Trials@uspto.gov Paper 17
`Tel: 571-272-7822
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` Entered: January 26, 2016
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`_______________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_______________
`
`OCEAN TOMO, LLC,
`Petitioner,
`
`v.
`
`PATENT RATINGS, LLC,
`Patent Owner.
`_______________
`
`Case CBM2015-00157
`Patent 9,075,849 B2
`_______________
`
`
`
`Before BARRY L. GROSSMAN, KRISTINA M. KALAN, and
`PETER P. CHEN, Administrative Patent Judges.
`
`CHEN, Administrative Patent Judge.
`
`DECISION
`Denying Institution of Covered Business Method Review
`37 C.F.R. § 42.208
`
`
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`

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`CBM2015-00157
`Patent 9,075,849 B2
`
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`I. INTRODUCTION
`Ocean Tomo, LLC (“Petitioner”) filed a Petition (Paper 1, “Pet.”) to institute
`a covered business method review of claims 1, 9, 16, 18–25, 34, 49, 50–52, and 57
`(“the challenged claims”) of U.S. Patent No. 9,075,849 B2 (Ex. 1001, “the ’849
`patent”). Patent Ratings, LLC (“Patent Owner”) filed a Preliminary Response
`(Paper 10, “Prelim. Resp.”), to which we permitted a reply by Petitioner (Paper 13,
`“Pet. Reply”). We have statutory authority under 35 U.S.C. § 324.
`After considering the Petition, Preliminary Response, and Reply, and
`accompanying exhibits, we determine that Petitioner does not have standing to file
`a Petition for a covered business method review of the ’849 patent under §
`18(a)(1)(B) of the Leahy-Smith America Invents Act (“AIA”)1 and 37 C.F.R. §
`42.302. Accordingly, we deny institution of a covered business method patent
`review of the challenged claims of the ’849 patent.
`II. ANALYSIS
`A. Standing
`Standing to file a covered business method patent review is a threshold
`issue. Under § 18(a)(1)(B) of the AIA,
`A person may not file a petition for a transitional proceeding with
`respect to a covered business method patent unless the person or
`the person’s real party in interest or privy 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.
`See also 37 C.F.R. §§ 42.206, 42.302(a), 42.304(a) (trial rules on standing in a
`covered business method review). A petition for covered business method review
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`1 Pub. Law 112–29, 125 Stat. 284, 331 (Sept. 16, 2011).
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`CBM2015-00157
`Patent 9,075,849 B2
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`must set forth the petitioner’s grounds for standing. 37 C.F.R. § 42.304(a). Rule
`42.304(a) states it is Petitioner’s burden to “demonstrate that the patent for which
`review is sought is a covered business method patent, and that the petitioner meets
`the eligibility requirements of § 42.302.” Id.
`Under 37 C.F.R. § 42.302(a), a person may not file a petition for covered
`business method patent review, “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.”
`As the Office explained in comments to the Final Rules governing covered
`business method patent review:
`To establish standing, a petitioner, at a minimum, would be
`required to certify with explanation that the patent is a covered
`business method patent and that the petitioner meets the eligibility
`requirements of § 42.302. This requirement is to ensure that a
`party has standing to file the covered business method patent
`review and would help prevent spuriously instituted reviews.
`Facially improper standing is a basis for denying the petition
`without proceeding to the merits of the decision.
`Changes to Implement Inter Partes Review Proceedings, Post-Grant Review
`Proceedings, and Transitional Program for Covered Business Method Patents,
`77 Fed. Reg. 48,680, 48,709 (Aug. 14, 2012) (Response to Comment 102;
`emphases added). Consequently, the petition must show that the petitioner meets
`the requirements of 37 C.F.R. § 42.302, and such “[a] showing can only be made
`through sufficient proof.” Id. (Response to Comment 106). For example, in
`Global Tel*Link Corp. v. Securus Technologies, Inc., Case CBM2014-0016, slip
`op. at 9 (PTAB Feb. 17, 2015) (Paper 10), the Board denied institution of a
`covered business method review based on the determination that Petitioner’s
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`Patent 9,075,849 B2
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`assertion of standing in the Petition was not supported sufficiently by proof in the
`Petition.
`For the reasons discussed below, we determine that the Petition and Reply
`fail to proffer sufficient proof to support Petitioner’s standing to file the request for
`a covered business method review.
`B. Analysis
`Petitioner “provides, among other things, financial products and services
`related to expert testimony, valuation, investments, risk management and
`transactions throughout the United States and overseas.” Pet. 1. Patent Owner
`“owns and develops computer-generated metrics that can be used to help determine
`the quality and relevance of issued United States patents.” Id. Patent Owner’s
`patents “are used to assess the quality and relative value of patent portfolios.” Id.
