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`No.
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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 CBM2014-00118
`Patent 7,958,024
`Title: METHOD AND APPARATUS FOR PROCESSING SALES
`TRANSACTION DATA
`_____________________
`
`
`
`PATENT OWNER’S PRELIMINARY RESPONSE
`UNDER 37 C.F.R. § 42.207
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`TABLE OF CONTENTS
`
`Introduction ...................................................................................................... 5 
`I. 
`'024 Patent Overview ........................................................................................ 5 
`II. 
`III.  TRIAL SHOULD NOT BE INSTITUTED BECAUSE PETITIONER IS
`STATUTORILY BARRED FROM SEEKING POST-GRANT REVIEW ... 7 
`A.  Section 325(a)(1) Defines a Statutory Bar that Pertains to the
`Transitional Program for Covered Business Method Review ...................... 9 
`B.  Plain Language of § 325(a)(1) Bars Post-Grant Review ............................ 10 
`C.  Legislative History Confirms the Meaning of § 325(a)(1)’s Plain
`Language; Petitioner’s Own Choice Triggers Statutory Bar ...................... 12 
`D.  Statutory Framework is Hardly Inequitable to Patent Challenger .............. 16 
`E. 
`Prior Judicial and Administrative Interpretations Confirm Applicability
`of Statutory Bar for Prior-Filed Civil Action Challenging Validity ........... 18 
`F.  The Prior CBM and Prior Institution........................................................... 23 
`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 ............................................................................................ 26 
`IV.  Claim Construction ......................................................................................... 27 
`A.  Claim 1 from which claims 3-34 indirectly depend. ................................... 27 
`1.  Claim Term: “Using a Distributer Management System” ...................... 27 
`2.  Claim Term: “Regulatory Conditions Applicable to/Associated with
`said Sales” ........................................................................................................ 30 
`3.  Claim Term: “Executing a Payment Process” ........................................ 33 
`4.  Claim Term: “Generating a Selling Agreement” .................................... 35 
`V.  Conclusion ...................................................................................................... 40 
`Certificate of Service ............................................................................................... 43 
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`–2–
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`FEDERAL CASES
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
` TABLE OF AUTHORITIES
`
`Ethicon, Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir. 1998) .......................................... 12
`Hoechst Aktiengesellschaft. v. Quigg, 917 F.2d 522 (Fed. Cir. 1990) .................... 12
`Graves v. Principi, 294 F.3d 1350 (Fed. Cir. 2002) ................................................ 19
`InVue Sec. Prods., Inc. v. Merch. Techs., Inc., 2012 U.S. Dist. LEXIS 92097
`(W.D.N.C. July 3, 2012) ...................................................................................... 20
`Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc) .................. 27, 35
`
`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) .................................... 18
`Branch Banking and Trust Co. v. Maxim Integrated Products, Inc., CBM2013-
`00059, Paper No. 12 (P.T.A.B. March 20, 2014) .................................................. 9
`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) ........... 19
`FEDERAL STATUTES
`
`35 U.S.C. § 325(a)(1) ....................................................................................... passim
`35 U.S.C. § 325(a)(3) ...................................................................................... 8, 9, 16
`AIA § 18(a)(1) ................................................................................................ 8, 9, 10
`REGULATIONS
`
`37 CFR § 42.302(a) .................................................................................................. 20
`LEGISLATIVE HISTORY
`
`153 Cong. Rec. E774 ............................................................................................... 13
`157 Cong. Rec. S1041.............................................................................................. 15
`157 Cong. Rec. S1363.............................................................................................. 15
`157 Cong. Rec. S1375.............................................................................................. 14
`157 Cong. Rec. S5428.............................................................................................. 16
`157 Cong. Rec. S5429.............................................................................................. 17
`157 Cong. Rec. S952 ................................................................................................ 16
`154 Cong. Rec. S9987.............................................................................................. 14
`OTHER AUTHORITIES
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`–3–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
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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
`CBM2014-00118 (Patent 7,958,024)
`
`Introduction
`Patent Owner Versata Development Group, Inc. (“Versata” or “Patent
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`Owner”) submits the following Preliminary Response to the Petition filed by
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`Callidus Software Inc. (“Callidus” or “Petitioner”) on April 17, 2014, requesting
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`post-grant review of Claims 3-34 of U.S. Patent No. 7,958,024 (“the ’024 Patent”)
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`under § 18 of the America Invents Act’s transitional program for covered business
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`method patent review. Versata respectfully requests that the Patent Trial and
`
`Appeal Board (“Board” or “PTAB”) decline to institute post-grant review of the
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`’024 Patent because Callidus is statutorily barred from seeking post-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 one-and-
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`a-half years before filing its Petition for post-grant review, Callidus filed a civil
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`action in the Northern District of California seeking a declaratory judgment of
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`invalidity of the claims of the ’024 Patent. As a result, a post-grant review
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`proceeding cannot be instituted.
