Trials@uspto.gov
`571-272-7822
`
`
`
`
`Paper 8
`Date: October 17, 2014
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`FIRST DATA CORPORATION,
`Petitioner,
`
`v.
`
`CARDSOFT (ASSIGNMENT FOR THE
`BENEFIT OF CREDITORS), LLC,
`Patent Owner.
`____________
`
`Case IPR2014-00720
`Patent 7,302,683 B2
`____________
`
`
`Before SALLY C. MEDLEY, MEREDITH C. PETRAVICK, and
`JAMES P. CALVE, Administrative Patent Judges.
`
`
`PER CURIAM.
`
`
`
`DECISION
`Denying Institution of Inter Partes Review
`37 C.F.R. § 42.108
`
`
`
`
`571-272-7822
`
`
`
`
`Paper 8
`Date: October 17, 2014
`
`
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`FIRST DATA CORPORATION,
`Petitioner,
`
`v.
`
`CARDSOFT (ASSIGNMENT FOR THE
`BENEFIT OF CREDITORS), LLC,
`Patent Owner.
`____________
`
`Case IPR2014-00720
`Patent 7,302,683 B2
`____________
`
`
`Before SALLY C. MEDLEY, MEREDITH C. PETRAVICK, and
`JAMES P. CALVE, Administrative Patent Judges.
`
`
`PER CURIAM.
`
`
`
`DECISION
`Denying Institution of Inter Partes Review
`37 C.F.R. § 42.108
`
`
`
`
`
`IPR2014-00720
`Patent 7,302,683 B2
`
`INTRODUCTION
`
`I.
`
`
`
`
`
`First Data Corporation (“Petitioner”) filed a Petition (“Pet.”) for inter
`
`partes review (“IPR”) of claims 1–5 of U.S. Patent No. 7,302,683 B2 (“the
`
`’683 patent”) pursuant to 35 U.S.C. §§ 311–319 on May 1, 2014. Paper 1.
`
`Cardsoft (Assignment for the Benefit of Creditors), LLC (“Patent Owner”)
`
`filed a Preliminary Response (“Prelim. Resp.”) on August 8, 2014. Paper 8.
`
`We have jurisdiction under 35 U.S.C. § 314.
`
`Upon consideration of the Petition, we determine that a third party,
`
`VeriFone, Inc. (“VeriFone”), is a real party-in-interest that was served with a
`
`complaint alleging infringement of the ’683 patent more than one year
`
`before the filing of this Petition. The Petition is, therefore, untimely under
`
`35 U.S.C. § 315(b). Moreover, because the Petition does not identify
`
`VeriFone as a real party-in-interest, the Petition fails to identify “all the real
`
`parties in interest,” as required by 35 U.S.C. § 312(a). Accordingly, the
`
`Petition is denied.
`
`A.
`
`Related Proceedings
`
`Petitioner identifies the following related district court proceedings
`
`that involve the ’945 patent: Cardsoft (Assignment for the Benefit of
`
`Creditors) LLC v. First Data Corp., Civil Action No. 2:13-cv-290 (E.D.
`
`Tex.) (“the 2013 Litigation”) and Cardsoft, Inc. v. VeriFone Systems, Inc.,
`
`Civil Action No. 2:08-cv-00098 (E.D. Tex.) (“the 2008 Litigation”). Pet. 5.
`
`B. Real Party-in-Interest
`
`Patent Owner argues that VeriFone is a real party-in-interest to this
`
`proceeding, and because the Petition was filed more than one year after the
`
`date on which VeriFone was served with a complaint alleging infringement
`
`
`
`2
`
`
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`IPR2014-00720
`Patent 7,302,683 B2
`
`
`of the patent, an inter partes review may not be instituted due to the time
`
`
`
`limitation set forth in 35 U.S.C. § 315(b). Prelim. Resp. 7.
`
`Facts
`
`Patent Owner initiated the 2008 Litigation by filing and serving a
`
`complaint in 2008 accusing VeriFone, VeriFone Systems, Inc., and others of
`
`infringing the ’945 patent. Pet. 5; Prelim. Resp. 6–7. On June 8, 2012, a
`
`jury rendered a verdict that the ’683 patent was valid and infringed by
`
`VeriFone and others. Ex. 1007 ¶ 12 (page 4). VeriFone has appealed that
`
`decision to the U.S. Court of Appeals for the Federal Circuit. See Ex. 2004.
