Patents owned by states are not immune from administrative validity challenges at the US Patent and Trademark Office, and real party-in-interest or privity relationships that arise after the filing of a petition for inter partes review (IPR) can trigger the time-bar provisions of section 315(b),¹ according to a pair of recent decisions from the Court of Appeals for the Federal Circuit.²

Patent owners, including state university tech transfer offices, often pursue damages for patent infringement. Patents owned by sovereigns, such as states and Native American tribes, would be more valuable if they were immune from administrative challenges known as IPR. They are now not immune, unless the Supreme Court reverses the holding in Regents of the University of Minnesota.

The Federal Circuit, citing the Supreme Court, held that IPR proceedings, unlike Article III proceedings, are brought by the US government, with the help of third parties.³ The court further stated that sovereign immunity does not apply in proceedings brought by the government.⁴ However, the court left open the possibility that states might still enjoy sovereign immunity from other administrative proceedings, but found that the University had consented to the Patent Office’s jurisdiction by applying for a patent.⁵ Therefore, states and tribes may still enjoy sovereign immunity in other contexts to be determined in the future.

Finally, the court offered unusual “additional views.” These views focused on the fact that states did not have “physical possession” of patents.⁶ The court analogized proceedings involving patent rights to an in rem proceeding from which there is no state sovereign immunity. The decision could implicate other areas of administrative practice involving state-owned enterprises or property.

In a separate opinion issued on the same day⁷, the court expanded the reach of the time-bar provision of section 315(b)⁸. The statute in question bars granting a petition for IPR where the filing of the petition occurs more than one year after the date a complaint alleging infringement of the challenged patent was served⁹. The statute applies not only if the party actually filing the petition was so served, but is also triggered if a “real party-in-interest” or “privy” of the petitioner was served more than a year ago.

The facts before the court were that at the time the IPR petition was filed, petitioner ON Semiconductor had already entered into an agreement to merge with a third-party that had been served with a complaint for infringing the patent being challenged more than one year prior to the filing date of the petition. However the merger had not yet closed at the time the petition was filed. Subsequently, and four days before the Patent Trial and Appeal Board issued its decision on whether to institute a review of the challenged patent, the merger closed. Thus, the issue presented was whether the time-bar provision of section 315(b) was triggered only when there was a real party-in-interest or privy of the petitioner served with a complaint for infringing the challenged patent more than one year prior to the actual filing date of the petition, or whether the time bar could be triggered by a real party-in-interest or privity relationship formed only after the filing date of the petition but before instituting an IPR.

The court held that because the time bar’s focus was to preclude institution, not filing, privity and real party-in-interest relationships that arise after filing but before institution are fair-game when analyzing whether the time bar applies¹⁰. The court justified its statutory interpretation by noting that Congress adopted the use and meaning of the common law terms “real party-in-interest” and “privy” in the statutory provision. Noting that common law preclusion cases suggest that preclusion can apply based on privity arising after a complaint is filed, the court reasoned that the common law application of the notion of privity supported its position that privity relationships arising after an IPR is filed, but before the date of institution, should be considered in the section 315(b) time-bar analysis.¹¹

The decisions by the Federal Circuit will likely have the greatest impact on those seeking to challenge the validity of patents using IPR, who now must be mindful not only of privity and real party-in-interest relationships as of the filing date of their petitions, but should also carefully monitor the activities and relationships that the petitioner may have planned in the future, or may subsequently form.

Please contact the authors if you would like to discuss the potential impacts and opportunities raised by these decisions.

1. 35 U.S.C. § 315(b). ↩
2. Regents of the University of Minnesota v. LSI Corporation, appeal no. 2018-1559 (Fed. Cir. June 14, 2019). ↩
3. Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743, 760, 765 (2002). ↩
4. Regents of the University of Minnesota, slip. op. at 24. ↩
5. Id. at 26–27 (FN20) (“even if state sovereign immunity might in some circumstances bar administrative proceedings involving states, this would not bar the USPTO’s reconsideration of a prior patent grant because a state impliedly consents to such proceedings when it applies for, or otherwise obtains ownership of, a patent that is “a creature of statute law and granted subject to potential cancellation in an executive proceeding.”) (Internal quotations omitted). ↩
6. Id., additional views at 6. ↩
7. Power Integrations, Inc. v. Semiconductor Components Inds. LLC, d/b/a, ON Semiconductor, appeal no. 2018-1607 (Fed. Cir. June 14, 2019) ↩
8. 35 U.S.C. § 315(b): “A inter partes review may not be instituted if the petition requesting the proceeding is filed more than one year after the date on which the petitioner, real party in interest, or privy of the petitioner is  served with a complaint alleging infringement of the patent.” ↩
9. Id. ↩
10. Power Integrations, slip op. at 14. ↩
11. Id., at 17. ↩