How High Court IPR Time-Bar Case Affects Gov't Contractors
In its widely reported April 20 decision in Thryv Inc. v. Click-To-Call Technologies LP, the U.S. Supreme Court held that institution decisions by the Patent Trial and Appeal Board relating to whether an inter partes review petition is timely under Title 35 of U.S. Code Section 315(b) are not appealable.
Relying on its decision in Cuozzo Speed Technologies LLC v. Lee, the Supreme Court explained "that § 314(d) bars review at least of matters 'closely tied to the application and interpretation of statutes related to' the institution decision."
It found that the PTAB's determinations under Section 315(b) easily satisfied that standard because:
Section 315(b)'s time limitation is integral to, indeed a condition on, institution. After all, § 315(b) sets forth a circumstance in which "[a]n inter partes review may not be instituted."
Thus, the Supreme Court held that, under Section 314(d), the PTAB's institution decisions under Section 315(b) are unreviewable. Because of its impact on another, unrelated, appeal also based on Section 315(b), this decision could have major unintended consequences for government contractors seeking to file IPR petitions.
Impact of Thryv on the Microsoft Corp. v. SAIC IPR Decision
In June 2017, Science Applications International Corp. sued the government in the U.S. Court of Federal Claims, alleging patent infringement by products incorporating a rapid target acquisition feature. In November 2018, Microsoft entered into a contract with the government to supply a system that includes the accused rapid target acquisition feature. In May 2019, Microsoft intervened in the COFC case, and, in July 2019, Microsoft filed IPR petitions against all five patents asserted in the COFC case.
The PTAB denied institution of Microsoft's IPR petitions as untimely under Section 315(b) because a privy of Microsoft (i.e., the government) was served with a complaint alleging infringement more than one year before Microsoft filed its petitions. The PTAB found that Microsoft and the government were in privity based on the factors set forth in Taylor v. Sturgell.
Of the six factors identified in Taylor, the PTAB focused on three (although the presence of one factor is sufficient to establish privity): (1) preexisting substantive legal relationships between the parties, (2) where special statutory schemes foreclose successive litigation by the nonparty, and (3) the nonparty's control of the prior litigation.
The PTAB found a preexisting substantive relationship by focusing primarily on the supply contract for the alleged infringing product between Microsoft and the government. Because of the contract, the PTAB found both parties had an interest in invalidating the patents and that Microsoft's only reason for invalidating the patents was due to the contract. The PTAB also found that Microsoft intervened in the COFC case because of the contract and that the parties had aligned interests in that case as well.
The PTAB also found a special statutory scheme applied, namely, "35 U.S.C. § 315(b), which bars institution of an IPR if a 'privy of the petitioner is served with a complaint alleging infringement of the patent' more than one year before the petition was filed."
The PTAB found that Microsoft's privy, the government, was served with the complaint more than one year before the petition was filed and that the government stood to benefit from Microsoft's IPR petitions since it could not file its own petitions under the Supreme Court's decision in Return Mail Inc. v. U.S. Postal Service. In Return Mail, the Supreme Court held the government does not qualify as a person under Title 35 of U.S. Code Section 311.
Regarding the third Taylor factor, although there was no evidence that the government controlled Microsoft's IPR petitions, the PTAB noted there were some prefiling communications in which the government asked Microsoft whether it had decided to file IPRs. The PTAB explained the prefiling communications were not dispositive, but they confirmed its conclusion that the two parties were in privity.
Because Microsoft filed its IPR petitions more than a year after SAIC served the government with a complaint alleging infringement, the PTAB held Microsoft's IPR petitions were time barred under § 315(b) and denied institution.
The PTAB, however, did not stop there. It went on to state that, even if Microsoft and the government were not in privity (and presumably, even if Microsoft filed its IPR petitions within one year of the government being served), it would have nonetheless exercised its discretion to deny institution "to avoid any concerns that the government is obtaining a benefit to which it is not permitted under Return Mail."
Although the Supreme Court never once stated that government contractors, like Microsoft, are precluded from filing IPR petitions, the PTAB seemingly extended Return Mail to hold just that.
The PTAB cited SAS Institute Inc. v. Iancu and Cuozzo as purportedly supporting its discretion to deny institution for this reason. But neither of those cases stand for that proposition. Rather, SAS and Cuozzo both refer to the director's discretion to deny institution under Section 314.
In other words, the PTAB's discretion appears limited to substantively analyzing whether "there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition." There is no apparent support in these decisions for the PTAB's claimed discretion to deny institution of IPRs filed by a government contractor due to the government's inability to file its own petition.
Microsoft appealed the noninstitution decisions. The U.S. Court of Appeals for the Federal Circuit dismissed the appeals, holding that it was barred under Section 314(d) from reviewing noninstitution decisions. Thryv confirms that the Federal Circuit correctly declined to hear Microsoft's appeals.
Although the holding in Thryv appears limited to the nonappealability of time-barred IPR petitions, it may have major unintended ramifications for government contractors. Namely, it appears to insulate the PTAB's decision in Microsoft v. SAIC, meaning the decision remains good, apparently unappealable, law. As a result, government contractors' ability to file IPR petitions may be in jeopardy.
