Paper No.
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`CALLIDUS SOFTWARE INC.
`
`Petitioner
`
`V.
`
`VERSATA DEVELOPMENT
`
`GROUP, INC.
`
`Patent Owner
`
`AND
`
`VERSATA SOFTWARE, INC.
`
`Real Party-In-Interest
`
`Case CBM2013-00054
`
`Patent 7,908,304
`
`Title: METHOD AND APPARATUS FOR MANAGING
`
`DISTRIBUTOR INFORMATION
`
`PATENT OWNER’S REQUEST FOR REHEARING
`UNDER 37 C.F.R. § 42.71
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`CALLIDUS SOFTWARE INC.
`
`Petitioner
`
`V.
`
`VERSATA DEVELOPMENT
`
`GROUP, INC.
`
`Patent Owner
`
`AND
`
`VERSATA SOFTWARE, INC.
`
`Real Party-In-Interest
`
`Case CBM2013-00054
`
`Patent 7,908,304
`
`Title: METHOD AND APPARATUS FOR MANAGING
`
`DISTRIBUTOR INFORMATION
`
`PATENT OWNER’S REQUEST FOR REHEARING
`UNDER 37 C.F.R. § 42.71
`
`
`
`Patent Owner’s Request for Rehearing
`CBM20l3-00054 (Patent 7,908,304)
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`Patent Owner Versata Development Group, Inc. (“Patent Owner”) submits
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`the following Request for Rehearing of the Decision — Institution of Covered
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`Business Method Patent Review entered March 4, 2014 (“Institution Decision”),
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`instituting a post—grant review of Claims 1, 12-25, 30-32, 42, and 43 of U.S. Patent
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`No. 7,908,304 (“the ’304 Patent”) under § 18 of the America Invents Act’s
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`transitional program for covered business method patent review. Under 37 C.F.R.
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`§ 42.7l(d), a party dissatisfied with a decision to institute a trial may file a request
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`for rehearing, and must “specifically identify all matters the party believes the
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`Board misapprehended or overlooked, and the place where each matter was
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`previously addressed.” As explained below, the Institution Decision
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`misagggrehends and overlooks Patent Owner’s arguments regarding the plain
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`language of the § 325(a)(l) statutory bar and applicable legislative history in
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`arriving at its incorrect decision. Accordingly, Patent Owner requests that the
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`Patent Trial and Appeal Board reconsider and vacate the Institution Decision.
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`In deciding that Petitioner’s prior—filed civil action does not bar institution of
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`this proceeding, the entirety of the Board’s reasoning amounts to the following
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`sentence: “The Board, however, has determined that dismissal without prejudice
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`does not trigger the statutory bar.” Institution Decision, p. 11. This reasoning,
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`standing alone (as it does in the Institution Decision), overlooks the vast majority
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`of Patent Owner’s arguments.
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`
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`Patent Owner’s Request for Rehearing
`CBM2013-00054 (Patent 7,908,304)
`
`First, the Institution Decision fails to explain how Petitioner’s complaint
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`challenging validity does not trigger the plain language of § 325(a)(l)’s statutory
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`bar. Patent Owner’s Preliminary Response discussed in detail the clear language
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`of § 325(a)(l): “post-grant review may not be instituted if, before the date on
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`which the petition for such a review is filed, the petitioner. . .filed a civil action
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`challenging the validity of a claim of the patent.” (emphasis added).
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`Preliminary Response, pp. 6, 8-10. The text of the statute is clear: the filing of a
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`civil action controls the determination. As the Board surely knows, the filing of a
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`civil action is effectuated by the filing of a complaint. Here, Petitioner filed a
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`complaint challenging validity, which still exists in the electronic records of the
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`federal courts system, and which was included as an exhibit to Patent Owner’s
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`Preliminary Response. Exh. 2001. The Board does not and cannot state that the
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`complaint was not filed, nor does the Board cite any case law or other authority
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`supporting such an un-filing. Thus, there can be no doubt that the bar applies. The
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`inquiry should have ended there.
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`Instead of examining the plain language of the statute and applying the facts
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`to the plain language, the Board veers to an unrelated tangent, and in quoting an
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`earlier institution decision, alleges that “[e]xcluding an action that dejure never
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`existed from the scope of § 315(a)(1) is consistent with both relevant case law and
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`legislative history.” Institution Decision, p. 11. The Board’s quotation confirms
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`Patent Owner’s Request for Rehearing
`CBM2013-00054 (Patent 7,908,304)
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`that the civil action itself no longer exists, but § 325(a)(1)’s applicability does not
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`turn on the present existence of an action, and such legal non-existence does not
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`negate the bar under § 325(a)(1). The event relevant to a § 325(a)(1) determination
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`is the filing of an action, i.e., the filing of a complaint. The Board uses its
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`incorrect determination and interpretation of the law to sua sponte and without any
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`legal authority, conclude that a factual event (i.e., the filing of Petitioner’s
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`complaint and thus the commencement of the action) disappeared from existence
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`and cannot act as a bar under the clear statutory language. But none of the case
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`law citation provided by the Board in its cited decisions’ can support such a
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`conclusion, as the reasoning in each case is only relevant to the existence or non-
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`existence of the action itself after it has been filed and dismissed, not whether an
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`action and complaint are erased from existence. The fiction that the Institution
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`Decision creates is nonsensical, and leads to an incorrect result.
