The PTAB Requires Settlement and Collateral Agreements to Terminate IPRs

by Jo Dale Carothers, Ph.D.
The IP Law Blog

Following the America Invents Act, a petition for inter partes review (“IPR”) has become a common method for challenging the validity of a patent before the Patent Trial and Appeal Board (“PTAB”) at the United States Patent and Trademark Office (“USPTO”).  Such challenges are often brought by petitioners in response to a patent owner suing them for patent infringement.  But what happens to the IPR if the parties settle the infringement lawsuit?

When parties settle the underlying dispute, they can request that the IPR be terminated.  Under 35 U.S.C. § 317(a),

An inter partes review instituted under this chapter shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed.

However, under 35 U.S.C. § 317(b), any settlement agreement, including any collateral agreements that are referenced, must be filed with the USPTO before the termination of the IPR.  Specifically, the statute states:

Any agreement or understanding between the patent owner and a petitioner, including any collateral agreements referred to in such agreement or understanding, made in connection with, or in contemplation of, the termination of an inter partes review under this section shall be in writing and a true copy of such agreement or understanding shall be filed in the Office before the termination of the inter partes review as between the parties. At the request of a party to the proceeding, the agreement or understanding shall be treated as business confidential information, shall be kept separate from the file of the involved patents, and shall be made available only to Federal Government agencies on written request, or to any person on a showing of good cause.

Questions, however, have been raised as to what constitutes collateral agreements that much be filed with the USPTO under this statute.

In DTN, LLC v. Farms Technology, LLC, the parties filed a Joint Motion to Terminate along with the settlement agreement between the parties.  The settlement agreement referenced two other agreements (the “Additional Agreements”), but the patent owner, Farms Technology, was not a party to those Additional Agreements.  Further, the parties argued that the Additional Agreements “were not ‘made in connection with, or in contemplation of,’” the termination of the IPR proceedings.  As a result, the parties argued they did not have to file the Additional Agreements with the PTAB.  The PTAB disagreed stating that “in requiring the filing of the Settlement Agreement ‘including any collateral agreements referred to’ in the Settlement Agreement, the statute does not require any more than that.”  In other words, the collateral agreements do not have to be between the petitioner and patent owner for disclosure to be required.  In addition, the statute does not require the Additional Agreements to have been “made in connection with, or in contemplation of, the termination” of the IPR.  The PTAB said, “‘any’ means ‘any’.” Thus it was irrelevant that the patent owner in this case was not a party to the Additional Agreements, and the purpose behind the Additional Agreements was also irrelevant.

Further explaining its reasoning, the PTAB said that interpreting the statute otherwise “would allow parties to IPR proceedings to circumvent the statute’s filing requirement easily, thereby frustrating the purpose of the statute.”  The parties could enter into simple settlement agreements while referencing undisclosed agreements between one or more related but different entities that contained terms the parties wanted to hide from review by the Federal Government or by persons showing good cause under 35 U.S.C. § 317(b).

On June 11, 2020, the PTAB designated its earlier decision in DTN, LLC as precedential meaning that this decision is now binding authority on this issue in future cases.