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PTAB Refuses to Vacate Holding that Patent Claims are Invalid Despite Petitioner’s “Abandonment” of the CBM

In an IPR petition filed by petitioner, the petitioner sought review of patent owner, VirtualAgility, Inc.’s U.S. Patent No. 8,095,413. The PTAB instituted trial on November 19, 2013, the Patent Owner filed its Patent Owner Response on January 28, 2014, the Petitioner then filed its Reply on April 11, 2014, oral argument was held on July 14, 2014, and a Final Written Decision was rendered on September 16, 2014. In the Final Written Decision, the Boart held that Petitioner has proven, by a preponderance of the evidence, that claims 1-21 of the ‘413 patent are unpatentable.

As a result, on November 18, 2014, the Patent Owner filed a Notice of Appeal to the Court of Appeals for the Federal Circuit. At the same time, the parties filed a Joint Motion to File Settlement Agreement as Confidential Business Information. Subsequently, on November 21, 2014, the Patent Owner requested authorization to file a motion to vacate the Final Written Decision and to terminate the proceeding after the Final Written Decision was vacated. After hearing from the Patent Owner, the Board denied its request.

The Patent Owner argued that the Petitioner had “abandoned” the proceeding based on a statement in the settlement that “Petitioner will take no further action in this proceeding and will not participate in any subsequent appeal.” The Board rejected the Patent Owner’s characterization that, pursuant to a settlement between the parties, the Petitioner had “abandoned” the proceeding and, on that basis, the Final Written Decision should be vacated:

At this stage of the proceeding, where Petitioner already has proven by a preponderance of the evidence that claims 1-21 of the ‘413 patent are unpatentable, and where a Final Written Decision already has been rendered, lack of further participation by Petitioner in this proceeding and in any subsequent appeal is inconsequential to the merits or legitimacy of the Final Written Decision. Such “abandonment,” if even appropriate to be referred to as “abandonment,” does not undo the work Petitioner already has done in completing trial and obtaining an adverse judgment against Patent Owner. No more participation by Petitioner is either necessary or required. The claims already have been proven unpatentable.

The Board then went on to reject the Patent Owner’s characterization that the trial was not yet complete:

We disagree with Patent Owner’s characterization that trial before the Board is not yet complete. Patent Owner’s rationale is this: (1) a covered business method review is a trial per 37 C.F.R. § 42.300; (2) a trial is a contested matter per 37 C.F.R. § 42.2; and (3) because Patent Owner is appealing the Board’s Final Written Decision, the matter remains contested, and that means trial is not yet complete. Appellate review, however, is not a part of the trial before the Board. Trial before the Board is complete when the Final Written Decision was entered.

The Board further explained that pursuant to 35 U.S.C. § 327(a), “the Board may continue to completion of trial to render judgment even if the parties have settled and the proceeding is terminated with respect to each petitioner. [Thus,] [i]f the Board can proceed to issuance of a Final Written Decision despite settlement between the parties and termination of the proceeding with respect to each petitioner, an already issued Final Written Decision should not be vacated based on settlement between the parties.”

The Board also rejected the Patent Owner’s argument that no public interest remains in a CBM where the parties have settled. Relying on the Supreme Court’s U.S. Bancorp decision, the Board explained the value of judicial precedents to the public interest and legal community as a whole:

There is “a strong public interest in the finality of judgments in patent litigation.” Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 100 (1993). Here, the public interest lies in not having claims which have been proven unpatentable remain in an issued patent, whether or not all disputes between two parties to a law suit with regard to that patent have been resolved. In that regard, we note also the following statement from the Supreme Court:

Judicial precedents are presumptively correct and valuable to the legal community as a whole. They are not merely the property of private litigants and should stand unless a court concludes that the public interest would be served by a vacatur. U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 26 (1994) (citation omitted).

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This decision illustrates the difficulty of convincing the Board to vacate a Final Written Decision even where the parties have reached a settlement. In fact, the Board’s citation to 35 U.S.C. § 327(a) suggests that a settlement before a Final Written Decision will not automatically terminate the proceeding. Thus, litigants would be advised to seek a resolution well before the Final Written Decision, ideally before the briefing is complete, if ultimately they will seek a dismissal of the proceeding., Inc. v. VirtualAgility,Inc., Case IPR2013-00024 (PTAB Nov. 24, 2014) (Paper 52) (A.P.J. Lee)

The authors of 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