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`l As noted above, the Institution Decision only cites previous inter partes review
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`institution decisions as support. The “case law citation[s]” referred to by Patent
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`Owner refer to citations the Board includes in those previous inter partes review
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`institution decisions (IPR20l3-00401, Paper No. 17 and IPR20l3-00438, Paper
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`No. 9). The Institution Decision in the instant proceeding is curiously devoid of
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`any case law citation in the section dealing with the issue of standing under §
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`325(a)(l).
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`
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`Patent Owner’s Request for Rehearing
`CBM2013—00054 (Patent 7,908,304)
`Federal Rules of Civil Procedure are themselves are contrary to the Board’s
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`“dejure never existed” premise, indicating that a complaint and the action still
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`exists, even after an action is dismissed without prejudice. Specifically, Rule
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`41(a)(l)(B) considers the existence of a previously filed and dismissed action for
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`the purposes of determining whether dismissal of a subsequent civil action acts as
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`an adjudication on the merits. Fed. R. Civ. P. 41(a)(l)(B). Similarly, Rule 41(d)
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`allows a court to consider a previously filed and dismissed action in ordering a
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`plaintiff to pay costs. Fed. R. Civ. P. 4l(d). Whether an action is dismissed
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`without prejudice or not and thus by law erased from existence, even the Federal
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`Rules of Civil Procedure acknowledge the existence in fact of an action previously
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`dismissed without prejudice. The filing remains; the complaint is not unfiled; and
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`relevant barring event under § 325(a)(1) remains extant under the Federal Rules,
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`notwithstanding dismissal.
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`The Institution Decision also overlooks Patent Owner’s extensive citations
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`of the applicable legislative history. Preliminary Response, pp. 10-12. For
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`example, as cited in Patent Owner’s Preliminary Response, Congress intended to
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`restrict the cancellation petitioner in the originally proposed post—grant opposition
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`procedure to “one window one time.” 153 Cong. Rec. E774 (daily ed. Apr. 18,
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`2007), Exh. 2004 at 2 (emphasis added). The other quoted portions of the
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`legislative history confirm the same goal. Specifically, the quotations affirm
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`
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`Patent Owner’s Request for Rehearing
`CBM2013—00054 (Patent 7,908,304)
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`Congress’s intent to bar a party who “has filed a declaratory—judgment action” or
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`“sought a declaratory judgment.” 154 Cong. Rec. S9987 (daily ed. Sept. 27,
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`2008), Exh. 2005 at 6 (Statement of Sen. Kyl) (emphasis added), 157 Cong. Rec.
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`S1375 (daily ed. Mar. 8, 2011), Exh. 2006 at 16 (Statement of Sen. Kyl) (emphasis
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`added). Here, upon filing its declaratory judgment complaint, Petitioner chose its
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`one window: district court. Inexplicably permitting Petitioner a second window a
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`second time flies in the face of the legislative history. Petitioner unquestionably
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`filed and sought a declaratory judgment that the ’304 Patent was invalid, but in
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`overlooking the legislative history and Congress’s intent, the Board determines that
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`operative fact to be of no moment.
