How Good is Good Enough for a “Good Cause” Extension Before the Patent Trial and Appeal Board? [Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (Fed. Cir. 2018)]
D. Dean Kirk II | April 4, 2019 | PDF Version (198 KB)
Summary: In the wake of recent Federal Circuit and Supreme Court decisions, the Patent Trial and Appeal Board has seen its discretion reduced and responsibilities expanded. As the Board’s responsibilities grow, but its options for deadline adjustment remain narrow, the Board is left with the options of joinder, good cause, or non-institution. When a case is improper for joinder, and non-institution would frustrate the Board’s purpose, the only remaining option is time adjustment for good cause. However, the Board has invoked good cause only once, under extremely unusual circumstances, and it remains unclear how the Board will use the standard in the future.
Preferred Citation: D. Dean Kirk II, How Good is Good Enough for a “Good Cause” Extension Before the Patent Trial and Appeal Board?, 58 Washburn L.J. Online 104 (2019), http://washburnlaw.edu/wljonline/kirk-goodcauseextension
I. Introduction
With the passage of the Leahy-Smith America Invents Act (“AIA”), the Board of Patent Appeals and Interferences (“BPAI”) was replaced by the Patent Trial and Appeal Board (“PTAB”).[1] As part of this process, the AIA created mechanisms to streamline costly and time-consuming prior art challenges by moving them from district court litigation to inter partes review before the Board.[2]
To maintain the efficiency of the AIA review process, the Board’s review is limited in scope and time through both strict statutory deadlines and interpreting regulations.[3] The Board’s options for altering a statutory deadline are narrow, requiring either: (1) joinder of parties, or (2) time adjustment for “good cause.”[4] While the Board has implicitly used the joinder exception in multiple cases, it has used the “good cause” extension only once, and under very unusual circumstances.[5] It remains unclear what other circumstances will meet the “good cause” extension standard.[6]
The Board is bound by Federal Circuit and Supreme Court decisions interpreting the AIA and its implementing regulations.[7] Therefore, decisions by these courts may effectively alter the Board’s responsibilities. This can result in increasing the scope of the Board’s review responsibilities or in reducing its procedural discretion.[8] The cost of these changes inherently increases the complexity of many current and future matters before the Board.[9] This slows the review process and adds generalized court responsibilities to a highly-specialized administrative body.[10] As these responsibilities expand, the Board’s statutory deadlines remain relatively strict, absent a case-by-case reevaluation and extension.[11] This leaves the Board with increased responsibilities, but no escape valve to reduce time pressure, and it leads to two likely resolutions: (1) the Board may expand its treatment of “good cause,” and (2) the Board may decline institution.[12]
II. Background
A. Case Description
Applications in Internet Time, LLC v. RPX Corp. (“AIT”)[13] deals with the triggering circumstances under 35 U.S.C. § 315(b) for the time bar on filing an inter partes review action. Specifically, § 315(b) prohibits the institution of inter partes review if more than one year has elapsed since the service of a complaint of infringement upon either: (1) the petitioner; (2) a real party in interest (“RPI”); or (3) a privy of the petitioner.[14]
AIT arose due to the unique business model of RPX Corporation (“RPX”). RPX sells a form of litigation-as-a-service where its clients pay a subscription and, in exchange, RPX uses the inter partes review mechanism to quickly extinguish patent infringement suits against its clients.[15] Because RPX has many patent-owning clients, the result of their business model is that by filing a successful petition for review on behalf of a single client, many clients may benefit from the invalidation of that same challenged patent.[16] This creates significant problems in light of the common-law RPI standard, which in the patent law context, is understood to include a “party that [generally] desires review of the patent” and any party that may “exercise[] control over...fund[]...or direct[] the proceeding.”[17] Because RPX has many clients paying for its services, and more than one client may benefit from the invalidation of a particular patent, it has several clients who may simultaneously desire review (and invalidation) of a challenged patent.[18]
B. Legal Background
