`571-272-7822
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`Paper 9
`Date: October 17, 2014
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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`_____________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`____________
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`FIRST DATA CORPORATION,
`Petitioner,
`
`v.
`
`CARDSOFT (ASSIGNMENT FOR THE
`BENEFIT OF CREDITORS), LLC,
`Patent Owner.
`____________
`
`Case IPR2014-00715
`Patent 6,934,945 B1
`____________
`
`
`Before SALLY C. MEDLEY, MEREDITH C. PETRAVICK, and
`JAMES P. CALVE, Administrative Patent Judges.
`
`PER CURIAM.
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`
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`
`
`
`
`DECISION
`Denying Institution of Inter Partes Review
`37 C.F.R. § 42.108
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`IPR2014-00715
`Patent 6,934,945 B1
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`INTRODUCTION
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`I.
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`First Data Corporation (“Petitioner”) filed a Petition (“Pet.”) seeking
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`inter partes review (“IPR”) of claims 1–17 of U.S. Patent No. 6,934,945 B1
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`(“the ’945 patent”) pursuant to 35 U.S.C. §§ 311–319 on April 30, 2014.1
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`Paper 1. Petitioner filed a Corrected Petition (“Corr. Pet.”) on May 20,
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`2014.2 Paper 5. Cardsoft (Assignment for the Benefit of Creditors), LLC
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`(“Patent Owner”) filed a Preliminary Response (“Prelim. Resp.”) on August
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`7, 2014. Paper 8. We have jurisdiction under 35 U.S.C. § 314.
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`Upon consideration of the Petition, we determine that a third party,
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`VeriFone, Inc. (“VeriFone”), is a real party-in-interest that was served with a
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`complaint alleging infringement of the ’945 patent more than one year
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`before the filing of this Petition. The Petition is, therefore, untimely under
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`35 U.S.C. § 315(b). Moreover, because the Petition does not identify
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`VeriFone as a real party-in-interest, the Petition fails to identify “all the real
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`parties in interest,” as required by 35 U.S.C. § 312(a). Accordingly, the
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`Petition is denied.
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`A.
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`Related Proceedings
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`Petitioner identifies the following related district court proceedings
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`that involve the ’945 patent: Cardsoft (Assignment for the Benefit of
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`Creditors) LLC v. First Data Corp., Civil Action No. 2:13-cv-290 (E.D.
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`1 Petition for Inter Partes Review Under 35 U.S.C. §§ 311–319 and 37
`C.F.R. § 42.100 et. seq. Paper 1. All references to Petition and citations to
`“Pet.” are to the initial petition that was filed on April 30, 2014, as Paper 1.
`2 Corrected Petition for Inter Partes Review Under 35 U.S.C. §§ 311–319
`and 37 C.F.R. § 42.100 et. seq. Paper 5. All references to Corrected
`Petition and citations to “Corr. Pet.” are to the Corrected Petition, filed on
`May 20, 2014, as Paper 5.
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`2
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`IPR2014-00715
`Patent 6,934,945 B1
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`Tex.) (“the 2013 Litigation”) and Cardsoft, Inc. v. VeriFone Systems, Inc.,
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`Civil Action No. 2:08-cv-00098 (E.D. Tex.) (“the 2008 Litigation”). Corr.
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`Pet. 5–6.
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`B. Real Party-in-Interest
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`Patent Owner argues that VeriFone is a real party-in-interest to this
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`proceeding, and because the Petition was filed more than one year after the
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`date on which VeriFone was served with a complaint alleging infringement
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`of the patent, an inter partes review may not be instituted due to the time
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`limitation set forth in 35 U.S.C. § 315(b). Prelim. Resp. 7.
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`Facts
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`Patent Owner initiated the 2008 Litigation by filing and serving a
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`complaint in 2008 accusing VeriFone, VeriFone Systems, Inc., and others of
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`infringing the ’945 patent. Corr. Pet. 5–6; Prelim. Resp. 7. On June 8,
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`2012, a jury rendered a verdict that the ’945 patent was valid and infringed
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`by VeriFone and others. Ex. 1007 ¶ 8. VeriFone has appealed that decision
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`to the U.S. Court of Appeals for the Federal Circuit. See Ex. 2004.
