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Standing for CBM Review Requires a “Real” and “Substantial” Controversey

August 02, 2018
Patent Office Trials Blog

In Ticketnetwork, Inc. v. Ceats, LLC, CBM2018-00004 (PTAB 2018) (Final Written Decision), the Patent Trial and Appeal Board (“the Board”) held that Ticketnetwork failed to establish standing under 37 C.F.R. § 42.302, and accordingly did not institute a covered business method (“CBM”) review of U.S. Patent No. 8,229,774 (the “’744 Patent”).

In 2010, Ceats sued Ticketmaster and others for infringement of a patent related to the ‘744 Patent. While the case ultimately resulted in the Federal Circuit affirming invalidation of the related patent, the parties to the instant CBM settled – Ticketmaster was granted a license to certain Ceats patents including the ‘744 Patent, wherein Ticketmaster was to pay a royalty to Ceats. (Decision, pages 6-7).

About a year and a half after the Federal Circuit affirmance, Ticketmaster sent a letter to Ceats purporting to terminate the license agreement. Ceats responded in a July 2015 letter and noted that they “have determined that [Ticketmaster is] . . .  infringing on CEATS’ patent rights, including. . . [the ‘744 Patent]” . . . “. (Id., page 7).

Ticketmaster subsequently filed a declaratory judgment action against Ceats, arguing that: (1) the license agreement was unenforceable; (2) Ticketmaster does not infringe any of the patents referenced in Ceats ‘ letter; and (3) that the patents referenced in Ceats’ letter were invalid. (Id., page 7).

In June 2017, Ticketmaster moved to voluntarily dismiss the claims regarding non-infringement and invalidity. ((Id., pages 8-9).

Finally, in November 2017, Ticketnetwork filed a petition to instate CBM review on all eight claims of the ‘744 Patent. (Id., page 9).

Under § 42.302, only parties who “have been sued or charged with infringement . . . are permitted to file a petition seeking a CBM []  review”. The Board defines “charged with infringement as ”a real and substantial controversy regarding infringement . . .[,]  such that the petitioner would have standing to bring a declaratory judgment action in Federal court”. (Id., pages 4-5).

In support of their standing position, Ticketnetwork argued that at the time of filing the CBM petition (November 2017), Ceats’ July 2015 letter, coupled with Ceats’ statements in a summary judgment hearing for claims related to the licensing dispute, show that, under the totality of the circumstances, Ticketmaster was “charged with infringement” of the ‘744 Patent by Ceats. (Decision, pages 9-10).

Ceats on the other hand argued that “the letter and the statement at the summary judgment hearing [(wherein Ceats conceded that if the agreement was held unenforceable, Ticketnetwork would infringe]) are together or apart, not specific enough to meet the “charged for infringement” prong for CBM standing.” (Id., page 10).

Regarding Ceats July 2015, letter the Board held that since nearly 28 months had passed since Ceats sent the letter and when Ticketmaster filed the instant CBM petition, “whatever weight in favor of standing the July 2015 Letter had . . .  has been considerably diminished”. The Board also gave little weight to the letter since the letter didn’t assert infringement of specific patent. (Id., page 14; see id., page 12; see also, Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed. Cir. 2009)).

As to Ceats statements at the Summary Judgment hearing, the Board explained that although Ceats indicated that it could sue for infringement if the agreement was terminated, Ceats never indicated that it actually planned to sue if the agreement was terminated. (Decision, page 15).

The Board also briefly touched upon a covenant not to sue provided by Ceats after the filing of the petition. Without reaching the issue of whether post petition filing conduct is relevant to the standing issue, the Board noted in apparent dicta that it does “not believe offering of a covenant not to sue weighs in favor of standing.” (Id., page 14).

Thus, the Board held that under the totality of the circumstances, Ticketnetwork had failed to demonstrate a “real” and “substantial” controversy sufficient to bring a declaratory judgment action or in this case, to file a CBM review petition.