The AIT appeal and decision originates from three inter partes review challenges to two patents.[19] Petitioner RPX sought and received institution against the patents of AIT.[20] AIT had previously served an infringement complaint on Salesforce.com, Inc.—a client of RPX—more than one year prior to RPX’s attempt to institute.[21] Alleging that both RPX and Salesforce were real parties in interest, AIT argued that the time bar of § 315(b) should apply to prevent RPX from petitioning for institution outside of the one-year limit.[22] The Board was not persuaded that RPX and Salesforce were each real parties in interest; therefore, it held that multiple claims of the AIT patents were unpatentable.[23] AIT timely appealed the Board’s time bar and unpatentability decisions to the Federal Circuit.[24]
III. Court’s Decision
The Circuit began by turning to the § 315(b) time bar and determining that the statute’s uses of “real party in interest” and “privy of the petitioner” were necessarily intended to create a substantially broader bar than merely on the named parties to a proceeding.[25] Interpreting these two classes, the court looked to Federal Rule of Civil Procedure 17(a), which lists seven types of “real part[ies] in interest” derived from the old meaning at common law and equity.[26]
The Court turned to two general questions for identifying real parties in interest: “(1) what ‘right’ is being enforced; and (2) who is ‘entitled’ to enforce that right,” but found these unhelpful because the second factor, when coupled with the broad standing in inter partes review, would create overbroad estoppel.[27] Instead, the Circuit applied the Board’s approach from its Trial Practice Guide, looking to whether a non-party client of RPX could have “desire[d] review” of the challenged patent.[28] Furthermore, the Court considered whether the petitions by RPX could have been filed at a non-party client’s “behest,” before emphasizing factors that the Board had not substantially weighed in the proceedings below.[29] The Court found significantly persuasive how the Trial Practice Guide contemplated a “deeper consideration of the facts in [a] particular case” where an alleged “real party-in-interest” was a member of a trade association who acted as the petitioner—similar to how the business association of RPX was acting as petitioner for its members.[30]
On balance, the Court stated that the Board’s treatment of the evidence was “impermissibly shallow, both under the Trial Practice guide and the common law.”[31] As suggested by the facts, the Court found both that RPX filed petitions for inter partes review “to serve its clients’ financial interests,” and this was a “key reason” clients paid for RPX’s services.[32]
IV. Commentary
The AIT ruling comes as part of a suite of Federal Circuit and Supreme Court rulings, including the SAS,[33] Oil States,[34] and Saint Regis[35] decisions, which clarify the boundaries of both the Board’s procedural discretion and its substantive obligations.[36] Collectively, the decisions explain that while inter partes review remains a valid administrative process, the Board’s discretion in the scope of inter partes review is limited to whether or not it grants institution.[37]
A. Procedural Concerns
The procedural balancing problem comes from the combination of the Board’s relatively rigid statutory timing requirements and its limited institution discretion.[38] Under normal circumstances, the Board is required to issue its decision within one year of institution.[39] The Board can no longer issue partial institutions and decisions, and its deadline-managing discretion is limited to either declining institution or granting a case-specific deadline extension.[40] However, even if the Board chooses to institute and joinder is either unavailable or impractical, it is unclear whether extension for “good cause” will be possible.
While the Board has implicitly adjusted the statutory deadline due to joinder, there is currently only one decision dealing with the “good cause” extension.[41] This interpretation comes after the Federal Circuit’s en banc decision in Aqua Products[42], which issued five separate opinions across 148 pages.[43] At the time, the Board in Minerva[44] faced a patent owner’s contingent motion to amend, and Aqua Products dealt specifically with the burden of proof before the Board in those particular amendments.[45] The Circuit issued its decision in Aqua Products only two days before the Board’s statutory time limit would run out.[46] The Board’s order, pursued sua sponte, stated that “[b]ecause of the potential impact of Aqua Products and limited amount of time for the Board and parties to analyze the guidance...and apply it to this proceeding,” a “good cause” extension would be granted.[47] In light of this grant, it is clear that the “good cause” extension may be granted in cases where the governing case law changes due to court review, but it remains unclear what other circumstances—if any—will allow a time extension.[48]
