NPE Files Unsuccessful IPR Against Target

Over the years I have seen a handful of non-practicing entities (NPEs) pursue post grant challenges against the patents of their opponent. This “turning of the tables” by the NPE is an odd strategy since the patent of the innovator defendant is useless against an NPE (i.e., they don’t make or do anything to infringe). Clearly, the challenge is not to avoid infringement liability, or narrow a broad patent scope. Instead this tactic is an extension of the game NPEs play—that is, forcing cost and business uncertainty on their opponent to drive settlement.

Whether through patent reexamination, or the more robust Inter Partes Review (IPR), the ploy is almost always an afterthought. Not surprisingly, since these types of filings are hastily assembled and typically prepared on the cheap, they are rarely effective. One example of this unsuccessful strategy can be found in the IPR of U.S. Patent No. 7,582,051 (Heart Failure Technologies, LLC v. CardioKinetix, Inc.) as reported yesterday by Patently-O.

In this dispute, HFT threatened IPR of the ‘051 as a last ditch effort to exact a license fee from Cardio as to their asserted patent. (letter here) When Cardio failed to respond, HFT prepared the IPR petition and filed it (paying a roughly $25K filing fee, and necessary attorney fees). Tellingly, no expert declaration was filed in support of the petition, a characteristic of 90% of IPR petition filings.

Cardio responded to the petition explaining the conclusory positions of the petition as to obviousness, and attaching the threat letter as an exhibit. The response likely cost Cardio about the same, perhaps even less, than the fees expended by HFT to pursue the petition. Last week, the PTAB denied the IPR as deficient with respect to the required 103 showings. (here)

While the asymmetrical discovery burden of district court litigations fuel NPE driven assertions and drive settlements, PTAB battles present a scenario where the cost burden is roughly equal for both sides. For smaller NPEs, this tactic seems like a very bad idea to say the least. On the other hand, larger, more sophisticated licensing entities (such as Intellectual Ventures) have pursued IPR against their licensing targets, not to inflict cost, but to force the targets into positions on prior art that may damage their own portfolio and complicate their defensive use of the same art.