Paper No.
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`
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`PATENT OWNER’S PRELIMINARY RESPONSE
`UNDER 37 C.F.R. § 42.207
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`
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`
`
`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 SYSTEM FOR MANAGING DISTRIBUTOR
`INFORMATION
`_____________________
`
`
`
`

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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`TABLE OF CONTENTS
`
`E. 
`F. 
`
`I. 
`II. 
`
`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 
`“Backbone” .............................................................................................. 25 
`1. 
`“Interface” ................................................................................................ 26 
`2. 
`“Generate a Selling Agreement” .............................................................. 27 
`3. 
`B.  Patent Owner Opposes the Constructions Proposed by Callidus insofar
`as they Diverge from the ’304 Patent Specification, Include
`Inappropriate and Extraneous Limitations and are Inconsistent with a
`Broadest Reasonable Interpretation ............................................................ 27 
`IV.  Conclusion ...................................................................................................... 28 
`Certificate of Service ............................................................................................... 31 
`
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`–2–
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`

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`FEDERAL CASES
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`
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
` TABLE OF AUTHORITIES
`
`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
`
`
`REGULATORY CASES
`
`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
`
`35 U.S.C. § 325(a)(1) ....................................................................................... passim
`35 U.S.C. § 325(a)(3) ............................................................................................... 14
`AIA § 18(a)(1) ........................................................................................................... 6
`REGULATIONS
`
`37 CFR § 42.8(b)(2) ................................................................................................... 7
`37 CFR § 42.302(a) .................................................................................................. 18
`LEGISLATIVE HISTORY
`
`153 Cong. Rec. E774 ............................................................................................... 10
`157 Cong. Rec. S1041.............................................................................................. 12
`157 Cong. Rec. S1363.............................................................................................. 13
`
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`–3–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`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
`
`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
`CBM2013-00054 (Patent 7,908,304)
`
`Introduction
`Patent Owner Versata Development Group, Inc. (“Versata” or “Patent
`
`Owner”) submits the following Preliminary Response to the Corrected Petition
`
`filed by Callidus Software Inc. (“Callidus” or “Petitioner”) on September 17, 2013,
`
`requesting post-grant review of Claims 1, 12-25, 30-32, and 42-43 of U.S. Patent
`
`No. 7,908,304 (“the ’304 Patent”) under § 18 of the America Invents Act’s
`
`transitional program for covered business method patent review. Versata
`
`respectfully requests that the Patent Trial and Appeal Board (“Board” or “PTAB”)
`
`decline to institute post-grant review of the ’304 Patent because Callidus is
`
`statutorily barred from seeking post-grant review.
`
`Pursuant to 35 U.S.C. § 325(a)(1), a post-grant review proceeding cannot be
`
`instituted where the petitioner, prior to the filing of a petition for post-grant review,
`
`filed a civil action challenging the validity of a claim of the patent. Over 10
`
`months before filing its Petition for post-grant review, Callidus filed a civil action
`
`in the Northern District of California seeking a declaratory judgment of invalidity
`
`of the claims of the ’304 Patent. As a result, a post-grant review proceeding cannot
`
`be instituted.
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`–5–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`II. Trial Cannot Be Instituted Because Petitioner is Statutorily Barred
`from Seeking Post-Grant Review.
`A.
`
`Section 325(a)(1) Defines a Statutory Bar that Pertains to the
`Transitional Program for Covered Business Method Review
`
`Section 18 proceedings are “regarded as, and shall employ the standards and
`
`procedures of, a post-grant review under chapter 32 of title 35, United States
`
`Code…” AIA § 18(a)(1). Section 321(c) (filing deadline), and subsections (b)
`
`(stay of civil action), (e)(2) (estoppel), and (f) (reissue patents) of section 325 do
`
`not apply to a § 18 proceeding. AIA § 18(a)(1)(A). However, included in chapter
`
`32, and absent from this exclusion, is 35 U.S.C. § 325(a)(1), which states:
`
`“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.”
`
`35 U.S.C. § 325(a)(1).
`
`The plain language of § 325(a)(1) bars any petitioner who has “filed a civil
`
`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
`
`validity of the ’304 Patent before filing the present Petition. See Exh. 2001.
`
`Accordingly, post-grant review is barred and cannot be instituted.
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`–6–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`B. Callidus Failed to Identify Its Civil Action Challenging Validity in
`its Required Mandatory Notices
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`
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`Trial practice and procedure rules require a petitioner to identify, as part of
`
`its petition, any other judicial or administrative matter that would affect, or be
`
`affected by, a decision in the proceeding. See 37 CFR § 42.8(b)(2). Clearly, the
`
`existence of a statutory bar resulting from a civil action challenging validity of a
`
`claim of the patent would affect a decision on institution in this proceeding.
`
`Indeed, in its final rulemaking, the Office specifically notes that:
`
`“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.”
`
`77 Fed. Reg. 48,612, 48,617 (Aug. 14, 2012) (discussing rule 42.8, emphasis
`
`added). Thus, it is reasonable to characterize the petitioner’s mandatory notice
`
`requirement as an integral part of the rules whose purpose includes early
`
`identification of the very statutory bar implicated in the present proceedings.
`
`Despite this requirement, Callidus failed to identify in its mandatory notices
`
`the previously-filed civil action discussed below. Petition at 4. Because Callidus’
`
`counsel of record in this proceeding and its counsel of record in the prior-filed civil
`
`action challenging validity are the same counsel, it is difficult to understand the
`
`
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`–7–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`oversight. Regardless, Versata now turns to the nature and legal effect of the §
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`
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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
`
`C.
