OpenSky Industries, LLC v. VLSI Technology LLC

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Director_PTABDecision_Review@uspto.gov 	Paper No. 102
571-272-7822 	Date: October 4, 2022
UNITED STATES PATENT AND TRADEMARK OFFICE
BEFORE THE OFFICE OF THE UNDER SECRETARY OF COMMERCE
FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED
STATES PATENT AND TRADEMARK OFFICE
OPENSKY INDUSTRIES, LLC,
INTEL CORPORATION,
Petitioners,
v.
VLSI TECHNOLOGY LLC,
Patent Owner.
IPR2021-010641
Patent 7,725,759 B2
Before KATHERINE K. VIDAL, Under Secretary of Commerce for
Intellectual Property and Director of the United States Patent and
Trademark Office.
DECISION
Determining Abuse of Process, Issuing Sanctions, and Remanding to Patent
Trial and Appeal Board Panel for Further Proceedings
1 Intel Corporation (“Intel”), which filed a petition in IPR2022-00366, has
been joined as a party to this proceeding.

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I. 	INTRODUCTION
On December 23, 2021, the Patent Trial and Appeal Board (“PTAB”
or “Board”) issued a Decision granting institution of an inter partes review
(“IPR”) of claims 1, 14, 17, 18, 21, 22, and 24 (“challenged claims”) of U.S.
Patent No. 7,725,759 B2 (“the ’759 patent”), based on a Petition filed by
OpenSky Industries, LLC (“OpenSky”). Paper 17 (“Institution Decision”).
VLSI Technology LLC (“VLSI” or “Patent Owner”) subsequently filed a
rehearing request and a request for Precedential Opinion Panel (“POP”)
review. See Paper 20 (“Req. Reh’g”); Ex. 3002. I initiated Director review
of the Board’s Institution Decision on June 7, 2022. Paper 41. Concurrent
with my Order, the POP dismissed the rehearing and POP review requests.
Paper 42. On June 8, 2022, the Board joined Intel as a Petitioner in this
case. Paper 43.
I explained that Director review would address questions of first
impression as to what actions the Director, and by delegation the Board,
should consider when addressing allegations of abuse of process or conduct
that otherwise thwarts the goals of the United States Patent and Trademark
Office (“USPTO” or “Office”) and/or the America Invents Act (“AIA”).
Paper 47, 7. Due to the importance of the issues to the Office in fulfilling its
mission, I ordered the parties to respond to interrogatories and to exchange
information (“Mandated Discovery”) to assist me in evaluating these issues
of first impression. Id. at 8–11; see also Paper 51.
For the reasons below, I determine that OpenSky has engaged in
discovery misconduct by failing to comply with my Order for interrogatories
and Mandated Discovery. See Paper 47 	. Failure to comply with an
order is sanctionable. 37 C.F.R. § 42.12(a)(1). Accordingly, when
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analyzing whether OpenSky’s conduct amounted to an abuse of process, I
apply a negative inference and hold facts to have been established adverse to
OpenSky. See 37 C.F.R. § 42.12(b)(1) (providing that sanctions may
include “[a]n order holding facts to have been established in the
proceeding”); Paper 47, 10 (“Any attempt to withhold evidence based on a
narrow interpretation of the requests will be reviewed in conjunction with
any other subject conduct and may, alone or in combination with other
conduct, be sanctionable.”); Paper 52, 4 (“As highlighted in the Scheduling
Order, failure to comply with my Order may be sanctionable. . . . For
example, and without limitation, sanctions may include ‘[a]n order holding
facts to have been established in the proceeding.’”).
Based on the evidence of record and the facts held to have been
established, I determine that OpenSky, through its counsel, abused the IPR
process by filing this IPR in an attempt to extract payment from VLSI and
joined Petitioner Intel, and expressed a willingness to abuse the process in
order to extract the payment. OpenSky’s behavior in this proceeding is
entirely distinguishable from conventional settlement negotiations that take
place in an adversarial proceeding. I also find that OpenSky engaged in
abuse of process and unethical conduct by offering to undermine and/or not
vigorously pursue this matter in exchange for a monetary payment. See
Woods Servs., Inc. v. Disability Advocs., Inc., 342 F. Supp. 3d 592, 606
(E.D. Pa. 2018) (“The essence of an abuse of process claim is that
proceedings are used for a purpose not intended by the law.”). Each aspect
of OpenSky’s conduct—discovery misconduct, violation of an express
order, abuse of the IPR process, and unethical conduct—taken alone,
constitutes sanctionable conduct. 37 C.F.R. § 42.12(a)(6). Taken together,
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the behavior warrants sanctions to the fullest extent of my power. Not only
are such sanctions proportional to the conduct here, but they are necessary to
deter such conduct by OpenSky or others in the future. See 37 C.F.R.
§ 42.11(d)(4).
Given OpenSky’s conduct, from this day forward OpenSky and their
counsel are precluded from actively participating in the underlying
proceeding. The conduct of the individual attorneys in this case might also
rise to the level of an ethical violation under the rules of their respective
bars. OpenSky is precluded from filing further papers into the record or
presenting further argument or evidence in the underlying proceeding or on
Director review unless expressly instructed to do so by me or the Board. See
37 C.F.R. §§ 42.12(b)(2–4) (providing that sanctions include “[a]n order
expunging or precluding a party from filing a paper”; “[a]n order precluding
a party from presenting or contesting a particular issue”; and “[a]n order
precluding a party from requesting, obtaining, or opposing discovery”).
Moreover, I order OpenSky to show cause as to why it should not be
ordered to pay compensatory damages to VLSI, including attorney fees, to
compensate VLSI for its time and effort in this proceeding. I further order
OpenSky to address the appropriate time period for which any fees should
be assessed. See 37 C.F.R. § 42.12(b)(6) (providing that sanctions include
“[a]n order providing for compensatory expenses, including attorney fees”).
As set forth below, I order briefing from OpenSky and VLSI on this issue.
Lastly, as to the underlying proceeding, for the reasons articulated
below, I am remanding for the Board to determine, within two weeks of the
date of this Order, whether OpenSky’s Petition, based only on the record
before the Board prior to institution, presents a compelling, meritorious
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challenge. I recognize that the record in this proceeding has progressed
through oral hearing. Nevertheless, as discussed in more detail below, the
Board is to confine its compelling-merits analysis to the record that existed
prior to institution, consistent with the June 21, 2022, Director’s
Memorandum (“Memorandum”) and my additional direction below.2 If the
Board finds that OpenSky’s Petition presented compelling merits, the
underlying proceeding to determine whether the ’759 patent should be
canceled will, in the interest of the public, continue. If the Board finds the
Petition does not rise to this standard, the Board will dismiss the IPR. As
explained in more detail below, requiring the Board to assess whether the
Petition presents a compelling-merits case based on the record before the
Board prior to institution balances the interests of patent owners, including
practicing entities and small to medium-sized enterprises, in reliable patent
rights, with the public interest in canceling invalid patents, clearing the path
for future innovation, and removing the tax on society caused by the
litigation and licensing of invalid patents.
II. 	BACKGROUND
The dispute over the challenged patent has a long and complex
history, starting with VLSI’s complaint against Intel for infringing the ’759
patent, filed in the Waco Division of the United States District Court for the
Western District of Texas on April 22, 2019.
2 Available at www.uspto.gov/sites/default/files/documents/interim
_proc_discretionary_denials_aia_parallel_district_court_litigation_memo_2
0220621_.pdf.
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A. 	Intel’s Prior Petitions and Litigation
After being sued by VLSI, Intel filed two petitions for IPR,
challenging claims of the ’759 patent. IPR2020-00106, Paper 3; IPR2020-
00498, Paper 4. Considering the factors set forth in the Board’s precedential
decision in Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar.
20, 2020) (precedential) (“the Fintiv factors”), the Board exercised
discretion to deny institution of both proceedings. IPR2020-00106,
Paper 17, 13; IPR2020-00498, Paper 16, 10. In particular, the Board
highlighted “the advanced stage of the Western District of Texas litigation, a
currently scheduled trial date approximately seven months before the would-
be deadline for a final written decision, and the overlap between the issues.”
IPR2020-00106, Paper 17, 13; see IPR2020-00498, Paper 16, 6, 10. The
Board did not address the merits of the Petition, other than determining “that
the merits of the Petition[s] do not outweigh the other Fintiv factors.”
IPR2020-00106, Paper 17, 13. Notably, the Board issued these decisions
prior to the issuance of the Memorandum, which clarifies that “the PTAB
considers the merits of a petitioner’s challenge when determining whether to
institute a post-grant proceeding in view of parallel district court litigation”
and that “compelling, meritorious challenges will be allowed to proceed at
the PTAB even where district court litigation is proceeding in parallel.”
Memorandum at 4–5.
Intel requested POP review of the Board’s decisions, which was
denied. IPR2020-00106, Papers 19 and 20; IPR2020-00498, Papers 19 and
20. The trial in the Western District of Texas began on February 22, 2021,
months after the date that was presented to the Board for the discretionary
denial analysis. See Ex. 2025; cf. Memorandum at 8 (“A court’s scheduled
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trial date [] is not by itself a good indicator of whether the district court trial
will occur before the statutory deadline for a final written decision.”). The
trial resulted in a jury verdict finding that Intel neither literally nor willfully
infringed the ’759 patent, but did infringe claims 14, 17, 18, and 24 under
the doctrine of equivalents. Ex. 1027, 2–4. The jury also found that Intel
had not proven by clear and convincing evidence that claims 14, 17, 18, and
24 were invalid as anticipated. Id. at 5. The invalidity basis presented to the
jury during the trial did not overlap with the grounds for unpatentability in
Intel’s Petitions. Institution Decision 8. The jury awarded VLSI $675
million in damages for infringing the ’759 patent.3 Id. at 6. Intel appealed
to the Federal Circuit, and that appeal is currently pending as VLSI
Technology LLC v. Intel Corporation, No. 22-1906 (Fed. Cir. June 15,
2022). The appeal will not resolve the patentability issues pending before
the Board.
B. 	OpenSky’s Petition
On June 7, 2021, OpenSky filed the Petition for IPR in this
proceeding, challenging claims 1, 14, 17, 18, 21, 22, and 24 of the
’759 patent. Paper 2 ( “Pet.”). OpenSky also filed a Petition for IPR,
challenging claims 1–3, 5, 6, 9–11, and 13 of U.S. Patent No. 7,523,373 B2
(“the ’373 patent”). IPR2021-01056, Paper 2. OpenSky copied extensively
from Intel’s two earlier petitions. Ex. 2024 (redline comparison of portions
of the Petition in this IPR with portions of Intel’s petitions in IPR2020-
3 Concurrently, the jury found that Intel had also infringed U.S. Patent
No. 7,523,373 B2 (“the ’373 patent”), owned by VLSI, and awarded VLSI
$1.5 billion in damages. Ex. 1027, 6. The ’373 patent is the subject of
IPR2021-01229.
