Authored by Michelle Carniaux and Michael E. Sander
In District Court, one must satisfy Article III standing requirements before bringing an action challenging a patent’s validity. This requirement is often satisfied by a preexisting controversy between parties, or one party’s demand for remuneration for alleged patent infringement. In contrast, in an inter partes review proceeding, any “person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent,” except under certain circumstances. See 35 U.S.C. §§ 311(a), 315. The petitioner need not be involved in a preexisting controversy or generally satisfy the Article III standing requirements.
The broad standing rules and the relatively low cost of an IPR trial (compared to the cost of a district court case) has made IPR proceedings attractive to a variety of would-be patent validity challengers, with motivations quite different from a typical accused infringer in a district court patent litigation.
Last week, investor and Silicon Valley entrepreneur Michael Farmwald, along with the patent defense firm RPX, filed petitions for inter partes review against three patents owned by a publicly traded patent assertion entity, ParkerVision, Inc. (“ParkerVision”). See IPR2014-00946, 00947, 00948. In 2013, a jury awarded ParkerVision $172M in damages against Qualcomm based on a finding that Qualcomm infringed four ParkerVision patents, three of which are now being challenged by Mr. Farmwald and RPX. Qualcomm has been unable to file petition for inter partes review because they were sued by ParkerVision more than one year before the before inter partes review proceedings became available, making them ineligible under 35 U.S.C. § 315(b). Given the current state of the Qualcomm case, it is possible that the new IPRs could conclude before Qualcomm and ParkerVision exhaust all appeals, possibly impacting ParkerVision’s jury award.
Prior to filing the three IPR petitions, at least Mr. Farmwald did not appear to have been directly involved in legal dispute with ParkerVision regarding these patents. Rather, according to one report, Mr. Farmwald is an investor with a short position in ParkerVision and has publicly denounced the company, calling the CEO a “con man” with patents on “b.s.” technology. See online.barrons.com/news/articles/SB119647334993210312. According to their IPR petitions, Mr. Farmwald and RPX are are not under Qualcomm’s direction or control, although Mr. Farmwald has stated that he has stock in Qualcomm. It is unclear whether Mr. Farmwald is motivated by his stock positions, playing the role of an activist, or both.
This is not the first instance in which a petitioner for inter partes review was itself not under a threat of a patent infringement action. We previously discussed the case of New Bay Capital LLC, a company rumored to be run by a hedge fund seeking to influence the stock of a publicly traded patent assertion entity through the IPR process.
In addition, in April of this year inter partes review was instituted in a proceeding brought by the Electronic Frontier Foundation (“EFF”) as part of its “Patent Busting Project,” against a non-practicing entity that asserts its patents against internet podcasters. See IPR2014-00070; www.eff.org/press/releases/eff-files-challenge-patent-office-against-trolls-podcasting-patent. EFF has no financial stake in their IPR petition, other than to further the organization’s mission to eliminate “illegitimate patent[s].” See https://www.eff.org/patent-busting.
As was discussed in a previous post, a recent Federal Circuit decision may have put this new breed of IPR petitioner at a great disadvantage. The Federal Circuit held that even though a party does not need Article III standing to initiate a patent office proceeding, “once a party seeks review in a federal court, the constitutional requirement that it have standing kicks in.” See Consumer Watchdog v. Wisconsin Alumni Research Foundation, 2013-1377 (June 4, 2014). Accordingly, if a petitioner who is not under threat of a patent infringement action loses their IPR trial at the patent office, they may be ineligible to appeal from an adverse PTAB decision, since appeals from PTAB decisions must go to a federal court .
Taken together, it is unclear whether these types of IPR petitions are the beginning of a trend or will become less popular given their disadvantage on appeal and as the inter partes review process matures.