What are the takeaways from Unified Patents v. Realtime, the PTAB’s first post-AIT RPI decision?

Zachary Silbersher

In August, we blogged about the Federal Circuit’s decision in Applications In Internet Time, LLC v. RPX Corp. (hereinafter, the AIT decision,) which includes a more comprehensive explanation of the history of this issue.  At the time, we were skeptical that Unified Patents could continue filing IPRs, while identifying only itself as an RPI in light of the AIT decision.  We were not alone.

Now, however, the PTAB has issued its first post-AIT decision, Unified Patents, Inc. v. Realtime Adaptive Streaming, LLC.  In Realtime, the Patent Owner sought to defeat institution by arguing that Unified has run afoul of the AIT decision by failing to identify all RPIs, namely, its members.  The PTAB disagreed and instituted Unified’s IPR.  (The institution decision was entered in October, but the redacted decision issued on November 27, 2018).  How do we square the AIT decision with the Realtime decision?  Will third-party filers, such as Unified and RPX, no longer face RPI issues?

In Realtime, Unified argued, and the PTAB agreed, that Realtime pushed an impermissibly broad reading of the AIT decision.  What the AIT decision held, however, was fairly straightforward.  The Court began with the conclusion that Congress intended an RPI within the context of inter partes review to have “its expansive common law meaning.”  (AIT at 25).  And that meaning was intended to serve two purposes: (1) to ensure parties sufficiently close to the Petitioner are bound by the IPR’s outcome and its corresponding estoppel; and (2) to safeguard patent owners from fielding multiple, belated attacks that hinder quiet title to a patent.  (AIT at 24-25).   

Based on this, the Court in AIT found that two issues were critical to the RPI question—first, the nature of RPX’s relationship with Salesforce, and second, the nature of RPX’s business itself.  (AIT at 26).  On the latter question, considering the facts of RPX’s business itself, the Court found that RPX files IPRs to benefit its clients’ financial interests, and this is why these clients pay RPX.  (Id.).  The Court’s suggestion in AIT was that the nature of RPX’s business may itself end the inquiry.  Indeed, the Court specifically called out as error the AIT panel’s “decision not to examine critically [] RPX’s business model . . . .”  (AIT at 32-33).  

Yet, in the Realtime decision, the PTAB found that Unified’s business model was the same as RPX.  The PTAB recognized that like RPX, Unified is a for-profit company that files IPRs to serve its clients, with whom its interests are 100% aligned.  (AIT at 15).   Despite this, and in somewhat contradiction to the AIT decision, the Realtime panel concluded that the inquiry does not end there.  (Realtime at 15).  In other words, the Realtime panel concluded that, barring exceptional circumstances, the nature of Unified’s business model does not by itself demand that that it name its members as RPIs.

This is the $64k question.  Admittedly, AIT did not hold that for-profit companies that file IPRs for paying clients must name all of those clients as RPIs.  But nor did the Federal Circuit rule it out.  Indeed, that was the point of the remand—so that the AIT panel could re-consider that evidence.  

In Realtime, however, the PTAB appeared to rule it out.  For instance, in Realtime, the PTAB girded its holding with the legal principle that, as a general rule, “a litigant is not bound by a judgment to which she was not a party” except in special circumstances.  (AIT at 15-16).  That general principle may be true, but creating those special circumstances appears to have been Congress’ intent when deciding that RPIs are to be named in an IPR petition. 

Indeed, in the AIT decision, the Federal Circuit cites Congress’ intent that certain parties sufficiently close to an IPR petitioner should be bound by those decisions.  (AIT at 24-25).  Elsewhere, the Court notes that RPX’s statement that its interests are 100% aligned with its clients suggests apparent authority to be so bound.  (AIT at 39).  The concurrence argued that, the roots of privity lie in the other side of the coin—it may be unfair for a litigant to be bound to a litigation to which it was not a party, but it is equally unfair to afford certain parties two bites at the apple.  (AIT Concurrence at 3).  As discussed above, this is precisely one Congress’ concerns when legislating the RPI requirement for IPRs.

