Indemnity Agreement Does Not Equate to a “Real Party in Interest” to Create Time-Bar for Inter Partes Review

by McDermott Will & Emery

Apple v. Achates Reference Publishing

The Patent Trial and Appeal Board (PTAB, the Board) has concluded that an inter partes review of a patent is not time-barred if a petition was filed more than one year after the date on which an indemnity of the petition was served with a complaint alleging infringement of the patent.  Apple v. Achates Reference Publishing, Case IPR2013-00080 (PTAB, June 2, 2014) (Arbes, J.).

Achates Reference Publishing owned a patent which generally covered techniques for distributing one or more information products together, while reserving to the publisher the ability to control which products are actually installed on a user’s computer.  Achates accused Apple and several other defendants of infringing the patent.  Apple petitioned for inter partes review of the patent on the basis that the patent was invalid as anticipated or obvious based on several references.  Achates argued that Apple’s petition was time-barred under § 315(b), which provides that an inter partes review may not be instituted based on a petition “filed more than one 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.” Specifically, Achates contended that QuickOffice, one of Apple’s co-defendants in the related litigation, was served with a complaint alleging infringement of the patent more than one year before the filing date of Apple’s inter partes review petition.

Achates argued that QuickOffice had a pre-existing substantive legal relationship with Apple and, therefore, was in privity with Apple.  Specifically, Achates argued that QuickOffice agreed to Apple’s software development kit for developing iPhone applications, which required the developer (QuickOffice) to indemnify Apple for third party patent infringement claims.  Thus, according to Achates, QuickOffice could not settle the litigation without Apple’s consent and was in privity with Apple.

The PTAB disagreed, noting that privity, in patent law and in other areas of law, exists between parties whose relationship is sufficiently close such that both should be bound by the trial outcome and related estoppels.  The Board explained that common relationships where there is privity include preceding and succeeding owners of property, bailee and bailor, and assignee and assignor. In these relationships, privity exists as much from the needs of property law as from the values of preclusion by judgment. The relationship between Apple and its developers, such as QuickOffice, is different from these common privity relationships because Apple’s relationship does not involve a successive interest in the same property or any control by Apple over the actions of its developers that do not implicate Apple’s rights.

The Board also observed that, in the related litigation, Achates accused Apple of infringing the patent due to its own actions, as well as those of QuickOffice, and Achates accused QuickOffice of infringing the patent due to its activities in the Apple App Store, as well as other systems (e.g., the Amazon App Store for Android).  Thus, there is a distinct basis for liability against Apple and against QuickOffice.  In the view of the Board, these allegations further distinguished the relationship between Apple and QuickOffice from the common privity relationships.

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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