Indemnification Obligation May Trigger IPR Clock

Indemnification from a claim of patent infringement is a common warranty in contractual agreements for the exchange of technological goods. In the event of an infringement claim against the contracted goods/services, a demand for indemnity triggers a duty of the supplier to defend against the claim in some manner, typically funding the defense, or taking over responsibility for the defense effort. As I discussed previously, indemnification clauses require special attention after the America Invents Act (AIA).

Recently, in Atlanta Gas Light Company v. Bennett Regulator Guards Inc., (IPR2013-00453, Paper 31, January 22, 2014) the Patent Trial & Appeal Board (PTAB) analyzed the interplay of an indemnification obligation as it relates to 35 U.S.C. § 312(a) and the 12 month window of 35 U.S.C. § 315(b). That is, does the existence of a contract/indemnification clause create privity between the contracting party under the IPR statutes, or render an indemnitor a real-party-in-interest with respect to the indemnified party?

At the heart of this case (the most confusing fact pattern in the history of the world, greatly simplified here for your casual reading pleasure), was that the lawsuit filed by the patentee was served on Indemnitor X on July 11, 2012, and the petitioner (indemnified party) was served a week later on July 18th. These dates were important as the IPR petition was filed on the one year anniversary of the 18th (i.e., not the 11th). So, if the patentee were successful in arguing that Indemnitor was a “real-party-in-interest”, or “privy” to the IPR petitioner, the filing would have been 7 days outside of the 12 month window of 315(b).

First, the patentee argued that the petitioner and Indemnitor were real-parties-in-interest (RPIs) since Indemnitor was contractually obligated to indemnify the petitioner, and the petitioner was contractually obligated to cooperate in the defense. Therefore, the patentee reasoned that Indemnitor was likely controlling the petitioner — and must be named as an RPI in the petition under 35 U.S.C. § 312(a). However, this argument was shot down after additional briefing, and a declaration from the petitioner that no such control was provided. (to add to the intrigue, petitioner was dismissed from the lawsuit prior to filing of the IPR making them seem all the more like a “straw-man” of the Indemnitor in the eyes of the patentee)

Second, and perhaps of more interest going forward was the argument centering on the impact of an indemnity obligation on 35 U.S.C. § 315(b). Here, the patentee alleged that the existence of the indemnification clause created “privity” between Indemnitor and the petitioner. The PTAB acknowledged that “privity” is a more expansive concept than RPI. However, the PTAB found that privity was not created until the indemnification obligation was triggered by the complaint filing (i.e., July 18th), explaining:

. . .Patent Owner’s privity theory relies fundamentally on [Indemnitor] having the right to control Petitioner’s involvement in this proceeding—a right that, at best, arises from Petitioner having been served with the complaint in the district court proceeding. Service upon [Indemnitor], prior to service upon Petitioner, creates no clear obligation or opportunity for control of Petitioner by [Indemnitor] in this proceeding. To the extent that such obligation or opportunity for control arose when Petitioner was served on July 18, 2012, Petitioner’s filing on July 18, 2013, is timely.

Clearly, the Board did not need to reach the question of whether or not privity actually existed as a result of the claim for indemnification. Instead, the Board surmised that even if it did exist at the time of the claim, the creation of privity on July 18th was not outside of the 12 month window. Still, one might be left with the impression that a presumption of privity could be created upon trigger of an indemnity obligation.