, both petitioners and patent holders need to evaluate the specific facts on the nature of the relationship with the patent at issue. In some cases, the PTAB may not grant the petitioner's request due to Section 315(b), even though the petitioner had not been served with a complaint alleging infringement of the patent at issue in the petition. Conversely, in other cases, the Section 315(b) defense the patent holder thought it may have had against a petitioner that is a customer of a previously served supplier may not be available, because the facts of that relationship may not support an allegation that the supplier is the real party-in-interest of the petition.
Another important limitation on Section 315(b) is the explicit Declaratory Judgment Rule for IPR petitions. In particular, the AIA prohibits a party from bringing an IPR petition if "before the date on which the petition for such a review is filed, the petitioner or real party-in-interest filed a civil action challenging the validity of a claim of the patent."26 Thus, Section 315(a)(1) prohibits a declaratory-judgment plaintiff from filing an IPR petition if the plaintiff filed a declaratory judgment complaint for noninfringement and invalidity before filing the IPR petition. As with the One Year Rule, the Declaratory Judgment Rule also seeks to preclude proceedings from happening in parallel, thereby wasting time and resources of one of the two forums. Thus, the petitioner under the AIA must pick a forum, either by filing a declaratory judgment action in district court or by filing an IPR (but not both).
Notably, Section 315(a)(1) prohibits the petitioner from bringing an IPR petition if either the petitioner or the "real party-in-interest" filed an earlier civil action. Thus, the issue of identifying the real party-in-interest discussed above also becomes relevant when considering whether to file a declaratory judgment action. For example, if a subsidiary corporation files a declaratory judgment action, and its parent brings an IPR petition (or vice versa), the PTAB must necessarily determine whether to preclude the IPR petition under the Declaratory Judgment Rule, under the same rationale identified above; that is, if the subsidiary corporation operates wholly independently of the parent corporation, the PTAB may ultimately allow the parent's IPR petition to proceed. This, however, necessarily cuts against the underlying policy rationale behind the Declaratory Judgment Rule, as two proceedings deciding the validity of the same patent would progress in parallel, wasting the time and resources of one forum or the other. Therefore, when faced with such a decision, the PTAB may more closely inquire into the identity of the real party-in-interest under Section 315(a)(1).
In addition, Section 315(a)(1) does not indicate whether the declaratory judgment action must be currently pending in order to bar an IPR petition. The statute merely states that if the petitioner or real party-in-interest filed a civil action at any time before filing the IPR petition, then the petition must be dismissed. The effect of a dismissal of the civil action remains unknown. But the policy rationales underlying Section 315(a)(1) would not be implicated, in most cases, if a declaratory-judgment complaint had been dismissed, because, without parallel proceedings, there is no risk of wasting resources.
In addition, the decision in Macauto may have significant implications when considering the dismissal of a declaratory judgment action. As discussed above, BOS filed suit against Macauto Taiwan on April 7, 2011, alleging that Macauto Taiwan infringed the '291 patent. BOS allegedly served the complaint on May 13, 2011. After Macauto Taiwan moved to dismiss the case for lack of personal jurisdiction, BOS and Macauto Taiwan executed a stipulation, voluntarily dismissing the action without prejudice. Then, on May 30, 2012, BOS filed suit against the subsidiary, Macauto U.S., alleging infringement of the same patent. Macauto U.S. later filed an IPR petition on September 16, 2012, more than one year after the alleged service on Macauto Taiwan (on May 13, 2011). In allowing Macauto U.S.'s IPR petition to proceed, the PTAB decided that the effect of voluntarily dismissing the first complaint without prejudice (against the parent company) left the parties as though the action had never been brought. Thus, Macauto U.S. was not precluded under the One Year Rule of Section 315(b) from bringing the action.
Similarly, the effect of a dismissal of a declaratory judgment action may also leave the parties as though the action had never been brought under the Declaratory Judgment Rule of Section 315(a)(1). If the declaratory judgment action has been dismissed, the PTAB would need to decide whether the declaratory plaintiff (or the real party-in-interest) is still prohibited from bringing an IPR petition under Section 315(a)(1). Of course, not all dismissals are created equally. The PTAB in Macauto (considering Federal Circuit jurisprudence) gave greater consideration to voluntary dismissals without prejudice. Therefore, a dismissal "with prejudice," under Federal Rules of Civil Procedure Rule 41(b), for example, may bar a petitioner from bringing an IPR.27
Rule 41(b) equates all dismissals as an "adjudication on the merits," unless the dismissal order states otherwise or the dismissal was grounded on a lack of jurisdiction, improper venue, or failure to join a party. Thus, if a declaratory judgment action is dismissed with prejudice under Rule 41(b), then the declaratory plaintiff may be prevented from instituting an IPR petition under Section 315(a)(1).
