Dismissal Based on Petitioner’s Prior DJ Action Cannot Be Waived

In a covered business method review filed by petitioner GTNX, Inc., the petitioner sought review of four patents owned by patent owner INTTRA, Inc. The PTAB instituted trial on all four patents following the patent owner’s preliminary response. Notably, in its preliminary response the patent owner did not raise that the reviews were barred under 35 U.S.C. § 325(a)(1) based on petitioner’s prior invalidity challenge of the patents in a declaratory judgment action before a United States District Court. After the parties briefed the issue to the Board, the Board vacated its Decisions on Institution and terminated the CBMs based on the petitioner’s prior declaratory judgment action.

In its precedential SecureBuy decision, the Board noted that “§ 18 of the Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284, 329-31 (2011) (“AIA”) “provides that covered business method patent review proceedings shall employ all the statutory standards and procedures of a post-grant review (i.e., 35 U.S.C. §§ 321-29), except for those expressly excluded.” 35 U.S.C. § 325(a)(1), which is not expressly excluded by § 18 of the AIA, states:

(1) POST-GRANT REVIEW BARRED BY CIVIL ACTION.–A post-grant review may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.

In it papers the patent owner noted that the petitioner filed a declaratory judgment action challenging the validity of all four patents in 2011. Petitioner, in its opposition, did not dispute that it previously had filed a DJ challenging the validity of the patents at issue before it filed the CBM petitions. However, it argued that the patent owner waived its § 325(a)(1) defense by failing to raise it in its preliminary responses or in requests for rehearing on the Decisions to Institute the proceedings. It further argued that the Board’s decision in SecureBuy was not controlling.

The Board rejected the petitioner’s argument and held that § 325(a)(1) cannot be waived:

GTNX’s arguments, however, do not persuade us that these covered business reviews should not be terminated. 35 U.S.C. § 325(a)(1) is a statutory requirement and, thus, a Congressional limitation on the Board’s jurisdiction. GTNX provides no persuasive authority that such a statutory requirement may be waived. In fact, the statute itself does not authorize the Board or parties to waive the requirement by stating that (emphasis added), “review may not be instituted” if a petitioner files a civil action challenging the validity of a claim of the patent being challenged. Indeed, “[a]n agency may not confer power upon itself. To permit an agency to expand its power in the face of a congressional limitation on its jurisdiction would be to grant to the agency power to override Congress.” La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 374-75 (1986). Thus, institution of trial for covered business method review of a patent challenged by petitioner in a civil action that was filed before filing a petition for covered business method review is not within the discretion of the Board. Additionally, the requirement that a petitioner not have filed a civil action challenging the validity of a claim of the patent before filing the petition cannot be waived by a patent owner.

The Board then went on to reject the petitioner’s argument that SecureBuy was not controlling. Because SecureBuy was issued under agency authority as a precedential opinion, the Board held that it was controlling authority on this issue.
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This decision may provide some relief to patent owners who, through inadvertence or otherwise, may not have raised § 325(a)(1) in a preliminary response as a basis for denying institution of the petition. This decision also is consistent with the statutory intent of providing CBMs as an alternative, rather than in addition to, challenging the validity of the patents in district court. GTNX, Inc. v. INTTRA, Inc., Case IPR2014-00072 (PTAB Dec. 10, 2014) (Paper 20) (A.P.J. Green)

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.