UNITED STATES PATENT AND TRADEMARK OFFICE
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`ZOLL LIFECOR CORPORATION
`Petitioner
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`v.
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`KONINKLIJKE PHILLIPS ELECTRONICS N.V.
`Patent Owner
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`Case IPR2013-00606 (Patent 5,593,427)
`Case IPR2013-00607 (Patent 5,749,904)
`Case IPR2013-00609 (Patent 5,836,978)
`Case IPR2013-00612 (Patent 5,803,927)
`Case IPR2013-00613 (Patent 5,735,879)
`Case IPR2013-00615 (Patent 6,047,212)
`Case IPR2013-00616 (Patent 5,749,905)
`Case IPR2013-00618 (Patent 5,607,454)
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`PETITIONER ZOLL LIFECOR’S BRIEF ON WHETHER ZOLL
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`MEDICAL CORPORATION IS A REAL-PARTY-IN-INTEREST OR IN
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`PRIVITY WITH PETITIONER
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`ZOLL LIFECOR CORPORATION
`Petitioner
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`v.
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`KONINKLIJKE PHILLIPS ELECTRONICS N.V.
`Patent Owner
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`Case IPR2013-00606 (Patent 5,593,427)
`Case IPR2013-00607 (Patent 5,749,904)
`Case IPR2013-00609 (Patent 5,836,978)
`Case IPR2013-00612 (Patent 5,803,927)
`Case IPR2013-00613 (Patent 5,735,879)
`Case IPR2013-00615 (Patent 6,047,212)
`Case IPR2013-00616 (Patent 5,749,905)
`Case IPR2013-00618 (Patent 5,607,454)
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`PETITIONER ZOLL LIFECOR’S BRIEF ON WHETHER ZOLL
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`MEDICAL CORPORATION IS A REAL-PARTY-IN-INTEREST OR IN
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`PRIVITY WITH PETITIONER
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` TABLE OF CONTENTS
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`INTRODUCTION ......................................................................................................... 1
`BACKGROUND ........................................................................................................... 2
`PETITIONER IS THE REAL PARTY IN INTEREST ................................................... 3
`THERE IS NO PRIVITY BETWEEN PETITIONER AND ZOLL MEDICAL FOR THEIR
`TWO LAWSUITS OR THESE IPRs ............................................................................ 6
`CONCLUSION .......................................................................................................... 10
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`I.
`II.
`III.
`IV.
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`V.
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`i
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`INTRODUCTION
`I.
`Pursuant to the Board’s January 13 Order, Petitioner hereby replies to Patent
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`Owner’s Preliminary Responses to the Petitions for Inter Partes Review of eight Philips
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`patents, regarding allegations that the petitions are time-barred under 35 U.S.C. § 315(b).
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`Patent Owner’s arguments about “real party in interest” and “privity” are simply an
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`assertion that a parent is necessarily a real party in interest for, and in privity with, its wholly-
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`owned subsidiary by virtue of its actual or potential control of the subsidiary. But the
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`Board’s standard is not “control,” and instead follows from common law treatment of
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`collateral estoppel. Office Pat. Trial Practice Guide, 77 Fed. Reg. 48,756 (Aug. 14, 2012).
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`Dismissal is improper under that standard. First, Petitioner is the sole real party in
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`interest—it has been sued over a product with hundreds of millions of dollars in associated
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`revenue, and it is managing and paying for the litigation and these IPRs without
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`compensation from, or control by, another entity. Second, no privity estops Petitioner, as
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`the two lawsuits differ in parties, accused products, and asserted claims. Indeed, Patent
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`Owner admits no privity by keeping its suits separate, because it would be equally estopped
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`if Petitioner and ZOLL Medical were as closely related as Patent Owner suggests. In short,
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`Patent Owner makes no prima facie case because it fails to address the relevant standard,
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`and the facts show in any event that 35 U.S.C. §315(b) does not bar the IPR petitions.
