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IP Alert: Federal Circuit Holds IPR Time-Bar Challenges Are Waivable

February 19, 2020

On February 13, in Acoustic Technology, Inc. v. Itron Networked Solutions, Inc., the Federal Circuit held that the patent owner had waived arguments that the petitioners were time-barred in an inter partes review (IPR) because the patent owner failed to raise the arguments before the Patent Trial and Appeal Board (PTAB). In short, the court held that time-bar challenges under 35 U.S.C. § 315(b) are not immune to waiver in IPR proceedings, contrary to prior cases that had described the time-bar as “jurisdictional.”

In 2016, Acoustic Technology filed a lawsuit against Silver Spring Networks for infringement of two of its patents. In response, Silver Spring filed a petition for an IPR of Acoustic’s asserted patents. On September 8, 2017, the PTAB instituted an IPR on Silver Spring’s petition. Nine days later, Silver Spring agreed to merge with Itron, Inc.

Acoustic had sued Itron for infringement of the same patents six years prior to this lawsuit. Thus, Itron was undisputedly time-barred from filing a petition for an IPR. Silver Spring and Itron completed the merger while the IPR remained underway. Acoustic learned of the merger three days after it was completed, and Silver Spring filed proper notices alerting the PTAB and Acoustic that Itron had become a real party in interest in the proceeding. Seven months after the merger was completed, the PTAB issued a final written decision. Acoustic never raised a time-bar challenge to the PTAB during this time.

On appeal, Acoustic argued that the PTAB’s final written decision should be vacated because the underlying IPR proceeding was time-barred under 35 U.S.C. § 315(b). Acoustic asserted that Itron was a real party in interest. Under section 315(b), “[a]n 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.” Under current precedent, the PTAB must evaluate section 315(b) time-bar issues at the time it decides whether to institute the proceeding. The real-party-in-interest determination must consider all relationships that arise after the petition filing date.

Acoustic asserted that Itron was a real party in interest before institution because merger discussions had already occurred and contended Itron was a real party in interest after institution because Silver Spring formally became a subsidiary of Itron. Acoustic argued that the PTAB must reassess section 315(b) issues after institution because otherwise parties would delay corporate deals until after institution to avoid time-bar consequences.

In response, Itron argued that Acoustic had waived its time-bar challenge of the IPR because Acoustic did not raise these arguments before the PTAB. Itron further argued that the time-bar of section 315(b) did not apply to the underlying IPR proceeding because Itron had merged with Silver Spring after the PTAB instituted the proceeding. Itron also asserted that the PTAB is not authorized to reevaluate section 315(b) after institution under the statute.

The Federal Circuit held that Acoustic had waived its time-bar challenge to the IPR because it failed to present these arguments before the PTAB. The court noted that Acoustic had not provided any reason for its failure to challenge the proceeding as time-barred before the PTAB and therefore exercised its discretion to find the arguments waived.

The court further held that time-bar challenges under section 315(b) are not immune from waiver. The court reasoned that allowing Acoustic to raise a time-bar challenge for the first time on appeal would afford the patent owner a significant and unfair advantage. Specifically, by waiting for the PTAB’s decision on the merits, patent owners could reap the benefit of estoppel arising from a favorable decision, while saving a challenge to the PTAB’s jurisdiction for appeal in the event of an unfavorable decision.

Because the court found that Acoustic had waived its time-bar challenge, the Federal Circuit did not reach the issues of whether pre-merger activities rendered it a real party in interest or whether the PTAB has any authority to reevaluate section 315(b) after an institution decision.

This decision is significant for parties who are or may be involved in an IPR proceeding, because unasserted time-bar arguments may be waived. Patent owners should be vigilant for any material changes in the real parties in interest and strive to raise any resulting time-bar challenges before the PTAB. Notably, however, the Federal Circuit did not hold that all time-bar challenges not raised before the PTAB are waived. The court pointedly mentioned that it had not addressed the merits of this case. Concealed involvement in an IPR by an interested time-barred party may justify raising a time-bar challenge for the first time on appeal. Fitch Even attorneys will continue to monitor developments related to this case.

For more information on this ruling, please contact Fitch Even partner David A. Gosse or attorney Zachary Van Engen, authors of this alert.

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