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00106 and IPR2020-00498). OpenSky further refiled Intel’s supporting
declarations of Dr. Bruce Jacob, without his knowledge. See Exs. 1002,
2097, 1046.4
In its Petition, OpenSky argued that the Board should not exercise
discretion to deny institution under 35 U.S.C. §§ 314(a) or 325(d). Pet. 7–
10. In addressing the Fintiv factors, OpenSky argued:
the Board needs to institute review to maintain the integrity of
the patent system, because a jury found that this patent is worth
at least $675 million ($675,000,000), yet no judge or jury (or
PTAB proceeding) has ever double-checked the validity of the
‘759 patent. The Fintiv analysis is designed to determine
whether the integrity of the system would be furthered by
instituting review. Apple v. Fintiv, IPR2020-00019, Paper 11,
p. 6 (“the Board takes a holistic view of whether efficiency and
integrity of the system are best served by denying or instituting
review.”). The integrity of the entire patent system is
threatened whenever a patent owner constructs a set of
proceedings in which no one ever checks the validity of a patent
found to be worth over six hundred million dollars. The denial
of invalidity review cannot be proper; OpenSky urges the Board
to find that this factor weighs strongly in favor of institution.
Id. at 9–10.
VLSI filed a Patent Owner Preliminary Response on September 24,
2021, explaining that this was the third IPR Petition filed against the ’759
patent. Paper 9, 1 (noting discretionary denial of Intel’s petitions in
IPR2020-00106 and IPR2020-00498). VLSI argued that this Petition should
4 OpenSky also filed identical copies of declarations of Intel’s other expert,
Dr. Hall-Ellis, without change. Paper 17, 5. Dr. Hall-Ellis is a librarian who
proffered testimony regarding the prior art status of certain references relied
on in Intel’s previous petitions. See Ex. 1040.
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be denied, alleging that “[s]hortly after the widely-reported Verdict” finding
that Intel infringed the ’759 and ’373 patents, “OpenSky formed in Nevada
on April 23, 2021. OpenSky’s only apparent business activity is the filing of
two IPR petitions against VLSI.” Id. at 5 (citation omitted). VLSI also
noted that “OpenSky fashioned this Petition by copying and then stitching
together portions of the rejected Intel Petitions. Rather than provide its own
expert testimony, OpenSky just refiled Intel’s declarations without even
changing the cover pages.”5 Id. at 1–2, 6. Moreover, VLSI noted that
“[j]ust one week after OpenSky filed its petitions, yet another new entity was
created, to file yet another petition against the ’373 patent using a similar
approach.” Id. at 1–2 (identifying IPR2021-01229, filed by Patent Quality
Assurance, LLC).
In this proceeding, the Board reviewed the evidence and arguments in
the Petition, Patent Owner Preliminary Response, Preliminary Reply, and
Preliminary Sur-reply, and instituted the requested IPR on December 23,
2021. Institution Decision 30. Specifically, the Board found that the Fintiv
factors did not weigh in favor of discretionary denial, in large part because
the district court jury trial did not resolve the unpatentability issues
presented in this proceeding. Id. at 8–9. Because the Board did not reach
the merits of the prior Intel petitions, the Board disagreed with VLSI’s
arguments that institution should be denied because the Petition presents the
5 Such practice has become known as “copycat” petition practice and, to
date, has not been held to be improper any more than copying claims to
invoke interference proceedings, which have likewise not been found to be
improper.
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same challenges as the prior Intel petitions.6 Id. at 10, 12 (relying on factors
set forth in General Plastic Industrial Co., Ltd. v. Canon Kabushiki Kaisha,
IPR2016-01357, Paper 19 (Sept. 6, 2017) (precedential) (“the General
Plastic” factors)). See Code200, UAB v. Bright Data Ltd., IPR2022-00861,
Paper 18, 5 (PTAB Aug. 23, 2022) (precedential) (“Where the first-filed
petition under factor 1 was discretionarily denied or otherwise was not
evaluated on the merits, factors 1–3 only weigh in favor of discretionary
denial when there are ‘road-mapping’ concerns under factor 3 or other
concerns under factor 2. . . . ‘[R]oad-mapping’ concerns are minimized
when, as in this case, a petitioner files a later petition that raises
unpatentability challenges substantially overlapping with those in the
previously-filed petition and the later petition is not refined based on lessons
learned from later developments.”).
The Board then, for the first time, discussed the merits of the Petition.
Institution Decision 15–29. The Board instituted the underlying proceeding,
concluding that the “Petitioner has shown a reasonable likelihood it will
prevail with respect to unpatentability of claim 1 over Shaffer and Lint—
Petitioner’s showing justifies institution.” Id. at 21. The Board likewise
concluded that because the “Petitioner has shown a reasonable likelihood it
will prevail with respect to unpatentability of claim 1 over Chen and
Terrell—Petitioner’s showing justifies institution.” Id. at 29.
On January 6, 2022, VLSI sought to challenge the institution decision,
filing requests for rehearing and for POP review. In the rehearing request,
6 In IPR2021-01056, however, the Board denied institution of an IPR due to
the unavailability of another expert declarant on which OpenSky relied in its
contentions in that case. IPR2021-01056, Paper 18, 10.
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VLSI argued that “[t]he Board should not permit entities formed after the
verdict and facing no infringement threat to treat these proceedings as
leverage to extract ransom payments in exchange for withdrawing abusive
attacks.” Req. Reh’g 1, 3–4, 6–8. VLSI argued that such a proceeding
advances no valid public interest and “fail[s] to weigh the overarching
interests of fairness to the parties and the integrity of the patent system.” Id.
at 1, 9–10. VLSI also criticized the Board’s reliance on two expert
declarations, which VLSI contended constitute inadmissible hearsay. Id. at
11–15.
C. 	Intel’s Motion for Joinder
Within a month of the Board instituting IPR in this proceeding, Intel
timely filed its own Petition for IPR with a Motion for Joinder to this
proceeding. IPR2022-00366, Papers 3 and 4. The Board joined Intel to this
proceeding on June 8, 2022, determining that Intel’s Petition warranted
institution and declining to discretionarily deny institution under 35 U.S.C.
§§ 314(a) and 325(d). Paper 43, 19–20. In considering discretionary denial,
the Board determined that:
[a]lthough Petitioner has directed this Petition to the same
claims and relies on the same art as in its first two petitions, that
the Board did not substantively address the merits of the prior
Intel petitions, in our view, weighs against discretionary denial
here. The district-court trial that led to the denial of its initial
petitions is over and did not resolve the challenges presented
here. Allowing Petitioner the opportunity to pursue a decision
on the merits from the Board at this time—by joining
OpenSky’s substantially identical petition—best balances the
desires to improve patent quality and patent-system efficiency
against the potential for abuse of the review process by repeated
attacks on patents.
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Id. at 9–10 (citing General Plastic, Paper 19 at 16–17). The Board correctly
identified that the statute expressly provides an exception to the 1-year time
bar (set forth in 35 U.S.C. § 315(b)) for a request for joinder. Id. at 12
(citing 35 U.S.C. § 315(b)) (“The time limitation set forth . . . shall not apply
to a request for joinder under subsection (c)”). VLSI requested POP review
of the Board’s decision to join Intel to the proceeding, and that request was
denied. Paper 53. On August 30, 2022, the Board authorized VLSI to file a
Motion to Terminate Intel from the proceeding, setting forth VLSI’s
arguments on res judicata. Paper 86, 2. The Board authorized Intel to file
an opposition to the motion. Id. VLSI filed the Motion to Terminate on
September 27, 2022. Paper 99. Intel’s opposition is pending.
D. 	Director Review
As noted above, I ordered a sua sponte Director review of the Board’s
institution decision in this proceeding on June 7, 2022, one day before the
Board joined Intel as a Petitioner in this case. Paper 41. Concurrent with
my Order, the POP dismissed the rehearing and POP review requests.
Paper 42. Because I did not yet have all the facts before me, I did not stay
the underlying proceeding.
On July 7, 2022, I issued a Scheduling Order for the Director review.
Paper 47. The Scheduling Order defined the scope of my review, as I
determined that “this proceeding presents issues of first impression” and
“involves issues of particular importance to the Office, the United States
innovation economy, and the patent community.” Id. at 7–8. In particular, I
identified the following issues as relevant:
1. 	What actions the Director, and by delegation the Board,
should take when faced with evidence of an abuse of process or
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conduct that otherwise thwarts, as opposed to advances, the
goals of the Office and/or the AIA; and
2. 	How the Director, and by delegation the Board, should
assess conduct to determine if it constitutes an abuse of process
or if it thwarts, as opposed to advances, the goals of the Office
and/or the AIA, and what conduct should be considered as
such.
Id. I directed the parties to address these questions and to support their
answers “in their briefing, including through new arguments and non-
declaratory evidence.” Id. at 8. I also invited amici curiae briefing. Id.
To enable me to address those questions in the context of this Review,
my Scheduling Order also instructed the parties to answer interrogatories
and exchange certain categories of information as Mandated Discovery. Id.
at 8–11; 35 U.S.C. § 316(a)(5) (“The Director shall prescribe regulations
setting forth standards and procedures for discovery of relevant evidence . . .
otherwise necessary in the interest of justice”). My interrogatories ordered
the parties to address specific questions related to the “issues of particular
importance” in this Review. Id. at 8–9.
I ordered the Mandated Discovery “to allow all parties to answer the
questions” I set forth, and to give each party an opportunity to produce
evidence supporting its position. Id. at 9–10. The Mandated Discovery
included categories of documents relating to the formation and business of
OpenSky; documents and communications “relating to the filing, settlement,
or potential termination of this proceeding, or experts in this proceeding, not
already of record in the proceeding”; and “communications with any named
party relating to the filing, settlement, or potential termination of this
proceeding.” Id. My Scheduling Order warned “that sanctions may be
considered for any misrepresentation, exaggeration, or over-statement as to
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the facts or law made in the parties’ briefing” (id. at 9), and that “[a]ny
attempt to withhold evidence based on a narrow interpretation of the
[discovery] requests will be reviewed in conjunction with any other subject
conduct and may, alone or in combination with other conduct, be
sanctionable.” Id. at 10.
