A recent dismissal in a declaratory judgment action filed by BMW of North America and Bayerische Motoren Werke marked the conclusion of BMW Group's long-fought battle against Arigna Technology (Arigna).
The dispute spanned multiple venues, including US district courts, the US International Trade Commission (ITC), the Federal Circuit, and the US Patent and Trademark Office (USPTO). The victory resulted from a multi-faceted legal approach that involved strategic use of both district court litigation and Patent Trial and Appeal Board (PTAB) proceedings.
This article, contributed by the Finnegan attorneys involved, outlines strategic decisions that resulted in BMW Group's victory and underscores how an integrated litigation and PTAB strategy plays a critical role in dismantling the litigation efforts of PAEs seeking to extract a settlement payment.
Arigna's Infringement Campaign Against BMW Group
Arigna, an Irish patent monetisation firm affiliated with Atlantic IP Services, embarked on a wide-ranging litigation campaign against several automotive giants, including BMW Group. Arigna accused BMW Group of infringing four semiconductor-related patents, including US Patent No. 8,289,082 (“the '082 patent”), which became the focal point of the protracted disputes.
The goal of Arigna's litigation campaign was to extract settlements from the automotive giants for their use of allegedly infringing semiconductor chips in their respective vehicles.
Arigna's strategy initially appeared solid, involving multiple district court lawsuits each filed in the US District Court for the Eastern District of Texas, a forum often favoured by patent assertion entities (PAEs) for its perceived plaintiff-friendly environment, and a corresponding complaint filed with the ITC.
As it relates to the '082 patent, in May 2021, Arigna sought to have the ITC ban the importation of several hybrid and electric BMW Group vehicles into the US under Section 337 of the Tariff Act of 1930.
Following institution of the ITC investigation, the case originally filed in the US District Court for the Eastern District of Texas was stayed. In December 2022, the ITC issued a final determination in BMW Group's favour, finding no violation of Section 337.
Agreeing with BMW Group's key arguments, the Administrative Law Judge ruled that the asserted '082 patent claims were invalid and not infringed. This victory not only ensured that BMW Group's fuel-efficient hybrid and electric vehicles would remain available for sale throughout the United States, but it also dealt a significant blow to Arigna's enforcement campaign.
Although BMW Group's victory at the ITC was a pivotal moment in its defence, it did not stop Arigna from pressing on with its case. Following its ITC defeat, Arigna resumed litigation in Texas, alleging that the use of certain chips in BMW Group vehicles infringed the '082 patent.
However, with BMW of North America already dismissed from the case due to improper venue, and the other vehicle co-defendants no longer in the case due to settlement, Arigna sought to press its claims in Texas against BMW AG alone.
BMW Group's Integrated Litigation and PTAB Strategy
The advantages of a multi-faceted approach in combating Arigna's litigation campaign were clear from the outset. Rather than settle, BMW Group opted for a coordinated strategy that leveraged both district court litigation and proceedings before the USPTO to challenge the enforceability of Arigna's patent.
BMW Group's integrated litigation and PTAB strategy focused on securing procedural victories to build a strong defensive position and dismantle Arigna's allegations surrounding the '082 patent.
While the ITC investigation was still pending, BMW Group filed a petition for Inter Partes Review (IPR) challenging the '082 patent. The timing of the IPR was such that an institution decision came out before a final determination issued in the ITC investigation, which required Arigna to juggle litigations on multiple fronts.
Although the PTAB declined to invalidate the patent, BMW Group maintained its challenge on the patent's validity by appealing the decision to the Federal Circuit.
In response to Arigna's effort to resume its case in Texas, BMW Group filed a declaratory judgment action in the US District Court for the District of Columbia, seeking a declaration of non-infringement and invalidity for the '082 patent.
In this declaratory judgment action, BMW Group averred that the DC court had jurisdiction over Arigna pursuant to the District of Columbia's long-arm statute in view of Arigna's pursuit of its business of acquisition, enforcement, and attempted monetisation of patents in DC, including actions related to the ITC investigation.
