On December 22, 2022, Director Kathi Vidal issued a pair of decisions in the OpenSky v. VLSI saga, dismissing OpenSky Industries LLC (“OpenSky”) and Patent Quality Assurance LCC (“PQA”) from their respective challenges of VLSI patents at the heart of a multi-billon dollar jury award against Intel. OpenSky Industries LLC v. VLSI Tech. LLC, IPR2021-01064, Paper 121 (PTAB Dec. 22, 2022); Patent Quality Assurance LLC v. VLSCI Tech. LLC, IPR2021-01229, Paper 102 (PTAB Dec. 22, 2022)(precedential).
Previously in her October 4, 2022 Director review decision (as we covered here), Director Vidal found OpenSky had abused the inter partes review (“IPR”) process by filing an IPR petition to extract settlement payment from both the Patent Owner, VLSI, and joined Petitioner, Intel. Further, OpenSky was found to have engaged in further sanctionable conduct including discovery misconduct, violation of an express order, and unethical conduct. As a result, Director Vidal precluded OpenSky from actively participating the proceeding and elevated Intel to a lead petitioner role. Additionally, the PTAB was directed to reconsider its institution decision on remand under a heightened “compelling merits” standard.
On October 14, 2022, the PTAB issued its Remand Decision, again finding that an IPR should be instituted against VLSI, this time under the “compelling merits” standard (as we covered here). Three days later, Director Vidal issued an Order for Sua Sponte Director Review. VLSI was also authorized to file a Rehearing Request in response to the PTAB’s Remand Decision.
In her most recent December 22, 2022 decision, Director Vidal found no error in the PTAB’s Remand Decision, finding the Petition’s evidence and PTAB’s reasonings to be “compelling.” Additionally, she addressed OpenSky’s party status by explaining she had not previously dismissed OpenSky because she needed more time to determine the appropriate course of action given the “extraordinary circumstances.” With the benefit of such time, she concluded that the best course of action was to dismiss OpenSky from the proceeding, leaving Intel as Petitioner. Next, Director Vidal turned to VLSI’s Rehearing Request arguments.
As a preliminary matter, VLSI and its counsel were admonished for supporting its arguments with “misleading statements of law and fact in contravention of their obligations under 37 C.F.R. § 11.303 (Candor Toward the Tribunal).” Director Vidal explained that this had not been the first time VLSI had made misleading statements of law and fact, citing VLSI’s misrepresentation of Federal Circuit case law on secondary indicia of obviousness made at VLSI’s initial appearance and in its Preliminary Response.
Director Vidal then ordered VLSI to show cause as to why it should not pay Intel’s reasonable attorney fees incurred in responding to VLSI’s Rehearing Request. She acknowledged that the amount of Intel’s fees may not be significant, but that she wanted to “make clear to the parties and the public that we will hold attorneys and parties accountable for the ethical obligations they owe to the Board.”
Director Vidal next addressed VLSI’s principal argument for rehearing: the PTAB’s Remand Decision represented a shift from the panel’s original position without explanation and amounting to a violation of the Administrative Procedures Act. PTAB in its original institution decision under the original reasonable likelihood standard, found Petitioner’s evidence to be “adequate” to support institution. VLSI argued that, in its Remand Decision, the PTAB found the same evidence to satisfy the Director’s heightened “compelling merits” standard, despite no description of the evidence beyond “adequate” in the original institution decision.
Director Vidal was not persuaded. Instead, she explained that evidence for IPR institution need only meet the reasonable likelihood standard, and commended the PTAB for not opining in its original decision on the strength of the evidence beyond meeting that standard. She explained, “VLSI suggests that the Board, by making the assessment it was legally required to make and not opining further [describing the evidence beyond ‘adequate’], implied that the evidence relied upon in its Institution Decision could not also meet the compelling merits standard – a standard not yet articulated at the time of the Institution Decision. That suggestion requires an unjustified leap that I am unwilling to take.” OpenSky, IPR2021-01064, Paper 121 at 7 (clarification added).
VLSI further argued the Remand Decision ignored factual issues identified by the PTAB’s original Institution Decision and relied on inadmissible hearsay. Unconvinced by VLSI’s arguments, Director Vidal denied VLSI’s Rehearing Request, affirmed the PTAB’s finding of compelling merits and allowed the IPR proceeding to continue with Intel as Petitioner.
In her decision in the parallel PQA case, Director Vidal found that PQA, through its counsel, abused the IPR process by advancing a misleading argument and a misrepresentation of fact. Specifically, PQA had represented to the PTAB that it had exclusively engaged an expert witness (who was also relied upon by OpenSky in its respective parallel proceeding), and later qualified the same engagement as not being exclusive. Additionally, Director Vidal found that PQA abused the IPR process by both filing and threatening to file an IPR seeking to join with OpenSky’s IPR in an attempt to extract payment from VLSI.
Director Vidal dismissed PQA from the proceeding and explained that each of PQA’s actions constituted sanctionable conduct and taken together, warranted sanctions. Further, PQA was ordered to show cause as to why it should not pay compensatory damages to VLSI. As explained in the decision, “Not only are the sanctions imposed proportional to PQA’s improper conduct here, but they are necessary to deter such conduct by PQA and others in the future.” Patent Quality Assurance, IPR2021-01229, Paper 102 at 4.
Finally, Director Vidal found PQA’s underlying Petition satisfied the “compelling merits” standard. She then ordered the stay on the proceedings to be lifted and the IPR to continue, with Intel as Petitioner.
To summarize, the pair of decisions result in the survival of both OpenSky and PQA’s IPR proceedings against VLSI, despite OpenSky and PQA’s respective transgressions. Intel, now as lead Petitioner in each, will continue to have an avenue to attack the validity of the patents central to VLSI’s multi-billion dollar jury award.