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`1
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`BACKGROUND1
`II.
`Patent Owner in 2010 sued ZOLL Medical on six of the IPR patents over external
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`defibrillators used by rescuers (e.g., below, left). It sued Petitioner in 2012 on all eight IPR
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`patents over a wholly different product known as the LifeVest—a defibrillator worn as a vest
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`that triggers itself when the patient has a cardiac event:
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` ZOLL Medical’s AED Plus
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`Petitioner’s Lifevest
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`The patents relate to how a device delivers shocks, which differ between the devices here
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`because they were developed when the companies were completely separate.
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`Petitioner’s interest is real. It has generated hundreds of millions in revenue and
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`high growth rates relating to the LifeVest over the past six years [LIFECOR-1017], and
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`1 Petitioner initially incorrectly omitted the Massachusetts litigation in identifying related
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`matters under 37 CFR 42.8(b)(2). That omission resulted from an innocent oversight and
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`has since been fixed by corrected Mandatory Notices in each of the eight IPRs.
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`2
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`Patent Owner has sought past and future damages, an injunction, enhanced damages, and
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`fees and costs. [LIFECOR-1016] By contrast, ZOLL Medical has no interest in the expired
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`‘904 and ‘427 patents on which it was never sued, or in the expired ‘927 and ‘879 patents
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`that Patent Owner dismissed in litigation before these IPRs were filed. And ZOLL Medical
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`has comparatively little interest in the remaining patents because it stands accused of
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`infringing only 5 claims compared to 92 claims asserted against Petitioner, and its liability on
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`those is scant because the jury found no indirect infringement, and four of the five claims
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`are methods that involve shocking a patient, which its employees do not do. [LIFECOR-
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`1018] The companies are also very different, with Petitioner controlling its own business in
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`general, and of the disputes with Patent Owner in particular, as discussed below.
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`PETITIONER IS THE REAL PARTY IN INTEREST
`III.
`The Preliminary Response suggests that “control” is the test for “privity” and “real
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`party in interest.” See, e.g., Prelim. Resp., at 4 (“According to specific guidance provide by
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`the [PTO], such actual or potential control indicates that Zoll Medical is both a ‘privy’ of
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`[Petitioner] and a ‘real party in interest’ in this proceeding.”). Rather, the Office makes clear
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`that “the ‘real party-in-interest’ is the party that desires review of the patent,” the “party
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`actually entitled to recover,” Office Pat. Trial Practice Guide, 77 Fed. Reg. 48,759 (Aug. 14,
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`2012)— judged, not by a single factor, but by flexible Article III estoppel standards (Id.):
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`Whether a party who is not a named participant in a given proceeding
`nonetheless constitutes a ‘‘real party in interest’’ or ‘‘privy’’ to that proceeding
`is a highly fact-dependent question. Such questions will be handled by the
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`3
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`Board on a case-by-case basis taking into consideration how courts have
`viewed the terms ‘‘real party in interest’’ and ‘‘privy.’’
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`Petitioner is truly the real party in interest. It is defendant in an 8-patent suit—a real interest
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`by itself. The LifeVest product is related to hundreds of millions in revenue and fast growth
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`by Petitioner over the last six years. [LIFECOR-1017] Patent Owner seeks an injunction,
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`damages for past and future infringement, enhanced damages from alleged willfulness, and
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`fees, costs, and expenses—all against Petitioner. [LIFECOR-1016] Patent Owner’s actions
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`in settlement discussions suggest that it will seek substantial damages. Moreover,
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`Petitioner is paying for and supervising the proceedings of the IPRs and the district court
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`litigation ($193,800 in IPR filing fees alone) without compensation from ZOLL Medical, and
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`its management is held directly responsible for the performance of Petitioner.
