Petitioners for inter partes review (IPR) of a patent under the America Invents Act (AIA) are required by statute to identify "all real parties in interest."1Who qualifies as a real party in interest (RPI) or privy has practical implications in view of statutory restrictions barring standing as a petitioner at the Patent Trial and Appeal Board (PTAB). For example, 35 U.S.C. § 315(b) bars institution of an IPR if the petitioner, RPI, or privy of the petitioner was served with a complaint for infringement of the challenged patent more than one year before the petition was filed. On July 25, 2018, the U.S. Court of Appeals for the Federal Circuit published a decision in Applications in Internet Time, LLC v. RPX Corp.2providing an expansive formula for determining whether a non-party is an RPI.
Although the PTAB's Trial Practice Guide emphasizes that RPI and privity determinations require a flexible approach, the board has often focused its analysis on two questions: (i) control over the IPR proceedings; and (ii) financing of the IPR proceedings. The Federal Circuit's decision in Applications in Internet Time rejected the board's use of an "unduly restrictive test" for making RPI determinations. The court explained that determining whether a non-party is an RPI instead "demands a flexible approach that takes into account both equitable and practical considerations, with an eye toward determining whether the non-party is a clear beneficiary that has a preexisting, established relationship with the petitioner." The court vacated two final written decisions of unpatentability and clearly signaled to the board, patent owners, and patent challengers that it takes a dim view of efforts to evade the one-year bar.
RPX filed IPR petitions on two patents that had been the subject of earlier petitions for covered business method (CBM) review that had not been instituted. The CBM petitioner was barred from seeking IPR review due to the running of the one-year time bar from earlier litigation. The CBM petitioner was also a member of RPX's client network. Prior to institution of the IPRs, the patent owner, Applications in Internet Time (AIT), argued that RPX was acting as a proxy for its member client who was time-barred under § 315(b). During pre-institution discovery, AIT gained access to evidence that RPX advertised invalidity challenges as one of its services, and that its client had paid RPX "substantial sums as membership fees...including a very significant payment shortly before the IPR petitions at issue here were filed." The board rejected AIT's argument based on declaration testimony RPX submitted to establish that it had its own reputational interests in bringing the IPRs, that it had no contractual obligation to the client or implicit understanding with the client to file the IPRs, and that it did not communicate with the client on the specific topic of the IPRs. RPX had also adopted "best practices" intended to avoid making its clients RPIs, including prohibitions against discussing validity challenges with clients prior to filing or during pending challenges, and a mandate for RPX to maintain complete control of all aspects of pending validity challenges. The IPRs were instituted and proceeded to final written decisions, resulting in decisions by the board that certain challenged claims were unpatentable.
Judge O'Malley delivered the opinion of the court in which Judge Hughes joined the judgment vacating the final written decisions. Judge O'Malley concluded that the board's decisions had to be vacated because the RPI determination relied on an impermissibly narrow understanding of the common-law meaning of RPI, was not based on consideration of the entirety of the administrative record, and misallocated the burden of proof to the patent owner. She stressed that determining whether a non-party is an RPI "demands a flexible approach that takes into account both equitable and practical considerations, with an eye toward determining whether the non-party is a clear beneficiary that has a preexisting, established relationship with the petitioner." She faulted the board for analyzing whether RPX had its own interest in bringing the IPRs instead of "whether RPX can be said to be representing" the client's interests in the IPR. She instructed the board to consider whether the client was an RPI based on an attorney-in-fact or an agency-for-litigation relationship. She also cautioned that "[d]epending on the nature of the parties' relationship, an entity can serve as an agent to a principal and file an IPR on the principal's behalf even without the two formally agreeing that the agent will do so." She concluded that additional discovery regarding privity "may be particularly warranted" in this case on remand.
Judge Reyna filed a concurring opinion, explaining that the board erred in failing to address whether RPX's petitions were barred under the privity provision of § 315(b). According to Judge Reyna, the board erred by focusing on the client's lack of ability to control the IPR proceedings instead of focusing on the substantive legal relationship between the parties. He concluded that "if the extent of the legal obligations" between RPX and its client "is such that the parties share a high degree of commonality of proprietary or financial interest, privity is established and §315(b) bars the institution of the IPR petitions." He also concluded that "relitigation through a proxy is itself an independent ground to establish privity."
This decision will likely increase the board's receptivity to patent owners' RPI and privity arguments even absent evidence that a time-barred party has the right or ability to control a petitioner's actions in the IPR proceeding. It also may increase the board's willingness to grant discovery on RPI and privity issues when a patent owner raises a bona fide question about the relationship between a petitioner and a time-barred party. IPR stakeholders should be aware that any arrangement designed to evade the one-year bar or the estoppel provisions of §315(e) might prompt an RPI or privity challenge to institution and will likely be heavily scrutinized.
For more information about the RPX decision or any related matter, please contact any member of the post-grant review practice at Wilson Sonsini.