In light of all this, it remains an outstanding question whether the Federal Circuit will conclude that the Realtime panel adequately considered the nature of Unified’s business model.  Until that question is answered, this issue cannot really be put to bed.

Rather than focusing a petitioner’s business model, the Realtime panel concluded that the AIT decision was rooted in unique circumstances, specifically the relationship between RPX and Salesforce.  And on this basis, the Realtime panel drew many distinctions between Unified’s petition in Realtime and RPX’s petition in AIT.  For instance, none of Unified’s members share officers or board members with Unified.  Nor were there any significant payments made shortly before the IPR was filed, as appears to have been the case in the AIT decision.   

The Realtime panel also found that “[p]erhaps most significantly, there is no evidence that any member desires review of the ‘535 Patent but is time-barred from filing an IPR—a fact that was crucial in AIT.”  (AIT at 16).  Indeed, in AIT, the Federal Circuit recognized that RPX may have been motivated to file the IPRs to benefit Salesforce, given that Salesforce was time-barred.  See, AIT, 897 F.3d at 1353, 1355 and 1356.  All together, these distinctions may fortify the PTAB’s finding that Realtime was distinguishable from AIT.

Indeed, in AIT, the Court appeared concerned that RPX filed the IPR to specifically benefit one of its clients, namely, Salesforce.  The Court pointed out that no other RPX member had apparently been sued by AIT, and Salesforce was time-barred.  (AIT at 30).  The Court also drew the inference that RPX may have specifically divined that its IPR would benefit Salesforce, even without specifically confirming that with Salesforce.  (AIT at 35).

The Court’s implication from all this was that, if a company such as RPX files IPRs to benefit a specific client, then that may dictate that client be deemed an RPI.  This is why communications between RPX and Salesforce were relevant, why overlapping officers between the companies was relevant, why the fact that Salesforce was time-barred was relevant. 

The Realtime panel hewed closely to this logic.  It emphasized that there was no circumstantial evidence that Unified apparently had a specific member in mind when filing its IPR against Realtime.  Indeed, although the Patent Owner tried to demonstrate that Unified specifically sought to benefit one notable member (whose name is redacted,) the PTAB observed that the IPR was filed before that notable member was even sued by Realtime.  (Realtime at 18).   

So what does all of this mean?  The big-takeaway implication here may be that, for companies such as RPX and Unified, if filing an IPR benefits lots of members equally, with no particular member benefiting in particular, then that’s kosher.  In that case, no members need to be identified as RPIs.  On the other hand, if the evidence shows that a single member uniquely benefitted from an IPR, that may dictate identifying that unique member of as an RPI.  (That assumes that the Federal Circuit concludes that the nature of RPX’s and Unified’s business model does not, by itself, end the inquiry.)

If this principle becomes law, that may slightly circumscribe Unified’s strategy or RPX’s strategy.  But it would hardly doom those businesses.  For instance, a company such as Unified may be more cautious filing IPRs where only one or two members have been sued, or where one of those members is time-barred.  Indeed, if any members benefitting from a Unified IPR are time-barred, that could raise RPI issues.  That may be ironic given that, at least in some circumstances, that is typically when Unified and RPX provide value to their clients.  But there would still remain a path forward for companies such as Unified or RPX to provide value to their clients.

Alternatively, patent-holders with many infringers in their sights may revise their tactics with these RPI considerations in mind.  They may be more cautious about suing lots of defendants at once.  If TC Heartland did not already provide reason not to do that, the emerging jurisprudence around RPI’s may do so. 

Yet, none of these competing considerations will crystallize into clear guidelines until the Federal Circuit issues a review of the PTAB’s analysis in Realtime.  Fortunately for everyone concerned, that is probably two years away!