On July 15, 2022, OpenSky requested an extension of the deadlines in
the Scheduling Order. Ex. 3012. On July 21, 2022, I extended the deadlines
for the parties to exchange information and accordingly extended the
briefing deadlines: as extended, the parties’ initial briefs and briefs of amici
curiae were due on August 18, 2022,7 and the parties’ responsive briefs were
due on September 1, 2022. Paper 51. In the Order granting a two-week
extension, I reminded the parties that “as set forth in the Scheduling Order, a
party may lodge legitimate, lawful grounds for withholding documents, and
shall maintain a privilege log of documents withheld.” Id.
On July 29, 2022, I issued a further Order addressing the scope of
Mandated Discovery. Paper 52. I reminded the parties that “they are
required to comply with the full scope of the Scheduling Order, including its
7 Fourteen amici curiae briefs have been entered into the record of this
proceeding, from the following: American Intellectual Property Law
Association (Paper 55) (“AIPLA”); Association of Amicus Counsel
(Paper 56); Naples Roundtable (Paper 57) (“Naples”); Ramzi Khalil
Maalouf (Paper 64) (“Maalouf”); Engine Advocacy et al. (Paper 74)
(“Engine”); High Tech Inventors Alliance (Paper 75) (“HTIA”); Robert
Armitage (Paper 76); Computer and Communications Industry Association
(Paper 77) (“CCIA”); BSA | The Software Alliance (Paper 78) (“BSA”);
The Alliance of U.S. Startups et al. (Paper 79) (“USIJ”); Hon. Paul R.
Michel (Paper 80); Unified Patents et al. (Paper 81) (“Unified”); Public
Interest Patent Law Institute (Paper 82) (“PIPLI”); and Centripetal
Networks, Inc. (Paper 83) (“Centripetal”).
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Mandated Discovery provisions now due to be exchanged by August 4,
2022,” and “failure to comply with my Order may be sanctionable.” Id. at 4.
I explained that potential sanctions may include, for example, “[a]n order
holding facts to have been established in the proceeding.” Id. (quoting 37
C.F.R. § 42.12). The parties were further “reminded that legitimate, lawful
grounds for withholding documents may be lodged and, if so, the party shall
maintain a privilege log of documents withheld. No responsive document
may be withheld without being included in such a privilege log.” Id.
(internal citations omitted). Thus, I provided specific notice of potential
sanctions to the parties, in addition to the general notice provided by the
Office’s regulations.
As discussed in detail below, OpenSky did not comply with the
Mandated Discovery as ordered. See Paper 84, 19–21.8 It produced a
minimal number of documents to the other parties and wholly inadequate
answers to my interrogatories, and did not produce a privilege log. See id.
In contrast, both VLSI and Intel produced responsive documents and
detailed privilege logs, as ordered.
III. 	FAILURE TO COMPLY
As explained above, I initiated Director review to answer questions of
first impression related to the IPR process. Paper 47, 7. Before proceeding
to those questions, however, I must address OpenSky’s deficient responses
to the discovery required in my Scheduling Order.
8 Paper 84 is the nonconfidential version of VLSI’s Initial Brief in response
to the Director review order; Paper 70 is the confidential version.
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A. 	OpenSky’s Objections to Mandated Discovery
The deadline for exchange of documents and communications
contemplated by my Mandated Discovery order was August 4, 2022.
Paper 51, 4. The deadline for the parties to submit briefs addressing the
Director’s interrogatories with supporting documentary evidence was
August 18, 2022. Id. at 4; Paper 47, 8–10. The parties were repeatedly
warned that no documents may be withheld without being included in a
privilege log, and that any attempt to withhold evidence may be
sanctionable. Paper 47, 10; Paper 52, 4.
On August 4, 2022, OpenSky filed a Notice of Objections to my
Mandated Discovery. Paper 54. I find their objections have no merit. For
example, OpenSky contends that the Order is inconsistent with 35 U.S.C.
§ 6(c) as modified by United States v. Arthrex, Inc., 141 S. Ct. 1970, 1987
(2021). Paper 54, 2. But OpenSky does not explain this assertion.
OpenSky further contends that the Order exceeds the discovery permitted
under 35 U.S.C. § 316(a)(5) and 37 C.F.R. § 42.51. Id. at 2. OpenSky’s
argument on this point is not persuasive. 35 U.S.C. § 316(a)(5) provides that
discovery may be sought where “necessary in the interest of justice,” which
is at the heart of the inquiry as to whether OpenSky has abused the IPR
process. And 37 C.F.R. § 42.51 is not relevant to Director-ordered
discovery, because that rule governs only discovery between the parties.
Furthermore, in general, it is within my purview to “determine a proper
course of conduct in a proceeding for any situation not specifically covered
by [the other regulations]” and to “enter non-final orders,” such as the
Scheduling Order, “to administer the proceeding.” 37 C.F.R. § 42.5(a).
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OpenSky also argues that the Scheduling Order is inconsistent with
Board procedures governing non-routine discovery. Paper 54, 2–3. For
example, OpenSky contends that there is no evidence “tending to show
beyond speculation that in fact something useful will be uncovered.” Id. at 3
(quoting Garmin Int’l, Inc. v. Cuozzo Speed Techs. LLC, IPR2012-00001
(PTAB Mar. 5, 2013) (Paper 26) (precedential)). Again, while Board
procedures governing party conduct do not formally apply to the Director’s
inquiry into process abuses, my Scheduling Order makes plain the basis for
the ordered discovery here. The Scheduling Order explains that the
discovery would permit the parties to answer the questions I identified as
germane to my inquiry into the circumstances surrounding OpenSky’s
formation and conduct—information about which is uniquely in the parties’
(and specifically OpenSky’s) possession. Paper 47, 7–10; 37 C.F.R.
§ 42.11(a) (“Parties and individuals involved in the proceeding have a duty
of candor and good faith to the Office during the course of a proceeding.”).
OpenSky’s other arguments similarly lack merit. OpenSky contends
that, in its judgment, certain categories of Mandated Discovery are not in
dispute. See, e.g., Paper 54, 3–4. That is not OpenSky’s judgment to make.
It is not appropriate for OpenSky to simply assert that something is
undisputed and, on that basis, refuse to comply with my Order by failing to
produce or log such materials. OpenSky’s argument that the Order is not
“easily understandable” is also not persuasive. Id. at 4. No other party
indicated that they had any issue understanding the Order, nor did they have
issues complying. OpenSky’s argument that the discovery is overly
burdensome (Paper 54, 4–5) fares no better. OpenSky could have sought to
file a motion to revise the standing protective order (37 C.F.R.
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§ 42.54(a)(1)), or at least have requested a second extension if it could
demonstrate an actual burden, but instead chose noncompliance.
OpenSky submits that the Order violates its and its members’
constitutional rights. Paper 54, 5–6. OpenSky cites no court case to support
this proposition, and instead gestures to the First Amendment right to
freedom of association and the Fourteenth Amendment’s right to due
process of law. OpenSky does not explain how complying with a discovery
order results in a constitutional violation. Further, by choosing to file this
IPR, OpenSky availed itself of my and the Board’s jurisdiction and opened
itself to questions regarding its members and purpose, among others.
OpenSky ends its objections with a series of similarly unpersuasive
arguments. OpenSky opines that the Order is inconsistent with the purposes
of the AIA. Paper 54, 6. OpenSky does not explain why it believes that to
be the case, and the argument lacks merit for reasons explained below.
Moreover, even if true, the argument does not provide sufficient basis for
OpenSky to disregard my Order. OpenSky’s argument that the Order is
inconsistent with the guidelines for Director review rests on its contention
that “the Order does not identify any issue of first impression.” Id. at 7.
OpenSky provides no citation for the claim that Director review is limited to
issues of first impression. In any event, my Order indicated that the issues
here are ones of first impression. Id. Finally, OpenSky contends that the
Order would require it to waive privilege objections (id. at 7–8), but
avoiding such waiver is the point of a privilege log, which OpenSky did not
submit.
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B. 	OpenSky’s Failure to Comply with Mandatory Discovery
OpenSky failed to comply with the discovery requirements set forth in
the Scheduling Order by: (1) refusing to provide confidential documents to
the other parties in the proceeding, or instead, a privilege log listing
privileged documents withheld for in camera review; and (2) failing to
respond in good faith to the interrogatories, including with supporting
evidence. Paper 47, 8–10. Each of these failures to comply is independently
sanctionable. Id. at 10.
1. 	OpenSky refused to produce confidential documents under seal, or a
privilege log of what was not produced
As explained above, the deadline for the exchange of documents and
communications was August 4, 2022. On August 11, 2022, VLSI requested
in camera review, as to the production made by OpenSky. Paper 62. VLSI
asserts that it:
cannot identify with specificity documents for in camera review
in OpenSky’s responsive documents, because OpenSky has
(i) failed to produce internal documents; (ii) failed to produce
any documents it deems either confidential or highly-
confidential under the Director’s modified direct protective
order, Ex. 3011; and (iii) failed to provide any privilege log in
this matter, each in violation of the Director’s Orders (see
Papers 47, 51, and 52).
Id. at 1. VLSI asserts that “OpenSky produced approximately 170
documents, all ‘nonconfidential,’ largely consisting of public filings and
correspondence already available to all parties.” Id. at 3. VLSI contends
that the produced non-public documents include only emails from
OpenSky’s lead counsel, Andrew Oliver, and “a single internal
communication.” Id. at 3–4. Notably, VLSI asserts that “OpenSky has not
logged a single document.” Id. at 4. VLSI argues that, due to OpenSky’s
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failure to produce documents, I should—again—order OpenSky to produce
“all withheld responsive documents in the seven categories of mandated
discovery.” Id. at 8 (emphasis in original).
On August 18, 2022, OpenSky filed its initial brief in response to the
Director review order. Paper 71.9 In the brief, OpenSky does not dispute
VLSI’s assertions that OpenSky failed to produce internal or confidential
documents and failed to produce a privilege log of withheld evidence. See
id. In its responsive brief, filed September 1, 2022, OpenSky asserts that it
produced “over 240MB of responsive documents to VLSI and Intel, of
which more than half were nonconfidential and of which the others bore
either confidential or highly confidential designations.” Paper 91, 19 (see
Exs. 1066, 1067)10. However, quantity does not substitute for quality.