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`Patent Owner initiated the 2013 Litigation by filing a complaint in the
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`Eastern District of Texas and serving the complaint on Petitioner on May 2,
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`2013. Exs. 1006, 1007. Patent Owner alleged that Petitioner and First Data
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`Merchant Services Corporation infringed the ’945 patent. Ex. 1007 ¶ 7;
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`Corr. Pet. 5. Patent Owner alleged that Petitioner infringed the ’945 patent
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`by selling Petitioner’s products. Ex. 1007 ¶ 7. Patent Owner also alleged
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`that Petitioner willfully infringed the ’945 patent by continuing to sell
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`VeriFone products that were found to infringe the ’945 patent in the 2008
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`litigation. Id. ¶ 9. Patent Owner sought enhanced damages and associated
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`attorneys’ fees and costs. Id.
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`3
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`IPR2014-00715
`Patent 6,934,945 B1
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`VeriFone is indemnifying Petitioner regarding certain claims in the
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`2013 Litigation. Ex. 1011, 1. As part of the indemnification, VeriFone can
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`choose counsel to defend Petitioner. Id., 3. Petitioner is represented in the
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`2013 Litigation by the same counsel who represented VeriFone in the 2008
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`Litigation, first the law firm of Jones Day and later the law firm of Orrick,
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`Herrington & Sutcliffe. Exs. 2002, 2005, 2006. Counsel representing
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`Petitioner in this proceeding are registered practitioners from the law firm of
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`Kilpatrick Townsend & Stockton. Corr. Pet. 2, 51.
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`VeriFone sought unsuccessfully to invalidate the ’945 patent in the
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`2008 Litigation. Ex. 1007 ¶ 8; see Corr. Pet. 2. VeriFone provided copies
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`of prior art from the 2008 Litigation to Petitioner for this IPR and consulted
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`with Petitioner’s counsel about prior art that may invalidate the ’945 patent.
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`Corr. Pet. 2.
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`VeriFone agreed to fund this IPR. Id. at 1; Ex. 1011, 1. VeriFone’s
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`funding covers attorney’s fees and costs associated with this IPR. Ex. 1011,
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`1.
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`The Petition is fifty-one pages in length and includes thirteen exhibits.
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`Pet. The exhibits to the Petition include lengthy prior art references and
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`declarations of Stephen Gray and Lawrence Forsely. Exs. 1002–1004, 1009,
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`1010, 1012, 1013.
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`On April 28, 2014, Petitioner and VeriFone signed a letter agreement.
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`Ex. 1011 (“the Letter Addendum”). The Letter Addendum states that
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`VeriFone currently is indemnifying Petitioner in relation to certain claims
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`4
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`IPR2014-00715
`Patent 6,934,945 B1
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`asserted in the 2013 Litigation per a “Master Engagement Agreement.”3
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`The Letter Addendum describes that VeriFone has agreed to indemnify
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`Petitioner for the attorney’s fees and costs associated with this IPR, citing a
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`provision of the Master Engagement Agreement, that VeriFone “shall have
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`the right at its expense to employ counsel . . . to defend against Claims that
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`VeriFone is responsible for . . . and to compromise, settle and otherwise
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`dispose of such claims.” Ex. 1011, 1. The Letter Addendum also states that:
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`While VeriFone has agreed to this associated indemnification
`as to the IPR, the purpose of this Letter Addendum is to clarify
`that notwithstanding any language contained in the Agreement
`or elsewhere concerning VeriFone and First Data’s rights and
`obligations pursuant
`to any provision providing
`for
`indemnification, First Data shall have the exclusive and sole
`right to control any and all actions taken in connection with or
`related to the IPR, including but not in any way limited to the
`choice of counsel for preparing any IPR, and that VeriFone
`shall have no such right of control.
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`Id. The Letter Addendum bears the signature of VeriFone’s Executive Vice
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`President of Corporate Development and General Counsel, and a Senior
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`Counsel of Petitioner. Id.
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`On April 30, 2014, two days after the Letter Addendum was executed,
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`Petitioner filed the Petition for this IPR and identified itself as the sole real
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`party-in-interest. Pet. 1; Paper 4.
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`3 Sections of the Master Engagement Agreement are attached to, and are
`part of, the Exhibit 1011 Letter Addendum. Id. at 2–4.
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`5
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`IPR2014-00715
`Patent 6,934,945 B1
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`Principles of Law
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`Section 315(b) of Title 35 of the United States Code provides:
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`(b) PATENT OWNER’S ACTION.–An inter partes review
`may not be instituted if the petition requesting the proceeding is
`filed more than 1 year after the date on which the petitioner,
`real party in interest, or privy of the petitioner is served with a
`complaint alleging infringement of the patent. The time
`limitation set forth in the preceding sentence shall not apply to a
`request for joinder under subsection (c).