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`II.
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`'024 Patent Overview
`The '024 Patent describes a method and apparatus for processing sales
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`transaction data in an efficient manner which minimizes the use of computing
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`resources in a traditionally computationally-expensive process.
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`–5–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`Managing sales and distribution channels had become a difficult task on and
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`
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`before March 15, 2001 (the filing date of the '024 Patent) in the business
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`environment where it is necessary to quickly and fairly administer incentives for
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`salespeople and distribution channel partners while coping with regulatory issues.
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`Exh. 1001, col. 1, lines 18-22. To keep revenues growing and to keep up with
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`customer demands, financial services providers had to move quickly even when
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`regulation, competition and new sales distribution channels inhibited growth. Id.,
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`lines 22-25. Management was expected to provide new opportunities for improved
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`revenues and margins, while providing customers with better, faster information
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`and services. Id., lines 25-28.
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`One of the problems facing financial service providers was the lack of
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`technological innovation to keep up with the process of implementing modern
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`compensation incentive programs. As the '024 Patent explained:
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`Sales compensation for direct and indirect channels can be one of the
`most effective levers for aligning sales performance with business
`goals. Unfortunately, designing and administering effective incentive
`programs is a difficult management challenge. The management of a
`business can spend a great deal of time and money in developing
`incentive plans. In the prior art, the creation and distribution of
`incentive plans is a slow process that is prone to error. It can take
`months to implement a new compensation plan, and dependencies on
`computer software can frustrate sales managers who want to make
`
`
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`–6–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`even simple changes. Moreover, a lack of measurement tools can
`make it impossible to develop a "closed loop", continuous
`improvement process. Businesses must be able to design, process, and
`communicate sophisticated incentive programs that drive revenue
`growth across all sales channels. Id., col. 2, lines 20-34.
`The inability of then-current technology to meet the problems faced by the
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`industry including a lack of technology to handle credential management and the
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`computer generation of selling agreements that define a relationship between an
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`institution and a distributor drove the development of the technology in the '024
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`Patent. See also, Exh. 1001, col. 3, lines 24-58.
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`The USPTO examined the '024 Patent over prior art references and
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`determined that the invention of the '024 Patent met all statutory requirements
`
`including novelty and non-obvious and was, thus, inventive.
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`III. TRIAL SHOULD NOT BE INSTITUTED BECAUSE PETITIONER IS
`STATUTORILY BARRED FROM SEEKING POST-GRANT REVIEW
`Trial should not be instituted and is, indeed barred, 1 where (as here) the
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`petitioner, prior to the filing of the petition for post-grant review, filed a civil
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`1
`In the prior CBM, Patent Owner briefed the preclusive effect of a statutory bar
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`under 35 U.S.C. § 325(a). Relying on interim orders issued in other
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`proceedings, the Board found that dismissal without prejudice of Petitioner’s
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`prior, and otherwise barring, civil action challenging validity nullified the
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`§ 325(a) statutory bar. Accordingly, the Board instituted trial in that prior
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`–7–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`action challenging the validity of a claim of the patent. Patent Owner’s analysis of
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`
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`the § 325(a) bar, and its dispositive effect in this proceeding, are briefed in
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`considerable detail below. Nonetheless, as a preliminary matter, Patent Owner
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`briefly addresses Petitioner’s alternative grounds arguments (1) that the Patent
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`Office, in its rulemaking, abrogated § 325(a)(1) as to transitional post-grant review
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`proceedings for review of covered business method (CBM) patents (see Pet. 7-8)
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`and (2) that its originally-filed declaratory judgment complaint should be viewed
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`as if it were a counterclaim as contemplated in § 325(a)(3) (see Pet. 9-10).
