We Settled! Or Did We…

February 1, 2014

John L. Strand

(as published in Inside Counsel)

When the America Invents Act (AIA) was enacted, many commentators praised a provision of the AIA that allows parties to settle a post-grant review, typically an inter partes review (IPR) or a covered business method review (CBM), by moving to terminate the proceeding. As an IPR often proceeds alongside district court litigation, this provision was expected to encourage parties to negotiate to settle both the litigation and the administrative proceeding.

The prior inter partes reexamination framework did not allow for voluntary termination. Once a reexamination proceeding was instituted, the U.S. Patent and Trademark Office would proceed without the petitioner, even if it filed no additional papers. This process deprived patent owners of the opportunity to eliminate the risk of an invalidity finding by settling. IPRs were partially designed to encourage settlement by giving the parties the opportunity to negotiate a meaningful compromise.

In spite of this optimism, the AIA states that a joint motion to terminate only may end the proceeding. Even if the parties settle, and "no petitioner remains in the post-grant review, the [Patent Trial and Appeal Board (PTAB)] may… proceed to a final written decision." 35 U.S.C. § 327(a) (emphasis added). This statutory language left open the question of what circumstances would cause the PTAB to move forward with a proceeding already settled by the parties.

The decision of Interthinx, Inc. v. CoreLogic Solutions LLC partially answered the question: The PTAB is willing to proceed to a final decision – possibly cancelling the relevant claims –even after the parties jointly moved to terminate.

Going forward, parties to any post-grant review must consider the Interthinx decision when evaluating whether to settle a dispute. This decision confirms that a patent owner is still at risk of having its patent cancelled, even if it settles a co-pending litigation or other dispute with the petitioner. If the proceeding has already been fully briefed, or if the patent owner asserted the patent against other parties, the patent owner must weigh the benefits and drawbacks of settling before the patent is possibly affirmed – or cancelled – during the proceeding.

If nothing else, parties must understand the potentially limited window during which post-grant review is a piece in play on the settlement board. A petitioner must know that by allowing a proceeding to reach an advanced stage, it may forfeit a valuable offering in future settlement negotiations as the petitioner. And after a certain point, the petitioner risks losing the ability to terminate the proceeding.

The Interthinx decision has provided at least some clarity to parties that are considering settling a lawsuit that has a co-pending PTAB proceeding, but this is one decision of one panel. In two IPRs involving Blackberry Corp. and Mobilemedia Ideas LLC, the PTAB likewise denied the parties’ joint request to terminate the proceedings, and instead proceeded without the petitioner. This situation will arise in many other proceedings over the coming year, providing more guidance.

Once a review reaches an advanced stage, it is beyond the control of the parties. This lack of control should motivate parties to settle a lawsuit with a co-pending IPR/CBM proceeding, or to litigate the dispute to a final conclusion – whether a final judgment or a settlement not driven by the release of the co-pending IPR/CBM proceeding.