`Petitioner is a 25% owner of Patent Owner. Ex. 1005, ¶ 4.
`Beginning in 2004, Petitioner and Patent Owner entered into a contractual
`relationship under a technology License Agreement (the “License Agreement”)
`pursuant to which Patent Owner provided to Petitioner “certain proprietary
`computer generated metrics for determining the quality and relevance of patents.”
`Pet. 1–2; Ex. 1004, ¶ 2. Since 2007, “the parties’ business relationship has been
`plagued by a number of disputes, including the three separate lawsuits which have
`essentially been consolidated into a single action” before the U.S. District Court
`for the Northern District of Illinois (the “Illinois action”). Pet. 2, 14.
`In particular, Petitioner alleges in its Second Amended and Supplemental
`Complaint in the Illinois action (the “Complaint”) that in 2005 it hired Patent
`Owner’s chief executive officer, Jonathan Barney, to be a managing director of
`Petitioner. Ex. 1004, ¶¶ 1, 6, 41. In that capacity, Barney oversaw the marketing
`and sale of certain of Petitioner’s products and services, for which he received an
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`annual salary of $ 210,000, along with profit-sharing payments and equity in
`Petitioner, which he retains as one of three equity holders in Petitioner. Id. ¶¶ 41–
`42. Petitioner alleges it provided Mr. Barney with a laptop computer, which he did
`not immediately return to Petitioner when he resigned from Petitioner in 2011. Id.
`¶¶ 8–9, 44, 52–54. Petitioner further alleges that after Mr. Barney eventually
`returned the laptop, Petitioner determined that Mr. Barney had “permanently
`destroyed and rendered inaccessible all [Petitioner] information” on the laptop’s
`hard drive, but not before making a copy of the hard drive. Id. ¶¶ 55–56. After his
`resignation from Petitioner in 2011, Mr. Barney and Patent Owner allegedly
`solicited a potential customer of Petitioner. Id. ¶¶ 9, 11, 99–101.
`Petitioner’s Complaint alleges nine causes of action against Mr. Barney and
`Patent Owner, for: (1) declaratory judgment of non-breach of the License
`Agreement (id. ¶¶ 107–115); (2) breach of employment agreement (id. ¶¶ 116–
`121); (3) breach of Petitioner’s Computer Asset Policy agreement (id. ¶¶ 122–
`127); (4) breach of fiduciary duty (id. ¶¶128–133); (5) misappropriation of trade
`secrets (id. ¶¶ 134–140); (6) violation of the Computer Fraud and Abuse Act (id. ¶¶
`141–146); (7) conversion (id. ¶¶ 147–152); (8) tortious interference with
`prospective business advantage (id. ¶¶ 153–161); and (9) declaratory judgment for
`tortious interference with Petitioner’s business expectancy (id. ¶¶ 162–167).
`Neither the Complaint nor the Petition, however, allege Petitioner has been
`sued for infringement of the ’849 patent. Petitioner’s 39-page Complaint did not
`mention the ’849 patent, or include a cause of action for declaratory judgment of
`non-infringement of the ’849 patent, and the Complaint and Petition do not allege
`that Petitioner otherwise has been expressly charged with infringement of the ’849
`patent.
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`Patent Owner has alleged that its Amended Counterclaim in the Illinois
`action that “arises from Ocean Tomo’s malicious, underhanded campaign to
`wrongfully oppress and freeze out one of its minority owners, Jonathan Barney.”
`Ex. 1005, ¶ 1. Patent Owner alleges that after joining Petitioner as one of its senior
`executives, Mr. Barney found the working “environment at [Petitioner] was rife
`with conflict, back-biting, and shady business and accounting practices . . .
`ultimately, [Petitioner] created intolerable working conditions and severe conflicts
`of interest with the goal of forcing Mr. Barney to resign his employment.” Id. ¶¶
`17, 24.
`Patent Owner also alleges that during an arbitration between the parties,
`Patent Owner “for the first time learned that for years [Petitioner] routinely and
`systematically sold products and reports to its clients using PatentRatings Analysis
`for which [Petitioner] had never reported or paid revenues to [Patent Owner], in
`spite of a contractual obligation to do so.” Id. ¶45. Patent Owner further alleges
`Petitioner also “wrongfully disclosed and misappropriated [Patent Owner’s]
`confidential information,” “wrongfully accessed [Patent Owner’s] computer
`servers,” used Patent Owner’s confidential information to develop its own patent
`ratings system, and interfered with Patent Owner’s business opportunity with a
`company in Japan. Id. ¶¶ 50, 52, 55, 63–64.
