In an order designated precedential, the PTAB terminated an instituted IPR proceeding after the petitioner failed to establish that no real parties in interest (“RPI”) or privies had been served with a complaint more than one year before it filed the IPR petition. 35 U.S.C. § 315(b). Ventex Co., Ltd. V. Columbia Sportswear North America, Inc., IPR2017-00651, Paper 148 (PTAB Jan. 24, 2019). As the petitioner, Ventex had the burden to demonstrate that Seirus, its customer, was neither an RPI nor a privy.
The record showed that patent owner Columbia served Seirus with a complaint alleging patent infringement in 2014. Seirus’ products incorporated an allegedly infringing “Heatwave” fabric material manufactured by Ventex. In 2017, Ventex filed its petition for inter partes review of the patent Columbia asserted against Seirus. Because there was no dispute that Seirus had been served with a complaint more than a year earlier, the issue before the Board was whether Seirus was an RPI or privy. The Board found that Seirus was both.
The Board looked to recent Federal Circuit guidance for its analysis, which included commentary on the legislative history of § 315:
[T]he terms “real party in interest” and “privy” were included in § 315 to serve two related purposes: (1) to ensure that third parties who have sufficiently close relationships with IPR petitioners would be bound by the outcome of instituted IPRs under § 315(e), the related IPR estoppel provision; and (2) to safeguard patent owners from having to defend their patents against belated administrative attacks by related parties via § 315(b).
Id. at 6 (quoting Applications in Internet Time, LLC v. RPX Corporation, 897 F.3d 1336, 1351 (Fed. Cir. 2018) (“AIT”)).
For the RPI issue, the Board examined whether Seirus “is a clear beneficiary that has a preexisting, established relationship with the petitioner.” Id. at 6 (quoting AIT, 897 F.3d at 1351). The evidence showed that Ventex and Seirus had a preexisting, established relationship as they had conducted business together since 2013. Ventex was also obligated to indemnify and defend Seirus under the terms of their Supplier Agreement. And, in 2016, Ventex contracted to “only manufacture Heatwave Material for Seirus” in return for an “exclusivity fee.” Based on their relationship, the Board concluded that the parties had a mutual interest in their continuing success and that Seirus was a clear beneficiary of Ventex’s IPR.
To support its position, Ventex argued that it filed the IPR in its own interest. However, the Board was not persuaded: “The point is not to probe [Ventex’s] interest (it does not need any); rather, it is to probe the extent to which [Seirus]—as [Ventex’s] client— has an interest in and will benefit from [Ventex’s] actions, and inquire whether [Ventex] can be said to be representing that interest.” Id. at 9–10 (quoting AIT at 897 F.3d at 1353). Accordingly, the Board held that Ventex’s petition was time barred because Seirus was an RPI. But the Board did not stop there.
The Board began its privity analysis with “a non-exhaustive list” from the Supreme Court “for examining whether the legal relationship between two parties establishes that one is the privy of the other: “(1) an agreement between the parties to be bound; (2) pre-existing substantive legal relationships between the parties; (3) adequate representation by the named party; (4) the nonparty’s control of the prior litigation; (5) where the non-party acts as a proxy for the named party to relitigate the same issues; and (6) where special statutory schemes foreclose successive litigation by the non-party (e.g., bankruptcy and probate).” Id. at 12 (quoting AIT, 897 F.3d at 1360 (citing Taylor v. Sturgell, 553 U.S. at 894–95)). Based on evidence establishing factors two and five, the Board concluded that a finding of privity “comports with the goal of ‘tak[ing] into account the “practical situation”, and [extending privity] to parties, to transactions, and other activities relating to the property in question.’” Id. at 12–13 (quoting Trial Practice Guide, 77 Fed. Reg. at 48,759). Thus, the Board also held that Ventex’s petition was time barred for the independent reason that Seirus was in privity with Ventex.
Pursuant to § 315(b), the Board dismissed Ventex’s petition, vacated its earlier Decision to Institute, and terminated the IPR.