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`Although the Board did not permit testimonial evidence to accompany this reply, if
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`requested, Petitioner will establish the facts above and that (a) Petitioner’s management
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`develops the strategic plan, business plan, and budget for Petitioner’s business (although
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`they are presented to ZOLL Medical for approval, as is typical in a parent-subsidiary
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`relationship, but the direction is provided from ground up, not top down); (b) ZOLL Medical
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`does not hold the LifeVest PMA regulatory approval, nor control LifeVest research &
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`development and manufacture, or LifeVest marketing, sales, leasing, and revenue
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`collection; (c) Petitioner is paying the costs of the litigation and the IPRs, and is not being
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`compensated by ZOLL Medical for such costs; and (d) Petitioner’s management is
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`4
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`supervising the conduct of the IPRs and the litigation against Petitioner. The companies are
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`separate, and no allegation has been made that the corporate separation is lacking.
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`Any ZOLL Medical benefit from patent invalidity is the same as any multi-defendant
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`situation, and is actually much less because ZOLL Medical’s exposure is minor in relation:
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`(1) it was not sued on the expired ‘427 and ‘904 patents and has absolutely no liability or
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`interest [LIFECOR-1015]; (2) the ‘879 and ‘927 patents were dropped against it before the
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`IPRs were filed, so again, no interest [LIFECOR-1018]; and (3) on the remaining four
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`patents, it was accused on only 5 claims (Petitioner is accused on 92 claims), the jury found
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`no indirect infringement, and there can be no direct infringement on the method claims
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`because ZOLL Medical does not shock patients.
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`Patent Owner’s entire focus is on supposed control, but that fails for multiple
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`reasons. First, it is not the legal standard. Second, even Patent Owner does not show
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`control of the litigation and the IPRs, or any lack of participation and control by Petitioner’s
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`management. Third, the evidence does not support Patent Owner’s assertions: (a)
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`Petitioner has full control over its hiring even though the companies share a web site for
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`soliciting employment interest; (b) Petitioner was represented at the settlement conference
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`by its Secretary, Mr. Grossman, who provides legal guidance for both companies; (c) it is
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`common and efficient, not evidence of control, for defendants who face the same plaintiff to
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`use a common law firm and expert; (d) that ZOLL Medical says “we” to describe a parent
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`and a subsidiary is also common in documents subject to oversight form the SEC, which
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`5
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`encourages plain language over immaterial detail; and (e) LifeVest owns its own facility
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`under an interest-bearing loan to ZOLL Medical, which is obligation but not control.
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`Patent Owner itself recognizes that ZOLL Medical is not the real party in interest. In
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`its Complaint against Petitioner, it did not name ZOLL Medical or mention that it was
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`Petitioner’s real party in interest. [LIFECOR-1016] In all of the many forms of relief it
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`sought, none were against ZOLL Medical. [Id.] And it served process on Corporation
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`Services Co., Petitioner’s agent, which is separate from who it served in the other suit (CT
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`Corporation). [LIFECOR-1019, LIFECOR-1020] The reason is plain—Patent Owner
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`understands its second suit is wholly against Petitioner, knows that it must obtain relief (if
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`any) from Petitioner, and knows ZOLL Medical is not the real party in interest.
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`Finally, and importantly, Patent Owner has cited no case that found real party in
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`interest status on the same or similar facts, though it bears the burden to establish its relief.
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`IV.
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`THERE IS NO PRIVITY BETWEEN PETITIONER AND ZOLL MEDICAL
`FOR THEIR TWO LAWSUITS OR THESE IPRs
`Again, Patent Owner’s Preliminary Response suggests that “control” is the sine qua
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`non for privity, and again the actual standard looks instead to Article III tests for estoppel:
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`The Office intends to evaluate what parties constitute ‘privies’ in a manner
`consistent with the flexible and equitable considerations established under federal
`case law. Ultimately, that analysis seeks to determine whether the relationship
`between the purported ‘privy’ and the relevant other party is sufficiently close that
`both should be bound by the trial outcome and related estoppels….
