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`Paper No.
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`__________________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`___________________
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`CALLIDUS SOFTWARE INC.
`Petitioner
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`v.
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`VERSATA DEVELOPMENT
`GROUP, INC.
`Patent Owner
`
`AND
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`VERSATA SOFTWARE, INC.
`Real Party-In-Interest
`___________________
`
`Case CBM2013-00052
`Patent 7,904,326
`Title: METHOD AND APPARATUS FOR PERFORMING COLLECTIVE
`VALIDATION OF CREDENTIAL INFORMATION
`_____________________
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`PATENT OWNER’S PRELIMINARY RESPONSE
`UNDER 37 C.F.R. § 42.207
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`TABLE OF CONTENTS
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`E.
`F.
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`I.
`II.
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`Introduction ...................................................................................................... 5
`Trial Cannot Be Instituted Because Petitioner is Statutorily Barred from
`Seeking Post-Grant Review ............................................................................. 6
`A. Section 325(a)(1) Defines a Statutory Bar that Pertains to the
`Transitional Program for Covered Business Method Review ...................... 6
`B. Callidus Failed to Identify Its Civil Action Challenging Validity in its
`Required Mandatory Notices ........................................................................ 7
`C. Plain Language of § 325(a)(1) Bars Post-Grant Review .............................. 8
`D. Legislative History Confirms the Meaning of § 325(a)(1)’s Plain
`Language; Petitioner’s Own Choice Triggers Statutory Bar ...................... 10
`Statutory Framework is Hardly Inequitable to Patent Challenger .............. 13
`Prior Judicial and Administrative Interpretations Confirm Applicability
`of Statutory Bar for Prior-Filed Civil Action Challenging Validity ........... 15
`G. Statutory Language Defining the § 325(a)(1) Prior Civil Action Bar, its
`Legislative History and Prior Interpretations of the Statute All Dictate
`Non-Institution ............................................................................................ 23
`III. Claim Construction ......................................................................................... 24
`A. Petitioner’s Proposed Constructions of Certain Claim Terms Fail to
`Comport with the Broadest Reasonable Interpretation Standard
`Applicable in Proceedings before the PTAB .............................................. 24
`“Credential Information” ......................................................................... 25
`1.
`“Denormalizing” ...................................................................................... 26
`2.
`B. Patent Owner Opposes the Constructions Proposed by Callidus insofar
`as they Diverge from the ’326 Patent Specification, Include
`Inappropriate and Extraneous Limitations and are Inconsistent with a
`Broadest Reasonable Interpretation ............................................................ 27
`IV. Conclusion ...................................................................................................... 27
`Certificate of Service ............................................................................................... 30
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`–2–
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`FEDERAL CASES
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`TABLE OF AUTHORITIES
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`Ethicon, Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir. 1998) .......................................... 10
`Hoechst Aktiengesellschaft. v. Quigg, 917 F.2d 522 (Fed. Cir. 1990) ...................... 9
`Graves v. Principi, 294 F.3d 1350 (Fed. Cir. 2002) ................................................ 20
`InVue Sec. Prods., Inc. v. Merch. Techs., Inc., 2012 U.S. Dist. LEXIS 92097
`(W.D.N.C. July 3, 2012) ...................................................................................... 17
`Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc) ......................... 24
`Procter & Gamble Co. v. Team Techs., Inc., No. 12-cv-552, 2013 U.S. Dist.
