Applications In Internet Time LLC V. RPX Corp

Applications in Internet Time LLC challenged the institution and subsequent invalidation of its patents US7356482 and US8484111 based on its contention that the filer, RPX Corp., was a real party in interest with Salesforce.com Inc. and thus subject to the one-year time bar for filing an IPR.

At the time of filing the IPRs, AIT objected to PTAB that the three IPRs filed by RPX were time-barred under 35 USC 315 (b). AIT contended that RPX was acting as a “proxy” for one of its clients, Salesforce.com, Inc., on whom AIT had served a complaint alleging infringement of the two patents at issue more than one year before RPX filed its petitions before the PTAB and that RPX was thus time barred from filing. The Court found that the PTAB had applied an “unduly restrictive test” in its determination that Salesforce was not a real party in interest within the meaning of the statute.

After RPX filed its petitions, AIT requested and was granted permission by the PTAB to compel additional discovery on the issue of whether Salesforce was a real party in interest to the RPX petitions.

The PTAB relied on the following legal standard to determine that Salesforce as a not a real party in interest:

Whether an entity that is not named as a participant in a given proceeding constitutes [a real party in interest] is a highly fact-dependent question that takes into account how courts generally have used the terms to “describe relationships and considerations sufficient to justify applying conventional principles of estoppel and preclusion.” Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,759 (Aug. 14, 2012).

The Trial Practice Guide:

[T]he spirit of that formulation as to IPR . . .proceedings means that, at a general level, the “real party-in-interest” is the party that desires review of the patent. Thus, the “real party-in-interest” may be the petitioner itself, and/or it may be the real party or parties at whose behest the petition has been filed.

Considerations may include, for example, whether a non-party exercises control over a petitioner’s participation in a proceeding, or whether a non-party is funding the proceeding or directing the proceeding.

A petition is presumed to identify accurately all RPIs. See Zerto, Inc. v. EMC Corp., Case IPR2014-01295, slip op. at 6–7 (PTAB Mar. 3, 2015) (Paper 34). When a patent owner provides sufficient evidence prior to institution that reasonably brings into question the accuracy of a petitioner’s identification of RPIs, the overall burden remains with the petitioner to establish that it has complied with the statutory requirement to identify all RPIs. Id.

In its final written decision, the Board rejected AIT’s real party in interest challenges and invalidated all claims of the challenged patents. AIT appealed.

The CAFC began its review by citing the Chevron legal standard requiring that a Court reviewing an administrative agency’s construction of a statute first discern “whether Congress has directly spoken to the precise question at issue.” Where it has not, as in the instant case, the Court must consider “whether the agency’s answer is based on a permissible construction of the statute.” In considering the language of Section 315(b), the Court noted that the inclusion of the terms “real party in interest” and “privy of the petitioner” makes it clear that the provision was intended to apply broadly. The Court noted that “Congress did not speak of there being only one interested party in each case; instead, it chose language that bars petitions where proxies or privies would benefit from an instituted IPR, even where the petitioning party might separately have its own interest in initiating an IPR.”

The use of familiar common law terms such as “privy” and “real party in interest” indicated to the Court that Congress “intended to adopt common law principles to govern the scope of Section 315(b)’s one-year bar” The Court then construed the term “real party in interest” in light of its common law definition and precedent. It noted that “Congress clearly did not intend for the term ‘real party in interest’ to be interpreted so broadly as to mean that ‘anyone who otherwise would be able to petition for IPR’ will always be deemed the sole real party in interest.” This interpretation would “render the terms ‘petitioner’ and ‘privy of the petitioner’…meaningless” while also rendering meaningless Section 315(e)’s two estoppel provisions.

Next, turning to the legislative history of the AIA, the Court noted that there was “nothing that suggests Congress intended for the term ‘real party in interest’ to have a meaning that departs from its common-law origins.” Based on these findings, the Court  found that Congress meant for the term “real party in interest” to have its common law meaning.

In applying these factors to the instant case, the Court found that the Board failed to consider the fact that in filing an IPR on behalf of a client, RPX is serving its client’s financial interests. Rounding on the PTAB, the Court explained that “the Board’s failure to consider Salesforce’s interest in the IPRs, its decision not to examine critically either RPX’s business model, its underestimation of the relevance, in the context presented here, of the fact that Salesforce and RPX had overlapping members on their respective boards of directors, and its decision to accept at face value RPX’s explanation of its own interest in the IPRs indicates that the Board did not adequately assess whether Salesforce actually ‘desire[d] review of the patent[s].’ “

Concluding its opinion, the Court wrote “the Board’s determination that Salesforce was not a real party in interest under 315(b) relied on an impermissibly narrow understanding of the common-law meaning of the term, was not based on consideration of the entirety of the administrative record, and seemingly misallocated the burden of proof. Any one of these errors might warrant vacatur—together, they compel it.”

Check back soon for opinion and analysis from IPVal on this case and its ramifications on the industry.

See our last Case Law review: An Unexceptional Case: Syncpoint v. Nintendo