The Software IP Report

Precedential PTAB Decision Provides Reminder That PG Patent Review Is Barred By Prior Civil Action Challenging Validity

On November 15, 2013, SecureBuy, LLC, petitioned the US Patent and Trademark Office for review of U.S. Patent No. 7,051,002 under the America Invents Act’s transitional program for covered business method patents. Two weeks earlier, on November 1, 2014, SecureBuy had filed actions in two different federal district courts seeking a declaratory judgment of invalidity of the ’002 patent. The Patent Trial and Appeal Board (PTAB), in a decision it has now designated as precedential, dismissed the petition because it was precluded by the prior civil suits. SecureBuy, LLC v. Cardinal Commerce Corporation, Case CBM2014-00035 (PTAB April 25, 2014).

The PTAB explained that 35 U.S.C. § 325(a)(1) was controlling. Provisions of the America Invents Act provide for parties sued for infringing “covered business method patents” to institute post-grant proceedings. However, Section 325(a)(1) clearly states that “[a] post-grant review may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.”

Accordingly, the PTAB’s analysis was simple. The Board explained that SecureBuy, two weeks prior to filing its petition for post-grant review of the ’002 patent, had “filed two separate civil actions seeking a declaratory judgment that the claims of the ’002 patent, including at least claim 1, are invalid under 35 U.S.C. §§ 101, 102, 103, and 112.” It was clear that “the Board may not institute a covered business method patent review of a challenged patent when the petitioner filed a civil action challenging the validity of a claim of the patent before the date on which the petition for review is filed.” Therefore, SecureBuy’s petition for post-grant review was denied “in all aspects.”

This decision, and the PTAB’s analysis, seems to be, and is, a very straightforward application of a clear statute. However, this opinion nonetheless bears reading and attention, because post-grant review is such a powerful tool for parties sued for infringing covered business method patents. The law, and the lesson of this case, are both very clear: if you are contemplating a post-grant review proceeding concerning a patent, do not first bring a declaratory judgment action attempting to invalidate the patent.