`Patent Owner’s amended counterclaim alleges six causes of action,
`including three causes of action for breach of contract (id. ¶¶ 68–93), and causes of
`action for tortious interference with prospective economic advantage (id. ¶¶ 94–
`100), violation of the Computer Fraud and Abuse Act (id. ¶¶ 101–104), and
`fraudulent inducement of Patent Owner to enter into an amendment to the License
`Agreement in 2007 (id. ¶¶ 105–113). Petitioner asserts it has alleged an
`affirmative defense to the amended counterclaim that Patent Owner’s patents are
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`invalid, and filed a summary judgment motion of invalidity. Pet. 16, Ex. 1007.
`The summary judgment motion identifies eight of Patent Owner’s patents, but the
`’849 patent is not among them. Pet. 16–17, Ex. 1007.
`Petitioner contends it was granted an exclusive license to use Patent Owner’s
`patent analysis technology. Pet. 1–2, 13; Prelim. Resp. 7; Ex. 1002 § 3.1. In
`particular, the License Agreement specifies Petitioner may “reproduce, install, and
`use the PatentRatings Tools and Improvements” for Petitioner’s “internal use
`only,” and may “distribute, sell, license or other transfer for use . . . and display
`PatentRatings Analysis to third parties for a fee.” Ex. 1002 § 3.1(a), (b).2
`According to Petitioner, the counterclaim’s allegations “that [Petitioner] is in
`breach of the License Agreement constitute a threat that [Patent Owner] will bring
`suit against [Petitioner] based on [Patent Owner’s] Patents and creates a reasonable
`apprehension by [Petitioner] that [Patent Owner] will enforce [its] Patents against
`[Petitioner].” Id. (citing Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118
`(2007)).
`Patent Owner contends, “[a] mere business relationship – even one built
`upon a foundation of patents – does not automatically amount to a charge of
`infringement as to a specific patent.” Prelim Resp. 6–7. Patent Owner states its
`amended counterclaim in the Illinois action “does not assert that unpaid revenues
`
`
`2 Petitioner states that section 4.3 of the License Agreement requires Petitioner to
`pay Patent Owner for “revenues received . . . for access and use of PatentRatings
`Analysis.” Pet. Reply 1–2; Ex. 1002 § 4.3. The License Agreement defines
`PatentRatings Analysis as “using the data output of one or more PatentRatings
`Tools.” Pet. Reply 2; Ex. 1002 § 1.7. The PatentRatings Tools in turn are defined
`to include Patent Owner’s technology, know-how, software, and other intellectual
`property, including Patent Owner’s patents. Pet. Reply 2; Ex. 1002 § 1.11. Patent
`Owner’s Patents include “all patent applications and patents . . . that are owned” by
`Patent Owner. Pet. 13; Ex. 1002 § 1.10.
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`are due for Petitioner’s use of the [Patent Owner’s] patents.” Prelim. Resp. 9
`(emphasis omitted). Rather:
`Pursuant to the License Agreement, revenues are owed to [Patent
`Owner] for the commercial use of the PR System (i.e., proprietary
`software and databases), not for practicing the [Patent Owner] Patents,
`which are explicitly licensed to Petitioner “royalty-free.” See Ex. 1002,
`pp. 3-4; §§ 3.1, 4.1.
`
`Prelim. Resp. 9. Patent Owner also notes the challenged ’849 patent was not even
`issued until over five months after Patent Owner’s amended counterclaim alleging
`breach of the License Agreement was filed in the Illinois action. Id. at 11.
`We are not persuaded that Petitioner has standing to file the Petition herein,
`for several reasons. First, there is no evidence that Patent Owner has sued
`Petitioner for infringement of the ’849 patent, in its 32-page amended counterclaim
`in the Illinois action, or in any other legal proceeding. Petitioner and Patent
`Owner, formerly in an employment and contractual relationship, have been parties
`to the License Agreement for over a decade, and find themselves mired in a matrix
`of contractual and tort disputes venued in the district court. The 15 causes of
`action alleged therein, however, contain no allegations by Patent Owner of
`Petitioner’s infringement of the ’849 patent, or of any of the Patent Owner’s
`patents.