`Versata filed a complaint against Callidus in the district of Delaware on July
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`19, 2012, alleging infringement of the ’304 Patent (hereinafter the “Delaware
`
`Action”). See Exh. 1005. On October 16, 2012, as part of a forum-shopping
`
`attempt to transfer venue of the Delaware Action and, indeed, a month after the
`
`transitional program for covered business method review became available,
`
`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 ’304
`
`patent were invalid. See Exh. 2001, at 4 (hereinafter “California Action”).
`
`Notably, Callidus’ complaint specifically alleged that the claims were invalid
`
`under 35 U.S.C. § 101 (the very same ground it now alleges in its present Petition).
`
`Id.
`
`Callidus voluntarily stayed the California Action pending a decision on its
`
`attempt to have the Delaware Action transferred to California. See Exh. 2002.
`
`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
`
`present Petition for post-grant review of U.S. Patent 7,908,304 on August 30,
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`
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`–8–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`2013, over 10 months after filing the California Action that challenged validity of
`
`
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`a claim of that very same patent.
`
`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
`
`the ’304 patent before this Board. Because Callidus filed a civil action challenging
`
`the validity of a claim of the ’304 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
`
`review of the ’304 Patent pursuant to Callidus’ Petition. “It is well settled law that
`
`the plain and unambiguous meaning of the words used by Congress prevails in the
`
`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
`
`language of § 325(a)(1) is clear and without any ambiguities:
`
`“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.”
`
`35 U.S.C. § 325(a)(1). Indeed, the statute dictates that “POST-GRANT REVIEW
`
`[IS] BARRED BY CIVIL ACTION.” Id.
`
`Callidus filed a civil action challenging validity of a claim of the ’304 patent
`
`before filing its Petition. As a result, Callidus’ petitioned-for post-grant review
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`
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`–9–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`under the Section 18 program for covered business method patents is barred by
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`
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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
`
`Because the statute is clear on its face, when there is no ambiguity in the
`
`words of the statute, “we turn to the legislative history to see if Congress meant
`
`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
`
`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
`
`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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`–10–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`The legislative history surrounding the Patent Reform Act of 2008
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`
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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:
`
`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 ….
`
`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.
`
`154 Cong. Rec. S9987 (daily ed. Sept. 27, 2008), Exh. 2005 at 6 (Statement of Sen.
`
`Kyl) (emphasis added).
`
`Later, in January 2011, Senator Leahy introduced Senate Bill 23, which
`
`contained much of the statutory language that eventually became § 325(a)(1). In
`
`detailing how the post-grant review procedures protected patent owners, Senator
`
`Kyl stated:
`
`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.
`
`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.
`
`157 Cong. Rec. S1375 (daily ed. Mar. 8, 2011), Exh. 2006 at 16 (Statement of Sen.
`
`Kyl) (emphasis added).
`
`
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`–11–
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`Patent Owner’s Preliminary Response
`CBM2013-00054 (Patent 7,908,304)
`In other discussions on the AIA and Senate Bill 23, Senator Kyl noted that
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`
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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
`
`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
`
`(Statement of Sen. Kyl) (emphasis added).
`
`Each of the above excerpts makes clear that the operative action Congress
`
`was concerned about was the filing or commencement of a declaratory judgment
`
`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
`
`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
`
`that the § 325(a)(1) statutory bar was intended to apply equally to Section 18
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`–12–
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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).
`
`Statutory Framework is Hardly Inequitable to Patent Challenger
`
`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
`
`of the California Action was without prejudice, Callidus can re-file its declaratory
`
`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 ’304 Patent in the context of a counterclaim in the Delaware
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`–13–
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`Patent Owner’s Preliminary Response
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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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`
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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
`
`foreclosed its option to seek post-grant review before the Board. Post-grant review
`
`is barred, and the post-grant review proceeding cannot be instituted.
`
`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
`
`if executed in the order chosen by Callidus. Specifically, in discussing changes
`
`between the Senate and House versions of the AIA, Senator Kyl further noted:
`
`“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.”
`
`157 Cong. Rec. S5429 (daily ed. Sept. 8, 2011), Exh. 2008 at 28 (Statement of Sen.
`
`Kyl) (emphasis added).
`
`Thus, if Callidus wished to file a separate declaratory judgment action, it
`
`should have filed its post-grant review Petition first, and then filed the declaratory
`
`judgment action. Section 18 review was available to Callidus at the time it filed
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`
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`–14–
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`Patent Owner’s Preliminary Response
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`the California Action, and indeed, § 325 explicitly permits a separate declaratory
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`
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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
`
`after the date petitioner files a petition for post-grant review of the patent, in order
`
`to secure venue for that declaratory judgment action. Instead, Callidus first filed a
`
`civil action challenging validity of the ’304 Patent, thereby triggering the
`
`§ 325(a)(1) bar. Thus, Callidus cannot seek post-grant review before the Board.
`
`The plain language of the statute and, indeed, the legislative history are clear on
`
`this point, and the necessary consequences of Callidus’ own choice are hardly
`
`inequitable.
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`F.
`
`Prior Judicial and Administrative Interpretations Confirm
`Applicability of Statutory Bar for Prior-Filed Civil Action
`Challenging Validity
`
`No federal district court has yet addressed § 325(a)(1), though one has
`
`examined § 315(a)(1), which is the parallel statutory bar for inter partes reviews.
`
`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
`
`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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`–15–
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`defendant’s petition for inter partes review was likely barred under § 315(a)(1)
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`
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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
`CBM2013-00054 (Patent 7,908,304)
`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
`CBM2013-00054 (Patent 7,908,304)
`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
`CBM2013-00054 (Patent 7,908,304)
`complaint challenging validity of the ’304 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
`CBM2013-00054 (Patent 7,908,304)
`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 ’304 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 op