To further compound challenges to the '082 patent's validity, BMW Group also filed an Ex Parte Reexamination (EPR) with the USPTO. The EPR focused on prior art separate from the references used in the IPR. Specifically, the EPR used the prior art reference that BMW Group had successfully used to invalidate claims at the ITC.
The USPTO granted BMW Group's request for reexamination, finding a substantial new question of patentability for the challenged claims. This strategic use of the EPR added another layer of pressure on Arigna, further undermining the patent's validity.
Once the declaratory judgment action was filed, BMW Group also moved to dismiss Arigna's claims in the Eastern District of Texas on various grounds, including improper venue and failure to join a necessary and indispensable party. Arigna argued that its case in the Eastern District of Texas should proceed as the first filed action, despite having dismissed BMW of North America.
BMW Group maintained the declaratory judgment action is the first-filed district court action that allows both BMW Plaintiffs to defend their products and customers and fully resolve the disputes between the parties.
As BMW Group mounted its defence in the co-pending District of Columbia action and sought to move out of Texas, Arigna's internal challenges with its litigation funder started to surface.
In the midst of the litigation, Arigna became embroiled in a highly publicised dispute with its litigation funder, Longford Capital Fund III. This dispute, which concerned the allocation of legal fees and costs in a separate litigation campaign, eventually led to the withdrawal of Arigna's original legal counsel, Susman Godfrey, from the case.
The public fallout from the funding dispute severely undermined Arigna's litigation efforts. With the loss of its legal representation and their wealth of institutional knowledge of the patent in suit and Arigna's enforcement campaign generally, and facing a well-coordinated defence from BMW Group, Arigna had little choice but to concede.
Arigna eventually agreed to grant BMW Group a covenant-not-to-sue on the '082 patent, effectively abandoning its claims of infringement. On September 10, 2024, Judge Contreras dismissed Arigna's counterclaim of infringement in the District of Columbia action with prejudice, marking the end of the litigation and, in effect, Arigna's broad enforcement campaign against BMW Group.
Key Lessons for IP Litigants and Legal Counsel
BMW Group's victory in this extensive legal battle offers several key lessons for legal counsel and companies facing aggressive PAEs seeking to extract settlement:
Integrated Litigation and PTAB Strategy
BMW Group's success demonstrates the importance of coordinating litigation with PTAB proceedings. By challenging the validity of Arigna's patents at the PTAB while simultaneously defending itself in district court, BMW Group was able to apply pressure on all fronts, weaken the portfolio of patents asserted against BMW Group, and strengthen its case for non-infringement.
Proactive Use of Declaratory Judgment Actions
Filing a declaratory judgment action allowed BMW Group to seize control of the litigation and bring the case into a forum less frequented by patent plaintiffs. This strategic move forced Arigna to defend its patent outside of its favoured court, ultimately contributing to its decision to abandon the case.
Patience and Persistence
BMW Group's refusal to settle with Arigna, despite the financial pressures of litigation, was critical to its success. PAEs often rely on the threat of prolonged litigation to extract settlements, but BMW Group's unwavering commitment to defending its position paid off in the end.
Impact of Internal Disputes
Arigna's internal disputes with its litigation funder and legal counsel highlight the risks PAEs face when relying on third-party funding. Disagreements over fees and strategy can severely undermine a plaintiff's case, as evidenced by Arigna's decision to withdraw from the litigation.
Importance of Procedural Aspects
BMW Group's procedural victories, including stays pending Patent Office proceedings and the dismissal of Arigna's claims in the Eastern District of Texas, helped shape the litigation in BMW Group's favour.
Conclusion
BMW Group's victory over Arigna is a testament to the power of a well-coordinated litigation and PTAB strategy.
By challenging the validity of Arigna's patents on multiple fronts and defending itself vigorously in court, BMW Group secured a decisive victory without paying any settlement or licensing fees.
For legal counsel and companies facing similar challenges, this saga demonstrates that integrated litigation and PTAB strategies, strategic foresight, and persistence can lead to favourable outcomes when combating aggressive PAEs.
Originally published by World Intellectual Property Review
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