`LEXIS 128949 (S.D. Ohio Sept. 10, 2013) ......................................................... 15
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`REGULATORY CASES
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`Anova Food, LLC v. Sandau, No. IPR2013-00114, Paper No. 17, Decision –
`Denying Inter Partes Review (P.T.A.B. Sept. 13, 2013) .................................... 16
`BAE Systems Information and Electronic Systems Integration, Inc. v. Cheetah
`Omni, LLC, No. IPR2013-00175, Paper No. 15, Decision – Institution of Inter
`Partes Review (P.T.A.B. July 3, 2013) ............................................................... 21
`InVue Sec. Prods., Inc. v. Merch. Techs., Inc., No. IPR2012-00122, Paper No. 17,
`Decision – Institution of Inter Partes Review (P.T.A.B. June 27, 2013) .... 18, 20
`Macauto U.S.A. v. BOS GmbH & KG, No. IPR2012-00004, Paper No. 18, Decision
`– Institution of Inter Partes Review (P.T.A.B. Jan. 24, 2013) ..................... 20, 21
`FEDERAL STATUTES
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`35 U.S.C. § 325(a)(1) ....................................................................................... passim
`35 U.S.C. § 325(a)(3) ............................................................................................... 14
`AIA § 18(a)(1) ........................................................................................................... 6
`REGULATIONS
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`37 CFR § 42.8(b)(2) ................................................................................................... 7
`37 CFR § 42.302(a) .................................................................................................. 18
`LEGISLATIVE HISTORY
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`153 Cong. Rec. E774 ............................................................................................... 10
`157 Cong. Rec. S1041.............................................................................................. 12
`157 Cong. Rec. S1363.............................................................................................. 13
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`–3–
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`157 Cong. Rec. S1375.............................................................................................. 11
`157 Cong. Rec. S5428.............................................................................................. 13
`157 Cong. Rec. S5429.............................................................................................. 14
`157 Cong. Rec. S952 ................................................................................................ 13
`154 Cong. Rec. S9987.............................................................................................. 11
`OTHER AUTHORITIES
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`77 Fed. Reg. 48,612, 48,617 ...................................................................................... 7
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`–4–
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`I.
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
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`Introduction
`Patent Owner Versata Development Group, Inc. (“Versata” or “Patent
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`Owner”) submits the following Preliminary Response to the Corrected Petition
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`filed by Callidus Software Inc. (“Callidus” or “Petitioner”) on September 17, 2013,
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`requesting post-grant review of Claims 1-22 of U.S. Patent No. 7,904,326 (“the
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`’326 Patent”) under § 18 of the America Invents Act’s transitional program for
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`covered business method patent review. Versata respectfully requests that the
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`Patent Trial and Appeal Board (“Board” or “PTAB”) decline to institute post-grant
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`review of the ’326 Patent because Callidus is statutorily barred from seeking post-
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`grant review.
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`Pursuant to 35 U.S.C. § 325(a)(1), a post-grant review proceeding cannot be
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`instituted where the petitioner, prior to the filing of a petition for post-grant review,
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`filed a civil action challenging the validity of a claim of the patent. Over 10
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`months before filing its Petition for post-grant review, Callidus filed a civil action
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`in the Northern District of California seeking a declaratory judgment of invalidity
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`of the claims of the ’326 Patent. As a result, a post-grant review proceeding cannot
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`be instituted.
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`–5–
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`II. Trial Cannot Be Instituted Because Petitioner is Statutorily Barred
`from Seeking Post-Grant Review
`A.
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`Section 325(a)(1) Defines a Statutory Bar that Pertains to the
`Transitional Program for Covered Business Method Review
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`Section 18 proceedings are “regarded as, and shall employ the standards and
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`procedures of, a post-grant review under chapter 32 of title 35, United States
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`Code…” AIA § 18(a)(1). Section 321(c) (filing deadline), and subsections (b)
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`(stay of civil action), (e)(2) (estoppel), and (f) (reissue patents) of section 325 do
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`not apply to a § 18 proceeding. AIA § 18(a)(1)(A). However, included in chapter
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`32, and absent from this exclusion, is 35 U.S.C. § 325(a)(1), which states:
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`“POST-GRANT REVIEW BARRED BY CIVIL ACTION. – A
`post-grant review may not be instituted under this chapter if,
`before the date on which the petition for such a review is filed,
`the petitioner or real party in interest filed a civil action
`challenging the validity of a claim of the patent.”
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`35 U.S.C. § 325(a)(1).
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`The plain language of § 325(a)(1) bars any petitioner who has “filed a civil
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`action challenging the validity of a claim of the patent” from thereafter seeking
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`post-grant review, including a transitional “post-grant review proceeding” under
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`§ 18 for a covered business method patent. Callidus filed a civil action challenging
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`validity of the ’326 Patent before filing the present Petition. See Exh. 2001.
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`Accordingly, post-grant review is barred and cannot be instituted.