OpenSky’s new exhibits merely show the size of the files shared with
opposing counsel, not the contents of files. See Exs. 1066, 1067. Notably,
OpenSky did not file any of the documents as exhibits in this proceeding,
despite the existence of the Modified Default Protective Order. And directly
contradicting the Scheduling Order’s requirements, OpenSky confirms that it
“will not be producing, filing, or lodging any privileged documents in this
proceeding; accordingly, OpenSky will not be producing a privilege log for
purposes of identifying documents for an in camera review that will not take
place.” Paper 91, 20. OpenSky’s refusal to comply with the requirements
set forth in the Scheduling Order is alone sanctionable conduct. See
Paper 47, 4.
9 Paper 71 is the nonconfidential version of OpenSky’s Initial Brief in
response to the Director review order; Paper 67 is the confidential version.
10 OpenSky filed a corrected version of its responsive brief as Paper 101.
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2. 	OpenSky’s responses to the interrogatories are inadequate and lack
evidentiary support
In addition to its express refusal to comply with the Mandated
Discovery, OpenSky failed to respond adequately to the interrogatories set
forth in the Scheduling Order, which required the parties to respond with
citation to supporting documentary evidence. Paper 47, 8. In its initial brief,
OpenSky asserts that VLSI “has promoted a false narrative in which it
portrayed itself as a victim of ‘harassment’ or a ‘shakedown.’” Paper 71, 2.
OpenSky presents its own version of the facts and refers to alleged
communications between OpenSky and VLSI that purportedly show VLSI to
be the bad actor. See id. at 2–6. However, throughout this portion of its
brief, OpenSky fails to cite a single source of evidence to support its
allegations of harassment, apart from a single citation to Exhibit 2055 (of
record as of April 11, 2022), which is addressed below. Id. at 5.
In addition to its largely unsupported narrative, OpenSky’s initial brief
purports to address the interrogatories listed in the Scheduling Order but
fails to do so adequately. Id. at 8–18. OpenSky refers to three sources of
evidence previously of record to support its answers to the interrogatories,
Exhibits 1048, 2055, and 2066. See id. As a result, many of the
interrogatories remain unanswered or unsubstantiated by OpenSky.
For example, interrogatory (a) asked about OpenSky’s formation and
business. Paper 47, 8. To answer these questions, the Scheduling Order
required OpenSky to provide the other parties with communications related
to the formation of OpenSky and documents related to OpenSky’s business
plan. Id. at 9. OpenSky responds by stating that “OpenSky has not limited
its business purpose” because “[a] Nevada Limited Liability Company is not
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required to state a ‘business’ on formation.” Paper 71, 9. This answer is
non-responsive. In addition to its effective refusal to answer the
interrogatory, OpenSky did not provide any required evidence that would
allow me, VLSI, or Intel to consider OpenSky’s position. See Paper 66, 10–
11; Paper 84, 2–3.
Interrogatory (b) asked, “[o]ther than communications already in the
record, what communications have taken place between OpenSky and each
of the other parties?” Paper 47, 8. To answer this question, the Scheduling
Order required OpenSky to provide the other parties with “all documents
and communications relating to the filing, settlement, or potential
termination of this proceeding, or experts in this proceeding, not already of
record.” Id. at 9. OpenSky admits that “the parties have had numerous
communications,” but asserts that “[t]he communications related to
substance and procedure in this proceeding would be unduly burdensome to
log and are not relevant to the topics of the Director’s review.” Paper 71,
10. OpenSky does not identify evidentiary support for these assertions and
does not raise a good faith claim to withhold this evidence. See id. For
example, OpenSky does not argue that the communications are privileged,
or exchange a privilege log of the communications, as required by the
Scheduling Order. Id. Rather, OpenSky impermissibly determines on its
own that no evidence is relevant to topics of the Director review and
withholds evidence on that basis. Id. Accordingly, OpenSky’s answer is
evasive and non-responsive to interrogatory (b).
Interrogatory (c) asked, “[c]ould OpenSky be subject to claims of
infringement of the ’759 patent,” and “[d]oes OpenSky have a policy reason
for filing the Petition that benefits the public at large beside any reasons
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articulated in the already-filed papers?” Paper 47, 8. OpenSky asserts that
this question is “irrelevant,” and states that “OpenSky has not attempted to
perform an infringement analysis.” Paper 71, 11. OpenSky also asserts that
“it is possible” it could infringe the ’759 patent if it has a computer product
containing an Intel product. See id. OpenSky lists a number of potential
policy reasons for filing the Petition, none of which are supported by
evidence showing OpenSky’s intent at the time of filing. See id.
Accordingly, OpenSky’s answer is non-responsive to interrogatory (c).
Interrogatory (d) asked, “[d]oes the evidence in this proceeding
demonstrate an abuse of process . . . [and] if so, which evidence and how
should that evidence be weighted and addressed?” Paper 47, 8. To answer
this question, the Scheduling Order required OpenSky to provide the other
parties with “all communications with any named party relating to the filing,
settlement, or potential termination of this proceeding.” Id. at 10. OpenSky
asserts that “[t]he evidence demonstrates abuse of process . . . only by VLSI.
No evidence demonstrates any such abuse by Intel or OpenSky.” Paper 71,
12. OpenSky refers to a single piece of evidence already of record,
Exhibit 2055, and offers no other supporting evidence. See id. at 13. As to
other communications between the parties, OpenSky asserts that “parties’
discussions of potential settlement positions are not admissible evidence in
this proceeding,” according to Rule 408 of the Federal Rules of Evidence.
Id. at 12–13. OpenSky’s argument is misplaced.
First, “Rule 408 does not warrant protecting settlement negotiations
from discovery. On its face, the rule applies to the admissibility of evidence
at trial, not to whether evidence is discoverable.” Phoenix Sols. Inc. v. Wells
Fargo Bank, N.A., 254 F.R.D. 568, 584 (N.D. Cal. 2008). Second, Rule 408
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does not bar the admission of settlement discussions for all purposes.
Rather, it only excludes certain settlement statements offered for the purpose
of “prov[ing] or disprov[ing] the validity or amount of a disputed claim or to
impeach by a prior inconsistent statement or a contradiction.” Fed. R.
408(a). Settlement discussions may be admissible for other purposes. See,
e.g., Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 689 (7th Cir.
2005) (“The district court has broad discretion to admit [408 settlement]
evidence for a purpose other than proving liability.”); BTG Int’l Inc. v.
Bioactive Labs., No. CV 15-04885, 2016 WL 3519712, at *8 (E.D. Pa. June
28, 2016) (“Rule 408 does not bar the introduction of settlement discussions
if offered for ‘another purpose,’ such as to show a party’s knowledge or
intent.”). Therefore, Rule 408 does not control, and OpenSky failed to
respond to interrogatory (d).
Interrogatory (e) asked, “[w]hat is the basis for concluding that there
are no other real parties in interest, beyond OpenSky,” and “[a]re there
additional people or entities that should be considered as potential real
parties in interest?” Paper 47, 8–9. To answer this question, the Scheduling
Order required OpenSky to provide the other parties with “all documents
relating to OpenSky’s business plan including its funding, its potential
revenue, and the future allocation of any of its profits.” Id. at 9. OpenSky
asserts that “OpenSky acted entirely on its own and with its own funding in
bringing its Petition” and that it “did not have the support of any other
entity.” Paper 71, 17. Again, OpenSky provides no evidence to support its
allegation. See id. For example, because OpenSky does not provide
evidence of its funding, it is not possible to ascertain whether or not
OpenSky merely acts as a shell for other entities seeking to challenge the
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’759 patent. And as a newly formed entity, seemingly created solely for
filing this IPR, OpenSky must have some source of undisclosed funding.
Accordingly, OpenSky’s answer is evasive and non-responsive to
interrogatory (e).
Interrogatory (f) asked, “[d]id OpenSky ever condition any action
relating to this proceeding . . . on payment or other consideration by Patent
Owner or anyone else?” Paper 47, 9. OpenSky asserts that it “has not
conditioned any action relating to this proceeding on payment or other
consideration.” Paper 71, 17. OpenSky does not cite supporting evidence
for this assertion, except to show that, at some point in time, OpenSky paid
its expert. See id. at 17–18 (citing Ex. 2066, 19:17–24). By contrast, VLSI
and Intel provide documentary evidence that contradicts OpenSky’s
assertion that it did not condition any action on payment or other
consideration, as discussed in detail below. Accordingly, OpenSky’s answer
is misleading and non-responsive to interrogatory (f). See 37 C.F.R.
§ 42.11(a) (“Parties and individuals involved in the proceeding have a duty
of candor and good faith to the Office during the course of a proceeding.”).
C. 	Sanctions for OpenSky’s Failure to Comply
OpenSky has identified no authority that would allow it to ignore the
interrogatories and Mandated Discovery in my Order. Therefore, I
determine that OpenSky has failed to comply. I further determine that it is
appropriate to sanction OpenSky for its discovery misconduct. See 37
C.F.R. § 42.12(b) (non-exhaustive list of sanctions).
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The Director11 has the authority to impose sanctions against a party
for misconduct. 35 U.S.C. § 316(a); 37 C.F.R. § 42.12(a); see Apple Inc. v.
Voip-Pal.com, Inc., 976 F.3d 1316, 1323 (Fed. Cir. 2020); see also AIPLA,
9; BAS, 6–7; Unified, 3–5, 12–17; Naples, 6. Though 37 C.F.R. § 42.12(a)
uses the permissive language “may” (“The Board may impose a sanction
against a party for misconduct”), the sanctity of practice before the Board is
best preserved by imposing sanctions for misconduct as a matter of course
absent extenuating circumstances.
Whether sanctions are appropriate is a highly fact-specific question,
and the relevant considerations will vary from case to case. Prior sanction
contexts have considered:
(1) whether the party has performed conduct warranting sanctions;
(2) whether that conduct has caused harm (to, for example, another
party, the proceedings, or the USPTO); and
(3) whether the potential sanctions are proportionate to the harm.
See, e.g., R.J. Reynolds Vapor Co. v. Fontem Holdings 1 B.V., IPR2017-
01318, Paper 16 at 5 (PTAB Aug. 6, 2018). The Director may impose
sanctions, for example, for “[f]ailure to comply with an applicable rule or
order in the proceeding”; “[a]buse of discovery”; “[a]buse of process”; or
“[a]ny other improper use of the proceeding, including actions that harass or
cause unnecessary delay or an unnecessary increase in the cost of the
proceeding.” 37 C.F.R. §§ 42.12(a)(1), (5), (6), (7). Sanctions may include,
for example, “[a]n order holding facts to have been established in the
11 The Director of the USPTO, the Deputy Director of the USPTO, the
Commissioner for Patents, the Commissioner for Trademarks, and the
Administrative Patent Judges constitute the PTAB. 35 U.S.C. § 6(a).
