By James Hall, Cabello Hall Zinda, PLLC
In many patent cases, litigation counsel—while often experienced trial attorneys—are not necessarily well-versed in certain nuances of patent law. This is especially true when it comes to the details of America Invents Act (AIA) trial practice before the Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) —i.e., inter partes and post-grant reviews (IPRs and PGRs). These administrative trials are now de rigueur in most patent infringement litigation. A client will often engage separate counsel, usually admitted to practice before the PTO and having specialized expertise, to handle these proceedings.
As the case proceeds, the parties often are able to reach a settlement. When they do, they very often want a quick resolution of all litigation, including the AIA proceedings, and may even require immediate dismissals in the settlement papers. Unfortunately, this is when the PTAB’s rules governing settlement can trip up unsuspecting attorneys, and in a worst-case scenario result in the loss of valuable patent rights.
First, unlike in district court, the parties cannot just file a request or motion to terminate the proceeding based on the settlement. Before filing such a request, the parties must request permission to file. Thus, there is often a delay in filing before permission is received. There can be further delay before the request is granted while the PTAB reviews the request.
Second, the applicable statutes and implementing regulations governing settlement create two primary issues for the parties. First, settlement does not guarantee termination. The statutes provide that a review “shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed.” Thus, it is possible that the parties could settle their dispute and request termination, and have the request denied—resulting in an unwanted final written decision affecting the parties’ rights. However, this is not common. The PTAB usually grants termination even late in the proceeding (even after all briefing has concluded). The PTAB’s trial practice guide states that “[t]he Board expects that a proceeding will terminate after the filing of a settlement agreement, unless the Board has already decided the merits of the proceeding.” Parties should be wary, however, if they wait until after oral argument to request termination. The PTAB has denied termination when the request was submitted after oral argument, even when substantial time remained before the one-year statutory deadline for the final written decision. After oral argument, there is a chance the PTAB panel has already deliberated and decided the merits, even though the final decision has not yet been drafted.
The second issue is that unlike in district court, the settlement agreement must be filed with the PTAB. Although the agreement is kept confidential upon request, the statutes provide that “[a]ny agreement or understanding between the patent owner and a petitioner, including any collateral agreements referred to in such agreement or understanding, made in connection with, or in contemplation of, the termination of [a] . . . review under this section shall be in writing and a true copy of such agreement or understanding shall be filed in the Office before the termination of the . . . review as between the parties.” Further, the PTAB interprets “collateral agreements” to include any agreement referenced in a settlement agreement between the parties, whether or not the collateral agreement itself is (1) between the petitioner and patent owner or (2) made in connection with or contemplation of a termination of the proceeding.
When possible, of course, IPR/PGR counsel should be involved in or at least review the draft of any settlement agreement that will terminate an IPR or PGR before it is finalized. When it is not, litigation counsel should be aware of three issues when drafting the settlement terms:
Termination is not immediate. The parties must request permission from the PTAB before filing the motion to terminate. There is often a delay of a few days before permission is granted. After the request is filed, there will be an additional delay while the panel reviews the filed settlement agreements for conformity with the applicable rules.
Termination is not guaranteed. If the request to terminate is filed after oral argument, there is a significant risk that termination will be denied because the PTAB has already reached a decision on the merits. Generally, however, if the request to terminate is filed before oral argument, then termination should be forthcoming.
All settlement agreements must be filed. In addition, any other agreements referenced in a settlement agreement must also be filed. This last point should cause counsel to be wary of including such references in the settlement agreement if they do not want to trigger the filing requirement. Of course, if such an agreement independently meets the statutory requirements (i.e., it is between the parties and in connection with/contemplation of termination), it must be filed in any event.
 37 C.F.R. § 42.20(b).  35 U.S.C. §§ 317, 327; 37 C.F.R. § 42.74. See Kinetic Techs., Inc. v. Skyworks Solutions, Inc., IPR2014-00690 (PTAB Oct. 19, 2015) (Paper 43) (request to terminate denied when filed eight days after oral argument and more than four months before statutory deadline); Apple Inc. v. OpenTV, Inc., IPR2015-00969 (PTAB Sept. 10, 2016) (Paper 29) (request denied when filed six weeks after oral argument and seven weeks before the statutory deadline). See also Rubicon Commc’ns., LP, v. Lego A/S, IPR2016-01187 (PTAB Dec. 14, 2017) (Paper 100) (request denied when filed two months after oral argument and four days before the statutory deadline).  At least, mostly confidential. Such agreements are “kept separate from the file of the involved patents” but are subject to disclosure in two situations: (1) to Federal Government agencies on written request; and (2) to any person on a showing of good cause (and a fee). See 35 U.S.C. §§ 317(b), 327(b); 37 C.F.R. § 42.74. See DTN, LLC v. Farms Technology, LLC, IPR2018-01412, slip op. at 3-9 (PTAB June 14, 2019) (Paper 21) (designated precedential June 11, 2020). James Hall and David Cabello were counsel for DTN in this proceeding.