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`–6–
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`B. Callidus Failed to Identify Its Civil Action Challenging Validity in
`its Required Mandatory Notices
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`Trial practice and procedure rules require a petitioner to identify, as part of
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`its petition, any other judicial or administrative matter that would affect, or be
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`affected by, a decision in the proceeding. See 37 CFR § 42.8(b)(2). Clearly, the
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`existence of a statutory bar resulting from a civil action challenging validity of a
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`claim of the patent would affect a decision on institution in this proceeding.
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`Indeed, in its final rulemaking, the Office specifically notes that:
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`“The mandatory notices concerning real parties in interest
`and related matters are consistent with the requirements of
`35 U.S.C. 315, as amended, and 35 U.S.C. 325. These statutes
`describe the relationship between the trial and other related
`matters and authorize amongst other things … lack of standing
`for real parties in interest that previously have filed civil
`actions against a patent for which trial is requested.”
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`77 Fed. Reg. 48,612, 48,617 (Aug. 14, 2012) (discussing rule 42.8, emphasis
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`added). Thus, it is reasonable to characterize the petitioner’s mandatory notice
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`requirement as an integral part of the rules whose purpose includes early
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`identification of the very statutory bar implicated in the present proceedings.
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`Despite this requirement, Callidus failed to identify in its mandatory notices
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`the previously-filed civil action discussed below. Petition at 4. Because Callidus’
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`counsel of record in this proceeding and its counsel of record in the prior-filed civil
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`action challenging validity are the same counsel, it is difficult to understand the
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`oversight. Regardless, Versata now turns to the nature and legal effect of the
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`§ 325(a)(1) statutory bar in the present proceedings.
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`Plain Language of § 325(a)(1) Bars Post-Grant Review
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`C.
`Versata filed a complaint against Callidus in the district of Delaware on July
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`19, 2012, alleging infringement of the ’326 Patent (hereinafter the “Delaware
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`Action”). See Exh. 1005. On October 16, 2012, as part of a forum-shopping
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`attempt to transfer venue of the Delaware Action and, indeed, a month after the
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`transitional program for covered business method review became available,
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`Callidus filed a civil action against Versata in the Northern District of California,
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`seeking, amongst other things, a declaratory judgment that the claims of the ’326
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`patent were invalid. See Exh. 2001, at 3 (hereinafter “California Action”).
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`Notably, Callidus’ complaint specifically alleged that the claims were invalid
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`under 35 U.S.C. § 101 (the very same ground it now alleges in its present Petition).
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`Id.
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`Callidus voluntarily stayed the California Action pending a decision on its
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`attempt to have the Delaware Action transferred to California. See Exh. 2002.
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`After the Delaware court denied the requested venue transfer, Callidus voluntarily
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`dismissed the California Action. See Exh. 2012; Exh. 2003. Callidus next filed its
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`present Petition for post-grant review of U.S. Patent 7,904,326 on August 28,
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`2013, over 10 months after filing the California Action that challenged validity of
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`a claim of that very same patent.
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`As a result, and simply stated, Callidus’ own choices on venue tactics, as
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`well as its timing, have forever foreclosed its ability to seek post-grant review of
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`the ’326 patent before this Board. Because Callidus filed a civil action challenging
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`the validity of a claim of the ’326 Patent prior to filing its present Petition, §
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`325(a)(1) bars the institution of a post-grant review proceeding.
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`The plain language of § 325(a)(1) clearly bars institution of a post-grant
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`review of the ’326 Patent pursuant to Callidus’ Petition. “It is well settled law that
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`the plain and unambiguous meaning of the words used by Congress prevails in the
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`absence of a clearly expressed legislative intent to the contrary.” Hoechst
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`Aktiengesellschaft v. Quigg, 917 F.2d 522, 526 (Fed. Cir. 1990). Here, the
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`language of § 325(a)(1) is clear and without any ambiguities:
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`“A post-grant review may not be instituted if, before the date on
`which the petition [for post grant] review is filed, the petitioner
`or real party in interest filed a civil action challenging the
`validity of a claim of the patent.”
