The PTAB’s Misplaced Reliance on Litigation Trial Dates in the NHK Spring/Fintiv Framework

As discussed in prior blog posts (for example, here and here), the Patent Trial and Appeal Board (PTAB) has increasingly exercised its discretion under 35 U.S.C. § 314 (a) to deny institution of post-grant proceedings when the challenged patent is involved in related litigation, using the framework outlined in NHK Spring and Fintiv. See NHK Spring Co. Ltd. v. Intri-Plex Techs., Inc., IPR2018-00752, Paper 8 (Precedential); Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (Precedential). A major consideration in the NHK Spring/Fintiv framework is whether trial in related litigation will occur before the PTAB’s one-year statutory deadline for issuing a final written decision after institution; if trial will occur before, the PTAB will likely exercise discretion to deny institution. The rationale is simple and seemingly cogent: due to the advanced state of related litigation, institution would be an inefficient use of PTAB resources and inconsistent with the America Invents Act’s goal of providing an “effective and efficient alternative to district court litigation.” NHK Spring, Paper 8, pp. 19-20. But determining when trial in related litigation will occur is not straightforward because litigation schedules often change. Over the past year, such changes have become more prevalent due to the COVID-19 pandemic. Thus, the PTAB may deny institution based on a litigation trial date that ultimately falls after the statutory deadline. We discuss instances where this occurred below. 

• Next Caller, Inc. v. TRUSTID, Inc – Institution is denied but the trial date relied on is delayed by a year. 

TRUSTID asserted U.S. Patent 9,001,985 against Next Caller in January 2018 and amended its complaint to additionally assert U.S. Patents 8,238,532, and 9,871,913 in April 2018. See TRUSTID, Inc. v. Next Caller, Inc., 1:18-cv-00172-MN (D. Del. 2018). Next Caller filed an IPR petition challenging validity of the ’985 patent in October 2018; this proceeding was instituted and resulted in a final written decision finding some claims unpatentable and others not. IPR2019-00039, Paper 1; id., Paper 77, p. 90.

In April 2019, Next Caller filed IPR petitions challenging validity of the ’532 and ’913 patents. See IPR2019-00961; IPR2019-00962; IPR2019-00963. The PTAB exercised discretion to deny institution of each petition under § 314 (a), relying on the related litigation’s anticipated trial date in July 2020 versus the PTAB’s statutory deadline in October 2020. IPR2019-00961 and IPR2019-00962, Paper 10, pp. 14-16; IPR2019-00963, Paper 8, pp. 13-14. But the trial date was pushed back to July 2021 due to the COVID-19 pandemic.

•  Apple, Inc. v. Fintiv, Inc. – The trial date relied on in Fintiv itself is delayed and scheduled to occur months after the PTAB’s statutory deadline.

 Fintiv asserted U.S. Patent 8,843,125 against Apple in December 2018. See Fintiv, Inc. v. Apple, Inc., 1:19-cv-01238-ADA (W.D. Tex. 2018). In October 2019, Apple filed an IPR petition challenging validity of the patent. IPR2020-00019, Paper 1. The PTAB exercised discretion to deny institution of the petition under § 314 (a), relying on the related litigation’s anticipated trial date in March 2021 versus the PTAB’s statutory deadline in May 2021. Id., Paper 15, pp. 12-13. But again, due to COVID-19, the trial date was pushed back – this time to October 2021.

• Ethicon, Inc. v. Board of Regents, The University of Texas System – Institution is denied based on an “expectation” of trial within a year but knowledge of delay; the trial date relied on is delayed over a year.

The University of Texas (“UT”) asserted U.S. Patents 6,596,296 and 7,033,603 against Ethicon in November 2017 (serving the complaint in December 2017). See Board of Regents, The University of Texas System et al. v. Ethicon, Inc. et al., 1:17-cv-01084-LY (W.D. Tex. 2017). In December 2018, Ethicon filed IPR petitions challenging validity of the patents. See IPR2019-00406; IPR2019-00407. The IPRs were suspended for about a year pending the Federal Circuit’s decision in Regents of the University of Minnesota v. LSI Corp., Case No. 2018-1559, addressing the applicability of sovereign immunity to IPRs. IPR2019-00406 and IPR2019-00407, Paper 11. After the suspension was lifted, UT filed a preliminary response in the 00406 proceeding without addressing the merits, arguing only that the Board should exercise discretion to deny institution under § 314 (a). IPR2019-00406, Paper 26. And the Board did just that, even though it was aware the related litigation’s June 2020 trial date had already been continued due to COVID-19, relying on the litigation court’s “emphasis that the parallel litigation should proceed as if still set for June 22, 2020,” “expectation of holding a bench trial within a year,” and expected final written decision issuance date of June 2021. Id., Paper 27, pp. 9-10. But trial did not occur and instead, a bench trial is scheduled for September 2021.

