Valve Precedent Reined In by Director Review Order

Last week the Director vacated IPR denials based upon a misapplication of Valve Corp. v. Elec. Scripting Prods., Inc., IPR2019-00062, Paper 11 (Apr. 2, 2019) (precedential). As a reminder, Valve, extended the discretionary denial practices set out in General Plastic of so-called “follow-on” petitions of a same party to that of related parties having a “significant relationship.” However, over the years the unique scenario of Valve started to be argued as applicable to more typical scenarios where different parties happened to be litigating the same patent in different, unrelated suits.

Most recently, the Valve drift ensnared an IPR petitioners Honda, GM and Ford based on earlier filings of a co-defendant (Volkswagen). In last week’s Director Review Order the Director made clear that where there are different accused products in different court proceedings there is not a “significant relationship” between filers outside of “relevant or extenuating facts or circumstances.”

In the two panel decisions reviewed by the Director (Ford Motor Co. v. Neo Wireless LLC, IPR2023-00763 (Nov. 9, 2023), and (American Honda Motor Co, Inc. v. Neo Wireless LLC, IPR02023-00797 (Nov. 9, 2023), the Board denied review on the basis that the petitioners were improper “serial petitioners.” The panel reasoned that because Volkswagen AG, had previously filed a challenge to the patents, and since the 21 lawsuits filed against the different auto manufacturers had been consolidated by order of the district court, the parties were required to coordinate their contentions and defenses. The Board also relied on the fact that the response to Volkswagen’s petition, which Volkswagen had filed more than half a year before the statutory deadline, was publicly available at the time that the other defendants filed their petitions.

Prior to the Director taking up her Review, several industry groups lambasted this growing practice of the PTAB in a letter to the Director, explaining (here):

[C]ompanies who are competitors in the marketplace often are targeted together in patent lawsuits. [Valve] as applied in these cases, assumes that such defendants will nevertheless be fully aligned in the litigation, such that one defendant’s defenses will “virtually represent” the interests of the others. . . .

[C]odefendants who sell products that work differently often have conflicting interests when filing IPR petitions. One defendant, for example, may wish to present prior art that works in the same way as its own accused product, while another may prefer to focus on particular claim constructions. It is improper for the Office to assume that one defendant will fully represent the interests of its marketplace competitors

Following this rationale (although officially stating that the letter would not be considered), the Director explained in her Order of last week (here) that:

Upon review, I find that [petitioners] do not have a “significant relationship,” for purposes of the General Plastic analysis. Under existing Office policy and precedent, the Board does not recognize a “significant relationship” between parties having different accused products that merely engage in court-ordered pretrial coordination. In reaching this conclusion, this decision recognizes that existing policy does not support the result reached by the Board in this case. . .

[Petitioners] and Volkswagen are accused of infringing the challenged patent with different products in different court proceedings, and there is no evidence that they had any interactions or agreements regarding the accused wireless standard or the accused products. In addition, their court-ordered case-management coordination, by itself, does not create the type of “significant relationship” contemplated by Valve.

(internal citations omitted)

Notably, the agency had floated a proposal in its ANPRM of last year to perhaps extend Valve along the lines of these initial panel decisions via a “substantial relationship” test, but it has been expected—and essentially confirmed here— that this proposal is being dropped from the eventual (still in OIRA review stage) rule package.

Going forward, Valve will be more easily avoided for defendants that are merely grouped in the same litigant’s crosshairs.