Other grounds, however, for dismissing a declaratory judgment action might allow a declaratory plaintiff to proceed with an IPR, without invoking the Section 315(a)(1) bar. For example, certain dismissals under Rule 12 may not implicate the Section 315(a)(1) bar. Specifically, Rule 41(b) carves out three explicit exceptions to dismissal with prejudice, namely, lack of subject-matter jurisdiction under 12(b)(1), improper venue under 12(b)(3), or failure to join a party under 12(b)(7).28 Thus, a dismissal of a declaratory judgment action under one of these exceptions may not prevent a petitioner from proceeding with an IPR, as the parties would have been left as if the declaratory judgment action had never been brought. In contrast, a dismissal under Rule 12(b)(6), for failure to state a claim on which relief can be granted, may operate as a dismissal with prejudice, preventing the declaratory plaintiff from bringing an IPR proceeding.29
Similarly, a court may dismiss or transfer a declaratory judgment action under the first-to-file exception, which is typically invoked in a venue inquiry. This exception favors first-filed complaints and prohibits a plaintiff from maintaining a second-filed action against the same parties concerning the same issues as the first-filed complaint.30 For example, a patent holder may file an initial complaint in one venue, and the accused infringer (or, perhaps, its corporate parent or subsidiary) may later file a declaratory judgment complaint for invalidity in another venue. The court of the second venue may decide to dismiss the declaratory judgment complaint under the first-to-file rule, giving preference to the patent holder's first-filed complaint, which concerns the same issue (e.g., validity of the asserted patent).
Dismissal under the first-to-file rule, however, should not constitute a decision on the merits. The dismissal or transfer of the action concerns the propriety of venue, which is a special exception, carved out by Rule 41(b) as a dismissal without prejudice. Similar to a voluntary dismissal without prejudice, a dismissal of a second-filed declaratory judgment action leaves the parties as if the action had never been brought and, thus, should not prohibit the declaratory plaintiff from instituting an IPR petition.
In summary, Section 315(a)(1) prohibits a declaratory judgment plaintiff from bringing an IPR petition, but it has not yet been determined whether the plaintiff can bring the petition after its declaratory judgment action has been dismissed. In certain circumstances, when the dismissal leaves the parties as if the action had never been brought, the policy underlying Section 315(a)(1) would not be served by prohibiting the plaintiff from bringing the IPR petition. As a result, the PTAB may ultimately limit the application of Section 315(a)(1) to actions currently pending in district court, and not preclude IPR petitioners if their civil action has since been dismissed. In addition, the PTAB ultimately will need to decide whether the real party-in-interest limitation of Section 315(a)(1) bars a petitioner, who was not a party to the declaratory-judgment action, from bringing a co-pending IPR petition. As this is a highly fact dependent inquiry, the PTAB likely will consider the specific relationship between the declaratory plaintiff and the petitioner.
Although the PTAB's decision in Macauto provides some guidance on the application of Section 315(b), questions remain about whether the reasoning also would apply to Section 315(a)(1). Questions also arise about other situations that might allow an IPR petition to proceed even though the plain language of Section 315(a)(1) and Section 315(b) seems to prevent it.
For example, when raising a defense under the One Year Rule or the Declaratory Judgment Rule, patent holders should realize that any previous voluntary dismissal without prejudice nullifies the service date of the complaint, effectively resetting the clock on the one year bar or removing the availability of the Declaratory Judgment Rule to bar the petition. In addition, patent holders should always file signed service waivers with the court to properly establish a service date and start the clock on the one-year bar. Furthermore, when a patent holder responds to an IPR petition, it should carefully investigate whether it properly served a complaint concerning the patent at issue in the petition on a party that could be considered a real party-in-interest or privy of the petitioner. If so, the patent holder should consider collecting facts that support a defense using the One Year Rule and the Declaratory Judgment Rule and evaluate whether the petitioner could use any previous voluntary dismissals to thwart any defense.
In contrast, when a party is under the threat of litigation, it should consider whether the faster IPR proceeding provides a more preferred forum, because filing a declaratory judgment suit may preclude any opportunity to file a later IPR. Furthermore, a potential IPR petitioner should carefully evaluate the relationship between it and any related party that was previously sued for infringement of the patent at issue in the IPR petition and collect facts and evidence that demonstrate sufficient independence from the previously sued, related party. Such facts may include those indicating that the petitioner has independent control of litigation, independent decision making authority, and/or financial independence. In addition, the potential petitioner also should carefully evaluate any proceedings that may appear to trigger the One Year Rule and the Declaratory Judgment Rule defenses to determine whether a voluntary dismissal, or a failure to file a waiver of service with the court, nullifies the effective service date that would trigger the defenses. By doing so, the petitioner will be best prepared to defeat a defense raised under the One Year Rule and the Declaratory Judgment Rule.