Accordingly, the Director may levy sanctions as a member of the Board.
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proceeding”; “[a]n order precluding a party from filing a paper”; and “[a]n
order providing for compensatory expenses, including attorney fees.” Id.
§§ 42.12(b)(1), (2), (6). Additionally, the Director may issue sanctions not
explicitly provided in 37 C.F.R. § 42.12(b). See Voip-Pal.com, 976 F.3d at
1323–24. Any sanction must be commensurate with the harm caused. See
R.J. Reynolds, IPR2017-01318, Paper 16 at 5.
As a result of OpenSky’s failure to comply with my ordered
Mandated Discovery provisions, I, VLSI, and Intel do not have a complete
record to fully examine OpenSky’s assertion that it has not committed an
abuse of the IPR process, or to evaluate whether its allegation of
“harassment” is supported.
OpenSky should not be allowed to profit from its discovery
misconduct. Accordingly, I determine that the proper sanction is to hold
disputed facts as established against OpenSky. 37 C.F.R. § 42.12(b)(1);
Paper 52, 4 (warning parties that “failure to comply with my Order may be
sanctionable,” and specifically warning that “without limitation, sanctions
may include ‘[a]n order holding facts to have been established in the
proceeding” under 37 C.F.R. § 42.12(b)(1)). The Federal Circuit has
approved this remedy of adverse inference in the context of district court
litigation, stating that “when ‘the alleged breach of a discovery obligation is
the non-production of evidence, a district court has broad discretion in
fashioning an appropriate sanction, including the discretion to . . . proceed
with a trial and give an adverse inference instruction.’” Regeneron Pharms.,
Inc. v. Merus N.V., 864 F.3d 1343, 1363 (Fed. Cir. 2017) (quoting
Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d
Cir. 2002)).
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In view of the record as discussed above, including OpenSky’s
response to interrogatory (f), I find that OpenSky was not only non-
responsive to my interrogatories but that OpenSky was evasive in its
responses, and engaged in egregious conduct. I further apply adverse
inferences in my decisions on abuse of process below.
IV. 	ABUSE OF PROCESS
I initiated Director review in this proceeding to examine and address
VLSI’s allegations of abuse of process by OpenSky. See Paper 47. Under
existing Office regulations, an abuse of process is sanctionable (i.e., it is
“conduct that warrants sanctions”). 37 C.F.R. § 42.12(a)(6). Abuse of
process is a fact-based inquiry, and existing regulations do not attempt to
specify what acts constitute an abuse of process. Accordingly, I consider
OpenSky’s conduct to determine whether it demonstrates an abuse of
process or conduct that otherwise thwarts, as opposed to advances, the goals
of the Office and/or the AIA.
A. 	Background Principles
Congress created the AIA to support the “important congressional
objective” of “giving the Patent Office significant power to revisit and revise
earlier patent grants,” among other objectives. Cuozzo Speed Techs., LLC v.
Lee, 579 U.S. 261, 272 (2016). Congress did not implement a standing
requirement for petitioners; any party (other than the patentee) may seek
such review. 35 U.S.C. § 311(a). AIA post-grant proceedings, and more
specifically, the IPR proceedings at issue here, do not exist in isolation but
are part of a larger patent and innovation ecosystem. Congress intended
AIA proceedings to be a less-expensive alternative to district court litigation
to resolve certain patentability issues. AIA proceedings were not, however,
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intended to replace patent litigation, which remains a vital forum for
determining patent validity. Nor were they intended to be tools of patent
owner harassment. Congress expressed the intent of the AIA in the statute
when it directed the Director, when prescribing regulations, to “consider . . .
the economy, the integrity of the patent system, the efficient administration
of the Office, and the ability of the Office to timely complete proceedings.”
35 U.S.C. § 316(b). I consider this mandate not just when promulgating
regulations, but in administering the AIA through guidance and decision-
making. Abuse of AIA proceedings undermines these important objectives,
and the Office will not tolerate it.
B. 	OpenSky’s Conduct
Although OpenSky’s Petition stressed that granting IPR was
necessary to maintain the “integrity of the patent system” (Pet. 8–9),
OpenSky’s conduct belies that statement. OpenSky’s subsequent conduct
made clear that OpenSky was using the IPR process to extract payment from
either Intel or VLSI without meaningfully pursuing unpatentability grounds.
See Exs. 2055; 1524–1529. Again, this differs from typical settlement
negotiations between adversaries during AIA proceedings, in which parties
may offer payment or other consideration in return for settlement of the
dispute. Using AIA post-grant proceedings, including the IPR process, for
the sole purpose of extracting payment is an abuse of process warranting
sanctions.
After OpenSky filed its Petition and before institution, on August 28,
2021, OpenSky and VLSI entered into a “Confidential Discussions
Agreement” for settlement negotiations. Paper 84, 3 (citing Ex. 2081–
2083). Although OpenSky insists throughout its briefs that VLSI initiated
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and pursued settlement negotiations, and not vice versa (see Paper 71, 13–
16; Paper 91, 4–9 (see Exs. 1063, 1065)), I draw an adverse inference and
find that OpenSky initiated settlement negotiations. See Vodusek v. Bayliner
Marine Corp., 71 F.3d 148, 156 (4th Cir. 1995) (“Even the mere failure,
without more, to produce evidence that naturally would have elucidated a
fact at issue permits an inference that” the evidence would have exposed
facts unfavorable to the non-disclosing party.). Typically, the query about
who initiated settlement talks does not raise questions about abuse of the
IPR process. See Patent Trial and Appeal Board Consolidated Trial Practice
Guide (“Consolidated Practice Guide”)12 at 86 (“There are strong public
policy reasons to favor settlement between the parties to a proceeding”).
However, the adverse inference here that OpenSky initiated settlement
negotiations is relevant to the larger question of whether OpenSky’s pursuit
of the IPR constitutes improper, abusive conduct.
After institution, OpenSky contacted Intel about collaborating in the
IPR. See Paper 84, 6 (citing Ex. 2095, 2096); Paper 66, 11–12 (citing Ex.
1520). OpenSky’s counsel told Intel’s counsel that “VLSI has already
reached out to OpenSky to discuss resolving the newly instituted IPR,” but
“[w]hile OpenSky remains open to discussing this matter with VLSI,
OpenSky would prefer to discuss the matter directly with Intel.” Id.
(emphasis omitted). Specifically, OpenSky sought monetary payment from
Intel in return for success in the IPR. Paper 66, 12 (citing Exs. 1520, 1521).
“Intel rejected OpenSky’s request and stated that it would not make
12 Available at www.uspto.gov/TrialPracticeGuideConsolidated.
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OpenSky any monetary offer, including to avoid any potential risk of
becoming a real-party-in-interest in OpenSky’s IPR.” Id. (citing Ex. 1520).
Following Intel’s rejection of OpenSky’s offer, OpenSky reengaged
with VLSI. See Paper 84, 4–5 (citing Ex. 2084–2087). The negotiations
were now complicated by the joinder request of Patent Quality Assurance,
LLC (“PQA”) in IPR2022-00480, by which PQA sought to join this
proceeding. See id. at 4 (citing Ex. 2090–2093). Intel also filed a Motion
for Joinder to this proceeding in IPR2022-00366. Paper 43, 1.
VLSI asserts, and I find, that settlement negotiations between it and
OpenSky culminated in a scheme proposed by OpenSky in an email dated
February 23, 2022.13 Paper 84, 4–5 (citing Ex. 2055). Specifically,
OpenSky set forth a “construct of a proposed deal” that included the
following terms (screen shot of email reproduced here):
13 OpenSky contends that VLSI violated a confidentiality agreement with
OpenSky (Ex. 1051) by bringing the email to the Board’s attention and
making the email public. Paper 71, 14–16. Although VLSI properly
brought OpenSky’s conduct to the Board’s attention, VLSI should have filed
the document confidentially with the Board only. See Ex. 2055 (filed as
public material). My decision in this case should not be viewed as an
endorsement of VLSI’s behavior or of others potentially violating
confidentiality agreements.
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Ex. 2055, 1–2. While OpenSky’s email did not list monetary amounts, it did
make clear: “First payment upon execution of agreement” and “Second
payment upon denial of both joinder petitions.” Id. at 2. Moreover,
OpenSky agreed that if PQA’s Motion for Joinder to the proceeding was
granted, OpenSky would not produce its expert, on whom PQA relied, for
deposition, creating “a potentially fatal evidentiary omission that PQA
would be unable to remedy.” Id. at 1. OpenSky provided that, in that
situation, “[t]here could be an alternative second payment if joinder is
granted but claims are affirmed because of OpenSky’s refusal to produce
witnesses.” Id. at 2.
In pressing the urgency of its proposal to VLSI, OpenSky pointed out
that any deal would “not benefit [VLSI] unless it ultimately leads to
dismissal of the petition, or affirmance of the claims.” Id. OpenSky also
noted that “there is substantial value to VLSI in settling with OpenSky
before the Board takes up” either Intel’s or PQA’s “joinder petition[s].” Id.
VLSI reported this scheme to the Board, and there were no further
negotiations between OpenSky and VLSI. Ex. 2094. Initiating a legal
proceeding to deliberately sabotage for money, including offering to violate
the duties of candor and good faith owed to the Board, amounts to an abuse
of process. See Woods Servs., 342 F. Supp. 3d at 605–606; see also BTG
Int’l Inc. v. Bioactive, 2016 WL 3519712 at *12 (“BTG has accordingly
alleged sufficient facts to demonstrate that Defendants were using the IPR
petition for an improper purpose—specifically, “as a threat and a club to
extort and coerce millions of dollars . . . from BTG”).
After engaging in an abuse of process with regard to its conduct with
VLSI that did not prove fruitful to OpenSky, OpenSky continued its
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discussions with Intel. Indeed, after Intel was joined to this proceeding
(IPR2022-00366, Paper 43), it became clear that OpenSky had no interest in
meaningfully pursuing the unpatentability grounds in its Petition.14
Ex. 1524. For example, OpenSky proposed that it might rest on “its initial
filings and may decide not to depose VLSI’s expert or file a reply brief.” Id.
OpenSky allegedly offered Intel the leading role in the case, but only if Intel
compensated OpenSky “for its prior work in the IPR” as well as “additional
remuneration.” Id. OpenSky did not notice VLSI’s expert for deposition
until after Intel proposed going to the Board to seek a more active role.