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`35 U.S.C. § 325(a)(1). Indeed, the statute dictates that “POST-GRANT REVIEW
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`[IS] BARRED BY CIVIL ACTION.” Id.
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`Callidus filed a civil action challenging validity of a claim of the ’326 patent
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`before filing its Petition. As a result, Callidus’ petitioned-for post-grant review
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`under the Section 18 program for covered business method patents is barred by
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`statute and a post-grant review proceeding cannot be instituted.
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`D. Legislative History Confirms the Meaning of § 325(a)(1)’s Plain
`Language; Petitioner’s Own Choice Triggers Statutory Bar
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`Because the statute is clear on its face, when there is no ambiguity in the
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`words of the statute, “we turn to the legislative history to see if Congress meant
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`something other than what it said statutorily.” Ethicon, Inc. v. Quigg, 849 F.2d
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`1422, 1426 (Fed. Cir. 1988). The legislative history of the AIA supports the same
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`conclusion as reached above based on the statute’s plain language, namely that
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`Callidus’ prior filing of the California Action bars Callidus’ petitioned-for post-
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`grant review. A post-grant review proceeding cannot be instituted, and the Board
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`should confirm that in its decision on the Petition. Versata now notes specific
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`aspects of that legislative history.
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`One of the earliest versions of what became the AIA, the Patent Reform Act
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`of 2005, proposed a post-grant opposition procedure. Representative Howard
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`Berman, who later introduced a version of the Patent Reform Act of 2005 as the
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`Patent Reform Act of 2007, commented on the post-grant opposition procedure,
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`and noted that “the bill prohibits multiple bites at the apple by restricting the
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`cancellation petitioner to opt for only one window one time.” 153 Cong. Rec.
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`E774 (daily ed. Apr. 18, 2007), Exh. 2004 at 2 (emphasis added).
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`The legislative history surrounding the Patent Reform Act of 2008
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`emphasized this one window, one time goal. Specifically, in discussing
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`§ 322(b)(1) of the 2008 Act, Senator Kyl stated:
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`Proposed section 322 includes a number of provisions that are
`designed to limit the use of post grant review proceedings as a
`delaying tactic and to mitigate these proceedings’ negative
`impact on efforts to enforce a patent ….
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`Paragraph (1) of subsection (b) bars a party that has filed a
`declaratory-judgment action challenging the validity of a
`patent from also challenging the patent in a post grant review
`proceeding.
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`154 Cong. Rec. S9987 (daily ed. Sept. 27, 2008), Exh. 2005 at 6 (Statement of Sen.
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`Kyl) (emphasis added).
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`Later, in January 2011, Senator Leahy introduced Senate Bill 23, which
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`contained much of the statutory language that eventually became § 325(a)(1). In
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`detailing how the post-grant review procedures protected patent owners, Senator
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`Kyl stated:
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`Subsections (a) and (b) of sections 315 and 325 impose time
`limits and other restrictions when inter partes and post-grant
`review are sought in relation to litigation.
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`Sections 315(a) and 325(a) bar a party from seeking or
`maintaining such a review if he has sought a declaratory
`judgment that the patent is invalid.
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`157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011), Exh. 2006 at 16 (Statement of Sen.
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`Kyl) (emphasis added).
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`In other discussions on the AIA and Senate Bill 23, Senator Kyl noted that
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`the 2009 Minority Report, which he co-authored, recommended that the bill
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`“coordinate inter partes and post-grant review with litigation, barring use of these
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`proceedings if the challenger seeks a declaratory judgment that a patent is
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`invalid ….” See 157 Cong. Rec. S1041 (daily ed. March 1, 2011), Exh. 2007 at 8
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`(Statement of Sen. Kyl) (emphasis added).
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`Each of the above excerpts makes clear that the operative action Congress
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`was concerned about was the filing or commencement of a declaratory judgment
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`action. Congress intended to force any challenger of a patent’s validity to make a
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`choice between: (i) filing a declaratory judgment action in district court action and
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`(ii) an institutable petition for post-grant review. In the statute enacted and
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`consistent with the legislative history, Congress made no exceptions to this rule:
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`once the challenger has made its choice by filing a declaratory judgment action in
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`district court action, it cannot change its decision; post-grant review is barred and
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`may not be instituted. Notably, Congress did not express an intent that the
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`§ 325(a)(1) or § 315(a)(1) statutory bars could be unwound if, upon the later filing
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`of a petition for post-grant or inter partes review, a prior-filed declaratory
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`judgment action challenging validity no longer remained active.
