It's often said that hard cases make bad law. And that is what had happened here: faced with an unreasonable number of potentially asserted claims in litigation, and a Plaintiff not required to identify which of those claims it would actually assert within the filing limit (one-year) between being served with a complaint and filing to initiate an inter partes review (IPR) proceeding, Facebook played the novel gambit of trying to join its own IPR to attack the claims actually asserted against it. At the Patent Trial and Appeal Board, it actually worked (with a little assistance from the USPTO Director). But the Federal Circuit held otherwise, finding that joinder was only permitted for other parties who were seeking review of the same issues, not for the same party seeking to change the scope of the review. Thus, it vacated the PTAB's decision on the late-added claims, despite otherwise affirming the PTAB's decision on the merits of the claims.
The dispute between Facebook and Windy City began on June 2, 2015, when Windy City sued Facebook for infringement of four patents in the U.S. District Court for the Western District of North Carolina. Those four patents, U.S. Patent Nos. 8,458,245; 8,694,657; 8,473,552; and 8,407,356, have 58, 671(!), 64, and 37 claims, respectively. The Complaint did not identify which of those 830 claims Facebook allegedly infringed. Facebook was served with the Complaint the day after it was filed, and moved to dismiss it on July 24, 2015, arguing that the Complaint was deficient because it did not identify the allegedly infringed claims. Facebook then filed a motion to transfer the case to the Northern District of California on August 25, 2015.
The North Carolina District Court did not take action on either motion for over six months. Then, on March 16, 2016, over ten months after Facebook had been served, that North Carolina District Court transferred the case to the U.S. District Court for the Northern District of California without ruling on the motion to dismiss. The Northern District judge didn't rule on the motion either, but entered a scheduling order on April 6, 2016 that included a case management conference for July 7, 2016. Under the Northern District's Patent Local Rules, Windy City wouldn't have to identify its asserted claims until two weeks after that conference, on July 21, 2016. Cognizant that the deadline for filing petitions for inter partes review -- one year after service of the complaint[i] -- was more than a month earlier than that and was also quickly approaching, Facebook moved for an order requiring Windy City to identify no more than 40 asserted claims by May 16, 2016. The Northern District denied that motion.
On June 3, 2016, the very last day on which it could timely file IPR petitions, Facebook filed petitions challenging the validity of some of the claims of each of the four asserted patents. The Patent Trial and Appeal Board instituted review of all but two of the challenged claims,[ii] on all the obviousness grounds in the petitions. But Facebook's foresight was not perfect; when Windy City ultimately identified its asserted claims on October 19, 2016, there were a number of claims in the '245 and '657 patents that hadn't been challenged in the IPR petitions. With the statutory deadline for filing petitions to challenge those claims long past, Facebook tried to get the newly identified claims in through a procedural back door. It filed additional petitions on those claims, along with motions for joinder with the earlier-filed petitions.
The provisions of the America Invents Act governing joinder and consolidation in IPRs, 35 U.S.C. § 315(c) & (d), provide in relevant part:
(c) Joinder.—
If the Director institutes an inter partes review, the Director, in his or her discretion, may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.
(d) Multiple Proceedings.—
Notwithstanding sections 135(a), 251, and 252, and chapter 30, during the pendency of an inter partes review, if another proceeding or matter involving the patent is before the Office, the Director may determine the manner in which the inter partes review or other proceeding or matter may proceed, including providing for stay, transfer, consolidation, or termination of any such matter or proceeding.
Over Windy City's objection, the PTAB granted the motions for joinder, reasoning that the newly-challenged claims, although not identical, involve "substance . . . very similar such that the addition of [the new] claims . . . is not likely to affect the scope of the trial significantly." The Board noted that the addition of the new claims would not significantly disrupt the schedule, briefing, or discovery, and that Facebook did not unduly delay challenging those claims. Indeed, the Board indicated that under the circumstances here, Facebook could not have reasonably determined which claims were asserted against it by the expiration of the one-year deadline.
This joinder was not without controversy, however. Two of the Administrative Patent Judges on the panels granting joinder concurred in the decision to express "concerns with permitting a party to, essentially, join to itself." They did not themselves believe that "§ 315(c), when properly interpreted, [would] authorize same-party joinder because a party cannot be joined to a proceeding 'as a party' if it already is a party to that proceeding." However, in light of the USPTO Director's repeated espousal for allowing such joinder -- including in a brief filed as an intervenor in these proceedings -- the concurring APJs agreed to follow their boss's interpretation despite their disagreement.
The IPRs then proceeded to final written decisions, in which the PTAB found Facebook had shown some claims of each of the patents invalid as obvious, but had failed to do so for certain other claims of each of the patents. Both parties appealed: Facebook on the claims found not invalid, and Windy City on both the question of same-party joinder and on the claims found invalid.
The Federal Circuit took up the issue of same-party joinder first. Both sides argued that § 315(c) is unambiguous,[iii] but they reached opposing conclusions as to what it meant. Facebook asserted that it permits same-party joinder (including to raise new claims); Windy City asserted that it does not allow same-party joinder or the inclusion of new issues upon joinder. Ultimately, the Federal Circuit determined that Windy City's position was correct: not only is the statute unambiguous, it prohibits both same-party joinder and the inclusion of new issues upon joinder.
