Federal Circuit Finds PTAB Discovery Determinations One-Sided

On the heels of Applications in Internet Time, LLC v. RPX Corporation, the Federal Circuit once again finds itself considering a PTAB RPI/Privity dispute. In RPX, the Court held that “determining whether a non-party is a “real party in interest” demands a flexible approach that takes into account both equitable and practical considerations, with an eye toward determining whether the non-party is a clear beneficiary that has a preexisting, established relationship with the petitioner.” That is, the inquiry is fact-dependent, and not limited to one party controlling the other as some PTAB decisions seemed to suggest.

Last week, the Court examined the allocation of burdens in such disputes in Worlds Inc. v. Bungie, Inc., finding that the PTAB may be improperly shifting the burden to Patent Owners in RPI/Privity discovery disputes.

First, the Court agreed that the initial representation in the petition as to RPI/Privity relationships of the petitioner should be accepted absent challenge by the Patent Owner.  But, this representation should not be accorded a “rebuttable presumption” that formally shifts the burden of production. Rather, the Patent Owner need only come forward with some evidence that an unnamed party exists. When doing so, it then falls to the petitioner based upon its burden of persuasion to prove the petition designations are accurate.

In Applications, the Board vacated and remanded as the record was unclear as to whether the burden was shifted to Patent Owner in assessment of certain indemnification documents.  Moreover, the Court faulted the Board’s seeming reliance on attorney argument of the petitioner as meeting its burden, explaining (here)

[T]he Board was entitled to rely, at least initially, on [Petitioner’s] list of all real parties in interest, which raised no time-bar issues under the facts presented. Here, however, [Patent Owner] presented evidence sufficient to put [Petitioner’s] identification of itself as the sole real party in interest into dispute. Thus, in this circumstance, the Board could no longer merely rely upon [Petitioner’s] initial identification of the real parties in interest. Instead, the Board was required to make any factual determinations necessary to evaluate whether [Petitioner] had satisfied its burden to demonstrate that its petition was not time-barred based on the complaints served upon [alleged unnamed party], the alleged real party in interest.

This marks the point in the analysis at which the burden of persuasion becomes essential. There is here a complete absence of any statement as to which party should bear the burden of persuasion. At the same time, the Board rejected the patent owner’s arguments because the Board was “unpersuaded that there is sufficient evidence that [alleged unnamed party] is an unnamed real party in interest for the reasons given in the Institution Decision.” This implies that the Board assumed the burden of persuasion rests with the patent owner. Moreover, the Board’s potential reliance on the rebuttable presumption from [PTAB precedent] may have effectively skewed the burden of persuasion . . .

As an aside, we have some concern that the Board may have relied on attorney argument as evidence that [alleged unnamed party] was not controlling or funding these IPRs. . . . This is particularly concerning given that the Board’s apparent reliance on such statements seemed to outweigh the actual evidence presented by [Patent Owner]. Instead of citing evidence to support this factual conclusion, the Board merely cited attorney argument from [Petitioners’] briefing—attorney argument that itself failed to cite evidence, such as affidavits or declarations.

(internal citations omitted)

This RPI/Privity dispute, like many at the PTAB, started with Patent Owner seeking additional discovery on the topic.  This additional discovery was denied by the Board, and its rationale reiterated in its Final Written Decision (FWD).

Going forward, it seems that the Board will need to more closely asses these factual situations in accordance with the guidance of RPX.  And where the Patent Owner is able to identify some quantum of evidence calling the petitioner representations as to RPI/Privity into question (the Court made clear that unsupported accusations are not enough), look to the Petitioner to either produce declarations directed to the challenge, or authorize limited discovery of the issues. As such, it may be that additional discovery could on RP/Privity could expand in the wake of these recent cases.