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`For completeness, it is worth noting that the legislative history makes clear
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`that the § 325(a)(1) statutory bar was intended to apply equally to Section 18
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`proceedings. In discussing the transitional program for covered business method
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`patent review, Senator Schumer noted that, like post-grant review, the transitional
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`program “should be used instead of, rather than in addition to, civil litigation.” See
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`157 Cong. Rec. S1363 (daily ed. March 8, 2011), Exh. 2006 at 4 (Statement of
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`Sen. Schumer). Consistent with this goal, Section 18 proceedings were to be
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`“modeled on the proposed post-grant review proceeding under Section 6 of the
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`Act,” which became the post-grant review proceedings under 35 U.S.C. §§ 321 et
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`seq. See 157 Cong. Rec. S5428 (daily ed. Sept. 8, 2011), Exh. 2008 at 27
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`(Statement of Sen. Leahy). As the AIA was intended to “[r]educe the ability to use
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`post-grant procedures for abusive serial challenges to patents,” application of §
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`325(a)(1)’s prohibition of post-grant review where a civil action already sought the
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`same remedy is consistent with and furthers the goals of the AIA. See 157 Cong.
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`Rec. S952 (daily ed. Feb. 28, 2011), Exh. 2009 at 17 (Statement of Sen. Grassley).
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`Statutory Framework is Hardly Inequitable to Patent Challenger
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`E.
`While § 325(a)(1) and its legislative history do not contain any exceptions,
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`they are in no way are unfair to the challenger. For example, because the dismissal
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`of the California Action was without prejudice, Callidus can re-file its declaratory
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`judgment action (subject, of course, to the automatic stay provided in § 325(a)(2)).
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`Additionally, Callidus could have (and indeed has) sought a declaratory judgment
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`of invalidity of the ’326 Patent in the context of a counterclaim in the Delaware
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`Action. See Exh. 2010 at 5; see also 35 U.S.C. § 325(a)(3) (contemplating such a
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`counterclaim). That action is within the statutory framework established by
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`Congress. However, by choosing to file the California Action, Callidus has (under
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`the statutory framework established by Congress, specifically § 325(a)(1)) forever
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`foreclosed its option to seek post-grant review before the Board. Post-grant review
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`is barred, and the post-grant review proceeding cannot be instituted.
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`To be sure, Callidus’ use of a civil action as a tactic to secure venue is
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`permitted under the statute, just not without triggering the § 325(a)(1) statutory bar
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`if executed in the order chosen by Callidus. Specifically, in discussing changes
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`between the Senate and House versions of the AIA, Senator Kyl further noted:
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`“Another set of changes made by the House bill concerns the
`coordination of inter partes and postgrant review with civil
`litigation. The Senate bill, at proposed sections 315(a) and
`325(a), would have barred a party or his real party in interest
`from seeking or maintaining an inter partes or postgrant review
`after he has filed a declaratory-judgment action challenging the
`validity of the patent. The final bill will still bar seeking IPR or
`PGR after a declaratory-judgment action has been filed, but
`will allow a declaratory-judgment action to be filed on the
`same day or after the petition for IPR or PGR was filed.”
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`157 Cong. Rec. S5429 (daily ed. Sept. 8, 2011), Exh. 2008 at 28 (Statement of Sen.
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`Kyl) (emphasis added).
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`Thus, if Callidus wished to file a separate declaratory judgment action, it
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`should have filed its post-grant review Petition first, and then filed the declaratory
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`judgment action. Section 18 review was available to Callidus at the time it filed
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`the California Action, and indeed, § 325 explicitly permits a separate declaratory
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`judgment action. Specifically, consistent with Sen. Kyl’s statement (see Id.),
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`§ 325(a)(2) allows the petitioner to file a civil action challenging validity on or
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`after the date petitioner files a petition for post-grant review of the patent, in order
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`to secure venue for that declaratory judgment action. Instead, Callidus first filed a
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`civil action challenging validity of the ’326 Patent, thereby triggering the
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`§ 325(a)(1) bar. Thus, Callidus cannot seek post-grant review before the Board.