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`Office Patent Trial Practice Guide, at 48759 (citations omitted). While control is one of
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`6
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`multiple factors (along with whether the Petitioner is paying for the proceeding, which it is
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`here), it is a slippery factor, because, as the Trial Practice Guide explicitly recognizes, “there
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`is no ‘bright-line test’ for determining the necessary quantity or degree of participation to
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`qualify as a ‘real party in interest’ or ‘privy’ based on the control concept.” Id.
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`On the ultimate standard, a defendant is not estopped by an outcome in a first case
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`in the current situation—with wholly different products, different infringement assertions, and
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`wholly different defendants. This is true for several reasons, each sufficient alone.
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`First, a defendant like Petitioner is estopped from challenging validity only when the
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`causes of action are the same, which is not true when different products are accused. See
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`Young Eng’rs, Inc. v. U.S. Int’l Trade Comm’n, 721 F.2d 1305, 1316 (Fed. Cir. 1983).
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`Patent Owner here does not argue that ZOLL Medical’s portable defibrillators for rescuers
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`are similar to Petitioner’s wearable defibrillators in any way relevant to infringement, and its
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`assertion of 92 claims against Petitioner and only 5 against ZOLL Medical directly indicates
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`how different the products are. Their respective waveforms, at the center of the litigations,
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`were in fact independently developed independently.
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`Second, the claims asserted in the two suits have little overlap, and a party cannot
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`be estopped from claiming invalidity of a claim that was not asserted in an earlier action.
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`See Howard Hess Dental Labs. Inc. v. Dentsply Intl., Inc., 602 F.3d 237, 247-48 (3d Cir.
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`2010) (issue must have been actually litigated in a previous action to estop). The claims in
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`Petitioner’s suit are very different, with 92 asserted instead of the prior 5, with the ‘427 and
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`7
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`‘904 patents never asserted, and the ‘879 and ‘927 patents dropped before the IPRs were
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`filed. It is hard to understand how Petitioner could possibly be estopped from challenging
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`the validity of any of those claims, and Patent Owner certainly does not explain how.
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`Third, the parties are different. Patent Owner noted in its first Complaint that ZOLL
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`Medical “is a corporation organized under the laws of the Commonwealth of Massachusetts,
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`with a principal place of business at 269 Mill Road, Chelmsford, Massachusetts.”
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`[LIFECOR-1015] And in its Complaint against Petitioner, “[Petitioner] is a corporation
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`organized under the laws of Delaware, with a principal place of business at 121 Gamma
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`Drive, Pittsburgh, Pennsylvania 15238.” [LIFECOR-1016] When filing two different suits
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`against two different companies so that it could have two different trials, Patent Owner most
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`certainly recognized the distinction between the companies. And as explained above,
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`Patent Owner has not shown other factors to support privity, and has ignored most of Taylor
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`v. Sturgell, 553 U.S. 880 (2008) factors, to which the Trial Practice Guide cites repeatedly.
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`While Patent Owner flogs the “parent-subsidiary” horse within inches of its life, that is
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`because it is the only horse Patent Owner has. Unfortunately, that is only a single factor in
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`the privity determination, and Patent Owner’s repetition of selective facts cannot turn it into
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`the standard. Rather, as the cases above illustrate, the parent-subsidiary relationship does
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`not trump the other considerations just discussed. Moreover, the actual facts (discussed
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`above) show that Petitioner has a real interest of its own in the litigation, is paying for the
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`litigation and the IPRs, is responsible for their outcome, and controls them.
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`8
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`It also makes perfect practical sense that estoppel not apply in these situations,
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`because a patentee would otherwise be encouraged to abuse the system. For example, if
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`estoppels applied across truly different parties or products, a patentee could insulate itself
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`by first suing a party that had low risk (e.g., few sales), and then follow up with a real suit
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`(e.g., a party like Petitioner with high revenue) and claim estoppel. The result is even more
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`severe if estoppel were allowed to apply across claims that were not asserted in the prior
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`action, like almost every claim asserted against Petitioner. Again, Patent Owner ducks all of
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`these concerns that underlie the application of collateral estoppel and privity.