Possible Strategies for Government Contractors Filing IPR Petitions Post-Thrv and Microsoft v. SAIC
As an initial matter, it is clear from Microsoft v. SAIC that, at a minimum, any government contractor considering whether to file an IPR petition would be well advised to do so within one year of either it or the government, whichever is earlier, being served with a complaint for patent infringement. This strategy should avoid the PTAB denying institution as untimely under Section 315(b).
But, as explained above, this may not be enough to avoid noninstitution. The PTAB's broad statements in Microsoft v. SAIC suggest it may deny institution of an IPR petition timely filed by a government contractor to avoid any concerns that the government may receive a benefit to which it is not entitled under Return Mail. But the PTAB does not state when those possible concerns outweigh a government contractor's statutory right to file an IPR petition.
For instance, is it after the government contractor is named in a complaint filed against the government? Or is it after the government moves to serve the government contractor with a Rule 14 notice (i.e., an invitation to participate in the case)? Or is it after the government contractor responds to the Rule 14 Notice and agrees to participate in the COFC action as a third-party defendant? Or perhaps the government contractor loses its ability to file a petition as soon as it enters into a contract with the government? There is no clear answer presently.
Until the PTAB provides some clarity to these issues, a government contractor seeking to file an IPR petition after the government has been served with a complaint alleging infringement should consider taking certain steps to avoid the appearance of privity and/or to establish an independent interest (aside from the government's interest) for invalidating the patent(s) asserted against the government.
For example, if the government contractor was already served with a Rule 14 notice, it should consider filing its IPR petition before responding to the notice. The government contractor should also consider whether it makes sense to forgo responding to the notice and not get involved in the COFC matter.
But this latter option has risk as the government contractor could be excluded from both forums if the PTAB ultimately denies its petition. At the very least, the government contractor should avoid any communications with the government regarding the substance of the IPR or COFC matter before filing its petition.
A government contractor may be on even firmer ground if it files a petition before the government serves it with a Rule 14 notice. To do so, the government contractor would need to know that the product or service it provides to the government is accused of infringement. This would likely require monitoring the COFC for lawsuits filed against the government. While this may seem burdensome, the number of patent infringement lawsuits filed against the government is relatively low and can be monitored for relatively little cost.
In addition to the above-noted strategies, government contractors should consider addressing Microsoft v. SAIC, either directly or indirectly, in their petitions. For example, if applicable, a government contractor should cite to the existence of commercial sales involving the accused product in its IPR petition. If the government contractor could potentially be sued in a district court for these commercial sales, it would have an independent interest for invalidating the same patent asserted against the government.
The government contractor may also be able to demonstrate an independent interest if it has an obligation to indemnify the government for any infringement liability assessed against the government. If the government contractor is ultimately on the hook for damages, it may have a bigger incentive to invalidate the patent than the government does. The government contractor might also argue that Microsoft v. SAIC is nonprecedential and, therefore, is not binding on other panels.
Lastly, the government contractor should consider addressing Return Mail head-on in its petition. It might argue, for example, Return Mail does not support denying institution of a petition filed by a private party.
Thryv and Microsoft v. SAIC make one thing clear: Before filing an IPR petition, government contractors should consult patent counsel and carefully consider the procedural posture of any related COFC cases and whether the cost of filing an IPR is worth the risk that the petition may be denied. If a government contractor decides not to file an IPR petition, naturally the same invalidity defenses, and others, may be pursued in the COFC, albeit with a higher standard of proof.
“How High Court IPR Time-Bar Case Affects Gov't Contractors,” by Salvatore P. Tamburo and Megan R. Wood was published in Law360 on May 12, 2020.
 Thryv, Inc v. Click-To-Call Techs., LP, No. 18-916, 2020 WL 1906544 (U.S. Apr. 20, 2020).
 Id. at *2.
 Cuozzo Speed Techs., LLC v. Lee,136 S. Ct. 2131 (2016).
 Thryv, 2020 WL 1906544, at *5 (quoting Cuozzo, 136 S. Ct. at 2141).
 Microsoft Corp. v. Sci. Applications Int'l Corp., No. IPR2019-01311, 2020 WL 572706, at *1 (P.T.A.B. Jan. 27, 2020).
 The case numbers are IPR2019-01311, IPR2019-01312, IPR2019-01359, IPR2019-01360 and IPR2019-01361.
 Microsoft, 2020 WL 572706, at *5.
 553 U.S. 880 (2008).
 Microsoft, 2020 WL 572706, at *2–5.
 Id. at *3–4.
 Id. at *4 (quoting 35 U.S.C. § 315(b)).
 Return Mail, Inc. v. United States Postal Serv., 139 S. Ct. 1853 (2019).
 Microsoft, 2020 WL 572706, at *4.
 Return Mail, 139 S. Ct. at 1867.
 Microsoft, 2020 WL 572706, at *4.
 Id. at *5.
 138 S. Ct. 1348 (2018).
 Microsoft, 2020 WL 572706, at *5.
 In practice, the PTAB exercises this institution discretion on behalf of the Director. 37 C.F.R. § 42.4(a).
 SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1356 (2018); Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016) (citing 35 U.S.C. § 314(a)).
 35 U.S.C. § 314(a).
 Microsoft Corp. v. Sci. Applications Int'l Corp., No. 2020-1464, slip op. at 2–3 (Fed. Cir. Apr. 16, 2020).