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`“Whether a party who is not a named participant in a given
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`proceeding nonetheless constitutes a ‘real party-in-interest’ . . . to that
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`proceeding is a highly fact-dependent question.” Office Patent Trial Practice
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`Guide, 77 Fed. Reg. 48,756, 48,759 (2012) (citations omitted).
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`[T]he spirit of that formulation as to IPR . . . proceedings means
`that, at a general level, the ‘real party-in-interest’ is the party
`that desires review of the patent. Thus, the ‘real party-in-
`interest’ may be the petitioner itself, and/or it may be the party
`or parties at whose behest the petition has been filed.
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`Id. (emphasis added).
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`Multiple factors are relevant to the issue of whether a non-party may
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`be recognized as a “real party-in-interest” or “privy.” Id. (citing Taylor v.
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`Sturgell, 553 U.S. 880, 893–895, 893 n.6 (2008)). A common consideration
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`is whether the non-party exercised or could have exercised control over a
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`party’s participation in a proceeding. Id. (citing Taylor, 553 U.S. at 895).
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`The concept of control generally means that “it should be enough that the
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`nonparty has the actual measure of control or opportunity to control that
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`might reasonably be expected between two formal coparties.” Id. (citation
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`omitted). The non-party’s participation may be overt or covert, and
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`evidence of that participation may be direct or circumstantial, but the
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`evidence as a whole must show that the non-party possessed effective
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`6
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`IPR2014-00715
`Patent 6,934,945 B1
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`control from a practical standpoint. Gonzalez v. Banco Cent. Corp., 27 F.3d
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`751, 759 (1st Cir. 1994). The inquiry is not based on isolated facts, but
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`rather must consider the totality of the circumstances. Id.
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`Analysis
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`After considering the evidence presented by Petitioner and Patent
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`Owner, we are persuaded that VeriFone is a real party-in-interest. The
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`evidence demonstrates that VeriFone desires an inter partes review of the
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`’945 patent and has controlled, and/or has had an opportunity to control, the
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`events leading up to the filing of the Petition. Petitioner acknowledges that
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`“VeriFone, per an indemnity with [Petitioner], is providing the funding for
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`this petition.” Corr. Pet. 1. Per the Letter Addendum, we understand this
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`“funding” to include Petitioner’s attorney fees and at least the nearly
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`$24,000 petition fees associated with filing the Petition. Ex. 1011, 1; Master
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`Engagement Agreement, Section 6.1. We find that per this same indemnity
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`agreement VeriFone had an opportunity to control all of the events leading
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`up to the filing of the Petition. In particular, Section 6.1.3 of the Master
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`Engagement Agreement indicates that VeriFone “shall have the right at its
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`expense to employ counsel . . . to defend against Claims that VeriFone is
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`responsible for . . . and to compromise, settle and otherwise dispose of such
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`Claims.” Id., 3. The Letter Addendum indicates that “VeriFone has agreed
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`to this associated indemnification as to the IPR.” Id., 1. Thus, up to
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`April 28, 2014 (i.e., two days prior to the Petition being filed), VeriFone had
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`every opportunity and right, per the indemnification agreement, to control
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`the filing of the Petition and pursue an inter partes review of the challenged
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`patent. That the opportunity to control ended just two days prior to filing the
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`Petition, does not negate the control or opportunity to control the events
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`7
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`IPR2014-00715
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`leading up to the filing of the Petition. By Petitioner’s own admission, and
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`during the period leading up to the filing of the Petition, counsel for
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`VeriFone communicated with counsel for Petitioner about initiating an IPR,
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`including discussing what prior art to assert. Corr. Pet. 2. Moreover,
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`VeriFone agreed to, and did, pay for all costs associated with the filing of
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`the Petition. We have considered Petitioner’s arguments that it alone
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`decided to use different prior art for this proceeding compared to the prior
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`art that VeriFone asserted in the 2008 Litigation. See id. Petitioner,
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`however, does not provide sufficient evidence that would support this
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`assertion, and in any event, even if true, that alone would not outweigh the
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`other evidence of record that tends to show that VeriFone controlled and/or
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`had the opportunity to control the filing of the Petition.
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`Moreover, we find that VeriFone has an interest in the review of the
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`’945 patent in this proceeding. VeriFone was found to have infringed the
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`’945 patent in the 2008 Litigation and was unable to invalidate the
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`’945 patent in that proceeding. See Ex. 1007 ¶ 8. VeriFone also must
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`defend and indemnify Petitioner in the 2013 Litigation for Petitioner’s
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`alleged willful infringement of the ’945 patent from the sale of VeriFone
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`products that were found to have infringed the ’945 patent in the 2008
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`Litigation. Invalidity of the ’945 patent has been asserted in the 2013
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`Litigation that VeriFone is defending under its indemnity agreement with
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`First Data Merchant Services. Ex. 2003, 3 (second affirmative defense).