`
`Patent Owner initiated the 2013 Litigation by filing a complaint in the
`
`Eastern District of Texas and serving the complaint on Petitioner on May 2,
`
`2013. Exs. 1006, 1007. Patent Owner alleged that Petitioner and First Data
`
`Merchant Services Corporation infringed the ’683 patent by selling
`
`Petitioner’s products. Ex. 1007 ¶ 11. Patent Owner also alleged that
`
`Petitioner willfully infringed the ’945 patent by continuing to sell VeriFone
`
`products that were found to infringe the ’945 patent in the 2008 litigation.
`
`Id. ¶ 9 (page 3). Patent Owner sought enhanced damages and associated
`
`attorneys’ fees and costs. Id. ¶ 13.
`
`VeriFone is indemnifying Petitioner regarding certain claims in the
`
`2013 Litigation. Ex. 1011, 1. As part of the indemnification, VeriFone can
`
`choose counsel to defend Petitioner. Id., 3. Petitioner is represented in the
`
`2013 Litigation by the same counsel that represented VeriFone in the 2008
`
`Litigation, first the law firm of Jones Day and later the law firm of Orrick,
`
`Herrington & Sutcliffe. Ex. 2002, 2005, 2006. Counsel representing
`
`Petitioner in this proceeding are registered practitioners from the law firm of
`
`Kilpatrick Townsend & Stockton. Pet. 2, 50.
`
`
`
`3
`
`
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`IPR2014-00720
`Patent 7,302,683 B2
`
`
`VeriFone sought unsuccessfully to invalidate the ’945 patent in the
`
`
`
`2008 Litigation. Ex. 1007 ¶ 12 (page 4); see Pet. 2. VeriFone provided
`
`copies of prior art from the 2008 Litigation to Petitioner for this IPR and
`
`consulted with Petitioner’s counsel about prior art that may invalidate the
`
`’683 patent. Pet. 2.
`
`VeriFone agreed to fund this IPR. Id. at 1; Ex. 1011, p. 1. VeriFone’s
`
`funding covers attorney’s fees and costs associated with this IPR. Ex. 1011,
`
`1.
`
`The Petition is fifty pages in length and includes thirteen exhibits.
`
`Pet. The exhibits to the Petition include lengthy prior art references and
`
`declarations of Stephen Gray and Lawrence Forsely. Exs. 1002–1004, 1009,
`
`1010, 1012, 1013.
`
`On April 28, 2014, Petitioner and VeriFone signed a letter agreement.
`
`Ex. 1011 (“the Letter Addendum”). The Letter Addendum states that
`
`VeriFone currently is indemnifying Petitioner in relation to certain claims
`
`asserted in the 2013 Litigation per a “Master Engagement Agreement.”1
`
`The Letter Addendum describes that VeriFone has agreed to indemnify
`
`Petitioner for the attorney’s fees and costs associated with this IPR, citing a
`
`provision of the Master Engagement Agreement, that VeriFone “shall have
`
`the right at its expense to employ counsel . . . to defend against Claims that
`
`VeriFone is responsible for . . . and to compromise, settle and otherwise
`
`dispose of such claims.” Ex. 1011, 1. The Letter Addendum also states that:
`
`
`
`
`1 Sections of the Master Engagement Agreement are attached
`to, and are part of, the Exhibit 1011 Letter Addendum. Id. at 2–4.
`
`
`
`4
`
`
`
`
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`IPR2014-00720
`Patent 7,302,683 B2
`
`
`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.
`
`Id. The Letter Addendum bears the signature of VeriFone’s Executive Vice
`
`President of Corporate Development and General Counsel, and a Senior
`
`Counsel of Petitioner. Id.
`
`On May 1, 2014, three days after the Letter Addendum was executed,
`
`Petitioner filed the Petition for this IPR and identified itself as the sole real
`
`party-in-interest. Pet. 1; Paper 4.
`
`Principles of Law
`
`Section 315(b) of Title 35 of the United States Code provides:
`
`(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).
`
`“Whether a party who is not a named participant in a given
`
`proceeding nonetheless constitutes a ‘real party-in-interest’ . . . to that
`
`proceeding is a highly fact-dependent question.” Office Patent Trial Practice
`
`Guide, 77 Fed. Reg. 48,756, 48,759 (2012) (citations omitted).
`
`
`
`
`
`5
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`IPR2014-00720
`Patent 7,302,683 B2
`
`
`[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.”
