The PTAB Authorizes the Patent Owner to File Its Motion for Leave to Take Discovery of General Electric on Possible Privity with a Customer-Defendant

October 23, 2014

In General Electric Co. v. Transdata, Inc., the patent owner requested authorization to file a motion for leave to take discovery of petitioner General Electric regarding whether GE is in privity with a defendant in litigation with the patent owner. Should the patent owner prevail and prove that GE is in privity with its customer, then the patent owner asserts that an inter partes review cannot be instituted because of the time limitations under 35 U.S.C. ยง 315(b), presumably because GE's customer was served with a complaint more than one year before the petitioner filed the instant IPR petition.

The patent owner seeks the production of the following information:

(1) an indemnification agreement between Petitioner and [customer] that was claimed to be entered into around December 30, 2011; (2) any other indemnification agreements between Petitioner and [customer] regarding the Oklahoma litigation; (3) communications regarding these indemnification agreements; (4) retention agreements between Petitioner, [customer], and counsel for Petitioner and [customer] in the Oklahoma litigation; (5) the amounts of legal bills paid by Petitioner for its defense of the Oklahoma litigation; and (6) indemnification agreements between Petitioner and other defendants in the Oklahoma litigation.

The patent owner identified four "pieces of evidence" that it suggests show that there is a privity relationship between the petitioner and its customer. First, the patent owner filed suit against the customer and not the petitioner. Second, the patent owner asserts that it discovered the petitioner's standard terms and conditions with its customers applicable to the accused products. Third, those terms and conditions require the petitioner to indemnify the customer and give the petitioner the sole authority to control the defense of any litigation against its customers. Fourth, the customer replaced its original outside counsel with a firm that represents the petitioner.

Petitioner GE responded that the standard terms and conditions discovered by the patent owner do not relate to the products accused of infringement in the suit between the patent owner and the customer. Thus, the sought-after discovery was speculative and not in the interests of justice. GE further argued that the relevant proceeding on which privity should be considered is the IPR and not the litigation. That is, the petitioner argued that the relevant issue is whether the customer is controlling the IPR and not whether the petitioner is controlling the litigation. Thus, the requested discovery would not be inconsistent with the petitioner's statement in its petition that its customers are not real-parties-in-interest or in privity with petitioner regarding the IPR proceeding.

After considering both parties' positions, the Board authorized the filing of the motion but required the patent owner to "explain specifically what discovery is requested and why each category of such discovery is 'necessary in the interest of justice.'"

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Although the Board authorized only the filing of patent owner's motion (and has not yet required the production of the sought-after information), this decision raises important issues regarding the relevant proceeding about which privity should be considered (IPR vs. litigation; but see Broadcom Corp. v. TELEFONAKTIEBOLAGET LM ERICSSON, Case No. IPR2013-00601, Paper No. 23 (PTAB Jan. 24, 2014)(analyzing the control over the litigation for privity-related discovery motion)), whether there is sufficient evidence suggesting that the sought-after discovery meets the "interests of justice" standard, and, if the discovery is allowed, the evidence necessary to show that the petitioner is in privity with its customer sufficient to bar the petitioner from seeking inter partes review because of the statutory time limits under Section 315(b). General Electric Co. v. Transdata, Inc., Case IPR2014-01380 (PTAB Oct. 20, 2014) (Paper 11) (Kaiser, 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.