The Federal Circuit's analysis started, as it must, with the language of the statute. The time-bar provision, § 315(b), was clearly the impetus for the attempted joinder. However, that section expressly indicates that "[t]he time limitation set forth in the preceding sentence shall not apply to a request for joinder under subsection (c)." The joinder provision in subsection (c) then indicates that the Director has the discretion in an instituted IPR to "join as a party to that inter partes review any person who properly files a petition under section 311 . . ." For the Federal Circuit, the critical word in that provision is a "party." That is, the joinder provision clearly relates to adding new persons to a proceeding, not new questions or issues. In this case, a petitioner is already a party to an IPR and therefore logically cannot be joined.
The Federal Circuit noted that the PTAB appeared not to be viewing the joinder provision in that manner, and instead was viewing the provision in terms of joining later proceedings to earlier proceedings. The Federal Circuit rejected that understanding under the plain language of the statute. But it also indicated that the distinction between the two views was analogous to the distinction between Rules 19 and 20 of the Federal Rules of Civil Procedure and Rule 42. The former two rules clearly relate to parties rather than issues, whereas Rule 42 relates to issues rather than parties. Furthermore, there is another provision, § 315(d), relating to consolidation of proceedings with potentially different issues rather than joinder. Thus, the structure of the statute would not suggest that different proceedings could be "joined."
The Federal Circuit recognized that the Board's Precedential Opinion Panel had previously analyzed this issue in Proppant Express Investments, LLC v. Oren Technologies, LLC, No. IPR2018-00914, Paper 38 (P.T.A.B. Mar. 13, 2019), and came to the opposite conclusion. But the Federal Circuit reviews the statutory construction de novo, and potentially defers to the Board only if it finds ambiguity in the statute. Since it did not find any ambiguity, the Federal Circuit rejected any deference to the POP decision.
The Federal Circuit also relied on the fact that Facebook had changed the scope of the proceedings by adding new claims. As the Supreme Court had found in the SAS case, "Congress chose to structure a process in which it's the petitioner, not the Director, who gets to define the contours of the proceeding."[iv] That meant that the original petition created the scope of the IPR proceeding, which could not be altered by a second petition (even one by the same petitioner). Finally, the Federal Circuit considered the legislative history of the statute and found that it supported its interpretation.
Having resolved that the statute did not permit same-party joinder, the Federal Circuit vacated the PTAB's findings of invalidity of any claims not included in the original petitions. It then proceeded to consider whether the PTAB's decision on the other claims was supported by substantial evidence. It found that the PTAB's analysis was sufficiently clear and supported to affirm.[v]
In addition to the panel opinion, the Federal Circuit included additional views to address the POP's decision in Proppant, which issued after primary briefing in the appeal, and whether deference would be appropriate. Facebook had earlier suggested the Federal Circuit should defer under Chevron, but the Federal Circuit had never done so with a nonprecedential Board decision (and expressly refused to do so here). But Proppant was precedential, which caused the Federal Circuit to look more closely. Proppant suggested that the Director had discretion to allow same-party joinder, but would only exercise that discretion where fairness requires it and would alleviate unfairness to a party.
The Federal Circuit again rejected that deference for a number of reasons. First, it found the statute unambiguous, which preempts Chevron deference. Second, although the AIA gave the Director rulemaking authority in relation to the procedures for joinder in IPRs (and therefore deference would be most appropriate), it found that was different from interpreting the statute itself. The panel found that there was no deference indicated for statutory interpretation, just filling in the interstices of the statute. Finally, the Federal Circuit found that there were other ways to alleviate the potential unfairness to parties (including patent local rules, which normally would call for early disclosure of asserted claims) that would cause less disruption to the statutory scheme. Thus, it rejected the Proppant decision.
In rejecting same-party joinder, or joinder that would change the scope of an IPR, the Federal Circuit brought the process into harmony with joinder rules in Federal litigation. And while Facebook was not accorded the quick, less expensive justice that IPRs are intended to provide, it is unlikely that its situation will recur. Had the Federal Circuit found otherwise, it might have created a back door that would allow procrastinating defendants more time to determine whether they wanted to challenge all of the claims asserted in litigation.
Facebook, Inc. v. Windy City Innovations, LLC (Fed. Cir. 2020)
Panel: Chief Judge Prost and Circuit Judges Plager and O'Malley
Opinion by Chief Judge Prost; additional views by Chief Judge Prost and Circuit Judges Plager and O'Malley
[i] See 315 U.S.C. § 315(b).
[ii] The IPR institution decisions were made prior to the Supreme Court’s resolution of SAS Institute, Inc. v. Iancu, 138 S. Ct. 1348 (2018).
[iii] As discussed below, Facebook also argued that the Federal Circuit should defer under Chevron to the USPTO’s interpretation of the statute, which would only be appropriate if the statute were ambiguous. See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
[iv] SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1355 (2018).
[v] The PTAB had construed the claims according to the broadest reasonable interpretation, the standard that was in place at that time.
