Impact of PTAB's Decision in RPX v. AIT -- Has RPX Filed Its Last IPR Petition?

By Peter C. Schechter

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In its October 2020 decision in RPX Corp. v. Applications In Internet Time, LLC, the Patent Trial & Appeal Board of the U.S. Patent & Trademark Office has cast considerable doubt on the ability of member-supported defensive patent aggregators such as RPX, Askeladden, and Unified Patents to file petitions for Inter Partes Review and Post-Grant Review without naming one or more of their members who will benefit from the challenges as real parties in interest (“RPI”) and/or privies of the petitioner.

When Congress created the Inter Partes Review (“IPR”) validity challenge as part of the America Invents Act (“AIA”), it required IPR petitioners to identify all real parties in interest in the initial petition. 35 U.S.C. § 312(a)(2) (“A petition … may be considered only if—… (2) the petition identifies all real parties in interest”). This disclosure by the petitioner is required for the Patent Trial & Appeal Board (“PTAB” or “Board”) of the U.S. Patent & Trademark Office to administer two other provisions of the AIA, namely, the time bar and estoppel provisions.

Under 35 U.S.C. § 315(b), an IPR may not be instituted “if the petition requesting the proceeding [wa]s filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner [wa]s served with a complaint alleging infringement of the patent.” Separately, under 35 U.S.C. § 315(e)(2), the petitioner in an IPR “that results in a final written decision …, or the real party in interest or privy of the petitioner, may not assert either in” an infringement suit in court or in an ITC proceeding “that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”

Legislative history reveals “two related purposes” for the RPI and privity disclosure requirements. First, these disclosures ensure that third parties who have sufficiently close relationships with IPR petitioners would be bound by the outcome of instituted IPRs under § 315(e). Second, they serve to safeguard patent owners from having to defend their patents against belated administrative attacks by related parties.

Member-supported defensive patent aggregators were formed, at least in part, in response to the litigation/licensing business model of many Non-Practicing Entities. RPX Corporation is one of the earliest and most successful of this class of defensive patent aggregators, which includes other well-known entities such as Askeladden LLC and Unified Patents. RPX Corporation touts the following benefits of membership:

“Significantly reduc[e] patent litigation risk and costs”

“Tap into our collaborative power to prevent or end litigation”

“Limit your company’s exposure to litigation costs”

“We remove patents – pre-litigation and out of active litigation – before they can become a costly problem for our clients”

Askeladden LLC advertises similar benefits and activities:

“Through the [Patent Quality Initiative], Askeladden strives to improve patents by diminishing the number of those that should not have been issued”

“As part of the PQI, Askeladden … petitions the United States Patent and Trademark Office to take a second look at patents under Inter Partes Review (IPR) that it believes are invalid”

The business model of Unified Patents is described slightly differently in that Unified claims to work “independently of its members” according to the following promotional statements:

“Unified is a 200+ international membership organization that seeks to improve patent quality and deter unsubstantiated or invalid patent assertions in defined technology sectors (Zones) through its activities. Its actions … may include … administrative patent review (PTAB)”

“Unified works independently of its members to achieve its deterrence goals. Small members join for free while larger ones pay modest annual fees.”

In the RPX Corp. v. Applications In Internet Time, LLC litigation, Applications In Internet Time, LLC (“AIT”) sued RPX member Salesforce in 2013 for infringement of three AIT patents. Salesforce responded by filing three Covered Business Method Review petitions in 2014, which were eventually denied by the PTAB. In 2015 RPX, not its member Salesforce, filed three IPR petitions challenging the same three AIT patents, without naming Salesforce as RPX’s RPI or privy. From the beginning, AIT argued that RPX was doing Salesforce’s bidding because the IPR petitions would have been time-barred under 35 U.S.C. § 315(b) if filed by Salesforce itself, or if Salesforce was identified as an RPI or privy of petitioner RPX. The PTAB instituted IPR trial on all three RPX petitions, and eventually found all challenged claims unpatentable. AIT appealed to the Court of Appeals for the Federal Circuit (“CAFC”).

In July 2018, the CAFC overturned the PTAB’s final written decisions in all three RPX IPRs,[1] holding that the PTAB “applied an unduly restrictive test for determining whether a person or entity is a ‘real party in interest’.” Moreover, the PTAB “failed to consider the entirety of the evidentiary record in assessing whether § 315(b) barred institution of these IPRs.”  The Court of Appeals explained that “the focus of the real-party-in-interest inquiry is on the patentability of the claims challenged in the IPR petition, bearing in mind who will benefit from having those claims canceled or invalidated,” and that the determination of who is an RPI should consider “who, from a ‘practical and equitable’ standpoint, will benefit from the redress that the chosen tribunal might provide,” and whether the un-named non-party “is a clear beneficiary that has a preexisting, established relationship with the petitioner.” RPX’s IPRs were remanded to the PTAB for further proceedings.

