United States: Facts Govern Real Party-in-Interest Determinations

TRW Automotive US LLC v. Magna Electronics Inc.; Paramount Home Entertainment Inc. v. Nissim Corporation

Addressing the real-party-in-interest (RPI) requirement of 35 U.S.C. § 312(a) in two separate proceedings, the U.S. Patent and Trademark Office (PTO) Patent Trial and Appeal Board (PTAB or Board) emphasized the fact-dependent nature of the inquiry and explained that the inquiry necessarily requires "totality of the circumstances" approach.  TRW Automotive US LLC v. Magna Electronics Inc., Case No. IPR2014-01497 (PTAB, Mar. 19, 2015) (Grossman, APJ.); Paramount Home Entertainment Inc. v. Nissim Corporation, Case Nos. IPR2014-00961, -00962 (PTAB, March 19, 2015) (Scanlon, APJ.).

In TRW Automotive v. Magna Electronics, the patent owner claimed that the petitioner failed to identify all of real parties in interest in violation of § 312(a)(2).  In this case, the petitioner identified TRW Automotive U.S. LLC as the sole real party in interest and identified TRW Automotive Holdings Corp. and TRW Vehicle Safety Systems Inc. as co-defendants in the related litigation.

The patent owner argued that TRW Automotive Holding Corp. was the "ultimate parent corporation" of the petitioner and therefore "undoubtedly exhibits a significant measure of control" over the petitioner's activities.  Among the evidence of "control," the patent owner cited the Annual Report of the parent company, noting that the report discussed the petitioner's financial position.  The patent owner also cited a statement in the report that the parent company "conduct[s] substantially all of our operations through subsidiaries" as further evidence of control.  As additional evidence, the patent owner identified certain press releases issued by the parent company, and pointed to the use of a common law firm by the Petitioner and the parent company for both the inter partes proceedings and the related litigation.

The PTAB rejected the patent owner's arguments and determined that the petitioner properly identified all of the real parties in interest. The PTAB explained that real parties in interest are determined under the totality of circumstances, and the process is a "highly fact-dependent question."  Factors that the PTAB may consider include whether a non-party funds and directs and controls an IPR petition or proceeding, the non-party's relationship with the petitioner and to the petition itself, and the nature of the entity filing the petition.  The PTAB particularly noted that a party "is not considered a real party-in-interest in an inter partes review solely because it is a joint defendant with a petitioner in a patent infringement suit.  The evidence as a whole must show the non-party possessed "effective control" over the petitioner."

Addressing the specific evidence cited by the patent owner, the PTAB determined that the Annual Report only generally stated the parent company's relationship to the petitioner and was not persuasive to establish sufficient opportunity to control "all aspects of Petitioner's business," including controlling the inter partes review.  Nor did the PTAB find evidence that the petitioner was acting as a proxy for the parent company, or that the parent company was involved in strategic planning, preparation and review of the IPR petition. Rather, the evidence merely demonstrated a "traditional parent/subsidiary business relationship."

In Paramount Home Entertainment v. Nissim, the PTAB denied the petitioner's request for rehearing of a decision denying institution of inter partes review.  In this case, the petitioner disagreed with the PTAB's "clearly erroneous" determination that Paramount Pictures Corporation was an unidentified real party-in-interest.  According to the petitioner, the record did not contain any evidence rebutting the presumption of corporate separateness between the petitioner and Paramount Pictures Corp.  The PTAB, however, pointed to "substantial evidence" presented by the patent owner showing Paramount Pictures to be "an involved and controlling parent corporation."

The PTAB was also not persuaded by the petitioner's attempt to address each of the individual pieces of evidence provided by patent owner (and relied upon by the Board) in deciding the real-party-in-interest issue.  As the PTAB explained, there is "no bright-line test" used to determine the necessary degree of participation, "the inquiry is not based on isolated facts, but rather on consideration of the totality of circumstances."  Because the petitioner's arguments did not consider the totality of the circumstances, they were not found to be persuasive.

Practice Note:  The PTAB emphasizes that the determination of a real party in interest is a highly fact-dependent question that is based on a totality of the circumstances.  When citing cases in support of your position to the PTAB, be sure that the facts closely align with your own.

Facts Govern Real Party-in-Interest Determinations

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