`
`Second, regarding Petitioner’s Medimmune-based arguments that it has been
`“charged with infringement,” because a real and substantial controversy exists
`regarding infringement of the ’849 patent, Patent Owner asserts:
`In contrast to the “well defined” dispute in MedImmune
`
`concerning the validity and infringement of a particular patent with
`respect to a particular identified product, the current disputes between
`[Patent Owner] and Petitioner do not specifically relate to the
`infringement or validity of a particular patent with respect to any
`particular identified product. Instead, as noted above, the parties’
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`License Agreement includes no provisions that condition any payment
`or other contractual obligation on the scope or validity of any patents
`held by [Patent Owner]. The License Agreement grants a “royalty-free”
`license to the PR patents and requires payments only for Petitioner’s
`commercial use of [Patent Owner’s] proprietary software and
`databases, not its patents. Accordingly, as explained above, [Patent
`Owner] has not alleged that any current activities of Petitioner infringe
`any patents held by [Patent Owner], let alone the ’849 patent. . . . Thus,
`the facts here are quite different than those in MedImmune, where there
`was a “well defined” allegation of patent infringement based on a
`license agreement that required payment of royalties for the sale of
`products “which ... would, if not licensed under the Agreement, infringe
`one or more claims of either or both of [the covered patents].”
`
`Prelim. Resp. 16. We have reviewed the parties’ arguments and evidence on
`this issue, and agree with Patent Owner. This case is factually distinguishable
`from MedImmune for the reasons described by Patent Owner. We are not
`persuaded any of the evidence herein sufficiently demonstrates a charge by Patent
`Owner of Petitioner’s infringement of the ’849 patent. For example, the parties’
`amended pleadings in the Illinois action total 15 causes of action, spanning 71
`pages and 280 paragraphs of allegations, yet there is no mention of the ’849 patent,
`or patent infringement, or non-infringement of patents, or charges of patent
`infringement. Exs. 1004, 1005. The parties’ contract, tort, and related causes of
`action concern and arise from the fractured employment and business relationship
`between Petitioner and Mr. Barney and Patent Owner, not from charges of
`infringement of the ’849 patent.
`In addition, we agree with Patent Owner’s contention that its discovery
`requests in the Illinois action cannot place Petitioner in apprehension of being sued
`for patent infringement as to the ’849 patent, because that patent was not included
`in the scope of those discovery requests. Prelim. Resp., 12–13.
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`Lastly, we agree with Patent Owner that Petitioner’s cause of action for
`declaratory judgment of non-breach of contract does not establish a real and
`substantial controversy for purposes of covered business method review standing:
`Petitioner improperly equates the standing requirement set forth in the
`Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, with the standing
`required under AIA § 18(a)(1)(B) to petition for CBM review. . . .In
`fact, Petitioner’s interpretation of the standing requirement for CBM
`review contradicts the plain language of § 42.302(a), which requires not
`a generic dispute between Petitioner and [Patent Owner], but a “real
`and substantial controversy regarding infringement of a covered
`business method patent.” 37 C.F.R. § 42.302(a) (emphasis added).
`Petitioner’s position represents a novel
`interpretation of AIA
`§ 18(a)(1)(B) that, if accepted by the Board, would relax, if not
`completely eliminate, the threshold “charged with infringement”
`requirement for CBM review.
`
`Id. at 18–20. We agree with Patent Owner that a real and substantial controversy
`regarding infringement of the ’849 patent has not been created by Petitioner’s
`cause of action in the Illinois action seeking declaratory judgment of non-breach of
`the License Agreement. The controversy between the parties, regarding alleged
`contractual and tortious conduct arising out of an employment and business
`relationship gone awry, does not meet the threshold requirements of 37 C.F.R. §
`42.302(a). The proper forum for the parties’ disputes is the district court, not the
`Board in the guise of a covered business method petition challenging patentability
`of claims in the ’849 patent, as to which neither a suit alleging infringement nor a
`charge of infringement has occurred.
`Accordingly, based on the record before us, and for purposes of this
`Decision, we determine the information presented in the Petition and Reply does
`not establish that Petitioner had standing to file the Petition.
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`III. CONCLUSION
`Petitioner has not established standing for filing a petition for covered
`business method patent review.
`
`IV. ORDER
`In consideration of the foregoing, it is hereby:
`ORDERED that the Petition is denied; and
`FURTHER ORDERED that no covered business method patent review is
`instituted.
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`CBM2015-00157
`Patent 9,075,849 B2
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`FOR PETITIONER:
`
`Robert Rigg
`rrigg@vedderprice.com
`
`FOR PATENT OWNER:
`
`Joashua Goldberg
`joshua.goldberg@finnegan.com
`
`Jonathan Barney
`jbarney@patentratings.com
`
`
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