PTAB Denies Customer’s “Follow-On” IPR Petition Based On Supplier’s Prior Petition
10/17/2019On October 3, 2019, the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office issued a Decision Denying Institution of Inter Partes Review (IPR) under 35 U.S.C. § 314(a). PayPal, Inc. v. IOENGINE LLC, IPR Case No. IPR2019-00884, Paper 22 (PTAB Oct. 3, 2019). The PTAB exercised its statutorily-authorized discretion to deny institution based primarily on a customer-supplier relationship between the instant petitioner and a prior petitioner.
In the now-precedential General Plastic decision, the PTAB identified seven “non-exhaustive” factors to consider when determining whether to exercise its discretion under 35 U.S.C. § 314(a) to deny a petition that challenges the same patent as a previous petition:
(1) whether the same petitioner previously filed a petition directed to the same claims of the same patent;
(2) whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known of it;
(3) whether at the time of filing of the second petition the petitioner already received the patent owner’s preliminary response to the first petition or received the Board’s decision on whether to institute review in the first petition;
(4) the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition;
(5) whether the petitioner provides an adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent;
(6) the finite resources of the Board; and
(7) the requirement under 35 U.S.C. § 316(a)(11) to issue a final determination not later than one year after the date on which the Director notices institution of review.
General Plastic Industries Co. v. Canon Kabushiki Kaisha, IPR Case No. IPR2016-01357, Paper 19 at 15–16 (PTAB Sept. 6, 2017) (designated precedential).
The PTAB has analyzed these factors in numerous institution decisions in various contexts—including “follow-on” petitions by the same petitioner as the first petition; by a new, unrelated petitioner; by a new, but related petitioner; and by a petitioner that had previously joined an earlier IPR and now seeks to file its own petition.
Here, IOENGINE filed a patent-infringement complaint in district court against PayPal, a customer of Ingenico. In response to PayPal requesting indemnity from Ingenico, Ingenico filed a declaratory judgment action in district court against IOENGINE, asserting non-infringement, as well as an IPR petition before the PTAB, challenging the patent’s validity. PayPal also filed its own IPR petition, in which it argued that the PTAB should not exercise its Section 314(a) statutory discretion in light of Ingenico’s co-pending petition because, among other things, (i) of “the stark difference in the claims challenged, the prior art relied upon, the grounds asserted, and the arguments made,” (ii) “PayPal and Ingenico are represented by separate counsel and their petitions are supported by different experts,” (iii) PayPal’s “petition was prepared under the sole direction and control of PayPal without contribution from Ingenico,” and (iv) “at the time PayPal filed its [petition], IOENGINE had not yet filed a preliminary response in the Ingenico IPR and thus PayPal did not receive any tactical advantage from the Ingenico IPR.”
Ingenico acknowledged in its mandatory notices that it has an indemnification agreement with [Petitioner] (see, e.g., IPR2019-00584, Paper 7 at 1), and in its declaratory judgment complaint relies on [Petitioner]’s indemnification request to [Ingenico] for purposes of standing. Ex. 2081 ¶ 9. Ingenico has further acknowledged that [Petitioner] is its customer, and that certain products accused of infringement in the PayPal Action are “supplied to [Petitioner] by Ingenico.” Ex. 2081 ¶¶ 7−8, 10. IOENGINE has asserted infringement claims against both Ingenico and [Petitioner] in the district court. Exs. 2029, 2030. Notably, [Petitioner] makes a concerted effort to separate itself from Ingenico, Petition at 7, but studiously avoids any mention or acknowledgment of the indemnification and supply relationship that is the basis for Ingenico’s involvement in these proceedings.
IOENGINE further argued that “[u]nder these circumstances, the relationship between Petitioner and Ingenico ‘incentivizes both parties to invalidate claims of [IOENGINE’s asserted patents]’ and ‘[i]n that sense, Ingencio [sic, Ingenico] is a clear beneficiary of [Petitioner’s] efforts in this inter partes review, and it follows readily that [Petitioner] represents Ingencio’s [sic, Ingenico’s] interests in this proceeding.’”
The PTAB agreed with IOENGINE, relying primarily on the recently-designated-precedential Valve Corp. decision, which addressed the impact of the relationship among petitioners on the General Plastic analysis. Valve Corp. v. Elec. Scripting Prods., Inc., IPR Case Nos. IPR2019-00062, -00063, -00084, Paper 11 (PTAB Apr. 2, 2019) (designated precedential). According to the PTAB, the existence of a significant and meaningful relationship between PayPal and Ingenico, and the substantial overlap in challenged claims, counseled toward the denial of PayPal’s petition.
This latest PTAB decision continues the ever expanding body of Section 314 case law, and once again demonstrates the PTAB’s reluctance to institute multiple IPR proceedings challenging the same patent.