District Court: Notification of IPRs Necessary to Comply with Duty of Candor and Good Faith

by Foley & Lardner LLP

On May 2, 2014, Judge Davis of the Eastern District of Virginia determined that counsel in a pending patent litigation “failed to comply with their general duty of candor and good faith to this Court” by not disclosing the fact that the defendant had filed petitions for inter partes review on the patents-in-suit while a motion for summary judgment of invalidity of those same patents was pending before the district court. While Judge Davis did not issue a formal reprimand of those attorneys, he stated in his opinion that “the issuance of this Opinion is more than sufficient to place all patent practitioners on notice that future failures to disclose to the Court any concurrent inter partes review proceedings will be met with far sharper consequences.” (emphasis in original).

In Virginia Innovation Scis., Inc. v. Samsung Elecs. Co., No. 12-cv-00548 (E.D. Vir.), there were five patents-in-suit. In August 2013, the defendants filed a motion for summary judgment of invalidity of all the patents-in-suit. In September 2013, the defendants filed petitions with the PTO seeking inter partes review (“IPR”) of 37 claims from the five patents-in-suit. In January 2014, the district court issued a 72-page opinion concerning, among other things, the validity of the patents-in-suit. On March 6, 2014, the PTAB granted the request to review three of the five patents-in-suit. Approximately a week later, the plaintiff filed a motion for reconsideration of the court’s summary judgment ruling, bringing the IPR proceedings to the court’s attention for the first time. During the hearing on plaintiff’s motion, the court “raised the issue of the parties’ failure to notify the Court that they had begun the IPR proceeding.” Counsel for the parties responded, as described by the court, that “it never occurred to them that they should advise this Court of such parallel proceeding.” Further, “[d]efendants seemed to suggest that they did not think to notify this Court of the IPR proceeding because this Court’s docket moved so quickly.”

Prior to analyzing the merits of plaintiff’s motion, the court reminded the parties of their “general duty of candor and good faith that encompasses an attorney’s duty to advise a district court of any development that may affect the outcome of the litigation” as well as Rule 3.3 of the Rules of Professional Conduct entitled “Candor Toward the Tribunal.” The court went on to explain that the duty of candor applies “when related cases are simultaneously pending in different courts” as well as when there are ”federal district court proceedings and related administrative proceeding pending at the same time.” The court then found that “[a] patent infringement suit with an invalidity counterclaim, and an IPR proceeding involving the validity of the same patent claims, fit into that category of related matters requiring notification to the respective adjudicative tribunals.”

The court explained that “[h]ad the parties promptly notified this Court of the pending petition, then the Court at least could have considered for itself what impact such related proceeding might have on the scheduling of matters, as well as whether it wished to stay the proceedings and its then-ongoing consideration of Defendants’ summary judgment motion of invalidity.” Further, “[b]y failing to advise this Court of the existence of the IPR proceedings, VIS and Samsung in effect had two bites at the apple regarding the validity of the disputed claims.”

The court concluded that:

The parties should have notified this Court of the IPR petition as soon as it was filed, and the failure to do so appears, at least to the undersigned Judge, to have been a glaring omission. By not notifying the Court, counsel have, at the very least, failed to comply with their general duty of candor and good faith to this Court because the IPR proceeding was clearly a “development which may conceivably affect the outcome of the litigation” – a fact best demonstrated by Plaintiff’s filing of the motion for reconsideration. However, in light of the undeveloped state of the law of this relatively new PTO review procedure, this Court’s admonition of all counsel involved in this case falls short of a formal reprimand of any of the individual lawyers. That said, the issuance of this Opinion is more than sufficient to place all patent practitioners on notice that future failures to disclose to the Court any concurrent inter partes review proceedings will be met with far sharper consequences.

In light of this recent opinion, perhaps we will see a trend of judges, including Judge Davis, making it an express requirement in their standing orders for patent cases that the parties must disclose to the court the existence of a petition for IPR concerning the patents-in-suit as soon as practicable, regardless of whether or not the PTAB has acted on the request.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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