Of course, as more IPR petitions are filed, the PTAB and the courts may offer more clarity on when and how the One Year Rule and the Declaratory Judgment Rule will apply. For now, patent holders and petitioners should carefully consider the Macauto decision and its reasoning when evaluating whether these rules apply to their specific situations, and plan their litigation strategy accordingly.
1 35 U.S.C. § 315(b).
2 35 U.S.C. § 315(a)(1).
3 Macauto U.S.A. v. BOS Gmbh & KG, Case No. IPR2012-00004, Jan. 24, 2013.
4 35 U.S.C. § 315(b).
5 See id. ("The time limitation set forth in the preceding sentence shall not apply to a request for joinder under subsection (c)."); see also 37 C.F.R. § 42.122(b) ("The time period . . . shall not apply when the petition is accompanied by a request for joinder.").
6 See Rules of Practice for Trials Before the Patent Trial and Appeal Board, 77 Fed. Reg. 48,663 (Aug. 14, 2012) [hereinafter PTAB Rules].
7 See, e.g., Sony Computer Entm't Am., Inc. v. Dudas, 85 U.S.P.Q.2d 1594, 1596 (E.D. Va. 2006) ("On the very day that the California district court entered its order denying Sony's post-verdict motions, Sony filed a request with the PTO for inter partes reexamination of the litigated claims of the ’333 patent . . . ").
8 Macauto at 2.
9 Macauto at 15 (citing Graves v. Principi, 294 F.3d 1350, 1356 (Fed. Cir. 2002)) ("The dismissal of an action without prejudice leaves the parties as though the action had never been brought.”); Bonneville Assocs., Ltd. v. Baram, 165 F.3d 1360, 1364 (Fed. Cir. 1999) ("The rule in the federal courts is that '[t]he effect of a voluntary dismissal without prejudice pursuant to Rule 41(a) is to render the proceedings a nullity and leave the parties as if the action had never been brought.'").
10 Macauto at 16.
11 35 U.S.C. § 315(b).
12 Macauto at 16.
13 37 C.F.R. § 42.8(b)(1).
14 PTAB Rules, 77 Fed. Reg. 48612 (Aug. 14, 2012).
15 Office Patent Trial Practice Guide, 77 Fed. Reg. 48756 (Aug. 14, 2012).
16 See PTAB Rules, 77 Fed. Reg. 48617 (Aug. 14, 2012); see also Office Patent Trial Practice Guide, 77 Fed. Reg. 48759-60 (Aug. 14, 2012).
17 See PTAB Rules, 77 Fed. Reg. 48617 (Aug. 14, 2012)
18 See id.
19 See id.
20 Office Patent Trial Practice Guide, 77 Fed. Reg. 48759 (Aug. 14, 2012) (citing 18A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 4451).
21 See PTAB Rules, 77 Fed. Reg. 48617 (Aug. 14, 2012); see also Office Patent Trial Practice Guide, 77 Fed. Reg. 48759-60 (Aug. 14, 2012).
22 See PTAB Rules, 77 Fed. Reg. 48617 (Aug. 14, 2012).
23 See Taylor v. Sturgell, 553 U.S. 880, 898 (2008) ("[O]ur decisions emphasize the fundamental nature of the general rule that a litigant is not bound by a judgment to which she was not a party . . . Accordingly, we have endeavored to delineate discrete exceptions that apply in 'limited circumstances.'").
24 See PTAB Rules, 77 Fed. Reg. 48617 (Aug. 14, 2012).
25 See Office Patent Trial Practice Guide, 77 Fed. Reg. 48759-60 (Aug. 14, 2012).
26 35 U.S.C. § 315(a)(1).
27 See Fed. R. Civ. P. 41(b) ("Involuntary Dismissal; Effect. If the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it. Unless the dismissal order states otherwise, a dismissal under this subdivision (b) and any dismissal not under this rule—except one for lack of jurisdiction, improper venue, or failure to join a party under Rule 19—operates as an adjudication on the merits.").
28 See also Torres v. United States, 225 Ct. Cl. 688, 690–691 (1980) (finding dismissal under 12(b)(1) for lack of subject matter jurisdiction does not operate as adjudication on the merits, but dismissal under 12(b)(6) for failure to state a claim does constitute a dismissal with prejudice).
29 See id.
30 See, e.g., Elecs. for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1347–1348 (Fed. Cir. 2005).
Reprinted with permission from the IP Litigator, published by Aspen Law and Business. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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