Latest Federal Court Cases - April 2021 #3

Schwabe, Williamson & Wyatt PC

Schwabe, Williamson & Wyatt PC

Mojave Desert Holdings, LLC v. Crocs, Inc., Appeal No. 2020-1167 (Fed. Cir. Apr. 21, 2021)

The Federal Circuit issued a single precedential patent case this week—a modified version of a non-precedential order issued February 11, 2021 concerning substitution of a successor company for a bankrupt company in PTAB proceedings. The modified version of the order has been designated precedential, with a dissenting opinion issued by Judge O’Malley.

The case relates to Crocs’s design patent for footwear. Crocs sued U.S.A. Dawgs, Inc. for infringement of a design patent. U.S.A. Dawgs thereafter filed a third-party request for inter partes reexamination of the patent. The USPTO ordered reexamination, and the district court stayed the infringement proceedings. The examiner rejected the claim, and Crocs appealed to the PTAB. While that appeal was pending, U.S.A. Dawgs filed for chapter 11 bankruptcy. In the bankruptcy, U.S.A. Dawgs sold its assets to Dawgs Holdings, LLC, which subsequently sold the “litigation claims” to Mojave. Mojave then moved to be substituted for U.S.A. Dawgs in the inter partes reexamination. The Board denied the request, finding that Mojave had failed to establish that it was the real party in interest because the bankruptcy sale did not explicitly state that the transfer from U.S.A. Dawgs to Dawgs Holdings included the rights in relation to the inter partes reexamination. The Board also found that Mojave did not have standing and failed to file its request within 20 days of any change, as required by 37 C.F.R. § 418(a).

The Board thereafter reversed the examiner’s rejection of the patent. U.S.A. Dawgs appealed, and it and Mojave moved to substitute parties so that Mojave would be the party in interest in the appeal. This case concerned the motion to substitute filed with the Federal Circuit.

After reviewing the various contractual agreements, the Federal Circuit held that Mojave was the successor in interest to the rights relating to the inter partes reexamination. The Court also rejected an argument that Mojave’s motion was untimely under 37 C.F.R. § 418(a), finding that the Board had erred in relying on this regulation to disallow Mojave to substitute:

If the Board were permitted to preclude substitution on the basis of a transfer in interest because of a late filing, this would defeat the important interest in having the proper party before the Board. The Board erred by not substituting Mojave as the third-party requester while the inter partes reexamination was pending before the Board.

The Court also rejected arguments that the interest of a requestor cannot be assigned under 35 U.S.C. § 141, and that Mojave did not have standing to appeal.

Judge O’Malley issued a one sentence dissent, relying on arguments in Crocs’s Motion for Reconsideration.

Meanwhile, on February 18, 2021, the Federal Circuit heard the appeal and affirmed the PTAB’s ruling. That six-page decision was designated non-precedential. A copy can be found here.

A copy of the opinion can be found here.

By Nika Aldrich

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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