Closeup of hands on clock face

Neither the Federal Circuit nor the PTAB has provided much guidance concerning the proper application of the one-year time-bar for filing IPRs when privity is alleged.  Recently, however, in AM General LLC v. UUSI, LLC, Case IPR2016-01049, Paper 14 (PTAB November 7, 2016), the PTAB has provided some guidance.

On May 18, 2016, Petitioner AM General LLC filed a Petition requesting inter partes review of various claims of U.S. Patent No. 5,570,666 (“the ‘666 Patent”).  In its Preliminary Response to the Petition, filed on August 19, 2016, the Patent Owner, UUSI, LLC, urged denial of the Petition, contending the petition was time barred. 

The Patent Owner noted that Petitioner had been served with an amended complaint alleging infringement of the ‘666 patent more than a year before it filed its petition seeking inter partes review. The Patent Owner pointed out that it had served petitioner with a copy that amended complaint in connection with an U.S. Court of Claims action against the U.S. government.  Pursuant to 28 U.S.C. § 1498, the Petitioner as the government’s supplier was deemed an interested party in the Court of Claims action.

The Patent Owner also asserted that Petitioner was in privity with the government as a consequence of its participation in the Court of Claims litigation, and because it had agreed to indemnify the government against liability.   On this basis, Patent Owner argued that its service of the amended complaint upon the government was sufficient to begin the one year period of limitations for filing an IPR petition.

The one year limitations period is set forth in 35 U.S.C. § 315(b).  That section provides, “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”  35 U.S.C. § 315(b) (emphasis added).

Petitioner countered that it had not been served with a complaint for patent infringement within the meaning of § 315(b).   First, Petitioner contended that claims against the government under § 1498 are not claims for patent infringement, arguing that it was well established that the government cannot be sued for patent infringement.  Claims under this statute, argued Petitioner, are more akin to those seeking compensation for a taking under the government’s powers of eminent domain.

Second, Petitioner argued that the time bar under § 315(b) requires service upon a defendant. Petitioner pointed out that it was merely an interested party in the action against the government.

Third, in response to Patent Owner’s alternative argument that service on the government constituted service upon the Petitioner’s privy, Petitioner noted that precedent established that it could not be bound by the Court of Claims judgment.  Disposing of the Patent Owner’s remaining arguments, the Petitioner further observed that neither its indemnity commitments, nor the existence of a supplier-customer relationship, were sufficient to create privity between it and the government.

In instituting review, the PTAB agreed with Petitioner, concluding that the Petitioner was not time-barred from filing its Petition because the Petitioner was never “served with a complaint alleging infringement of the patent” within the meaning of § 315(b).

According to the PTAB, the § 315(b) “does not apply to a third party defendant in a [Court of Claims] action, such as Petitioner here, that was served with a copy of the complaint against the Government alleging infringement of the patent under 28 U.S.C. § 1498, but is at most only a nominal defendant in the action.”  Id. at 8.  The PTAB found it particularly important that no claims were specifically directed against the Petitioner, and that any judgment would not bind Petitioner—in spite of Petitioner’s participation in that action.

The PTAB concluded that service on the government was not service upon Petitioner’s privy.  The PTAB looked to USPTO Trial Practice Guide and Federal Circuit precedent for guidance concerning the meaning of “privy”.  See USPTO Trial Practice Guide, 77 Fed. Reg. 48,756, 48, 759 (“privity is essentially a shorthand statement that collateral estopped is to be applied in a given case); Aspex Eyewear, Inc. v. Zenni Optical, Inc., 713 F.3d 1377, 1382 (Fed. Cir. 2013) (“a full and fair opportunity to litigate is the touchstone of any preclusion analysis”).  The PTAB thus determined: “in analyzing ‘privity’ for purposes of 35 U.S.C. § 315(b), it is important to consider “whether the non-party exercised or could have exercised control over a party’s participation in a proceeding.”  Id. at 4.  Applying these principles, the PTAB observed that the Petitioner lacked a “full and fair opportunity to litigate the invalidity issues in the [Court of Claims] action” because the Petitioner cannot appeal any final judgment, was not in control of that action, and, despite the indemnity agreement, was not required to defend any claims against the U.S. government.  Id. at 5.  The PTAB also agreed with Petitioner that a judgment against the government “cannot support the assertion of issue preclusion against a government contractor or supplier such as Petitioner”.  Id.  The PTAB therefore concluded that the government is not a privy of the Petitioner, such that Patent Owner’s service to the government did not trigger the one-year time bar against the Petitioner.