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`The plain language of the statute and, indeed, the legislative history are clear on
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`this point, and the necessary consequences of Callidus’ own choice are hardly
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`inequitable.
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`F.
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`Prior Judicial and Administrative Interpretations Confirm
`Applicability of Statutory Bar for Prior-Filed Civil Action
`Challenging Validity
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`No federal district court has yet addressed § 325(a)(1), though one has
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`examined § 315(a)(1), which is the parallel statutory bar for inter partes reviews.
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`Compare 35 U.S.C. §§ 315(a)(1) and 325(a)(1). In Procter & Gamble Co. v. Team
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`Techs., Inc., the Southern District of Ohio found the language of § 315(a)(1) to be
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`clear and to contain no exceptions or qualifications. See Procter & Gamble Co. v.
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`Team Techs., Inc., No. 12-cv-552, 2013 U.S. Dist. LEXIS 128949, at *7 (S.D.
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`Ohio Sept. 10, 2013). In the Procter & Gamble case, based on the clarity of the
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`statute, the court concluded that a stay of the litigation was unwarranted, as the
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`defendant’s petition for inter partes review was likely barred under § 315(a)(1)
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`because the defendant had filed a previous declaratory judgment action.1 Though
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`the declaratory judgment action had been dismissed, the court noted that, under
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`§ 315(a)(1), the “operative event is the filing of the civil action, not its ultimate
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`disposition.” Id.
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`Although the Board has not addressed § 325(a)(1), the Board has addressed
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`the parallel provision of § 315(a)(1) at least twice. In Anova Food, LLC v. Sandau,
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`No. IPR2013-00114, Paper No. 17, Decision – Denying Inter Partes Review
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`(P.T.A.B. Sept. 13, 2013), the petitioner had previously filed three declaratory
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`judgment actions in 2003 and 2004. The three declaratory judgment actions were
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`each dismissed before the declaratory judgment plaintiff (Anova Food) served the
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`respective complaints. Relying on the explicit text of § 315(a)(1), the Board noted
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`that “section 315(a)(1) refers only to filing,” and did not require that the complaint
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`be served to trigger the statutory bar. Anova Food at 6. The Board ultimately
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`found that the inter partes review petition was barred, and did not institute the
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`review. Anova Food at 13.
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`1 As of the filing of this Preliminary Response, the inter partes review petitions at
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`issue in the Procter & Gamble case, IPR2013-00438, IPR2013-00448, and
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`IPR2013-00450, are awaiting a decision on institution by the Board. The Patent
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`Owner has asserted in each case that the petitions are barred by § 315(a)(1).
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`–16–
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`The Board should reach a similar result here. As in Anova Food, prior to
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`filing the petition for post-grant review, Callidus filed a declaratory judgment
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`action challenging validity. Indeed, Callidus went further than in the Anova Food
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`case and served its complaint on Versata. See Exh. 2011. Like § 315(a)(1),
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`§ 325(a)(1) does not require that the civil action be active or maintained for the bar
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`to apply, as it refers only to “filing.” Accordingly, under the plain language of the
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`statute, and consistent with the § 315(a)(1) analysis in Anova Food, Callidus’
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`Petition is barred.
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`The Board has addressed a clearly distinguishable fact pattern in InVue Sec.
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`Prods., Inc. v. Merch. Techs., Inc., No. IPR2013-00122, Paper No. 17, Decision –
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`Institution of Inter Partes Review (P.T.A.B. June 27, 2013). In InVue, the
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`petitioner initially filed a civil action seeking a declaratory judgment of invalidity
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`of the patent at issue. However, the declaratory judgment action was involuntarily
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`dismissed by the District Court, as it lacked subject matter jurisdiction. InVue Sec.
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`Prods., Inc. v. Merch. Techs., Inc., 2012 U.S. Dist. LEXIS 92097 at *11
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`(W.D.N.C. July 3, 2012). The Board instituted the inter partes review despite the
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`existence of the previously-filed declaratory judgment action, stating that, because
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`the complaint was dismissed without prejudice for lack of subject matter
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`jurisdiction, the petitioner “was never in a position to litigate invalidity on multiple
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`fronts simultaneously.” See InVue Institution Decision at 10.
