The PTAB rejects Microsoft's attempt to institute an IPR proceeding almost 7 years after being served with a complaint involving the patent-at-issue

September 30, 2014

In Microsoft Corporation v. Virnetx Inc., Microsoft filed a petition seeking inter partes review of U.S. Patent No. 7,188,180 ("the '180 patent") on May 19, 2014. The '180 patent was asserted in a complaint for VirnetX Inc. v. Microsoft Corp., Case No. 6:07-cv-00080 (E.D. Tex. filed April 5, 2007) ("the 2007 complaint"), and a complaint for VirnetX Inc. v. Microsoft Corp., Case No. 6:10-cv-00094 (E.D. Tex. filed March 17, 2010) ("the 2010 complaint"). The '180 Patent also is involved in VirnetX Inc. v. Microsoft Corp., Docket No. 6:13-cv-00351 (E.D. Tex.) ("the 2013 complaint") as well as other pending litigation, two inter partes reexaminations (one concluded and one pending), and a second, concurrently filed inter partes review.

The issue before the Board was whether Section 315(b)'s one year time limitation to file a petition after being served with a complaint barred Petitioner's IPR in light of the 2007 and 2010 complaints or whether the time should run from the service of the 2013 complaint:

Petitioner was served with a complaint alleging infringement of the '180 patent on three occasions. The first complaint (i.e., the 2007 complaint) was served on April 5, 2007, and the second complaint (i.e., the 2010 complaint) was served on March 17, 2010. The 2007 complaint and the 2010 complaint were both served more than one year prior to the date on which the Petitioner filed the present Petition requesting inter partes review (February 4, 2014). The third complaint (i.e., the 2013 complaint) was served less than one year prior to the date on which the Petitioner filed the present Petition requesting inter partes review...As described above, 35 U.S.C. § 315(b) states that an inter partes review may not be instituted if the petition is filed more than one year after the date of service on Petitioner of a complaint alleging infringement of the patent.

Microsoft contended that Section 315(b) explicitly states that review may not be instituted if the petition is filed more than one year after the date a petitioner is served with "a" complaint. Thus, the 2013 complaint was served less than one year before the filing of the petition. In doing so, Microsoft argued that Section 315(b) is ambiguous when there are multiple complaints and it should be interpreted as the "a latest complaint" and not "a first complaint." The Board rejected Microsoft's interpretation and held that "[t]he statute prohibits institution of inter partes review if the petition is filed more than one year after the date petitioner is served with 'a' complaint. The record shows that in this case, Petitioner was served with 'a' complaint on April 5, 2007 (the 2007 complaint) and the Petitioner filed the present Petition for inter partes review on February 4, 2014." The Board held that, under these circumstances, Section 315(b) barred institution of inter partes review.

The Board further noted that the Court ordered the 2010 complaint dismissed with prejudice. However, Microsoft argued that the plaintiff voluntarily dismissed its action with prejudice before entry of final judgment and that this "has been found to nullify the legal effect of service of a corresponding complaint." Pet. at 4-5 (citing Universal Remote Control, Inc. v. Universal Electronics, Inc., Case IPR2013-00168, slip op. at 6 (PTAB Aug. 23, 2013) (Paper 9)). The Board explained that "according to Universal Remote Control, the Federal Circuit consistently has interpreted the effect of dismissals without prejudice as leaving the parties as though the action had never been brought." In that case the petitioner was unable to show that a dismissal with prejudice should be treated the same as a dismissal without prejudice - therefore, the petition was deemed to be too late. Id. For the same reason, the Board rejected Microsoft's argument.

Finally, Microsoft argued that the invalidity counterclaims or affirmative defenses in the 2007 and 2010 complaint were dismissed without prejudice. Microsoft also argued that a settlement and license agreement between it and the patent owner states that "a subset of 'affirmative defenses and counterclaims of (i) non-infringement and invalidity shall be dismissed without prejudice." The Board rejected these arguments because the complaints were dismissed with prejudice and Microsoft has not shown "persuasively that the date of any of Petitioner's affirmative defenses and counterclaims also pertain to the statute."

Petitioner argues that "the 'without prejudice' manner in which [Petitioner]'s affirmative defenses and counterclaims were dismissed placed [Petitioner] and [Patent Owner] in the same position as to invalidity that they would have been had the earlier invalidity action never been brought." Pet. 6-7. However, Petitioner does not show sufficiently that the "with prejudice" manner in which all claims asserted against Petitioner were dismissed (see, e.g., Ex. 1012) also places both Petitioner and Patent Owner in the same position as to "a complaint alleging infringement of the patent" (as per 35 U.S.C. § 315(b)). Rather, based on the "with prejudice" manner of the dismissal, it appears that the parties are not in the same position as if the action had never been brought.

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The Board's decision follows the line of decisions holding that the service of an earlier-filed complaint will start the one year clock running, absent a dismissal without prejudice of the infringement claims or a dismissal that leaves the parties "in the same position as if the action had never been brought."

Microsoft Corporation v. Virnetx Inc., Case IPR2014-00401 (PTAB Jul. 23, 2014) (Paper 10) (Siu, J.).

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. The authors represent inventors, patent owners and technology companies in patent licensing and litigation in U.S. District Courts and in the United States Patent and Trademark Office, including numerous IPRs currently pending before the PTAB. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Greg Cordrey at 949.623.7236 or GCordrey@jmbm.com.