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IP Alert
IP Alert: Petitioner in IPR Proceeding Must Always Prove It Is the Real Party in Interest

September 11, 2018

On September 7, the Federal Circuit issued its opinion in Worlds Inc. v. Bungie, Inc., holding that the burden of persuasion to establish compliance with the real party in interest requirement of 35 U.S.C. § 315(b) remains with the petitioner throughout an inter partes review (IPR) proceeding. Interestingly, the court also suggested that collateral estoppel might apply when the same issue is raised in multiple IPR proceedings.

Bungie is a video game developer that creates games for Activision. In 2012, Worlds Inc. asserted six patents against Activision. Over a year later, in 2014, Worlds notified Activision that it intended to add Bungie’s video game Destiny to the lawsuit as well. Bungie promptly filed six separate IPR petitions against the asserted patents.

In its IPR petitions, Bungie identified itself as the real party in interest. Worlds sought additional discovery regarding whether Activision should have been named as a real party in interest as well. If Activision were a real party in interest, the IPR petitions would be time-barred under 35 U.S.C. § 315(b) because Worlds had sued Activision more than one year before the filing of the petitions. In support of its request, Worlds submitted evidence of a software publishing and development agreement between Bungie and Activision demonstrating that Bungie was to perform “legal reviews” of software products subject to review and approval by Activision.

The Patent Trial and Appeal Board (PTAB) denied Worlds’s request for discovery, concluding that “Worlds had not shown more than a ‘mere allegation’ that something useful would have been found through the requested discovery.” Ultimately, the PTAB invalidated all six of Worlds’s patents. Worlds appealed only three of the six IPR decisions.

On appeal, the Federal Circuit held that the PTAB erred in its analysis of the real party in interest issue by not specifically identifying which party bore the burden of persuasion. The court reasoned that the “petitioner’s initial identification of the real parties in interest should be accepted unless and until disputed by a patent owner.” But this presumption merely shifts the burden of production to the patent owner—not the burden of persuasion. Thereafter, the patent owner need only produce “some evidence” that “reasonably brings into question the accuracy of a petitioner’s identification of the real parties in interest.” In this case, the court observed that Worlds had introduced evidence of the agreement between Bungie and Activision. From this the court concluded that the agreement was “sufficient to put Bungie’s identification of itself as the sole real party in interest into dispute.” As a result, the court remanded the case to the PTAB to reconsider the real party in interest issue while placing the ultimate burden of persuasion on Bungie, the petitioner.

Bungie further contended that Worlds should be estopped from contesting the PTAB’s real party in interest determination under the doctrine of collateral estoppel, arguing that Worlds had declined to appeal three of the six adverse IPR decisions. The court dismissed this argument based on the lack of factual development of the issue on appeal, reasoning that “the determination of whether a party is a real party in interest may differ from one IPR to the next, even among a set of seemingly related IPRs.” Lacking a comprehensive understanding of the underlying facts, the court instructed the PTAB to consider the collateral estoppel issue on remand. Notably, collateral estoppel might apparently result from these circumstances, depending on a factual record yet to be developed.

Finally, the court declined to address the merits of the invalidity arguments, holding that the parties could raise these issues later depending on the outcome of the remanded decision.

This case is relevant to PTAB practice because of both the time-bar issue and the potential for collateral estoppel if appeals are not taken from each of multiple related proceedings.

For more information on this decision, please contact Fitch Even partner Allen E. Hoover, author of this alert.

Fitch Even law clerk Evan Kline-Wedeen contributed to this alert. 

 

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