By Alison Ibendahl and Albert Liou

In a recent decision, the Patent Trial and Appeal Board granted institution of inter partes review after accepting the Petitioner Microsoft’s stipulation to forego overlapping challenges in parallel district court proceedings conditioned upon institution of IPR.  Microsoft Corp. v. D3D Tech., Inc., IPR2021-00647, Paper 10 (PTAB Sept. 1, 2021).  The Patent Owner D3D urged the PTAB to exercise its discretion to deny institution, but the Board found that Microsoft’s conditional stipulation mitigated inefficiencies caused by an overlap of issues between the IPR proceeding and the district court proceeding.  Concluding that the Fintiv factors weighed against a discretionary denial, the PTAB instituted IPR of D3D’s patent.

D3D initiated district court litigation in September 2020, alleging that Microsoft was infringing its patents, including U.S. Patent 8,384,771 (“the ’771 patent”).  Within six months of being served with the district court complaint, Microsoft filed its Petition requesting IPR of claims 1-21 of the ’771 patent, based on anticipation and obviousness grounds.  The claim construction hearing was held on June 16, 2021.  Trial is currently set for September 6, 2022.

D3D argued that the Board should exercise the discretion granted it by 35 U.S.C. § 314(a) to deny institution of IPR, citing Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020) (precedential) (“Fintiv”).  In Fintiv, the PTAB established factors it would consider in determining whether to grant a discretionary denial based on the advanced stage of a parallel proceeding.  While the PTAB in this case found several factors to be neutral, it found factor 5 (identity of parties) weighed in favor of discretionary denial, and factor 6 (other circumstances) weighed against discretionary denial because the merits of the Petition were particularly strong.

The PTAB considered Microsoft’s stipulation during its analysis of Factor 4, which considers overlap of issues before the PTAB proceeding and a parallel district court proceeding.  In Microsoft’s Reply to Patent Owner’s Preliminary Response, Microsoft had stipulated that “if the Board institutes an IPR based on Petitioner’s ’771 Petition, Petitioner will not assert any 35 U.S.C. § 102 or §103 invalidity ground in co-pending litigation . . . based on any of the primary or secondary references asserted in the ’771 Petition.”  D3D argued that Microsoft’s stipulation was improper because it was conditioned on institution of IPR on the ’771 patent.

Rejecting D3D’s argument, the PTAB explained that it had previously accepted a conditional stipulation in Sotera Wireless, Inc. v. Masimo Corporation, IPR2020-01019, Paper 12, 18-19 (PTAB Dec. 1, 2020) (precedential), finding that the stipulation “weigh[ed] strongly in favor of not exercising discretion,” and further stating “[w]e are not persuaded that conditioning the stipulation on institution in the instant proceedings is improper.”  Finding that Microsoft’s stipulation “would mitigate concerns of inefficiency,” the PTAB determined factor 4 weighed against exercising its discretion.  All together, the PTAB found the Fintiv factors weighed against a discretionary denial.

In light of this decision, Petitioners may consider making similar stipulations to forego similar district court challenges to patent validity, conditioned on institution of IPR.  In Sotera and this decision, the PTAB has taken a position that conditional stipulations are proper and provided a framework for the language practitioners can use.  By asserting a conditional stipulation, petitioners preserve validity challenges in parallel proceedings, in the event IPR is not instituted.

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Albert Liou

Albert Liou focuses his practice on intellectual property law, including PTAB trials, litigation, counseling, and transactions. He is a seasoned patent and trade secret litigator, having representing clients in the software, computing, automotive, chemical, and high-tech industries.