Real-Party-in-Interest & Privies Before the USPTO

Reach of Estoppel More of a Concern After AIA

The application of statutory estoppel to patent challengers was a concept first introduced in 1999 with the advent of inter partes patent reexamination (IPX). Initially, many sensationalized the estoppel effect of IPX together with the unpredictability of the reexamination process as justification to avoid use of the new proceeding. Over the years, due to the consistent performance of the USPTO’s Central Reexamination Unit (CRU), and perhaps to a greater extent, the 5-7 year duration of a fully contested IPX, patent challengers realized the estoppel risk to be an insignificant factor for most patent disputes (since most conclude before estoppel can attach). For this reason, the estoppel mechanics as to real-parties-in-interest and privies were infrequently considered by the courts, or USPTO.

Going forward, estoppel may once again become a concern for patent challengers under the new proceedings of the America Invents Act (AIA).

Inter Partes Review (IPR), Post Grant Review (PGR), and the Transitional Program for Covered Business Method Patents (TPCBMP), all have their own estoppel provisions. In view of the fact that all of these proceedings are designed to end within 12 months, estoppel is now a more clear and present danger. As such, it is now more important than ever for patent challengers to understand the meaning of “real party-in-interest” and “privies.”

In addition to the proposed rules for implementing these proceedings, the USPTO has provided the following explanation of real-party-in-interests and privy:

The Office proposed that the petitioner in one of the new administrative trial proceedings of inter partes review, post grant review, and covered business method review must identify the real party in interest. . . .

[I]dentification of the real party in interest alerts the Board of potential statutory bars to the proceeding.  For inter partes review (IPR) and post-grant review (PGR) proceedings, the petitioner (including any real party in interest or privy of the petitioner) is estopped by statute from re-litigating any ground that was raised or reasonably could have been raised in an earlier proceeding.  See 35 U.S.C. 315(e)(1) and 325(e)(1).  Thus, the petitioner must establish that he/she or its privy has not previously raised or had the opportunity to raise the ground in dispute in a previous IPR or PGR proceeding.

To that end, the Office proposes that the petitioner must certify at the time of filing a petition that he/she is not estopped from requesting an IPR or PGR of the patent.  . . .

Who constitutes a real party in interest or privy is a highly fact-dependent question, especially on the issue of whether a party who is not a named participant in a given proceeding nonetheless constitutes a “real party in interest” or “privy” to that proceeding.  Courts and commentators agree that there is no “bright-line test” for determining the necessary quantity or degree of participation to qualify as a “real party in interest” or “privy” based on the control concept.  See Gonzalez v. Banco Cent. Corp., 27 F.3d 751, 759 (1st Cir. 1994); see alsoWright & Miller § 44512 (“The measure of control by a nonparty that justifies preclusion cannot be defined rigidly.”).  Accordingly, the Office has not enumerated particular factors regarding a “control” theory of “real party in interest” or “privy” in the proposed rules.  Instead, to resolve a real party in interest or privy dispute that may arise during a proceeding, the Board plans to consider each case on its specific facts.

In sum, the USPTO believes the proposed rules provide (i) petitioners the ability to establish standing; (ii) patent owners the opportunity to challenge the petitioner’s standing in appropriate situations; and (iii) the Board the flexibility to consider the specific facts and relevant case law in resolving a standing dispute.

Once an IPR, PGR, or TPCBMP fails to render an adverse decision as to patentability, and estoppel attaches, the meaning of these definitions will be challenged both at the USPTO and the District Courts/ITC. It is expected that the Agency will attempt to apply the well established case law in this area to the relevant estoppel statutes of the AIA. For example, such factors identified in the case law may include the level of control exercised by a “privy” relative to the ongoing proceeding.

Interestingly, on the statutory interpretation side, Senator Schumer (as noted earlier this month) sent a letter to the USPTO discussing the legislative history behind the TPCBMP. In his letter he explains the word “privy” as being added to the legislation, not for estoppel reasons, but rather to embrace “customers.” (The Senator raised this point to rebut the argument that only financial organizations were contemplated as patent challengers under the legislation). While well intentioned, this type of commentary by a key legislator may give rise to a broader application of estoppel. That is to say, should an unsophisticated party fail to prove unpatenability in a TPCBMP, it could be argued that a “deeper pocket” defendant should be estopped from presenting the same arguments in an ensuing litigation.