One-Year Time Bar to File an IPR Begins on Date Complaint Served Regardless of Post-Service Activities
In Click-to-Call Technologies, LP v. Ingenio, Inc. et al., the U.S. Court of Appeals for the Federal Circuit overturned the Patent Trial and Appeals Board (PTAB), holding that service of a complaint that is later voluntarily dismissed without prejudice starts the one-year time period to file a petition for Inter Partes Review (IPR). No. 2015-1242, slip op. at 10 (Fed. Cir. Aug. 16, 2018). On its own motion, this portion of the decision was joined by a majority of the en banc court. Id. at 10 n.3. A dissent by Judges Dyke and Lourie would have upheld the PTAB’s decision allowing the time bar to reset when a complaint is voluntarily dismissed without prejudice; Judge Taranto wrote a concurrence in the en banc decision disagreeing with the dissent. This decision may not be the last word on these issues because a petition for formal rehearing en banc at the Federal Circuit and then for certiorari to the Supreme Court is possible.
Background – Lawsuit, Voluntary Dismissal Without Prejudice, and an IPR
The factual background of this case is complex. In short, in 2001 patent owner Inforocket.com, Inc. filed a complaint against accused infringer Keen, Inc., alleging infringement of U.S. Patent No. 5,818,836 (the ‘836 Patent). After filing an unsuccessful patent infringement suit in retaliation, Keen acquired Inforocket.com and in 2003 both complaints were voluntarily dismissed without prejudice as a condition of the merger. Keen later changed its name to Ingenio, Inc., and Ingenio requested ex parte reexamination of the ‘836 Patent. During ex parte reexam, several claims of the ‘836 Patent were cancelled, others were amended, and new claims were added. Click-to-Call Technologies, LP (CTC) later acquired the ‘836 Patent and asserted it in 2012 against Ingenio and other parties.
Within one year after CTC served its complaint, Ingenio, along with other parties, filed an IPR petition. CTC argued the IPR was time barred under 35 U.S.C. §315(b). The PTAB instituted the IPR over CTC’s arguments based on the Federal Circuit’s prior precedent holding that voluntarily dismissal of a complaint without prejudice leaves the parties as though an action had never been brought and thus resets the one-year clock to file an IPR under § 315(b). In a final written decision, the PTAB invalidated claims of the ‘836 Patent and CTC appealed to the Federal Circuit.
The Panel Decision
Reviewing the administrative proceedings under the Chevron two-step analysis, the Federal Circuit concluded that the PTAB was incorrect to institute the IPR in question because it was time barred. The panel opinion by Judge O’Malley explained that §315(b) is facially plain and unambiguous, because the text of the statute “clearly and unmistakably considers only the date on which the petitioner, its privy, or a real party in interest was properly served with a complaint.” In footnote three to the panel decision, the en banc Federal Circuit joined in this holding, but did not provide further elaboration about its reasoning.
The panel distinguished the Federal Circuit precedent that the PTAB had cited in support of its contrary conclusion: Graves v. Principi, 294 F.3d 1350 (Fed. Cir. 2002) and Bonneville Associates, Ltd. Partnership v. Barram, 165 F.3d 1360 (Fed. Cir. 1999). Whereas Bonneville and Graves held that a party’s voluntary dismissal of a complaint without prejudice did not toll the statute of limitations for the same party’s appeal of the decision below, the panel said the issue before the Federal Circuit in the present case was whether dismissal of a civil action without prejudice after service of the complaint triggers an administrative time bar for the party served with the complaint. The Federal Circuit criticized the PTAB for ignoring the plain text of the statute based on cases the court said were inapposite to the question at issue, and for “turning [these precedents] on their head.” Further, the panel found that Graves and Bonneville do not stand for an absolute rule, and emphasized that service of a complaint can have legal effect even after the complaint has been dismissed, such as on a motion for costs and fees, issue and claim preclusion, establishing a basis for a declaratory judgment action, or providing the foundation for claims of willful infringement in a later patent infringement suit.
