By John W. Scanlan, J.D.
In deciding an issue of first impression, the Federal Circuit ruled that privity and RPI relationships that arise after filing but before institution should be considered for purposes of the time bar in Sec. 315(b).
An inter partes review (IPR) of a patent’s claims was time barred because a time-barred entity was a real party in interest (RPI) at the time the IPR was instituted, even though it was not an RPI at the time the petition was filed, the U.S. Court of Appeals for the Federal Circuit ruled in vacating and remanding for dismissal a decision by the Patent Trial and Appeal Board (Power Integrations, Inc. v. Semiconductor Components Industries, LLC, June 13, 2019, Prost, S.).
Power Integrations, Inc. owns U.S. Patent No. 6,212,079 (the ‘079 patent), which discloses a switching regulator related to switched mode power supplies. Fairchild Semiconductor Corp. and Fairchild (Taiwan) Corp. (together, Fairchild) challenged this patent in 2005 and in 2006, but the Patent Office upheld the claims. Power Integrations later brought claims for infringement of this and two other patents against Fairchild, and in 2014 a jury found that Fairchild had infringed five claims of the ‘079 patent and awarded Power Integrations $105 million. After Fairchild was granted a new trial on the issue of damages in 2015, a jury awarded Power Integrations $139.8 million. The Federal Circuit affirmed the verdict but remanded the issue of damages; the district court released Fairchild’s $146.4 million bond plus interest, and no further action took place. In 2015, Semiconductor Components Industries LLC d/b/a ON Semiconductor entered into an agreement to merge with Fairchild; while the merger was pending, ON filed a petition for IPR challenging six claims of the ‘079 patent. This petition was filed in March 2016, more than one year after Fairchild was served with complaints for infringing the patent. The Fairchild-ON merger closed in September 2016, and four days later the PTAB instituted the IPR.
Power Integrations argued that the IPR was time barred under 35 U.S.C. § 315(b) because ON and Fairchild were in privity at the time of filing and Fairchild had been served with the infringement complaint more than a year previously. The Board rejected this argument, finding that there was insufficient evidence to establish privity at the time Fairchild filed its petition. The Board also rejected Power Integrations’ argument that Fairchild, which inarguably was time barred, was an RPI at least four days before institution when the merger closed. The Board held that RPI and privity relationships were relevant for purposes of the time bar only until the time an IPR petition is filed and went on to find the challenged claims unpatentable. Power Integrations appealed, arguing that privity and RPI relationships arising after filing but before institution should be considered for purposes of the time bar. ON argued that Power Integrations was precluded from challenging the ruling because it did not appeal a final written decision reaching the same determination in another IPR.
Issue preclusion. Although ON established the basic requirements for issue preclusion, Power Integrations could still bring its challenge under the lack of incentive to litigate exception. ON raised the same argument in a previous IPR for a different patent, actually litigated that issue, and the Board’s determination was essential to the final decision. However, the non-appealed IPR decision lacked any infringement finding or damage award, whereas the jury in litigation involving the present patent awarded Power Integrations $139.8 million. This gave Power Integrations a significantly greater incentive to litigate the issue. As a result, Power Integrations could challenge the Board’s ruling.
Statutory interpretation. In deciding an issue of first impression, the Federal Circuit concluded that the IPR was time barred because Fairchild was an RPI at the time the IPR was instituted even if not when the petition was filed. Section 315(b) states that an IPR "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 com-plaint alleging infringement of the patent." The focus of Sec. 315(b) is on institution and the language specifically prohibits "institution," rather than "filing," more than one year after the date the petitioner, real party in interest, or privy of the petitioner is served with the infringement complaint. This interpretation was consistent with Federal Circuit precedent finding that the time-bar limits the Director’s ability to institute IPR. Because Congress used common-law terms such as "real party in interest" and "privity," the court applied common law principles that suggest that preclusion can apply based on privity arising after a complaint was filed. The court noted that Congress used language barring petitions when proxies or privies would benefit from instituting an IPR, even when the petitioning party had its own interest. The opposite view would allow the Board to ignore the existence of RPIs or privies that would benefit from the institution of an IPR because they were not RPIs or privies at the time of filing.
The "is filed" language of Sec. 315(b) does not mandate a final determination of privity or RPI at filing but only marks the end of the period by when the petitioner must file for IPR. The fact that the Board has three months to make a decision on whether to institute and that the petitioner has no control over the exact date it institutes did not make it too unpredictable to address the time-bar question because the petitioner had control over the date of the merger. The language of Sec. 312(a)(2) providing that the petitioner has an ongoing requirement to update the Board within 21 days of any change to the RPI would not make sense unless it continued to be relevant throughout the proceeding, the court reasoned. However, the court noted that its present decision did not address the impact of a change in RPI, ownership, or privity after institution.
Deference. Finally, the Federal Circuit declined to give deference to the Board’s interpretation. The Board was not entitled to Chevron deference of its interpretation of its own regulations because the regulatory language merely mirrored the statutory language, nor to Chevron deference of its nonprecedential decisions as the Board did not hold itself bound to them.
This case is No. 2018-1607.
Attorneys: Frank Scherkenbach (Fish & Richardson P.C) for Power Integrations, Inc. Michael Hawes (Baker Botts, LLP) for Semiconductor Components Industries, LLC.
Companies: Power Integrations, Inc.; Semiconductor Components Industries, LLC
MainStory: TopStory Patent FedCirNews
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