Last week we outlined our suggestions as to what an IPR petitioner should assert in an IPR action to avoid triggering the "could have raised" estoppel in a later filed district court action. But what if the party involved in the later filed district court proceeding was not the petitioner in the IPR proceeding? Can unraised IPR grounds be later asserted by a different party in the court proceeding if the IPR petitioner failed to raise them?
A final written decision by the PTAB estops not only the petitioner, but also any "real party-in-interest or privy of the petitioner," from asserting in district court litigation that "the claim is invalid on any ground that the petitioner raised or reasonably could have raised" during the IPR proceeding. 35 U.S.C. § 315(e)(2). However, which parties may constitute a "real party-in-interest or privy of the petitioner" is not very clear. The America Invents Act (AIA) does not specifically define a "real party-in-interest" and "whether a party who is not a named participant in a given proceeding nonetheless constitutes a 'real party-in-interest' or 'privy' to that proceeding is a highly fact-dependent question" which will be handled by the Board on a case-by-case basis (link). As stated by Chief Judge James Donald Smith of the PTAB, "courts and commentators agree that there is no 'bright-line test' for determining the necessary quantity or degree of participation to qualify as a 'real party-in-interest' or 'privy'…"
Two recent decisions of the PTAB addressed whether a non-party to an IPR should be considered a real party-in-interest. In ZOLL Lifecor Corp. v. Philips Electronics North America Corp. (IPR2013-00609, Paper No. 15), the PTAB determined that ZOLL Medical, the 100% owner of Petitioner ZOLL Lifecor, was both a real party-in-interest and a privy of the Petitioner. Factors for determining whether the requisite control exists to make a non-party a real party-in-interest include (1) the "existence of a financially controlling interest," (2) the "non-party's relationship with the petitioner," (3) the "non-party's relationship to the petition itself, including the nature and/or degree of involvement in the filing," and (4) the nature of the entity filing the petition. Facts showing ZOLL Medical's control of ZOLL Lifecor included the Petitioner being a wholly owned subsidiary, the subsidiary's product being advertised on the parent company's website, the parent authorizing the subsidiary's budget and plans, and the parent's management team attending a court ordered mediation on behalf of the subsidiary.
In Denso Corp. v. Beacon Navigation BmbH (IPR2013-00026, Paper No. 34), the PTAB determined that all claims of the patent at issue to be unpatentable. The Patent Owner argued that the petition was deficient for a failure to identify Mazda and Nissan, defendants in a litigation involving the patent. The Patent Owner alleged that the fact that Mazda's attorneys in the related litigation were also co-Petitioner Denso's IPR counsel and Nissan's attorneys in the related litigation were also co-Petitioner Clarion's IPR counsel was evidence that Mazda and Nissan were real parties-in-interest and in privity with the Petitioners. However, the PTAB disagreed, finding that there was no evidence that "the alleged additional real-parties-in-interest have engaged in strategic planning, preparation, and review of the Petition."
One factor the PTO has emphasized in deciding privity issues is control; specifically, whether the party controlled or could have controlled a petitioner's participation in a PTAB trial. Although there is not any PTO or district court decision as of date addressing the question of when control must be present in order for the AIA estoppel provisions to apply, presumably that control must exist prior to the final written PTAB decision before a court or the PTO would apply the estoppel provisions. Other factors recognized by the Supreme Court as being relevant to deciding privity in the res judicata context, which serves as the rationale for the bar and estoppel provisions, include (1) agreements to be bound; (2) pre-existing "substantive legal relationships;" (3) adequate representation by parties with the same interests; (4) relitigating through proxies; and (5) special statutory schemes that "expressly foreclose successive litigation by nonlitigants." (See Taylor v. Sturgell, 553 U.S. 880, 893-95 (2008). However, these factors do not "establish a definitive taxonomy." Although the PTAB has opined on each of these factors, it has stated that neither indemnity agreements nor joint-defense groups (together or by themselves) are sufficient to produce "substantive legal relationships." (Broadcom Corp., Cases IPR2013-00601, IPR 2013-00602, IPR 2013-00636, Paper 23, at *7-11 (PTAB Jan. 24, 2014)).
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Polsinelli attorneys will be able to navigate these complex privity issues for you to determine the real parties-in-interest. For questions in this area or any other business needs you may have, please contact the author or your Polsinelli attorney.