Finally, the Federal Circuit refuted two arguments that the petitioner made in support of the decision to institute the IPR. First, the court found reexamination of the ‘836 patent did not render the claims of infringement in the 2013 complaint materially different from the claims in the 2001 complaint. Second, citing to PTAB precedent concerning covered business method reviews, the court concluded that exertion of substantial control over the single IPR petition by the time-barred petitioner taints the petition for all the non-time-barred petitioners. In other words, the one-year IPR time bar applies on a petition-by-petition basis, not on a petitioner-by-petitioner basis.
The En Banc Dissent
Judges Dyk and Lourie dissented from the en banc portion of the decision for several reasons. First, the dissenters argued that §315(b) is ambiguous because the statute should not be interpreted based on the text alone. To support this argument, the dissent compared the language of §315(b) to the statute at issue in Kasten v. Saint-Gobain Performance Plastics, Corp., 563 U.S. 1 (2011), where the U.S. Supreme Court found that the language “filing any complaint” created an ambiguity as to whether oral complaints were sufficient to trigger a permanent bar to benefits. Next, the dissent noted that Congress is presumed to legislate with background legal principles in mind, and argued that §315(b) was drafted under the basic assumption that dismissal of a complaint without prejudice always leaves the parties as though the action had never been brought. The dissent claimed that the 1-year deadline to file an IPR does not begin to run after voluntary dismissal of a complaint without prejudice because the text of the statute and legislative history of §315(b) do not demonstrate intent to depart from this legal principle. Lastly, the dissent argued that voluntary dismissal of a complaint without prejudice nullifies notice to the defendant and would encourage bad behavior on the part of patent owners. Judges Dyk and Lourie insisted that the en banc majority’s decision incentivizes patent owners to serve a potential infringer with a complaint and later dismiss that complaint without prejudice, because the patent owner may refile his infringement claim, avoid an IPR, and obtain increased damages for willful infringement once one year has passed from the original date of service.
The En Banc Concurrence
Judge Taranto fully joined the panel opinion, and concurred in the en banc portion of the decision for the purpose of addressing arguments made in the en banc dissent. Adding that the plain meaning of the statute requires no resort to extra-textual means of interpretation, the concurrence points out that the PTAB’s broad application of narrow precedent is uncalled for because the position of the parties, the claims, and the forum are distinguishable from those in Graves and Bonneville. Furthermore, the concurrence highlighted a logical flaw in the dissent’s argument concerning the mindset of a defendant served with a complaint that is later voluntarily dismissed without prejudice. Although the dissent contended that a defendant faced with an opposing-party’s decision to voluntarily dismiss a complaint without prejudice would be led to believe that the infringement action has been laid to rest, Judge Taranto stressed that the opposite is in fact the case. Namely, the purpose of dismissing a complaint without prejudice is to give the plaintiff the opportunity to refile at a later date. Therefore, Judge Taranto reasoned a prudent defendant should weigh the option of filing a petition for IPR in view of the uncertainty of facing litigation at a later point in time.
Click-to-Call Technologies appears to establish a bright-line rule: an accused infringer served with a complaint for patent infringement must file an IPR petition within one year from the date of service of the complaint in order to take advantage of IPR proceedings. As such, an accused infringer will want to discuss with counsel whether a petition for IPR makes strategic sense early on. Moreover, an accused infringer should carefully research his co-defendants and whether they have been served with complaints before joining a single IPR petition. Further, although 35 U.S.C. § 315(a) was not at issue in Click-to-Call, IPR petitioners who previously filed and voluntarily dismissed without prejudice a civil suit challenging validity of a patent, should carefully consider whether they are now barred from filing an IPR under § 315(a). On the other hand, patent owners should keep the PTAB statistics in mind and ensure that they are prepared to combat institution of an IPR before filing suit. Stated differently, although the en banc dissent in Click-to-Call proposes an interesting litigation strategy that could put increased damages for willful infringement on the table, it is still likely that an accused infringer could file a petition for IPR before the time limit expires. Finally, the decision may have an impact outside of patent litigation, such as on technology transactions. Companies involved in acquisitions and mergers should carefully analyze whether the transaction could raise IPR time-bar issues.