The Supreme Court and the Federal Circuit issued three precedential opinions this week concerning matters of first impression involving inter partes reviews, two of which concern the status of government actors in the process. We cover those below.
In our Case of the Week we address the third matter of first impression—a matter concerning the time bar restrictions for filing an IPR under 35 U.S.C. 315(b).
Power Integrations, Inc. v. Semiconductor Components Industries, LLC, Appeal No. 2018-1607 (Fed. Cir. June 13, 2019)
Power Integrations sued Fairchild Semiconductor Corporation for patent infringement in 2009. In 2014, a jury awarded Power Integrations $105 million in damages. Following appeal, the case was retried. In the second trial, the jury awarded $139.8 million.
In November 2015, Fairchild entered into an agreement to merge with Semiconductor Components Indus. (“ON Semiconductor”). The merger did not close immediately. While the merger was still pending, in March 2016, ON Semiconductor filed a petition for IPR challenging claims from one of the patents that had been asserted in the trial. The merger between Fairchild and ON Semiconductor closed six months later, in September 2016. Four days later, the Board instituted IPR.
Timing of the Determination of a Real Party in Interest
At issue was whether ON Semiconductor was a real party-in-interest in the IPRs. Section 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 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.” ON Semiconductor “contend[ed] that privity and RPI relationships for purposes of § 315(b) should be assessed only at the time the IPR petition is filed.” Power Integrations argued that the petition is barred if a party becomes a real party in interest or in privity with a barred party at any time before the IPR is instituted.
The PTAB agreed with Power Integrations, relying heavily on the statutory language in 315(b). The Court found that “[t]he focus of § 315(b) is on institution. The language of the statute, in our view, makes privity and RPI relationships that may arise after filing but before institution relevant to the § 315(b) time-bar analysis.” The Court also relied on its prior cases that have similarly characterized § 315(b) as a statutory limitation on the Director’s ability to institute an IPR, not on the petitioner’s ability to file a petition. The Court also found support in common law preclusion principles, from which the policies underlying § 315(b) are based, holding that “Common law preclusion cases suggest that preclusion can apply based on privity arising after a complaint is filed,” as well as “the statute’s purposes, as demonstrated by its language.”
The Court rejected various policy and interpretation arguments raised by ON Semiconductor. Notably, the Court rejected an argument that Chevron or Auer deference was owed to the PTAB’s interpretation of the statute. The Court held that the PTAB regulations did no more than parrot the statute, and that parroting regulations are not deserving of deference, and the PTAB’s decisions on the issue were not precedential authority and not deserving of deference.
Because ON Semiconductor became a real party in interest four days before institution, the Court held that the petition was barred.
The Court specifically noted that it was “not address[ing] the impact of a change in RPI, privity, or ownership occurring after institution.” That issue remains available for another case. The Court also did not decide whether ON Semiconductor was in privity with Fairchild prior to the completion of the merger.
Collateral Estoppel from Non-Appealed IPRs
In a tangential issue, the Court decided an issue concerning the collateral estoppel effect of appealing only some, but not all, IPRs decided by the PTAB. Last week, we covered Papst Licensing GMBH & Co. KG v. Samsung Electronics America, Inc., Appeal No. 2018-1777 (Fed. Cir. May 23, 2019) as our Case of the Week. See here. In that case, the Court found a party was collaterally estopped from appealing an issue where it dropped appeals on the eve of oral argument stemming from two other IPRs, holding that dropping the appeals rendered the PTAB decisions final and non-appealable, and thus capable of having a collateral estoppel effect of the pending appeal.
In Power Integrations, a similar issue arose. Power Integrations only appealed some of its IPR losses on the RPI/privity issue—not all of them. ON Semiconductor filed a motion asking for the Court to dismiss the appeal on grounds of collateral estoppel. The Court found in this case that collateral estoppel did not apply. Specifically, one of the exceptions to collateral estoppel is when the party who lost in the other action “did not have an adequate opportunity or incentive to obtain a full and fair adjudication in the initial action.” The Court found that this exception applied. Specifically, the patent at issue in the present appeal was the subject of a nine-figure damages award following trial in the district court, whereas the non-appealed cases did not have a similar incentive.
The Federal Circuit vacated the PTAB decisions and remanded with instructions to dismiss the IPR.
The opinion can be found here.
ALSO THIS WEEK
Regents of the University of Minnesota v. LSI Corp., Appeal Nos. 2018-1559, -1560, 1561, 1562, 1563, 1564, 1565 (Fed. Cir. June 14, 2019)
In this appeal from the Patent Trial and Appeal Board (“PTAB”), the Federal Circuit affirmed several decisions declining to dismiss petitions for inter partes review (“IPR”) filed against patents owned by the University of Minnesota (“UMN”), a state university. After the petitions were filed, but before the PTAB decided whether to institute them, UMN filed motions to dismiss each petition, arguing that sovereign immunity bars IPRs for state-owned patents because they are entirely a dispute between a private party and the state. The Court, applying the reasoning from St. Regis Mohawk Tribe v. Mylan Pharmaceuticals Inc., held that just as tribal sovereign immunity does not apply to IPRs, state sovereign immunity also does not apply. This is because during an IPR, the PTAB acts as the United States in its role as a superior sovereign to reconsider a prior administrative grant of a patent. That Congress enlisted the assistance of private parties to file petitions for IPR does not change their essential character – IPRs are agency proceedings.
The opinion can be found here.
Samsung Electronics Co., Ltd. v. Elm 3DS Innovations, LLC, Appeal Nos. 2017-2474 et al (Fed. Cir. June 12, 2019)
In this consolidated appeal of IPR proceedings involving 11 related patents and 105 patent claims, the Federal Circuit affirmed the Patent Trial & Appeal Board’s (PTAB) obviousness ruling in favor of the patent owner. The IPRs involved members of a family generally directed to stacked integrated circuit memory. The Federal Circuit first reviewed the PTAB’s construction of “substantially flexible” terms appearing in all but two of the asserted claims, applying the now-superseded BRI standard on a de novo review. After considering evidence concerning the plain and ordinary meaning of the “substantially flexible” terms in view of the patent specification, and a prosecution history disclaimer, the Federal Circuit adopted a construction slightly differing from the PTAB’s construction. Notwithstanding this adjustment, the Federal Circuit upheld the PTAB’s ruling that Petitioner had failed to carry its burden of proving obviousness of the challenged claims. The Court agreed that Samsung’s petition had glossed over complexities in making the asserted prior art combinations and had also failed to provide evidence sufficient to show a reasonable expectation of success.
The opinion can be found here.
Return Mail, Inc. v. United States Postal Service, No. 17-1594 (Sup. Ct. June 10, 2019)
The Supreme Court of the United States held that the U.S. government is not a “person” capable of petitioning for an inter partes review, post-grant review, or covered business method (“CBM”) review under the Leahy-Smith America Invents Act (“AIA”). At issue was a patent for a mail processing method issued to appellant Return Mail, Inc., which had been asserted against the U.S. Postal Service (“USPS”), and which the Patent Trial and Appeal Board had found to be patent-ineligible in a CBM review petitioned by USPS. The Federal Circuit affirmed and the Supreme Court reversed, applying a “longstanding interpretive presumption that ‘person’ does not include the sovereign” in the absence of Congressional intent to the contrary, which the Court did not find. Justices Breyer, Ginsburg, and Kagan dissented, pointing to indicia of Congressional intent to include the government among “persons” who may institute AIA proceedings.
The opinion can be found here.
