Leveraging PTAB 101 Determinations in Parallel Litigation

Covered Business Method (CBM) challenges have fallen out of favor with petitioners. This is due to a number of factors, not the least of which is the narrowing of CBM jurisdiction after Unwired Planet. Of course, this 101 challenge option will go away shortly as CBM will sunset in 2020. But, as more patents become eligible for Post Grant Review (PGR), the ability to challenge patent eligibility under 35 U.S.C. § 101 is slowly expanding to all patents.

Given the expanding option to file a PGR to challenge patent eligibility under 101 alongside art-based challenges, is it better to do so (if possible within the 9-month PGR window), or to simply wait out the 9-month window for Inter Partes Review (IPR)?

While 101 challenges can be especially lethal post-Alice, parallel tracking your 101 case at the Patent Trial & Appeal Board (PTAB) is not without its risks.

A growing number of district courts are now weighing in how CBM 101 determinations of the PTAB can impact the calculus under 35 U.S.C. § 101. These decisions may presage the PGR landscape to come. Two CBM decisions in particular discussed what weight should be given to a CBM institution with respect to requests for attorney’s fees at the end of a case.

In Global Cash Access, Inc. v. NRT Technology Corp., No. 2:15-cv-00822, 2018 WL 4566678 (D. Nev. Sept. 24, 2018) (here), the court determined that denied CBM institutions weigh against an exceptional case finding. After the defendant invalidated the asserted patent under 35 U.S.C. § 101 on a motion to dismiss, it moved for attorneys’ fees. The Court declined to find the case exceptional, in part because the Board had refused to institute the defendant’s two CBM petitions. The Court noted that even though it found the claims invalid, “the fact that another tribunal specialized in patent law declined to institute a proceeding that could have found the [asserted patent] invalid does tend to show that [the plaintiff’s] position was not objectively baseless.” Global Cash Access, Inc. v. NRT Tech. Corp., No. 2:15-cv-00822, ECF No. 102 (D. Nev. Sept. 24, 2018) (Du).

Another court dealt with the counterpoint to the above scenario – when the CBM petition is instead granted institution. In Credit Card Fraud Control Corp. v. Maxmind, Inc., No. 3:14-CV-3262-M, 2016 WL 3355163 (N.D. Tex. Apr. 7, 2016) (here), the Court found that a PTAB Decision to institute CBM review is not an automatic indicator of an “exceptional case” determination. After dismissal of the case, Defendant sought attorney’s fees and costs through an exceptional case finding under 35 U.S.C. § 285. Defendant argued in part that Plaintiff was aware of the § 101 issues with its patent, partially due to the filing of a CBM petition and subsequent institution. The Court noted in particular that “[t]he substantive law of Section 101 patent-eligibility has evolved since Plaintiff initiated this lawsuit,” and “[t]he mere fact that Plaintiff had a losing litigation position is not an automatic indicator that the case is exceptional under Section 285.” Additionally, while not opining on these points directly, the court did appear to credit Plaintiff’s arguments that (1) institution of CBM Review was not an early indication that all of the patented claims were invalid; and (2) even if the PTAB invalidated the patent as a result of the CBM review, Plaintiff could still maintain a reasonable good faith belief that the patent’s validity would be upheld on appeal.

Other courts have addressed CBM institution decisions in other contexts. First, in Intellectual Ventures I LLC v. T-Mobile USA, Inc., No. CV 13-1632-LPS, 2017 WL 3706495 (D. Del. Aug. 23, 2017) (here), the Court determined that in the context of a motion for reconsideration, CBM decisions do not count as “new evidence.” The Court here granted the defendant’s motion for judgment on the pleadings that certain claims of the asserted patent were invalid under 35 U.S.C. § 101. In response, Plaintiff filed a motion for partial reconsideration, citing the PTAB’s denial of institution on a related CBM petition as “new evidence.” Even though the PTAB’s denial of institution came before the court’s initial decision on the motion for judgment on the pleadings, the court noted that even if the PTAB decision had been issued after the initial opinion by the district court, “the PTAB Decision does not have any ‘bearing on the § 101 eligibility of the ’737 patent.’” The court further noted that the focus of the PTAB’s decision was on “whether the ’737 patent [was] eligible for CBM review,” rather than whether the patent was “abstract for the purposes of the § 101 analysis.”  But, CBM eligibility closely tracks 101 analyses, and not all courts agree as to the different focus.

Lastly, the Court in GoDaddy.com LLC v. RPost Commc’ns Ltd., No. CV-14-00126-PHX-JAT, 2016 WL 3165536 (D. Ariz. June 7, 2016) (here), addressed the weight of a CBM petition (and later institution decision) when directly considering a patent’s validity under § 101. As part of a motion for summary judgment, the defendant contended that the plaintiff’s patents were invalid under 35 U.S.C. § 101. In response, plaintiff argued that “’compelling evidence’ exists that the [patents] provide a ‘technical solution to a technical problem’ because the PTAB denied petitions to institute CBM patent reviews of the three patents.” However, the court noted that in this instance, the PTAB denied the petition due to “conclusory language in the petition” and “failing to ‘analyze the method steps separately, instead of examining each claim as a whole, as required.’” As a result, the court gave little consideration to the PTAB’s denial of institution when weighing patent validity.

To the extent that summary determinations on 101 remain a viable litigation short-circuit post-Berkheimer, pursuing a parallel 101 challenge at the PTAB may come back to haunt you.