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`This Board should unambiguously reject Petitioner’s abrogation argument
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`(see Pet. at 7-8). The Office’s authority to issue regulations as to transitional post-
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`grant review proceedings for review of covered business method (CBM) patents is
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`defined by AIA § 18(a)(1), which is discussed in detail below relative to Patent
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`Owner’s principal § 325(a) argument, but which (in pertinent part) states: “[t]he
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`transitional proceeding implemented pursuant to this subsection shall be regarded
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`as, and shall employ the standards and procedures of, a post-grant review under
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`chapter 32 of title 35, United States Code, subject to [further provisions which do
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`CBM. Patent Owner understands, though disagrees with, the Board’s decision
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`in the prior CBM, but nonetheless reemphasizes the § 325(a) statutory bar to
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`ensure a complete record in this proceeding and to preserve all issues for
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`appeal.
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`–8–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`not abrogate § 325(a)].” See AIA § 18(a)(1). The Board itself has confirmed the
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`
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`same in the decision denying institution of trial in CBM2013-00059, Branch
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`Banking and Trust Co. v. Maxim Integrated Products, Inc., wherein the Board
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`confirmed that a previously-filed declaratory judgment action barred the institution
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`of trial. CBM2013-00059, Paper No. 12, pp. 2-4 (P.T.A.B. March 20, 2014).
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`Plain and simple, § 325(a) applies to post-grant review proceedings, whether
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`transitional or otherwise.
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`Relative to the counterclaim argument (see Petition at 8-9), this Board
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`should likewise unambiguously reject. As detailed below relative to Patent
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`Owner’s principal § 325(a) argument, Petitioner’s filing was a complaint seeking a
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`declaratory judgment of invalidity of claims of the ‘024 Patent. Petitioner’s filing
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`was not a counterclaim. Petitioner could have filed a counterclaim availing itself
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`of the protections of § 325(a)(3) which, like the bar of § 325(a)(1), are not and
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`cannot be abrogated by regulation adopted by the Office. Petitioner chose instead
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`to file a complaint seeking a declaratory judgment of invalidity. That choice
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`brought into play the § 325(a)(1) bar.
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`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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`–9–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`(stay of civil action), (e)(2) (estoppel), and (f) (reissue patents) of section 325 do
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`
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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. Petitioner filed a civil action
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`challenging validity of the ’024 Patent before filing the present Petition. See Exh.
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`2001. Accordingly, post-grant review is barred and should not be instituted.
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`Plain Language of § 325(a)(1) Bars Post-Grant Review
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`B.
`Patent Owner filed a complaint against Petitioner in the district of Delaware
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`on July 19, 2012, alleging infringement of the ’024 Patent (hereinafter the
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`“Delaware Action”). See Exh. 1003. On October 16, 2012, as part of a forum-
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`shopping attempt to transfer venue of the Delaware Action and, indeed, a month
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`after the transitional program for covered business method review became
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`–10–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`available, Petitioner filed a civil action against Patent Owner in the Northern
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`
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`District of California, seeking, amongst other things, a declaratory judgment that
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`the claims of the ’024 patent were invalid. See Exh. 2001, at 3 (hereinafter
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`“California Action”). Notably, Petitioner’s complaint specifically alleged that the
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`claims were invalid under 35 U.S.C. § 101 (the very same ground it now alleges in
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`its present Petition). Id.
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`Petitioner 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, Petitioner voluntarily
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`dismissed the California Action. See Exh. 2012; Exh. 2003. Petitioner next filed
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`its prior petition for post-grant review of U.S. Patent 7,958,024 on August 30,
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`2013, over 10 months after filing the California Action. The instant Petition for
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`post-grant review of dependent claims of the ’024 Patent was filed on April 17,
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`2014, nearly 18 months after filing the California Action that challenged validity
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`of a claim of that very same patent.