On remand, the PTAB determined that Salesforce should have been named by RPX as an RPI and, as a consequence of AIT’s 2013 infringement suit against Salesforce, all three of RPX’s petitions were time-barred.[2]

Regarding RPX’s business model, including the nature of RPX as an entity, the evidence demonstrated that patent aggregation, licensing, and filing IPRs to protect its clients work together to protect its members from the threat of patent litigation and are all important components of RPX’s core subscription business. As a consequence, the PTAB found that RPX filed the IPRs to benefit its member Salesforce. As for RPX’s explanation of its own interest in the IPRs, all but one of the fifty-seven IPRs filed by RPX challenged a patent involved in district court litigation against one of its members. Moreover, RPX has no potential liability for infringement of AIT’s patents. The PTAB thus found that RPX filed the IPRs to benefit its existing clients, including Salesforce. 

The PTAB considered “whether, and under what circumstances, RPX takes a particular client’s interests into account when determining whether to file IPR petitions.” The Board noted that RPX member VirnetX had previously been held to be an RPI in IPRs filed by RPX in 2014, and that shortly after the VirnetX decisions, RPX created a Best Practices Guide to protect its business model from the rationale of the VirnetX decisions, and specifically to avoid its members being found to be RPIs. The PTAB found that the Best Practices Guide is used by RPX to “intentionally operate[] its business to circumvent the Board’s RPI case law.”

The Board also found that evidence indicated that, from a “‘practical and equitable’ standpoint,” Salesforce’s relationship with RPX was based, at least in part, on efforts to address the same patents asserted against Salesforce by AIT in litigation and also challenged by RPX in the IPRs, to the benefit of Salesforce. Moreover, in addition to the advertised benefits of RPX membership, “Salesforce has an additional benefit, as it unsuccessfully attempted to challenge the patents at issue in a prior AIA proceeding and any further challenges would be time-barred under § 315(b).” The PTAB thus found that in view of the pending litigation, invalidation of the challenged AIT patents would provide a benefit to Salesforce.

Of particular importance to all member-supported defensive patent aggregators, the PTAB explained how “RPX can be said to be representing” the interest of its members:

“That a member organization exists in part to file IPR petitions against patents being asserted or threatened to be asserted against its members is indicative of an RPI relationship between the organization and its members”

The Board found that “RPX inevitably represented Salesforce’s interests, and provided benefit to Salesforce, by filing IPR petitions challenging the same patents asserted against Salesforce in infringement litigation, in a manner that Salesforce itself could not do …, and previously failed to do via its own CBM petitions.”

The Board found that even if RPX did not have direct knowledge of Salesforce’s desire for IPRs to be filed, such lack of knowledge was due, in part, to the fact that RPX would not allow Salesforce to discuss the matter pursuant to the RPX Best Practices Guide. Nonetheless, the Board found that Salesforce would have been interested in PTAB review of the AIT patents asserted against Salesforce in the infringement litigation.

Finally, the Board found that RPX’s business model requires RPX to ascertain patent risks to its clients. Without doing so, it could not acquire relevant patents on its clients’ behalf, or, as it did here, file IPR petitions. Extensive record evidence of communications between RPX and Salesforce, and “timing and content” of tose communications “indicates [RPX’s] understanding that the very challenges to validity included in the IPR petitions were challenges Salesforce would like to have made if not time-barred from doing so.”

Importantly, the PTAB explained that “the RPI inquiry sweeps more broadly than requiring explicit evidence of request, funding, or control,” which are the factors relied upon by Askeladden and Unified Patents to avoid naming their members and RPIs in their IPR petitions. As the Board stated:

“Even if Salesforce did not directly fund, control, or expressly request these IPR proceedings, the evidence regarding RPX’s relationship with Salesforce indicates that RPX represented Salesforce’s interests to Salesforce’s benefit and, consequently, that RPX effectively acted as if Salesforce had requested action by RPX, when filing the IPR petitions.”

The “practical realities of [the RPX-Salesforce] purposeful business relationship creates the danger of ‘two bites at the apple’ that the statutes were meant to prevent via the § 315(e) estoppel provisions and the § 315(b) time bar.”

“RPX seeks to avoid the § 315(b) bar for itself, and estoppel provisions under § 315(e) for its members, by creating the appearance that RPX acts independently of its clients’ interests when filing IPR petitions.”

The PTAB also found that RPX’s Best Practices Guide is an attempt to insulate its clients from being named as RPIs, and that the attempt fails.

RPX filed one further IPR petition several days after the CAFC’s 2018 decision, but has filed none since then. Both Unified Patents and Askeladden have continued to file IPR petition in which they assert that there are no other RPIs in view of the facts that no other party exercised control or could have exercised control over their participation in the proceedings, or the filing of the petitions, or the conduct of any ensuing trials. As the Board explained, these facts alone are not sufficient to demonstrate the absence of any RPIs. Salesforce neither exercised control nor could have exercised control over RPX's participation in the proceedings, or the filing of the petitions, or the conduct of any ensuing trials, yet Salesforce has nonetheless been held to be an RPI in RPX’s IPRs. In view of the PTAB’s 2020 application of the CAFC’s 2018 admonition that the determination of who is an RPI should consider who, from a practical and equitable standpoint, will benefit from having those claims canceled or invalidated, only time will tell whether the business models of Askeladden and Unified Patents suffer the same fate as that of RPX Corporation.