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`Again, though Patent Owner has the burden, it has not cited a single case that has
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`applied estoppel or privity under facts like those in this case. The Supreme Court
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`recognizes non-party-preclusion as an exception. Taylor, 553 U.S. at 895. And ““doubts
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`about [collateral estoppel’s] application should usually be resolved against its use.”
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`Witkowski v. Welch, 173 F.3d 192, 206 (3d Cir. 1999). Indeed, under common law, “privity
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`exists in just three, narrowly-defined circumstances: (1) where the non-party is the
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`successor in interest to a party’s interest in property; (2) where the non-party controlled the
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`prior litigation; and (3) where the non-party's interests were adequately represented by a
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`party to the original suit.” Meza v. General Battery Corp., 908 F.2d 1262, 1266 (5th
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`Cir.1990). None of these situations is present (e.g., even Patent Owner does not argue that
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`Petitioner controlled ZOLL Medical’s litigation), and there can be no doubt that Patent
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`Owner has not established any compelling facts under a proper legal standard.
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`9
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`Finally, Patent Owner’s arguments are inconsistent with its filing of separate
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`lawsuits. As Patent Owner itself recognizes, “[R]es judicata may be invoked against a
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`plaintiff who has previously asserted essentially the same claim against different
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`defendants where there is a close or significant relationship between successive
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`defendants,” Patent Owner’s Response, at 18-19 (quoting Gambocz v. Yelencsics, 468 F.2d
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`837, 841 (3d Cir. 1972) (emphasis added). In other words, if Patent Owner is right that
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`estoppel must apply, then it too would be estopped, and its suit against Petitioner would be
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`void. What Patent Owner is actually doing is trying to have it both ways—estopping
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`Petitioner while trying to ignore the estoppel that would apply against it. This is the ultimate
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`indication that Patent Owner’s view of the law and facts here has a gaping hole.
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`CONCLUSION
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`V.
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`Patent Owner’s Preliminary Response fails to address the proper legal standard for
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`real party in interest and privity. Moreover, under the appropriate standard, Petitioner has
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`shown that it is the real party in interest—the party that truly seeks review—and that it is not
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`estopped from challenging the patents’ validity due to any privity relationship. Petitioner
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`thus asks that the Board institute IPR proceedings as originally requested by Petitioner.
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`Dated: January 22, 2014
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`/John C. Phillips/
`John C. Phillips, Reg. No. 35,322
`Dorothy Whelan, Reg. No. 33,814
`Fish & Richardson P.C.
`Attorneys for Petitioner
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`10
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`CERTIFICATE OF SERVICE
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`Pursuant to 37 CFR §§ 42.6(e)(4) and 42.205(b), the undersigned certifies
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`that on January 22, 2014, a complete and entire copy of this Petitioner
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`ZOLL Lifecor’s Brief On Whether ZOLL Medical Corporation Is A Real-
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`Party-In-Interest Or In Privity With Petitioner was provided via email to
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`the Patent Owner by serving the correspondence email address of record as
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`follows:
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`J. Michael Jakes
`Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.
`901 New York Avenue, NW
`Washington, DC 20001-4413
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`Denise W. DeFranco
`Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.
`Two Seaport Lane, 6th Floor
`Boston, MA 02210-2001
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`mike.jakes@finnegan.com
`denise.defranco@finnegan.com
`PTABdocket@finnegan.com
`Philips-Zoll@finnegan.com
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`Email:
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` /Diana Bradley/
`Diana Bradley
`Fish & Richardson P.C.
`60 South Sixth Street, Suite 3200
`Minneapolis, MN 55402
`(858) 678-5667
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`11
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