The “good cause” extension of § 316(a)(11) runs closely with the language used for federal court discretion rather than the highly-limiting conditions typical of administrative proceedings.[49] However, whether in the federal courts or an administrative proceeding, “good cause” is consistently something more than merely any reason.[50] While cases like AIT and SAS would likely qualify for an initial time extension under the Board’s decision in Minerva, the effects of those decisions persist beyond the day that they change the law, and eventually are no longer new enough to justify granting additional time under the existing standard.[51]
B. Substantive Responsibilities
Although the AIA review process is a mechanism to expedite parts of the patent litigation process, it is not meant to completely mirror a full district court proceeding.[52] The inter partes review system is replete with shortened procedure to accomplish exactly this goal.[53] Yet, decisions like AIT place the burden of substantial non-patent and common-law privity and interest analysis on the Board, rather than the full Article III proceeding.[54] While the outcome of AIT makes sense in light of how AIA review standing demands disclosure of an RPI, the added responsibility detracts from the purpose of expediting otherwise costly and burdensome district court litigation.[55] Finally, continued additions of responsibility risk distorting the efficiency of the Board as a specialized body.[56]
V. Conclusion
As the Board’s discretion currently stands, it has few options to respond to significant changes in responsibilities without weakening its institutional purpose. Given the procedural limitations on institution, the Board risks being cornered into either expanding the scope of the “good cause” extension, or managing its cases by declining institution.[57] Both options harm the ability of the Board to expedite patent cases, either by delaying what would otherwise be a relatively swift administrative proceeding, or by keeping the matter primarily in the court.[58] Furthermore, as appellate decisions add more substantive considerations to the Board’s duties, it risks both losing time for dedicated patent review and having its purpose distorted from a specialized body toward a conventional court.[59]
1. Pub. L. No. 112–29, 125 Stat. 284 (2011). [Return to Text]
2. See 35 U.S.C. §§ 311–19 (2018). [Return to Text]
3. 35 U.S.C. § 316(a)(11). [Return to Text]
4. See id. [Return to Text]
5. See Minerva Surgical, Inc. v. Hologic, Inc., IPR2016-00868 (P.T.A.B. Oct. 5, 2017) (Paper 56); IPR2016-00084. [Return to Text]
6. See id. [Return to Text]
7. See 35 U.S.C. § 144 (granting appellate review of Board decisions to the Federal Circuit). [Return to Text]
8. See infra Part IV. [Return to Text]
9. See infra Part IV. [Return to Text]
10. See Applications in Internet Time, LLC v. RPX Corp., 897 F.3d 1336 (Fed. Cir. 2018) (expanding the Board’s “real party in interest” analysis) [hereinafter AIT]. [Return to Text]
11. See 35 U.S.C. § 316(a)(11). [Return to Text]
12. See id.; SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1354–55 (2018) (noting the Board may choose not to institute inter partes review). [Return to Text]
13. AIT, 897 F.3d at 1338. [Return to Text]
14. 35 U.S.C. § 315(b). While any person may petition for inter partes review, similar to filing suit, the institution decision requires the Board to decide that the petitioner has a “reasonable likelihood” of success in invalidating at least one of the challenged claims of a patent, and is essentially the stage where the Board decides whether to take up the case. See 35 U.S.C. § 312 (petitions); 35 U.S.C. § 314 (institution decisions). Once the Board makes its finding on likelihood of success against one claim, it may either institute against all claims, or refuse institution. See SAS, 138 S. Ct. at 1353–54. [Return to Text]
15. This is possible because legal standing in inter partes review is “significantly larger than the universe of plaintiffs who would have Article III standing to bring a declaratory judgment action challenging the validity of a patent in federal court.” AIT, 897 F.3d at 1348; 35 U.S.C. § 311(a) (“[A] person who is not the owner of a patent may file with the Office a petition to institute an inter partes review of the patent.”) (emphasis added). [Return to Text]
16. AIT, 897 F.3d at 1355 (discussing the “willful blindness” strategy of the RPX model). [Return to Text]
17. Id. at 1342–43 (citing Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,759 (Aug. 14, 2012)). [Return to Text]
18. See id. at 1362–63 (Reyna, C.J., concurring). Judge Reyna noted that under common law privity principles, even if clients of RPX do not have a direct interest in any one petition, the business model of RPX likely makes it a privy of each of its clients because: (1) RPX appears on behalf of its clients; (2) RPX sells a patent litigation service similar to an insurer-insured relationship; or (3) RPX offered to effectively act in an attorney-client capacity for its customers. See id. Because the bar of § 315(b) extends to “priv[ies] of the petitioner,” each client of RPX might be subject to the time bar every time RPX challenges a patent on behalf of any other client. Id. at 1358–59; 35 U.S.C. § 315(b). [Return to Text]