Paper 44. Even then, OpenSky’s counsel noticed the deposition for July 7,
2022—a mere four days before its reply brief was due, leaving little time to
incorporate VLSI’s expert testimony into the brief. Ex. 1525. In addition,
OpenSky’s counsel indicated they were scheduled to be in trial between June
24–30, 2022, leaving little time to prepare the reply brief (or prepare for the
deposition). Id.
Given OpenSky’s representations, Intel offered to help “with Dr.
Conte’s deposition and the petitioner’s reply,” and suggested that OpenSky
seek a two-week extension “to give more time to integrate the deposition
materials into the petitioner’s reply.” Ex. 1526. OpenSky’s counsel
proceeded with Dr. Conte’s deposition on July 7, 2022, with the benefit of
14 To be clear, parties will make choices during the course of an IPR
regarding what arguments to make, papers to file, issues to pursue, etc.
Those kinds of judgment calls and tactical decisions do not reflect a failure
to “meaningfully pursue the merits.” As explained further below,
OpenSky’s conduct here goes beyond ordinary strategic decisions and
reflects a failure to essentially take any steps to develop or otherwise pursue
an unpatentability case.
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Intel’s deposition outline. Ex. 1062. However, OpenSky declined to seek
an extension to file its reply brief.
On Friday, July 8, 2022—three days before its reply brief was due—
OpenSky’s counsel initiated discussions with Intel in which OpenSky’s
counsel maintained that, as a result of the need to respond to the Scheduling
Order (Paper 47), OpenSky intended to “refrain from considering or making
further invalidity arguments and to file a reply on Monday [July 11, 2022]
indicating that OpenSky believes that its original petition establishes
invalidity and OpenSky rests on the arguments in that petition,” and not file
a reply. Ex. 1528.
At the same time, OpenSky “offered to let Intel write the reply on
OpenSky’s behalf in exchange for remuneration and indemnity against any
lawsuit brought by VLSI against OpenSky based on the IPR proceeding.”
Ex. 1529. Intel declined OpenSky’s offer but agreed to provide OpenSky
with a fully complete reply brief with supporting expert declaration. Id.
OpenSky agreed to “file it in full or in part” (id.), and did so two days later,
as Paper 49 (July 11, 2022).
On August 11, 2022, VLSI requested oral argument. Paper 61.
OpenSky did not request oral argument (the deadline passed August 11,
2022; Paper 18, 11) and did not meaningfully participate in the oral hearing.
C. 	Case-specific Considerations
1. 	Petitioner’s interest in the proceeding
I am mindful that Congress did not itself include a standing
requirement for IPRs. 35 U.S.C. § 311(a); see Cuozzo, 579 U.S. at 279
(“Parties that initiate [IPRs] need not have a concrete stake in the outcome;
indeed, they may lack constitutional standing.”); see also Engine, 13–14
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(“Congress created IPR so that any ‘person who is not the owner of a patent’
may file an IPR petition. . . . It would be improper for the PTO to supplant
that choice.”) (citations omitted). Instead, Congress left it to the USPTO to
prescribe regulations, to “consider . . . the economy, the integrity of the
patent system, the efficient administration of the Office, and the ability of
the Office to timely complete proceedings.” 35 U.S.C. § 316(b).
The Office has repeatedly instituted IPRs where the petitioner has not
been sued for infringement. See, e.g., Athena Automation Ltd. v. Husky
Injection Molding Systems Ltd., IPR2013-00290, Paper 18, 12–13 (PTAB
Oct. 25, 2013) (precedential) (declining to deny a petition based on assignor
estoppel); Fresenius Kabi USA, LLC, et al. v. Chugai Seiyaku Kabushiki
Kaisha, Inc. et al., IPR2021-01336, Paper 27, 48 (PTAB Feb. 23, 2022). In
practice, however, there is commonly a high degree of interplay between
IPR petitions/trials and Article III patent litigation. See, e.g., The Patent and
Trial Appeal Board: Examining Proposals to Address Predictability,
Certainty, and Fairness, Hearing Before the S. Comm. on Intellectual Prop.,
117th Cong. at 1:14:27–1:14:37 (June 22, 2022) (testimony of Tim Wilson,
Head of Patents and Intellectual Property Litigation, SAS Institute, Inc.)
(stating that IPR petitions are typically filed in response to a patent
infringement lawsuit).
Barring evidence to the contrary, there is little need to question the
motives of a party sued for infringement. However, where a petitioner has
not been sued for infringement, and is a non-practicing entity, legitimate
questions may exist regarding whether the petitioner filed the petition for an
improper purpose or one that does not advance the goals of the AIA or this
Office. For example, an amici identifies a concern with petitioners who file
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“petitions, filed for the primary purpose of obtaining a cash settlement” from
patent owners in order to settle and terminate the proceeding. See Naples, 2.
Not only would such a purpose not advance legitimate goals, but the PTAB
proceedings under the AIA are not intended to be a tool for patent owner
harassment.
To be clear, there is nothing per se improper15 about a petitioner who
is not a patent infringement defendant filing an IPR petition. For example,
there may be circumstances in which a petitioner has not yet been sued, but
believes it may be, or otherwise wants to make sure it has the freedom to
operate. Alternatively, there may be circumstances in which a petitioner is
planning to enter the field of technology that the patent protects and is trying
to clear entry barriers. See Engine, 10–11. Or a petitioner may act on behalf
of the public without having any research or commercial activities involving
the challenged patent. See Consumer Watchdog v. Wisconsin Alumni Rsch.
Found., 753 F.3d 1258, 1260 (Fed. Cir. 2014).
Although it is not per se improper for a person not charged with
infringement to file an IPR petition, the posture of a petitioner, in
conjunction with other surrounding circumstances, could raise legitimate
questions about whether the petition is reasonably designed to advance the
beneficial aims of the AIA or this Office and whether, in addition, the filing
amounts to an abuse of process.
So it is here. OpenSky has not been sued for infringing the ’759
patent. Pet. 5. When I asked whether OpenSky could be sued for
15 I address here only what conduct is improper and do not suggest that all
conduct that is not improper warrants institution. Such decisions are better
suited for guidelines and notice-and-comment rulemaking.
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infringement (see Paper 47, 8), OpenSky merely indicated that it has not
performed an infringement analysis and that it uses products that may
incorporate accused Intel products, so it might be sued for infringement in
the future. Paper 71, 11. OpenSky has not substantiated this argument,
despite my Order providing it an opportunity to do so. Thus, the lack of
evidence on this point is directly attributable to OpenSky’s failure to follow
my Order, and I draw negative inferences from that failure. See Residential
Funding Corp., 306 F.3d at 110 (finding that intentional acts that hinder
discovery support an inference that the evidence was harmful to the non-
producing party). Accordingly, I find the fact established that OpenSky does
not have a legitimate belief that it may be sued for patent infringement in the
future, and that fear of infringement did not motivate OpenSky to file its
Petition.
OpenSky maintains that its interest is in the integrity of the patent
system. Paper 71, 11–12. The record (and additional factors discussed
below) belies that representation. Indeed, I ordered OpenSky to produce
documentation and answer interrogatories related to its business purpose,
and it has not done so. In its briefing, for example, OpenSky says that it was
“not required to state a ‘business’ on formation,” and therefore, “OpenSky
has not limited its ‘business.’” Id. at 9. Again, the lack of evidence of
OpenSky’s business is due to OpenSky’s discovery misconduct, and
therefore, I find the fact established that OpenSky did not file this case for its
alleged purpose of testing patent quality or preserving the integrity of the
patent system. Indeed, based on the record and adverse inferences, I find
that the sole reason OpenSky filed the Petition was for the improper purpose
of extracting money from either or both Intel and VLSI.
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2. 	Recent trial verdict awarding significant damages
The mere existence of a trial verdict (whether by jury or from the
bench) does not automatically make the filing of a subsequent IPR on the
involved patent(s) an abuse of process. Indeed, patents are often asserted,
either in demand letters or in litigation, against multiple entities in serial
fashion. Both those entities subject to current or future assertions, or
potential assertions, and the public have a vested interest in canceling invalid
patents.
That said, an entity filing an IPR on the heels of a large jury verdict
may, when combined with other facts, raise legitimate questions regarding
the motivation behind the Petition. See USIJ, 15–16 (discussing petitions
filed after infringement verdicts).
Such is the case here. As the parties and amici are well aware, a jury
in the Western District of Texas rendered a verdict of more than $2 billion
against Intel for infringing two VLSI patents, including the ’759 patent
($675 million in damages). Ex. 1027. OpenSky filed its Petition shortly
after the infringement verdict and, as noted in section IV(C)(1) of this
decision above, without any established fear that it would be subject to a
subsequent assertion. Together with the significant damages award, this
suggests that the purpose of the IPR could be to extract a settlement from
VLSI or payment from Intel.
Notably, despite being given the opportunity, OpenSky has not
provided adequate evidence that it had another purpose for filing this IPR.
As explained previously, OpenSky flouted Mandated Discovery by refusing
to turn over documentation of the “purpose” for which OpenSky was
formed. Paper 47, 8. Accordingly, per the sanction for OpenSky’s
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discovery misconduct, I find that it has been established that OpenSky filed
its Petition for the purposes of extracting payment from VLSI or Intel.
3. 	Proximity of petitioner’s formation to jury award
Large jury awards attract publicity and attention. When the evidence
demonstrates that an IPR petitioner was formed from whole cloth soon after
a damages award, and in particular a significant damages award, this
suggests that the petitioner could be motivated to extract a financial windfall
from the patent owner or the adjudicated infringer, rather than being
motivated by any legitimate purpose.
Here, the evidence demonstrates that OpenSky was formed seven
weeks after a jury found that Intel infringed the ’759 patent, and awarded
VLSI $675 million in damages. Compare Ex. 1027 (Jury Verdict Form
dated March 2, 2021) with Ex. 2006 (OpenSky formation date of April 23,
2021). OpenSky refiled Intel’s discretionarily denied IPR petitions six
weeks after that. This timing, in the absence of contrary evidence from
OpenSky, supports the finding that OpenSky was formed in an attempt to
capitalize on that verdict. Moreover, and as explained in the previous factor,
OpenSky has provided inadequate evidence that it was formed for another
purpose, despite my Order giving it an opportunity to do so. As a sanction
for that discovery violation, I find that it has been established that OpenSky
was formed for the express and sole purpose of extracting payment from
VLSI or Intel.
