CBM Standing Denied for Petitioner With No Direct Contacts With Patent Owner

Last week, the PTAB clarified its application of standing in Covered Business Method (CBM) reviews in Texas Assoc of Realtors v Property Disclosure Technologies, LLC.

Under the AIA, a person may only file a transitional CBM petition if it, or a real party in interest or privity, has been sued for infringement or charged with infringement under that patent.  The AIA regulations clarify that “charged with infringement” means a “real or substantial controversy” such that the petitioner would have standing to bring a declaratory judgment action in Federal court. 

In Texas Association, Petitioner asserted standing because Patent Owner (PO) had filed suit against numerous real estate brokers and providers who operate websites similar to those owned by Petitioner. Petitioner also argued that its clients and customers, who have been sued by PO, use data from its product to create their own websites, and thus Petitioner has standing to protect them from attack by PO.

The PTAB rejected these arguments.  First, there had been no direct contact between Petitioner and PO concerning the patent-in-suit, let alone cease-and-desist letters.  This “weighed heavily” against there being a “substantial controversy” and instead was more akin to a petitioner merely disagreeing with the existence of a patent or suffering an attenuated, non-proximate, effect from the existence of a patent, which is insufficient to establish standing under the Supreme Court’s MedImmune - 549_U.S._118.  Although Petitioner attempted to distinguish from the Federal Circuit’s Assoc for Molecular Pathology - 689_F.3d_1303, where the declaratory judgment plaintiff had not practiced the claimed invention, this did not outweigh other facts, especially the lack of direct contact between Petitioner and PO.

The PTAB also rejected Petitioner’s second argument, noting that to establish a supplier’s liability for induced or contributory infringement, a showing of direct contact between Petitioner and PO is even more necessary.  Petitioner also failed to establish an alternative basis for supplier declaratory judgment standing because there was no evidence that Petitioner was obligated to indemnify its clients and customers who had been sued by PO.

Finally, the PTAB noted that all actions against Petitioner’s clients and customers were dismissed prior to the filing of the CBM petition.  Thus, the PTAB determined that Petitioner did not have standing to file a CBM review and denied institution.

This decision serves as guidance that without direct contact between Petitioner and PO over the patent-in-suit, it may be an uphill battle for a supplier to establish CBM standing, particularly for a supplier with no obligation to indemnify its customers.