Settlement Lesson in IPR: Settle Early!

By: Azy Kokabi

    35 USC §317 allows parties to terminate an instituted inter partes review (IPR) as to the petitioner “unless the Office has decided the merits of the proceeding before the request for termination is filed.”  See 35 U.S.C. §317; see also Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48768 (August 14, 2012)(“the Board expects that a proceeding will terminate after the filing of a settlement agreement, unless the Board has already decided the merits of the proceeding”).  Recent orders from the Patent Trial and Appeal Board (PTAB) reveal that the PTO may refuse to terminate an IPR proceeding even though the parties have negotiated a settlement agreement.  In particular, that the Office may decide that a settlement agreement between the parties does not terminate the IPR if the proceeding has advanced into the late stages, without a final decision.  Thus even though a settlement agreement may terminate the IPR as to the petitioner, the Office may nevertheless continue the proceedings if it has advanced to a late stage and issue a final written decision as to the Patent Owner’s claims.  See Blackberry Corp., et al v. Mobilemedia Ideas, LLC (IPR2013-00016)(Paper No. 31); Starwood Hotels & Resorts v. LoneStar Wifi, LLC (IPR2014-00101)(Paper No. 11) and Blackberry Corp et al., v. Mobilemedia Ideas, LLC (IPR 2013-0036)(Paper No. 64).  The Board’s Orders make clear that settling an IPR early may be just as important as negotiating the terms of the agreement. 

    In Blackberry Corp et al., v. Mobilemedia Ideas, LLC (IPR 2013-0036), the parties filed a joint motion to terminate the proceeding after the patent owner filed a patent owner response, the petitioner filed a reply, and an oral hearing was held.  The Board determined that in view of the advanced stage of the proceeding, rather than terminate the proceeding, the Board will proceed to a final decision. See Paper No. 64.  In another IPR involving Blackberry and Mobilemedia (IPR 2013-00016), the Board similarly decided that due to the advanced stage of the proceeding, it would proceed to the final decision.  In both cases, the involvement of Blackberry, the petitioner, was terminated.  In effect, the petitioner was able to (1) settle the action and maintain the terms of the settlement in confidentiality; (2) obtain a final decision on the patent (which in view of the Board’s recent trend will likely cancel or find the patent owner’s claims unpatentable), (3) while preventing any estoppel from attaching due to the termination of the petitioner’s involvement.   

    The Board’s refusal to terminate an IPR proceeding in advanced stages of the proceeding will likely encourage parties to settle early.  If the settlement does not happen early (preferably before oral argument), then the patent owner may be less motivated to enter into a settlement agreement, knowing that the Board may nevertheless find its claims unpatentable and prevent estoppel from applying to the petitioner.