`
`
`
`Id. (emphasis added).
`
`Multiple factors are relevant to the issue of whether a non-party may
`
`be recognized as a “real party-in-interest” or “privy.” Id. (citing Taylor v.
`
`Sturgell, 553 U.S. 880, 893–895, 893 n.6 (2008)). A common consideration
`
`is whether the non-party exercised or could have exercised control over a
`
`party’s participation in a proceeding. Id. (citing Taylor, 553 U.S. at 895).
`
`The concept of control generally means that “it should be enough that the
`
`nonparty has the actual measure of control or opportunity to control that
`
`might reasonably be expected between two formal coparties.” Id. (citation
`
`omitted). The non-party’s participation may be overt or covert, and
`
`evidence of that participation may be direct or circumstantial, but the
`
`evidence as a whole must show that the non-party possessed effective
`
`control from a practical standpoint. Gonzalez v. Banco Cent. Corp., 27 F.3d
`
`751, 759 (1st Cir. 1994). The inquiry is not based on isolated facts, but
`
`rather must consider the totality of the circumstances. Id.
`
`Analysis
`
`After considering the evidence presented by Petitioner and Patent
`
`Owner, we are persuaded that VeriFone is a real party-in-interest. The
`
`evidence demonstrates that VeriFone desires an inter partes review of the
`
`’683 patent and has controlled, and/or has had an opportunity to control, the
`
`events leading up to the filing of the Petition. Petitioner acknowledges that
`
`“VeriFone, per an indemnity with [Petitioner], is providing the funding for
`
`this petition.” Pet. 1. Per the Letter Addendum, we understand this
`
`
`
`6
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`
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`IPR2014-00720
`Patent 7,302,683 B2
`
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`“funding” to include Petitioner’s attorney fees and at least the nearly
`
`
`
`$24,000 petition fees associated with filing the Petition. Ex. 1011, 1; Master
`
`Engagement Agreement, Section 6.1. We find that per this same indemnity
`
`agreement VeriFone had an opportunity to control all of the events leading
`
`up to the filing of the Petition. In particular, Section 6.1.3 of the Master
`
`Engagement Agreement indicates that VeriFone “shall have the right at its
`
`expense to employ counsel . . . to defend against Claims that VeriFone is
`
`responsible for . . . and to compromise, settle and otherwise dispose of such
`
`Claims.” Id., 3. The Letter Addendum indicates that “VeriFone has agreed
`
`to this associated indemnification as to the IPR.” Id., 1. Thus, up to
`
`April 28, 2014 (i.e., two days prior to the Petition being filed), VeriFone had
`
`every opportunity and right, per the indemnification agreement, to control
`
`the filing of the Petition and pursue an inter partes review of the challenged
`
`patent. That the opportunity to control ended just three days prior to filing
`
`the Petition, does not negate the control or opportunity to control the events
`
`leading up to the filing of the Petition. By Petitioner’s own admission, and
`
`during the period leading up to the filing of the Petition, counsel for
`
`VeriFone communicated with counsel for Petitioner about initiating an IPR,
`
`including discussing what prior art to assert. Pet. 2. Moreover, VeriFone
`
`agreed to, and did, pay for all costs associated with the filing of the Petition.
`
`We have considered Petitioner’s arguments that it alone decided to use
`
`different prior art for this proceeding compared to the prior art that VeriFone
`
`asserted in the 2008 Litigation. See id. Petitioner, however, does not
`
`provide sufficient evidence that would support this assertion, and in any
`
`event, even if true, that alone would not outweigh the other evidence of
`
`
`
`7
`
`
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`IPR2014-00720
`Patent 7,302,683 B2
`
`
`record that tends to show that VeriFone controlled and/or had the
`
`
`
`opportunity to control the filing of the Petition.
`
`Moreover, we find that VeriFone has an interest in the review of the
`
`’683 patent in this proceeding. VeriFone was found to have infringed the
`
`’683 patent in the 2008 Litigation and was unable to invalidate the ’683
`
`patent in that proceeding. See Ex. 1007, ¶ 12 (page 4). VeriFone also must
`
`defend and indemnify Petitioner in the 2013 Litigation for Petitioner’s
`
`alleged willful infringement of the ’683 patent from the sale of VeriFone
`
`products that were found to have infringed the ’683 patent in the 2008
`
`Litigation. Invalidity of the ’683 patent has been asserted in the 2013
`
`Litigation that VeriFone is defending under its indemnity agreement with
`
`First Data Merchant Services. Ex. 2003, 3 (second affirmative defense).