19. AIT, 897 F.3d at 1338. [Return to Text]
20. Id. [Return to Text]
21. Id. at 1338–39. [Return to Text]
22. Id. [Return to Text]
23. Id. at 1339. [Return to Text]
24. Id. [Return to Text]
25. AIT, 897 F.3d at 1346; 35 U.S.C. § 315(b). [Return to Text]
26. AIT, 897 F.3d at 1347–48; see Fed. R. Civ. P. 17(a). The seven RPIs identified by FRCP 17(a) are executors; administrators; guardians; bailees; trustees of express trusts; parties “with whom or in whose name a contract has been made for another’s benefit;” and parties authorized by statute. Fed. R. Civ. P. 17(a)(1)(A)‑(G). [Return to Text]
27. AIT, 897 F.3d at 1348; see 35 U.S.C. § 311(a). Because the broad standing in inter partes review extends to every “person who is not the owner of a patent,” the use of the second prong’s entitled-to-enforce standard would create estoppel on almost every person regardless of their relation (or lack thereof) to the petition. 35 U.S.C. § 311(a). [Return to Text]
28. AIT, 897 F.3d at 1351. [Return to Text]
29. Id. [Return to Text]
30. Id. [Return to Text]
31. Id. at 1352–53. [Return to Text]
32. Id. at 1352. [Return to Text]
33. SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018). [Return to Text]
34. Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365 (2018). [Return to Text]
35. Saint Regis Mohawk Tribe v. Mylan Pharm., Inc., 896 F.3d 1322 (Fed. Cir. 2018). [Return to Text]
36. See 35 U.S.C. § 315(b) (time limitation); 35 U.S.C. § 318(a) (Director’s ability to institute); Saint Regis, 896 F.3d at 1327 (discussing the narrow scope of the Board’s institution discretion) (citing Oil States, 138 S. Ct. at 1371). [Return to Text]
37. See Oil States, 138 S. Ct. at 1377–79 (upholding the validity of inter partes review); SAS, 138 S. Ct. at 1354–55 (“If an inter partes review is instituted...the Board must address every claim the petitioner has challenged.”); Saint Regis, 896 F.3d at 1327–28 (noting “broad discretion in deciding whether to institute review” in the context of governmental respect for sovereign immunity). [Return to Text]
38. See 35 U.S.C. § 316(a)(11); SAS, 138 S. Ct. at 1354–55. [Return to Text]
39. See 35 U.S.C. § 316(a)(11). [Return to Text]
40. See id. (permitting extension for “good cause” and adjustment “in the case of joinder”); SAS, 138 S.Ct. at 1357–58. [Return to Text]
41. Compare Minerva Surgical, Inc. v. Hologic, Inc., IPR2016-00868 (P.T.A.B. Oct. 5, 2017) (Paper 56), with IPR2016-00084 (exceeding the deadline when joining a party). [Return to Text]
42. Aqua Prods., Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017). [Return to Text]
43. See generally id. In fact, the Board’s grant of extension in the Minerva proceeding specifically noted the unusual nature of the new governing decision. See Minerva, IPR2016-00868 (Paper 56) (noting the size and complexity of the multi-opinion decision). [Return to Text]
44. Minerva, IPR2016-00868 (Paper 56). [Return to Text]
45. Id. [Return to Text]
46. See id. It is possible that the Board either: (1) hoped to receive guidance before the statutory deadline, or (2) had already decided to extend the deadline to avoid the potential of a summary reversal on appeal due to the expected change in governing law. See id. [Return to Text]
47. Id. [Return to Text]
48. See id. [Return to Text]
49. Compare Fed. R. Civ. P. 16(b) advisory committee’s note to 1983 amendment (treating “good cause” as party showing that schedule cannot “be met despite the diligence of the party seeking the extension”), with 42 C.F.R. 405.1813 (allowing good cause only for “extraordinary circumstances...such as a natural or other catastrophe, fire, or strike” upon timely service, but specifically excluding changes in law or regulation). [Return to Text]
50. See id. [Return to Text]
51. It may be possible that even the changes of AIT and SAS might not be enough to grant an extension under Minerva, given different facts. The Chief Judge’s order in Minerva notes that the recent decision “may affect the parties’ arguments and the Board’s analysis of the evidence and arguments presented,” in addition to the extremely limited time involved. Minerva, IPR2016-00868 (Paper 56). Minerva may mean that even a significant change in law will not always merit an extension, provided sufficient time for the parties and the Board. See id. [Return to Text]
52. Saint Regis, 896 F.3d at 1327–28. [Return to Text]
53. Id. [Return to Text]
54. See AIT, 897 F.3d at 1346–47 (providing historical analysis of the common law). [Return to Text]
55. See Saint Regis, 896 F.3d at 1328–29 (collecting examples). [Return to Text]
56. See AIT, 897 U.S. at 1348 (distinguishing inter partes review from Article III standing). [Return to Text]
57. See SAS, 138 S. Ct. at 1354–55 (2018); 35 U.S.C. § 316(a)(11). [Return to Text]
58. See 35 U.S.C. § 315(a). [Return to Text]
59. See AIT, 897 U.S. at 1347–48. [Return to Text]