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`The reasoning in the Institution Decision essentially adds additional
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`language into the statute; specifically, it creates a requirement that the civil action
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`seeking a declaratory judgment be filed and remain active at some indeterminate
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`time (presumably, before a decision on institution, but even that is not clear) for
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`the bar to apply. Nowhere in the legislative history did Congress express any
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`intention to limit § 325(a)(1)’s applicability to active or undismissed civil
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`proceedings, nor did Congress provide for any provision that would allow a
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`petitioner to unwind the statutory bar. If Congress intended such a result, it would
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`have drafted the statute to that effect, or expressed some intent in the legislative
`
`history. The Board points to nothing that would lead to such a conclusion. The
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`
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`Patent Owner’s Request for Rehearing
`CBM2013-00054 (Patent 7,908,304)
`
`Board’s incorrect reasoning here could, and likely will, lead to serial challenges in
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`which petitioners are permitted unfettered access to both the district courts and
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`administrative proceedings. A petitioner could feasibly file a declaratory judgment
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`action alleging invalidity, negotiate a settlement agreement that dismisses all
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`claims without prejudice, and still file an institutable petition for post-grant review
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`under the Board’s reasoning. Such an absurd result would hardly be within
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`Congress’s intent. Eviscerating the statutory bar of § 325(a)(l) as the Board has
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`done here fails to comply with the AIA’s goal of “[r]educ[ing] the ability to use
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`post-grant procedures for abusive serial challenges to patents.” 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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`Moreover, the Board has previously stated, citing legislative history, that
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`post-grant review challenges were intended to be a “faster and more efficient
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`alternative to civil litigation.” The dictionary definition of the word “altemative”
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`(as a noun) is a “proposition or situation offering a choice between two or more
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`things only one of which may be chosen...” Alternative Definition, Merriam-
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`Webster.com, http://www.merriam-webster.com/dictionary/altemative (last visited
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`March 17, 2014) (emphasis added). Upon filing its complaint for declaratory
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`judgment, Petitioner made a choice of one of the two alternatives, and it still has
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`this alternative available. The alternative that now no longer may be chosen under
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`§ 325(a)(l) is a post-grant review. Once a petitioner makes a choice, it should be
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`Patent Owner’s Request for Rehearing
`CBM2013-00054 (Patent 7,908,304)
`
`held to that choice. Such a petitioner would not be without remedy; Petitioner here
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`can assert its claims of invalidity in district court, as it has.
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`The Board has also expressed concern that it was “not the intent of
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`Congress. . .to bar a petitioner under § 315(a) and force him to bring his claims in
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`civil litigation.” IPR2013—00401, Paper No. 17, p. 11. Apparently, the Board
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`misaggrehends the argument. Congress did not force this Petitioner to bring its
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`claims of invalidity in civil litigation: it gave Petitioner a choice. Petitioner made
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`its choice on October 16, 2012 by filing its declaratory judgment complaint. Prior
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`to that date Petitioner had the choice of either a civil action or a post-grant review,
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`and apparently Petitioner regained that choice: the reasoning of the Board’s
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`Institution Decision effectively turns back time and gives Petitioner another choice
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`despite the clear language of the law and legislative history.
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`The Board also overlooked Patent Owner’s arguments comparing the
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`parallels between § 325(a)(l)’s statutory bar and § 102’s statutory bar and noting
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`that the statutory term used in § 325(a)(l) (“bar” or more precisely “BARRED”) is
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`well known in the patent jurisprudence. Preliminary Response, pp. 22-23. In
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`§ 102 jurisprudence, a rejected offer can create an on sale bar. UMC Elecs. v.
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`United States, 816 F.2d 647, 653 (Fed. Cir. 1987). Such a rejected or withdrawn
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`offer is not erased from existence, as it still bars an applicant from receiving a
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`Patent Owner’s Request for Rehearing
`CBM2013-00054 (Patent 7,908,304)
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`patent. Here, like a rejected offer, a voluntarily dismissed civil action is not erased
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`from existence: it creates a statutory bar to post-grant review under § 325(a)(l).
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`The question posed by the statute and the legislative history is simple: did
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`Petitioner file a civil action challenging validity of the ’304 Patent? If the factual
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`answer is yes, then Petitioner is barred. The Board’s conclusion and reasoning
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`here effectively treats § 325(a)(l) as if it did not exist. Such a position is
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`untenable.
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`Because the Institution Decision misaggrehends and overlooks Patent
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`Owner’s arguments regarding the explicit text of § 325(a)(l) and the legislative
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`history behind the statute, and improperly institutes trial, Patent Owner requests
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`that the Institution Decision be vacated.
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`
`
`David W. O’Brien
`
`Registration No. 40,107
`HAYNES AND BOONE, LLP
`
`Dated: /’ 23/ L
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`
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`Patent Owner’s Request for Rehearing
`CBM2013-00054 (Patent 7,908,304)
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`CALLIDUS SOFTWARE INC.
`
`Petitioner
`V.
`
`VERSATA DEVELOPMENT
`
`GROUP, INC.
`
`Patent Owner
`
`AND
`
`VERSATA SOFTWARE, INC.
`Real Party—In-Interest
`
`Case CBM2013-00054
`
`Patent 7,908,304
`Title: METHOD AND APPARATUS FOR MANAGING
`
`DISTRIBUTOR INFORMATION
`
`CERTIFICATE OF SERVICE
`
`The undersigned certifies, in accordance with 37 C.F.R. § 42.6, that service
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`was made on the Petitioner as detailed below.
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`Date ofservice
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`March 17, 2014
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`Manner ofservice
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`Electronic Mail (VERSATA-CBM@dicksteinshapiro.com)
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`Document served
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`Patent Owner’s Request for Rehearing.
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`Persons served
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`Deborah E. Fishman
`
`Dickstein Shapiro LLP
`1841 Page Mill Road, S '
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`Palo Alto, CA 94304/'
`
`
`David W. O’Brien
`Registration No. 40,107
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