Title 35 of the U.S. Code, Section 315(b), provides a one-year bar for petitioning inter partes review, which is triggered by service of a patent infringement complaint on the petitioner, a real party in interest or privy of the petitioner.
Because, according to the U.S. Patent and Trademark Office consolidated trial practice guide, the terms "real party-in-interest" and "privy" are invoked by courts to describe relationships and considerations "sufficient to justify applying conventional principles of estoppel and preclusion,"1 the U.S. Court of Appeals for the Federal Circuit in Applications in Internet Time LLC v. RPX Corp. in 2018 demanded a flexible approach in determining whether a nonparty is a real party-in-interest or privy.2
A Patent Trial and Appeal Board panel decided in Luminex International Co. v. Signify Holding BV on May 9 that even when a supplier is being sued by a retailer, the retailer is still a real party-in-interest in an IPR filed by the supplier such that the one-year bar under Section 315(b) applies.3 This case confirms that post-RPX, the board continues interpreting "real party-in-interest" broadly and expansively.
In this case, Luminex, a supplier, filed a petition against Signify, the patent owner, more than one year after a retailer, Menard Inc., was sued by Signify for patent infringement. Instead of challenging patent invalidity in defense, Menard filed a third-party complaint against parties including Luminex under earlier indemnification agreements.4
Under the agreement between Luminex and Menard, Luminex should "indemnify, defend and hold harmless Menard from and against all claims of any actual or alleged violation or infringement of any intellectual property right, including patent infringement arising from Menard's use, sale or offering for sale of any goods provided by Luminex."5
After being sued by Menard and dragged into the litigation, Luminex raised a cross-claim against Signify and alleged invalidity challenges against the patent-at-issue.6 In the IPR, Luminex explained that the one-year bar was not triggered by Signify's service of complaint on Menard, as Menard had no involvement or control in preparing the IPR petition and thus is not a real party-in-interest.7
In determining whether Menard is a real party-in-interest, the board applied a multifactor analysis, finding, inter alia, that the petition was filed at Menard's behest, because "Menard demanded defense from infringement liability, and Petitioner responded by initiating this proceeding seeking to free Menard from infringement liability."8
The board further compared the scopes of patentability challenges in the litigation and IPR, and found that Menard desired review of the patent-at-issue.9 The PTAB then examined Luminex's relationship with Menard, determining that Luminex represents not only its own interest but also Menard's interest, and the two parties have a mutual interest in establishing unpatentability/invalidity.10
The PTAB further reviewed the IPR issue from a practical and equitable standpoint, finding that "Menard will benefit from the redress that the board might provide in this proceeding because a decision determining that the challenged claims are unpatentable would relieve Menard from liability for infringement."11
To the board, Luminex's selling accused products to other customers does not diminish the potential benefit to Menard from this proceeding.12
Finally, despite the board's repeated earlier holdings that "an indemnification agreement, without something more, is insufficient to establish a real party-in-interest relationship,"13 the panel in Luminex found that Menard's public demands for indemnification from the petitioner and the petitioner's response to Menard's demands constitute "something more" about communications concerning indemnification.14
Accordingly, the board held that because Menard is a real party-in-interest in the IPR, Luminex's petition is statutorily barred under Section 315(b).
Practice Consideration
Disputes about real parties-in-interest and privity may arise when a nonparty in an IPR was previously sued for infringement by the patent owner, as exemplified in earlier cases and Luminex.
The Federal Circuit precedents consistently promoted flexible approaches in interpreting privity and real party-in-interest expansively for subsequent one-year bar determination.15
Luminex further shows that even when an indemnifying party is not sued by a patent owner for infringement, it can still be sued by the indemnified party and dragged into litigation by the agreement and be barred from filing an IPR against the patent owner.
Thus, when parties make business collaborations or transactions and enter into business agreements, they should proactively consider future PTAB proceedings and the potential statutory bar and carefully allocate infringement liability, determine the timing of entering agreements, and consider the best strategy in future litigations.
For example, a complaint filed by one party against another for indemnification may be treated as a public demand sufficient as the "something more" necessary to establish a real party-in-interest.
And because the real party-in-interest and privity relationship formed after the petition's filing may also trigger the bar, the timing of agreement execution and forming business collaboration also needs to be considered along with potential PTAB proceedings down the road.
Interestingly, in Luminex, the patent owner also alleged that the bar under Section 315(a) should apply because the cross-claim raised by Luminex that challenges patent validity should not be deemed a counterclaim that is exempt from the civil action time bar under Section 315(a).16
Although the board did not rule on this issue, petitioners who are third-party defendants in litigation probably should consider challenging patent validity as a defense to mitigate risks of such disputes in future IPR.
Footnotes
1. USPTO Consolidated Trial Practice Guide (2019), at 13.
2. Applications in Internet Time LLC v. RPX Corp. , 897 F.3d 1336, 1350 (Fed. Cir. 2018).
3. IPR2024-00101, Paper 10.
4. Id. at 12-13.
5. Id. at 13.
6. Id. at 14.
7. Id. at 26-28.
8. Id. at 35-37.
9. Id. at 37.
10. Id.
11. Id. at 38.
12. Id.
13. ASSA ABLOY AB v. CPC Patent Techs. PTY, Ltd., IPR2022-01094, Paper 19 at 24 (PTAB Feb. 2, 2023).
14. IPR2024-00101, Paper 10 at 41.
15. See e.g., RPX Corp., 897 F.3d 1336 at 1350; Power Integrations Inc. v. Semiconductor Components Indus. LLC , 926 F.3d 1306 (Fed. Cir. 2019).
16. IPR2024-00101, Paper 10 at 18-21.
Originally published by Law360.
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