Inter Partes Review: Who is a Privy of the Petitioner? Written by - PDF document

Inter Partes Review: Who is a “Privy” of the Petitioner? - IPWatchdog.com... Page 1 of 6 Today's Date: February 5, Search | Home | Contact | Services | Patent Attorney | Patent Search | Provisional Patent Application | 2014 Patent Application | Software Patent | Confidentiality Agreements Inter Partes Review: Who is a “Privy” of the Petitioner? Written by Allard Chu Posted: February 5, 2014 @ 2:59 pm Share: Allard Chu Under the Leahy-Smith America Invents Act (AIA), Inter Partes Review (IPR) proceedings became an option for challenging validity of a patent at the U.S. Patent and Trademark Office on September 16, 2012. IPR proceedings allow for a petitioner to challenge the validity of a patent under 35 U.S.C. §§ 102 and 103 on the basis of prior art consisting of patents or printed publications. They are supposed to be completed quickly in a maximum of 18 months under 35 U.S.C. §§ 326(a)(11), and the availability of IPR proceedings provides a cost-effective option in litigation tactics. Despite the benefits provided, an Inter Partes Review is not without risk, and just how much risk is not yet known. There is a time limit for preventing certain petitioners from initiating an IPR proceeding against a patent, and there is currently a petition for writ of mandamus to the Federal Circuit as to the scope of petitioners covered by the time bar. This issue arises because 35 U.S.C. §§ 315(b). 35 U.S.C. §§ 315(b) states that “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after http://www.ipwatchdog.com/2014/02/05/inter-partes-review-who-is-a-privy-... 2/5/2014

Inter Partes Review: Who is a “Privy” of the Petitioner? - IPWatchdog.com... Page 2 of 6 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.” Unfortunately, the critical question regarding who exactly is covered by “privy of the petitioner” is not defined by the statute and is subject to great debate. With a large number of products being sold by one company and manufactured by another, a clear definition of privy of the petitioner for time limitations on initiating IPR proceedings is essential. In the often litigated high technology industries, many companies sell products either manufactured by or incorporating components from another company. One example of this would be the Samsung Galaxy S smartphone, which was manufactured by Samsung and resold by communication service providers under various names such as AT&T Captivate and T-Mobile Vibrant. On the other end of the supply chain, Samsung incorporated components into the Galaxy S from a variety of suppliers including Wolfson Microelectronics. Arrangements for manufacturing by one company for another can be seen across the consumer electronics industries. For example, in addition to Apple, Foxconn has manufactured products for clients including Acer, Dell, and Microsoft. Within these relationships, differing interpretations of privity and the availability of invalidating a patent through an IPR proceeding may mean a difference of millions of dollars in terms of potential royalty fees and litigation expenses. Petition for Writ of Mandamus in In Re MCM Portfolio LLC Against this backdrop is the current discussion over the scope of the term privy of the petitioner which has been petitioned for a writ of mandamus to the Court of Appeals for the Federal Circuit in In Re MCM Portfolio LLC . As of January 31, 2014, the Federal Circuit has not yet acted on the petition. The petition for writ of mandamus for In Re MCM Portfolio LLC resulted from Hewlett-Packard Co. v. MCM Portfolio, LLC , IPR2013-00217, an IPR proceeding instituted by Hewlett-Packard (“HP”) against U.S. patent 7,162,549. In Re MCM Portfolio LLC concerns the sale of Digital Picture Frames (“DPFs”) manufactured by Pandigital, Inc. (“Pandigital”) and sold by HP. While HP resells the DPFs under its own brand name, HP did list Pandigital as its supplier and directed customers to Pandigital for customer care support. MCM notified HP of alleged infringement in 2008 and 2010. MCM then proceeded to sue Pandigital in the Eastern District of Texas on August 24, 2011 and served Pandigital on September 21, 2011. On the date of filing, MCM also notified HP of the suit against Pandigital. On March 28, 2012, MCM filed suit against HP. HP then initiated the IPR proceeding in question on March 27, 2013, one day before the one year date of MCM Portfolio’s (“MCM”) filing of suit against HP. However, this was more than a year past the serving of the complaint to Pandigital. MCM opposed the IPR on the basis of a time bar due to privity, but the Patent http://www.ipwatchdog.com/2014/02/05/inter-partes-review-who-is-a-privy-... 2/5/2014

Inter Partes Review: Who is a “Privy” of the Petitioner? - IPWatchdog.com... Page 3 of 6 Trial and Appeal Board (PTAB) held that HP was not a privy of Pandigital. In adjudication of the issue, the PTAB has based their view to construe privity on an interpretation of a six factor test set forth in the 2008 Supreme Court case of Taylor v. Sturgell. Taylor v. Sturgell , 553 US, 890 (2008). The PTAB looked to the six Taylor factors of: 1) the existence of an agreement that the non-party be bound by a determination of issues in an action between the parties, 2) the existence of a pre-existing substantive legal relationship between the non-party and a party, 3) representation in an action by someone with the same interests as the non-party, 4) the assumption of control over an action by the non-party, 5) re-litigation of issues through a proxy, and 6) the existence of a special statutory scheme. In its analysis based on the Taylor factors, the PTAB denied the finding of privity in the specific action as HP did not exercise control over Pandigital in the Texas action. By focusing on the lack of control over Pandigital, it appears that the PTAB applied a balancing test emphasizing the fourth factor over the other five factors of Taylor . The PTAB held that MCM provided “no persuasive evidence that HP could have exercised control over Pandigital’s participation in the Texas Action. Thus § 315(b) does not bar HP from commencing an inter partes review as being untimely.” Consequently, MCM filed the petition for a writ of mandamus to the Federal Circuit alleging the PTAB is systematically misinterpreting Taylor. MCM asserts that the PTAB’s requirement to establish privity is an improper balancing test and too narrow. MCM asserts that the Federal Circuit should issue a writ of mandamus as: 1) the PTAB’s interpretation of § 315(b) privity is incorrect as a matter of law, 2) the systematic denial of Taylor ’s second ground for establishing privity is an usurpation of power, and 3) the order to institute an IPR cannot be remedied by reversal on appeal. http://www.ipwatchdog.com/2014/02/05/inter-partes-review-who-is-a-privy-... 2/5/2014