Interestingly, the same Board panel instituted the 00407 proceeding on the same day the 00406 denial issued. IPR2019-00407, Paper 29. The 00407 decision did not address Fintiv, but UT did not file a preliminary response in that proceeding. Id. UT disclaimed all challenged claims of the patent at issue after institution and the Board entered adverse judgement in June 2021. Id., Paper 33.

• Cisco Systems, Inc. v. Ramot at Tel Aviv University Ltd. – Institution is denied based on trial date that is now uncertain, but litigation is stayed pending Ex Parte Reexaminations filed after the denial.

Ramot sued Cisco, asserting U.S. Patents 10,270,535 and 10,033,465 in June 2019, and adding U.S. Patent 10,461,866 in an amended complaint in December 2019. See Ramot at Tel Aviv University Ltd. v. Cisco Systems, Inc., 2:19-cv-00225-JRG (E.D. Tex. 2019). Cisco filed IPR petitions challenging the ’535 and ’465 patents in November 2019, and another petition challenging the ’866 patent in January 2020. IPR2020-00122; IPR2020-00123; IPR2020-00484. The PTAB exercised discretion to deny institution of each petition under § 314 (a), relying on the related litigation’s anticipated trial date in December 2020 versus the PTAB’s statutory deadlines in May 2021 and August 2021. IPR2020-00122, Paper 15, pp. 7-8; IPR2020-00123, Paper 14, pp. 7-8; IPR2020-00484, Paper 10, pp. 7-8. But after denial, Cisco filed Ex Parte Reexaminations at the U.S. Patent and Trademark Office (USPTO) challenging validity of the patents in suit, and after reexamination was ordered, office actions issued rejecting all asserted claims.  Ramot, Dkt. 235, pp. 1-3. Thus, the litigation court granted a stay pending resolution of the reexaminations in January 2021. Id. When the stay issued, trial had been delayed from December 2020 to March 2021. The case is currently still stayed, with the trial date uncertain.

According to the U.S. Patent and Trademark Office, the average reexamination pendency from filing to certificate is just under 26 months. See https://www.uspto.gov/sites/default/files/documents/ex_parte_historical_stats_roll_up_21Q1.pdf. Here, Cisco filed its reexaminations in June 2020 and November 2020 for each patent.  Ramot, Dkt. 235. Thus, the reexaminations are estimated to conclude in August 2022 and January 2023. These dates are over a year past what would have been the PTAB’s statutory deadlines in May 2021 and August 2021, had the IPRs been instituted. IPR2020-00122, Paper 15, pp. 7-8; IPR2020-00123, Paper 14, pp. 7-8; IPR2020-00484, Paper 10, pp. 7-8.

Conclusion

Due to the likelihood that litigation trial dates change, the PTAB’s reliance on such dates to deny institution of post-grant proceedings under the NHK Spring/Fintiv framework has had unintended consequences, denying petitions (and an examination of the merits) when trial ends up occurring months after when a final written decision would have issued. The PTAB’s analysis of litigation trial dates under the NHK Spring/Fintiv framework should therefore not take litigation schedules at face value; instead, a more nuanced approach is needed that considers circumstances such as the current stage of litigation, issues that remain in litigation, and whether (and to what extent) extensions to deadlines and/or changes to the trial date have been requested and granted.

VVC royalty report by Charles River Assoc. estimates lower rates due to AV1 adoption

Unified is pleased to announce the release of a new economic royalty rate report estimating the aggregate royalty burden for all standard-essential patents (SEPs) covering the video codec standard H.266, also called Versatile Video Coding (VVC). The report is a part of Unified’s Video Codec Zone, the goal of which is to provide objective, independent evidence of reasonable royalty rates, thus refuting unsubstantiated SEP licensing demands. 