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`–17–
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`That the Board’s decision, under the very particular circumstances of the
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`InVue case, is anchored in a lack of standing, i.e., absence of the constitutionally
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`required “case or controversy,” is clear from the Board’s reliance on the particular
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`nature of the dismissal at issue in InVue as indicating that “the Court never had
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`authority to hear the case.” See InVue Institution Decision at 9. In this regard, it is
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`notable that the Office has itself recognized the importance of standing to bring a
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`declaratory judgment action as a threshold inquiry to institution of post-grant
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`review under the transitional program. Specifically, rule 42.302(a) provides:
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`A petitioner may not file with the Office a petition to institute a
`covered business method patent review of the patent unless the
`petitioner, the petitioner's real party-in-interest, or a privy of the
`petitioner has been sued for infringement of the patent or has been
`charged with infringement under that patent. Charged with
`infringement means a real and substantial controversy regarding
`infringement of a covered business method patent exists such that
`the petitioner would have standing to bring a declaratory
`judgment action in Federal court.
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`37 CFR § 42.302(a) (emphasis added). Because there is no issue of standing in the
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`present case (whether in Callidus’ civil action challenging validity or here before
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`the Board), the InVue Institution Decision is inapposite.
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`Here, in contrast, the California Action was dismissed on Callidus’ own
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`volition and not because the Northern District of California lacked subject matter
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`jurisdiction. Indeed, at the time it filed the California Action, Callidus had
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`standing to file either a post-grant review petition or a declaratory judgment
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`–18–
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`complaint challenging validity of the ’326 patent, and thus was in the position to
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`litigate invalidity on multiple fronts simultaneously at all times. Forcing an
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`irrevocable choice at this juncture (one window, one time) is exactly the role that
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`§ 325(a)(1) was intended to serve. Since Callidus chose the declaratory judgment
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`route as its first filing, the § 325(a)(1) statutory bar operates to foreclose post-grant
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`review before the Board.
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`The ultimate voluntary dismissal of Callidus’ California Action does not
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`undo the § 325(a)(1) statutory bar that was triggered immediately upon filing of
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`Callidus’ civil action challenging validity. The statute is clear; as discussed by the
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`Procter & Gamble court, the filing of an action triggers the bar, and the statute
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`makes no exception for dismissal with or without prejudice. As detailed above, the
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`statute does not state that the barring civil action challenging validity must be
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`maintained or remain active. Likewise, the statute does not contain any exceptions
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`that would permit the Board to ignore Callidus’ conduct. All that is required to
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`trigger the statutory bar enacted by Congress is the “filing” of a civil action
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`challenging validity.
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`While the InVue Board panel noted that the Federal Circuit has ruled that the
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`“dismissal of an action without prejudice leaves the parties as though the action
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`had never been brought,” the Federal Circuit has not gone so far as to say that
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`dismissal without prejudice erases from existence the barring act relevant here,
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`–19–
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`Patent Owner’s Preliminary Response
`CBM2013-00052 (Patent 7,904,326)
`namely the filing of a civil action challenging validity. But cf. InVue Institution
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`Decision at 9, citing Graves v. Principi, 294 F.3d 1350, 1356 (Fed. Cir. 2002).
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`Leaving the parties as though the action had never been brought does not nullify
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`the barring act of “filing.” A civil action challenging validity was filed. It is not
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`unfiled by voluntary dismissal, and the § 325(a)(1) statutory bar controls. These
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`are the very events with which § 325(a)(1) is concerned. The ultimate dismissal of
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`the California Action has no effect on the actual filing of the complaint challenging
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`the ’326 Patent’s validity. Because the declaratory judgment complaint was filed,
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`Callidus is barred from seeking post-grant review.
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`For completeness, Versata notes that the Board has addressed the effect of
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`dismissal without prejudice in the context of § 315(b), a very different provision
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`that establishes, for an opposing party, a one-year time limit after service for filing
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`an inter partes review pe