`
`VeriFone has an interest in an inter partes review of the ’945 patent at least
`
`equal to that of Petitioner. The record evidence establishes, however, that
`
`VeriFone could not have pursued an inter partes review on its own or in
`
`conjunction with the Petitioner, because VeriFone would have been barred
`
`from doing so pursuant to 35 U.S.C. § 315(b).
`
`We also have considered Petitioner’s argument that “sole and
`
`exclusive control over this petition rests entirely with [Petitioner].” Pet. 1.
`
`In support of that argument, however, Petitioner refers to the April 28, 2014
`
`Letter Addendum. Per the Letter Addendum, the indemnification (pursuant
`
`to the Master Engagement Agreement) from VeriFone to Petitioner gave
`
`VeriFone full opportunity to control all aspects of preparing the Petition
`
`prior to April 28, 2014—just three days prior to the actual filing of the
`
`Petition. By then, presumably, most of the work had been done by both
`
`Petitioner and VeriFone in preparation of the 50-page Petition, assemblance
`
`
`
`8
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`
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`IPR2014-00720
`Patent 7,302,683 B2
`
`
`of prior art, and gathering of witnesses and their declarations, and Petitioner
`
`
`
`does not indicate otherwise. That Petitioner and VeriFone agreed that
`
`Petitioner would have total control after April 28, 2014 is of no moment. A
`
`petition is a petitioner’s main brief in an inter partes review, on which a
`
`petitioner relies to persuade us to institute an inter partes review and
`
`eventually to make a final written decision regarding the patentability of
`
`challenged claims. See 35 U.S.C. §§ 311, 314, 316. Petitioner, as a party
`
`who controlled or had the opportunity to control what went into the Petition,
`
`is a real party-in-interest despite turning over the reins to another party after
`
`all of the work has been done. For all of the above reasons, we conclude
`
`that VeriFone participated in, controlled, and/or had the opportunity to
`
`control the filing of the Petition in material respects and is a real party-in-
`
`interest to this proceeding. Because VeriFone is a real party-in-interest and
`
`was served with a complaint alleging infringement of the ’683 patent in the
`
`2008 Litigation more than one year before the filing of the Petition, the
`
`Petition is untimely under 35 U.S.C. § 315(b).
`
`Moreover, because VeriFone is a real party-in-interest, the Petition
`
`does not identify “all real parties in interest” as required by 35 U.S.C.
`
`§ 312(a). As a result, the Board determines that the Petition is incomplete.
`
`Section 42.106(b) of Title 37 of the Code of Federal Regulations
`
`provides:
`
`(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.
`
`Ordinarily, because the Petition is incomplete, the Board would give
`
`Petitioner one month from the date of this decision to correct the deficiency
`
`
`
`9
`
`
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`IPR2014-00720
`Patent 7,302,683 B2
`
`
`and list VeriFone as a real party-in-interest. In this instance, however,
`
`
`
`curing the omission of VeriFone as a real party-in-interest would be futile
`
`because, even if corrected, the earliest filing date that could be accorded to
`
`the Petition that identifies VeriFone as a real party-in-interest would not fall
`
`within the one-year period specified by 35 U.S.C. § 315(b).2
`
`
`
`II.
`
`CONCLUSION
`
`The Board denies the Petition because it was not filed within the time
`
`imposed by 35 U.S.C. § 315(b) and does not comply with 35 U.S.C.
`
`§ 312(a).
`
`III. ORDER
`
`Accordingly, it is
`
`ORDERED that the Petition is denied and no trial is instituted.
`
`
`
`
`
`
`2 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).
`
`
`
`10
`
`
`
`IPR2014-00720
`Patent 7,302,683 B2
`
`For PETITIONER:
`
`
`
`
`
`Paul C. Haughey
`Darin J. Gibby
`Kilpatrick Townsend & Stockton LLP
`phaughey@kilpatricktownsend.com
`dgibby@kilpatricktownsend.com
`
`For PATENT OWNER
`
`Mark R. Buscher
`D. Richard Anderson
`George Dolina
`Birch, Steward, Kolasch & Birch, LLP
`mrb@buscherlaw.com
`dra@bskb.com
`
`
`
`
`
`11
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