4. 	Seeking compensation from both parties
It is not unusual for parties to seek to settle their dispute; litigation is
both risky and costly. Indeed, both this Office and the Federal Rules of
Evidence encourage settlement. See Consolidated Practice Guide at 86. A
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petitioner’s agreement to dismiss a petition or terminate a proceeding in
return for a payment from the patent owner may be the result of sound
business judgment by both parties.
What is unusual, however, is a petitioner seeking compensation from
both the patent owner and another petitioner in exchange for advocacy
against whichever party does not pay. The problem with this behavior
should be immediately apparent. For the purposes of the present analysis,
however, such double-dealing suggests that a petition was filed purely to
extract rents, in either direction, rather than for legitimate purposes.
The evidence against OpenSky here is both strong and concerning.
As explained above, I find that OpenSky initiated early settlement talks with
VLSI before institution. The evidence further demonstrates that following
institution, OpenSky asked both VLSI and Intel for money in exchange for
its cooperation in this IPR. Indeed, OpenSky contacted Intel on the very day
that the Board granted institution (Ex. 1518) and communicated with VLSI
both before and after the grant (Ex. 2083, 2084). That OpenSky, through its
counsel, was willing to offer its advocacy to either side of this adversarial
proceeding, depending on who was willing to pay, further suggests that its
Petition was purely motivated by a wish to extract a quick settlement from
either interested party in this proceeding. I am particularly concerned with
OpenSky’s counsel’s proposal to VLSI (Ex. 2055) to intentionally
undermine the proceeding and thereby violate the duty of good faith and
candor to the Board. See 37 C.F.R. § 41.11. This behavior alone is
sanctionable and will not be tolerated.
Moreover, OpenSky’s predatory behavior did not end once it became
clear that neither VLSI nor Intel was interested in paying OpenSky.
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OpenSky also suggested that it lacked the resources to pursue this IPR and
intimated that Intel should reimburse OpenSky for the predictable expenses
associated with filing its Petition. See, e.g., Ex. 1528 (email from
OpenSky’s counsel to Intel indicating that “OpenSky has been forced to
reallocate its remaining funds to address the director’s review,” and
therefore, “OpenSky has directed me to refrain from considering or making
further invalidity arguments” and to “rest[] on the arguments in th[e]
petition”); Ex. 1529 (email from OpenSky’s counsel to Intel stating that “it
is unfortunate that Intel is not willing to reimburse OpenSky for any of the
considerable filing fees and legal fees that were incurred in filing this
petition . . .”). Taken at face value, OpenSky’s comments that it was
running out of money indicate that it did not budget for litigating this
proceeding throughout its expected life, to a final written decision. In other
words, in the absence of contrary evidence due to its discovery misconduct,
OpenSky’s behavior and complaints about budgeting establish that it did not
intend to pursue the patentability merits but instead intended to leverage the
IPR’s existence only to extract a payout from one side or the other.
5. 	Failure to meaningfully pursue the merits
The evidence demonstrates that both before and after institution,
OpenSky was focused on getting payment from VLSI or Intel as opposed to
pursuing the merits of its patentability challenge. See, e.g., Ex. 1518
(OpenSky email to Intel Dec. 23, 2021); Ex. 2084 (OpenSky email to VLSI
Dec. 27, 2021).
Instead of vigorously litigating the IPR, as would be expected of a
lead petitioner, OpenSky continued to seek payment from Intel. For
example, OpenSky “offered to let Intel write the reply on OpenSky’s behalf
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in exchange for remuneration and indemnity against any lawsuit brought by
VLSI against OpenSky based on the IPR proceeding.” Ex. 1527. Intel
refused. Id. OpenSky then lamented Intel’s unwillingness “to reimburse
OpenSky for any of the considerable filing and legal fees that were incurred
in filing this petition” and stated that, nevertheless, it was “still willing to
partner with Intel”—its co-petitioner, allegedly working toward the same
goal—“moving forward.” Ex. 1529. Despite Intel’s refusal to pay,
OpenSky filed a reply brief that Intel drafted and used Intel’s deposition
outline. Exs. 1527, 1529. 	Moreover, OpenSky did not request oral
argument (the deadline passed August 11, 2022; Paper 18, 11) and did not
meaningfully participate in the oral hearing.
This focus on settlement or reimbursement, rather than litigating the
merits, further indicates that OpenSky’s goal was to extract a payment rather
than litigate the validity of VLSI’s patent.
6. 	Filing a copycat petition
As my Scheduling Order notes, filing a “copycat” petition is not
inherently improper. Paper 47, at 4 n.3. For example, under the current
joinder rules, a time-barred party may file a copycat petition when it is
seeking joinder as provided by the AIA. See 35 U.S.C. § 315(c); 37 C.F.R.
§§ 42.122(b), 42.101(b). There may be circumstances, however, in which
the filing of a petition that copies a previously denied petition may suggest
an abuse of process.
The present case provides an example. In addition to OpenSky filing
what was essentially a copy of Intel’s IPR petition, which had previously
been denied based on the Fintiv factors, OpenSky also filed a copy of Intel’s
expert declaration, without OpenSky notifying that expert that it was doing
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so, let alone confirming that his opinions had not changed. Ex. 2097.
OpenSky had also not engaged the expert to testify in the case, negotiated a
rate for his services, or inquired as to his interest or availability. Id.
Submitting a declaration in a proceeding, without securing the ability of the
declarant to be challenged, raises serious process concerns. The lack of
control over a key witness puts the entire case in jeopardy, which is exactly
what happened in OpenSky’s other IPR, which was denied because
OpenSky could not ensure that Intel’s expert, Dr. Singh, would appear for
deposition. See IPR2021-01056, Paper 18 (Dec. 23, 2021). On these facts,
this conduct suggests that OpenSky was attempting to file a petition with the
lowest possible cost in an effort to generate leverage against VLSI, but
without the intent or expectation of litigating the proceeding through trial.
D. 	Conclusion
Viewed as a whole, OpenSky’s conduct has been an abuse of the IPR
process, the patent system, and the Office. The totality of OpenSky’s
conduct evinces a singular focus on using an AIA proceeding to extort
money, from any party willing to pay, and at the expense of the adversarial
nature of AIA proceedings. Despite being given the opportunity, OpenSky
failed to offer a verifiable, legitimate basis for filing its IPR Petition, which
was filed only after a district court awarded large monetary damages keyed
to the subject ’759 patent. And the Petition it filed was not generated by
OpenSky, but was a copy of Intel’s earlier petition, filed without engaging
Intel’s expert or confirming his opinions or willingness to participate.
Further, after filing the Petition, OpenSky did not conduct itself in a manner
consistent with the AIA’s purpose of exploring patentability issues.
OpenSky’s post-institution activity was dominated by attempts to extract
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money from either Intel or VLSI instead of engaging with the patentability
merits.
Seeking an AIA trial for the primary purpose of extorting money,
while being willing to forego or sabotage the adversarial process, does not
comport with the purpose and legitimate goals of the AIA and is an abuse of
process. Opportunistic uses of AIA proceedings harm the IPR process,
patent owners, the Office, and the public. Naples, 2; USIJ, 4.16 To
safeguard the proper functioning of the patent system, and the confidence
therein, it is incumbent on me and the USPTO to protect against that harm.
V. 	REMEDY FOR ABUSE OF PROCESS
The AIA granted the Office broad authority to prescribe regulations
aimed at sanctioning the “abuse of process, or any other improper use of the
proceeding.” 35 U.S.C. § 316(a)(6). Our existing regulations take full
advantage of that authority and provide a broad range of potential sanctions
to address such abuse, ranging from awarding “compensatory expenses” to
“[j]udgment in the trial.” 37 C.F.R. § 42.12(a)(6), (b). These enumerated
sanctions are not exclusive. The Federal Circuit has held that § 42.12(b)
“allows the Board to issue sanctions not explicitly provided in the
regulation.” Voip-Pal.com, 976 F.3d at 1323. Accordingly, the Office has
robust powers to sanction the abuse of process where it occurs and to deter
similar abuse. The Director will ensure that the remedy suits the
16 This situation thus meaningfully differs from others in which a “profit
motive” was arguably present but there was not otherwise an allegation or
proof that the petitioner had failed to meaningfully pursue the patentability
merits. See, e.g., Coalition for Affordable Drugs VI, LLC v. Celgene Corp.,
Case IPR2015-01092, Paper 18 (Sept. 25, 2015) (denying motions for
sanctions for abuse of process).
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wrongdoing, both in this specific case and more generally when faced with
evidence of an abuse of process or conduct that thwarts, rather than
advances, the goals of the Office and the AIA.
Here, in addition to any monetary sanctions I may levy (see below), I
must decide whether to maintain or dismiss the underlying proceeding.
VLSI contends that the remedy for OpenSky’s abuse should be
termination of this IPR. Paper 84, 21. VLSI also argues that Intel should
not be “allowed to take advantage of OpenSky’s misconduct at VLSI’s
expense.” Paper 84, 24. VLSI asserts that Intel was a time-barred party, and
that the Board has previously terminated joined time-barred parties when
finding that an IPR was improperly instituted. See id. at 24–25 (citing I.M.L.
SLU v. WAG Acquisition, LLC, IPR2016-01658, Paper 46, 3, 5 (PTAB Feb.
27, 2018); Mylan Pharma Inc. v. Horizon Pharma USA, Inc., IPR2017-
01995, Paper 71, 12–13 (PTAB Mar. 17, 2019); Intel Corp. v. Alacritech,
Inc., IPR2018-00234, Paper 66, 23 (PTAB June 4, 2019); Sling TV, LLC v.
Realtime Adaptive Streaming, LLC, IPR2018-01331, Paper 39, 8 (PTAB
Jan. 17, 2020).
Intel responds that, in “VLSI’s cited cases, the IPRs were terminated
because the original petitioner was statutorily barred from bringing the
petition in the first instance,” so the petition was void ab initio. Paper 89, 12
(emphasis in original). That reasoning, however, does not apply to the
current proceeding. As Intel correctly points out, in other cases, the Board
has allowed a joined petitioner to step into an active role after the original
petitioner was terminated from the proceeding. See id. at 13 (citing Apple
Inc. v. Traxcell Techs., LLC, IPR2021-01552, Paper 19, 2 (PTAB May 26,
2022); AT&T Servs., Inc. v. Convergent Media Sols., LLC, IPR2017-01237,
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Paper 11, 26–28 (PTAB May 10, 2017); Qualcomm Inc. v. Bandspeed, Inc.,
IPR2015-01577, Paper 12 at 2–3, 6, 8 (PTAB Nov. 16, 2015).