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`As a result, and simply stated, Petitioner’s own choices on venue tactics, as
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`well as its timing, should have forever foreclosed its ability to seek post-grant
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`review of the ’024 patent before this Board. Because Petitioner filed a civil action
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`challenging the validity of a claim of the ’024 Patent prior to filing its present
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`Petition, § 325(a)(1) bars institution of a post-grant review proceeding.
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`–11–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`The plain language of § 325(a)(1) clearly bars institution of a post-grant
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`
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`review of the ’024 Patent pursuant to the Petition. “It is well settled law that the
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`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
`
`[IS] BARRED BY CIVIL ACTION.” Id.
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`Petitioner filed a civil action challenging validity of a claim of the ’024
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`patent before filing its Petition. As a result, Petitioner’s petitioned-for post-grant
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`review under the Section 18 program for covered business method patents was
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`barred by statute and a post-grant review proceeding should not be instituted.
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`C. 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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`–12–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`1422, 1426 (Fed. Cir. 1988). The legislative history of the AIA supports the same
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`
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`conclusion as reached above based on the statute’s plain language, namely that
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`Petitioner’s prior filing of the California Action bars Petitioner’s petitioned-for
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`post-grant review. Patent Owner now notes specific aspects of that legislative
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`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
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`–13–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`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.
`
`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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`–14–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`invalid ….” See 157 Cong. Rec. S1041 (daily ed. March 1, 2011), Exh. 2007 at 8
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`
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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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`–15–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`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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`D.
`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, Petitioner 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, Petitioner could have (and indeed has) sought a declaratory judgment
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`of invalidity of the ’024 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, Petitioner has
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`(under the statutory framework established by Congress, specifically § 325(a)(1))
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`–16–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`forever foreclosed its option to seek post-grant review before the Board. Post-
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`grant review is barred, and the post-grant review proceeding cannot be instituted.
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`To be sure, Petitioner’s 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 Petitioner. 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.”
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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 Petitioner 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 Petitioner at the time it filed
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`the California Action, and indeed, § 325 explicitly permits a separate declaratory
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`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, Petitioner first filed
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`a civil action challenging validity of the ’024 Patent, thereby triggering the
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`§ 325(a)(1) bar. Thus, Petitioner should not have been able to seek post-grant
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`review before the Board. The plain language of the statute and, indeed, the
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`legislative history are clear on this point, and the necessary consequences of
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`Petitioner’s own choice are hardly inequitable.
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`E.
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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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`The Board has previous addressed the applicability of § 325(a)(1) to covered
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`business method review proceedings under AIA § 18, as explained in the Decision
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`on the Request for Rehearing, in at least the aforementioned decision denying
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`institution of trial in Branch Banking and Trust Co. v. Maxim Integrated Products,
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`Inc., CBM2013-00059, Paper No. 12, pp. 2-4 (P.T.A.B. March 20, 2014).
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`Further, the Board has addressed the parallel provision of § 315(a)(1) at least
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`twice. In Anova Food, LLC v. Sandau, IPR2013-00114, Paper No. 17, Decision –
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`Denying Inter Partes Review (P.T.A.B. Sept. 13, 2013), the petitioner had
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`previously filed three declaratory judgment actions in 2003 and 2004. The three
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`declaratory judgment actions were each dismissed before the declaratory judgment
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`plaintiff (Anova Food) served the respective complaints. Relying on the explicit
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`text of § 315(a)(1), the Board noted that “section 315(a)(1) refers only to filing,”
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`and did not require that the complaint be served to trigger the statutory bar. Anova
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`Food at 6. The Board ultimately found that the inter partes review petition was
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`barred, and did not institute the review. Anova Food at 13.
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`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, Petitioner filed a declaratory judgment
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`action challenging validity. Indeed, Petitioner went further than in the Anova Food
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`case and served its complaint on Patent Owner. 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, Petitioner’s
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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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`CBM2014-00118 (Patent 7,958,024)
`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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`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
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`–20–
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`Patent Owner’s Preliminary Response
`CBM2014-00118 (Patent 7,958,024)
`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 Petitioner’s 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 Acti