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`VeriFone has an interest in an inter partes review of the ’945 patent at least
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`equal to that of Petitioner. The record evidence establishes, however, that
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`VeriFone could not have pursued an inter partes review on its own or in
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`8
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`IPR2014-00715
`Patent 6,934,945 B1
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`conjunction with the Petitioner, because VeriFone would have been barred
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`from doing so pursuant to 35 U.S.C. § 315(b).
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`We also have considered Petitioner’s argument that “sole and
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`exclusive control over this petition rests entirely with [Petitioner].” Pet. 1.
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`In support of that argument, however, Petitioner refers to the April 28, 2014
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`Letter Addendum. Per the Letter Addendum, the indemnification (pursuant
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`to the Master Engagement Agreement) from VeriFone to Petitioner gave
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`VeriFone full opportunity to control all aspects of preparing the Petition
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`prior to April 28, 2014—just two days prior to the actual filing of the
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`Petition. By then, presumably, most of the work had been done by both
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`Petitioner and VeriFone in preparation of the 51-page Petition, assemblance
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`of prior art, and gathering of witnesses and their declarations, and Petitioner
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`does not indicate otherwise. That Petitioner and VeriFone agreed that
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`Petitioner would have total control after April 28, 2014 is of no moment. A
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`petition is a petitioner’s main brief in an inter partes review, on which a
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`petitioner relies to persuade us to institute an inter partes review and
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`eventually to make a final written decision regarding the patentability of
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`challenged claims. See 35 U.S.C. §§ 311, 314, 316. Petitioner, as a party
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`who controlled or had the opportunity to control what went into the Petition,
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`is a real party-in-interest despite turning over the reins to another party after
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`all of the work has been done. For all of the above reasons, we conclude
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`that VeriFone participated in, controlled, and/or had the opportunity to
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`control the filing of the Petition in material respects and is a real party-in-
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`interest to this proceeding. Because VeriFone is a real party-in-interest and
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`was served with a complaint alleging infringement of the ’683 patent in the
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`9
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`IPR2014-00715
`Patent 6,934,945 B1
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`2008 Litigation more than one year before the filing of the Petition, the
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`Petition is untimely under 35 U.S.C. § 315(b).
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`Moreover, because VeriFone is a real party-in-interest, the Petition
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`does not identify “all real parties in interest” as required by 35 U.S.C.
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`§ 312(a). As a result, the Board determines that the Petition is incomplete.
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`Section 42.106(b) of Title 37 of the Code of Federal Regulations
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`provides:
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`(b) Incomplete petition. Where a party files an
`incomplete petition, no filing date will be accorded, and the
`Office will dismiss the petition if the deficiency in the petition
`is not corrected within one month from the notice of an
`incomplete petition.
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`Ordinarily, because the Petition is incomplete, the Board would give
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`Petitioner one month from the date of this decision to correct the deficiency
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`and list VeriFone as a real party-in-interest. In this instance, however,
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`curing the omission of VeriFone as a real party-in-interest would be futile
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`because, even if corrected, the earliest filing date that could be accorded to
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`the Petition that identifies VeriFone as a real party-in-interest would not fall
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`within the one-year period specified by 35 U.S.C. § 315(b).4
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`II.
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`CONCLUSION
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`The Board denies the Petition because it was not filed within the time
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`imposed by 35 U.S.C. § 315(b) and does not comply with 35 U.S.C.
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`§ 312(a).
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`4 Petitioner was served with a complaint alleging infringement of the ’945
`patent on May 2, 2013. Thus, the one-year period during which Petitioner
`could file a Petition expired on May 2, 2014. See 35 U.S.C. § 21(b).
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`10
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`IPR2014-00715
`Patent 6,934,945 B1
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`III. ORDER
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`Accordingly, it is
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`ORDERED that the Petition is denied and no trial is instituted.
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`11
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`IPR2014-00715
`Patent 6,934,945 B1
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`For PETITIONER:
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`Paul C. Haughey
`Darin J. Gibby
`Kilpatrick Townsend & Stockton LLP
`phaughey@kilpatricktownsend.com
`dgibby@kilpatricktownsend.com
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`For PATENT OWNER
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`Mark R. Buscher
`D. Richard Anderson
`George Dolina
`Birch, Stewart, Kolasch & Birch, LLP
`mrb@buscherlaw.com
`dra@bskb.com
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`12
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