The Software IP Report

Inter Partes Review Barred by Real Party in Interest Requirement

By Charles Bieneman

Categories: The Software IP Report, USPTO Post-Issue Proceedings

The USPTO’s Patent Trial and Appeal Board (PTAB) has dismissed RPX Corporation’s multiple petitions for inter partes review (IPR) of four patents owned by Virnetx, Inc., holding that Apple, Inc., whose ability to bring the IPR petitions was time-barred, was the real party in  interest.  RPX Corp. v. Virnetx, Inc., Cases IPR2014-171 to 177 (PTAB June 5, 2014).

The applicable statute, 35 U.S.C. § 315(b), states in relevant part that:

(b) Patent Owner’s Action.— An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

The PTAB had earlier held that Apple’s petitions seeking IPR proceedings against Virnetx’s patents were time barred.  There was no dispute that “that RPX filed [IPR] requests against the Virnetx Patents pursuant to a newly created program in which Apple . . . in October 2013, paid RPX a sum of $500,000, among other things, to file IPR reviews.”  Further, Apple had tried to join IPR proceedings initiated by New Bay Capital (NBC), but those proceedings had been terminated at NBC’s request.  Apple declined NBC’s offer to continue these proceedings in exchange for compensation, and then “paid RPX $500,000, among other things to ‘file with the [USPTO] requests for reexamination or petitions for post grant, covered business method, or inter partes review with respect to patents of questionable quality.”  A month later, RPX served Virnetx with the present IPR petitions.

The PTAB reviewed applicable case law, and cited a number of factors as supporting a conclusion that Apple was a real party in interest to the present proceedings.  Factors cited by the PTAB included the following:

  • Apple and RPX had discussed the Virnetx patents and “Apple at least suggested that RPX file challenges to the specific Virnetx Patents by compensating RPX to perform certain generic services that included filing IPR challenges to ‘patents of questionable quality.'”
  • RPX and Apple shared both an expert and legal counsel.
  • Apple’s $500,000 payment, Apple’s discussions with NBC and subsequent signing of the agreement with RPX to pursue “patents of questionable quality,” supported a finding that Apple had hired RPX to represent it.
  • Apple’s involvement with RPX went even further than a prior case in which trade association members paid the association to instigate litigation; Apple was the “single, interested member” of a “Fund.”

RPX argued that it had independent standing to challenge Virnetx’s patents under 35 U.S.C. § 311(a).  Regardless, the PTAB held that “based on the record presented, the interactions between RPX and Apple show an implicit authorization to challenge the Virnetx Patents.”  Apple had an interest in “potentially avoiding payment of the damages awarded for infringement of the Virnetx Patents in the district court judgment.”  RPX had no substantial interest apart from Apple, and was Apple’s “proxy,” and at best a “nominal plaintiff.”

It will be interesting to see further litigation of the real party in interest issue at the PTAB, and it will be interesting to see if this result is appealed.  Subsequent cases may test whether different facts — Apple not the only interested client of RPX, Apple not itself time-barred, Apple not a defendant in pending litigation — would have changed the result here.