Amici recognize that I must “weigh the policy goals of the Office and
the AIA” when facing abusive behavior because “the public has a clear
interest in discouraging conduct that is abusive or otherwise thwarts
Congress’s goals in passing the AIA and the Office’s goals in overseeing
post-grant proceedings.” AIPLA, 5–6. Many amici have pointed out that
“[o]ur patent system is rooted in the fact that valid claims . . . support
innovation, progress, and the public’s interests” (Engine, 3), while “[i]nvalid
patents unduly restrict innovation, competition, and access to knowledge”
(PIPLI, 2). See CCIA, 2; HTIA, 7; BSA, 10. Accordingly, “ensuring that
invalid patents do not remain in force [is] one of the core missions of the
PTAB” (CCIA, 2), and “AIA trials thus broadly aim to ‘protect the public’s
paramount interest in seeing that patent [rights] are kept within their
legitimate scope’” (HTIA, 5 (quoting Cuozzo, 579 U.S. at 789–80)). See
Unified, 5–6, Engine, 7–8. On the other hand, other amici highlight that
“the patent system incentivizes inventors to publicly disclose innovations
that advantage the public by granting an inventor a patent, upon which an
‘exclusive enjoyment is guaranteed.’” Centripetal, 14; USIJ, 15; Maalouf, 6.
Those amici point out that the legislative history of the AIA shows Congress
recognized the importance of reliable patent rights. Maalouf, 6 (citing H.R.
Rep. No. 112-98, pt. 1, at 48 (2011)); Centripetal, 13; USIJ, 15.
Going back to first principles, to further the objectives of this Office
in promoting and protecting innovation for the greater good of the public, I
must advance the goals of securing reliable patent rights and removing
patents that do not support innovation. See Lamar Smith, Don’t Weaken the
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Leahy-Smith America Invents Act, BLOOMBERG LAW (Mar. 30, 2022), at 3
(“In the committee report on the AIA, we wrote about the importance to
inventors of having ‘quiet title’—clear ownership that can’t be challenged”);
H.R. Rep. No. 112-98, pt. 1, at 40 (2011); 2011 U.S.C.C.A.N. 67, 69; S.
Rep. No. 110-259, at 20 (2008) (the congressional intent behind the AIA
was “to establish a more efficient and streamlined patent system that will
improve patent quality and limit unnecessary and counterproductive
litigation costs”).
I recognize that OpenSky should not benefit from its abusive use of
the IPR process. Accordingly, due to OpenSky’s abuse of the process, I am
temporarily elevating Intel to an active party and am relegating OpenSky to
a silent understudy role for the duration of this proceeding. Removing
OpenSky’s control of the IPR removes its ability to leverage that control for
or against a particular party. Therefore, for the duration of this case,
OpenSky will be prevented from presenting or contesting any particular
issue; requesting, obtaining, or opposing discovery; filing any additional
papers; or participating in oral argument, unless specifically authorized to do
so, for example, as detailed below in relation to an order to show cause. 37
C.F.R. §§ 42.12(b)(2–4).
On the issue of whether to terminate the proceeding, that sanction
could be the appropriate remedy here or in future proceedings reflecting an
abuse of process. However, the unique dynamics of this case, coupled with
the public interest in evaluating patent challenges with compelling merits,
counsels for a different approach here by permitting this IPR to continue
only if the panel determines that the unpatentability merits were compelling
as of the time of institution and on the record as it existed at that time.
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Predicating dismissal on the application of the compelling-merits standard
best serves the competing interests here.
I recognize that some may believe that I am allowing Intel to benefit
from OpenSky’s wrongdoing by not immediately terminating the
proceeding.17 However, there is no evidence that Intel was complicit in
OpenSky’s abuse. I therefore focus on a principled, replicable approach that
is in the best interest of the public and advances the USPTO and AIA goals
to “consider . . . the economy, the integrity of the patent system, the efficient
administration of the Office, and the ability of the Office to timely complete
proceedings.” 35 U.S.C. § 316(b).
The circumstances of this particular case are unusual and are not
likely to reoccur.18 As discussed above, after being sued by VLSI, Intel filed
its original IPR Petitions within the required time. 35 U.S.C. § 311(c)(1).
At that time, the Board exercised discretion to deny institution based on the
advanced state of a district court litigation that also involved the patent.
IPR2020-00106, Paper 17, 13; IPR2020-00498, Paper 16, 6, 10. Consistent
with how Fintiv was applied at that time, the Board did not address the
17 Under the USPTO’s rules, promulgated on August 14, 2012, and past
practices, even though Intel would have been otherwise time barred, it was
permitted to file a petition for joinder within one month of the institution
decision. 35 U.S.C. § 315(b); 37 C.F.R. §§ 42.122(b), 42.101(b).
18 Apart from the Memorandum that will require an earlier determination of
compelling merits in future cases with similar fact patterns, the Board issued
its Decisions several months before Sotera was designated precedential. See
Sotera Wireless, Inc. v. Masimo Corp., IPR2020-01019, Paper 12 (issued
Dec. 1, 2020, designated precedential Dec. 17, 2020) (applying Fintiv and
instituting review after the Petitioner filed a broad stipulation to limit
grounds in district court, addressing factor 4 in Fintiv).
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merits of the Petition, except to state “that the merits of the Petition[s] do not
outweigh the other Fintiv factors.” IPR2020-00106, Paper 17, 13. Although
I recognize that the “compelling merits” analysis would not normally apply
where the Fintiv factors are not implicated (as the Board correctly
determined here on OpenSky’s petition), when determining whether to
continue an IPR initially filed for improper purposes, I must consider the
public interest, which compels the USPTO to evaluate unpatentability
challenges that, at the institution stage, evidence compelling merits.19
I remand the decision to the Board to issue an order within two weeks
on whether the record before the Board prior to institution indicates that the
Petition presents a compelling, meritorious challenge as consistent with the
Memorandum. In assessing compelling merits, the Board should apply the
guidance set forth in my Memorandum. There, I explained that
“[c]ompelling, meritorious challenges are those in which the evidence, if
unrebutted at trial, would plainly lead to a conclusion that one or more
claims are unpatentable by a preponderance of the evidence.” Id. at 4.
To be clear, a compelling-merits challenge is a higher standard than
the reasonable likelihood required for the institution of an IPR under 35
U.S.C. § 314(a). A challenge can only “plainly lead to a conclusion that one
or more claims are unpatentable” (id.) if it is highly likely that the petitioner
would prevail with respect to at least one challenged claim. I recognize that
all relevant evidence likely will not have been adduced at the point of
institution; trial should produce additional evidence that may support a
19 My decision to conduct a compelling-merits determination here, per the
Memorandum, is limited to the facts of this case and should not be treated as
an endorsement of retroactive application of that Memorandum to institution
decisions made before it issued.
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determination in the Final Written Decision that unpatentability has not been
adequately proven. Thus, a determination of “compelling” merits should not
be taken as a signal to the ultimate conclusion after trial. The Board shall
provide its reasoning in determining whether the merits are compelling.
In making its determination, the Board must analyze the evidence and
the parties’ arguments as they existed at the date of institution. Consistent
with the ordinary course of institution, I do not authorize the parties to
provide any additional briefing or argument on this issue.
Should the Board find that such a challenge was made prior to
institution, the Board shall move forward with the proceeding with Intel as
the active party.
Should the Board find that the Petition does not present a compelling,
meritorious challenge prior to institution, the Board shall dismiss the
Petition (filed by both OpenSky and Intel), subject to the Director, the
Board, and the USPTO retaining jurisdiction over the issuance of sanctions.
VI. 	REQUESTS FOR IN CAMERA REVIEW
VLSI requested that I review in camera documents listed on Intel’s
privilege log and OpenSky’s documents, generally. See, e.g., Papers 62, 63.
No other parties requested in camera review. For the reasons explained
above, however, the evidence exchanged as Mandated Discovery is
sufficient to resolve this Director review without resorting to in camera
review. Accordingly, the request for in camera review is denied.
VII. 	SHOW CAUSE
Finally, for all the reasons discussed above, OpenSky also is ordered
to show cause as to why it should not be ordered to pay compensatory
expenses, including attorney fees, to VLSI as a further sanction for its abuse
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of process. 37 C.F.R. § 42.12(b)(6). Within two weeks of this Decision,
OpenSky and VLSI shall each file a 10-page Paper addressing whether an
award of attorney fees is appropriate, and if so, how such fees should be
determined, e.g., the appropriate time frame for which fees should be
assessed.
VIII. 	ORDER
For the foregoing reasons, it is hereby:
ORDERED that OpenSky is relegated to the silent understudy role in
this proceeding and is precluded from presenting or contesting any particular
issue; requesting, obtaining, or opposing discovery; or filing any additional
papers, unless specifically directed to do so;
FURTHER ORDERED that Intel is elevated to an active party in the
role of lead petitioner in this proceeding;
FURTHER ORDERED that the Board panel shall determine and issue
an order, within two weeks, addressing whether the petition, based only on
the record before the Board prior to institution, presents a compelling,
meritorious challenge, and shall take the appropriate action to dismiss or
maintain the underlying action as identified above based on its
determination; and
FURTHER ORDERED that OpenSky and VLSI shall file a
Paper responding to the show cause order for OpenSky, addressing whether
compensatory expenses should be ordered as a further sanction for
OpenSky’s abuse of process. Briefing shall be filed within two weeks of
this decision and shall be limited to 10 pages.
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For PETITIONER:
Andrew T. Oliver
Vinay V. Joshi
AMIN, TUROCY & WATSON LLP
aoliver@atwiplaw.com
vjoshi@thepatentattorneys.com
Benjamin Fernandez
David Cavanaugh
Steven Horn
WILMER CUTLER PICKERING HALE AND DORR LLP
ben.fernandez@wilmerhale.com
david.cavanaugh@wilmerhale.com
steven.horn@wilmerhale.com
For PATENT OWNER:
Babak Redjaian
IRELL & MANELLA LLP
bredjaian@irell.com
Kenneth J. Weatherwax
Bridget Smith
Flavio Rose
Edward Hsieh
Parham Hendifar
Patrick Maloney
Jason C. Linger
LOWENSTEIN & WEATHERWAX LLP
weatherwax@lowensteinweatherwax.com
smith@lowensteinweatherwax.com
rose@lowensteinweatherwax.com
hsieh@lowensteinweatherwax.com
hendifar@lowensteinweatherwax.com
maloney@lowensteinweatherwax.com
linger@lowensteinweatherwax.com
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