VVC (H.266) constitutes the latest installment in a series of video codec standards released by the ITU and ISO/IEC and is regarded as the direct successor to HEVC (also H.265).

The fragmented licensing landscape for HEVC with three different patent pools has resulted in a significant degree of uncertainty about HEVC’s licensing terms and very high aggregate royalties. The issues revolving around its licensing have not only significantly hampered HEVC’s adoption but also likely have further boosted the significant momentum around royalty free video codecs like AV1. Against this background, the future uptake of VVC will strongly depend on whether the VVC SEP holders will be able to set clear and transparent licensing terms and royalties that are not excessive, but FRAND. VVC’s estimated FRAND royalty rates range from $0.05 for cellular devices to $0.17 for streaming devices.

In addition, AV1, often considered equivalent to HEVC, is already being implemented in many recent TVs. As adoption of alternative codecs increases, the value of VVC decreases. In this case, AV1 adoption lowers the cellular FRAND rate of VVC 40% to $0.03.

Read the executive summary below. Members of Unified's Video Codec Zone receive a full copy of this economic report. Email info@unifiedpatents.com for more info.

VVC Report - Public by Jennifer M Gallagher on Scribd

The trials and tribulations of Chinese patent invalidation proceedings

Unified’s senior patent counsel, Jessica Marks, explains Chinese oppositions and some of the unexpected issues that can crop up.

Validity challenges at the China National IP Administration are an increasingly important part of the Chinese patent landscape, but they can be confusing affairs. With regulations and guidelines, the process that PRID follows is intended to be efficient and many Chinese practitioners will advise that invalidations can be accomplished in six to nine months. However, Unified Patents has filed 18 such challenges since 2020 in China but, based on its experiences, the reality can be very different to expectations.

Read the article HERE, published by IAM.

A Year of WSOU: Craig Etchegoyen’s Post-Uniloc NPE Files Nearly 200 Cases

For most U.S. businesses, the pandemic forced temporary (and sometimes permanent) closures, bankruptcies, and credit crunches. Many were forced to adapt to working remotely, deal with border closures and shortages, or address outbreaks. But for at least one kind of entity, 2020 was a banner year. Patent Assertion Entities (PAEs), entities that exist to acquire and enforce patent assets, filed upwards of 3,744 suits, up more than 12% over 2019—the vast majority of patent cases filed.  For patent lawyers, at least, business has been booming.

One particularly prolific NPE filed almost 200 suits since March 2020, representing 1 out of every 20 district court cases nationwide: WSOU Investments LLC, d/b/a Brazos Licensing (i.e., “we-sue”). WSOU is a new kind of patent troll in terms of scale—but it’s one built on an old file-and-settle model and run by the now-infamous Craig Etchegoyen (the guy behind the litigious NPE Uniloc), he’s gone from 600 patents being asserted through Uniloc to a web of over 15,000 Nokia and Alcatel-Lucent patents and applications from over 4,500 patent families. Most of the patents in the portfolio (and most of the patents asserted) relate to telecommunications and digital data processing and transmission, although they cover a range of fields, including wireless networks, video games, and image processing and communication. Over 5,000 of these patents are US Patents:

WSOU takes a “darken-the-skies” approach to litigation that forces operating companies to either settle or fight, on average, eight lawsuits at once. One defendant, Huawei, has the unrelished honor of finding itself defending against 20 of these patents in dozens of suits, with Google close behind at 15.

Rather than assert a few related patents against similar accused products or make any attempt to consolidate or streamline matters for the courts, WSOU instead clogs them, running up court costs and concerns with multiple single-patent cases against a wide variety of different accused products, relying on patents from different families for each defendant. Indeed, when accounting for transfers, 98% of the patents asserted come from unique families.

WSOU appears to be picking defendants off in a way that prevents any sort of joint defense, common interest, or other means of defending themselves, and then seeking to license the whole shebang seriatim, keeping all discussions separate and isolated.  To wit, WSOU has not asserted the same patent twice against different defendants.

It isn’t hard to see WSOU’s play here. By filing individual suits involving different patents, WSOU makes it expensive to perform prior art searches and develop non-infringement and invalidity contentions for each case. Accounting for refilings and transfers (which are often involuntary), WSOU has filed over 90% of its cases in the Western District of Texas, a known hotbed for PAEs ever since a particular Waco judge has created a reputation of hoarding patent cases with promises of fast resolution, even despite repeated admonitions from the Federal Circuit.

By litigating in well-known “rocket dockets” where it can, WSOU makes it difficult for defendants to meet the statutory requirements for filing IPRs, and filing all of those IPRs would not only be expensive (the filing fees alone, not including the cost of attorneys and experts, would cost about $250,000 for the average campaign per defendant, assuming one IPR per patent), but also somewhat superfluous when the presiding judge over almost all of the cases has a avowed policy of refusing to stay a case unless the defendant somehow manages to petition for inter partes review before they are even sued.

While the effectiveness of this boil-the-ocean approach is questionable, it certainly was foreseeable. With a one-year statutory bar to file any kind of expensive defensive challenge (a year being pretty generous under Apple v. Fintiv), and no obligation for patent owners to forewarn defendants about their patent portfolios, a patent owner would almost be foolish not to quietly build up a line of cases to spring on defendants all at once, and use the filing as a sort of ransoming starting point for negotiations once companies are staring down the barrel of millions of dollars in court costs. When the cost of defense can be upwards of $4,000,000 over three years, while it’s still hard to comprehend, defendants can at least budget ahead for the defense.  When the cost is multiplied by a dozen and sprung upon you on questionable patents, it can be a little harder to justify defending oneself.

Theoretically, this strategy should also be relatively expensive for a plaintiff. But WSOU has this down to a science. Using a firm that does work almost exclusively for Uniloc and WSOU, his hope is that the high costs of defense force defendants to surrender to settlement early.  This is particularly true given WSOU’s relationship with RPX. For an additional subscription, RPX (it appears) offers settlements for WSOU’s entire portfolio, creating a cycle of monetization that is antithetical to patent assertion deterrence.

WSOU is managed by Craig Etchegoyen, surfing-prodigy-turned-PAE-manager. Etchegoyen is the former CEO of Uniloc, another prolific PAE. In December 2020, it was discovered that based on a contract clause that gave a litigation financier a right to take ownership of patents if certain revenue targets were not met, Uniloc did not have standing to assert its patents. WSOU may be subject to similar contract clauses, and discovery into ownership and chain of title is already in process. A defendant would be wise to pore through assignment and financing agreements to catch any chink in the chain of ownership—the assignment frames on record with the USPTO do not, for instance, show a clear chain of title for many of the WSOU patents.  Rumor has it that he tried and failed to find a buyer for the portfolio, bringing unreasonable demands to the table.  It’s likely that his current demands are equally unreasonable, but he’s leveraging the cost of litigation as far as it can be leveraged in an attempt to avoid any sort of honest look at the value of his portfolio. 

It is too early to tell if WSOU’s strategy will pan out, but most defendants have not yet taken advantage of the inter partes review process, presumably because the costs there would extend into the millions just to file, and with the substantial uncertainty surrounding Fintiv and other USPTO flexes of discretion, it’s unclear if even meritorious challenges will be given the time of day. Of the 140+ patents asserted, so far just 12 PTAB challenges have been filed, including one IPR by Unified Patents against a video codec patent. Unified has also posted a number of PATROLL contests (US8209411, US7409715) and continues to monitor WSOU’s monetization activities.

Breaking the 5G Curve by Looking Beyond the U.S. Patent System

Unified’s Shawn Ambwani and Sam Jaffna published an article in IPWatchdog.com analyzing the growth in 5G Self-Declared Standard Essential Patents (SD-SEPs) and the idea that strategic oppositions and invalidity proceedings filed outside the U.S. could prove useful to manufactures/equipment makers of 5G technology. There are 94,000 active grants and applications (25,700 families) 5G SD-SEPs as of September 2020.

While successful validity challenges of a patent in foreign countries do not conclusively prove the invalidity of the U.S. counterpart, the successful arguments used in these challenges have been effective in the U.S. and used to argue lower portfolio values.

“Manufacturers of equipment implementing 5G technologies should consider strategic oppositions and invalidity proceedings outside the United States against SEPs held by major licensees. These challenges cost a tenth or more less than typical U.S. challenges and could impact the licensing value of up to 50% of the self-declared families of the major SEP holders.”

Click HERE to read the entire article posted on IPWatchdog.com.