Indemnity Agreements Can Be Sources of IPR Privity

18
Dec

Indemnity Agreements Can Be Sources of IPR Privity

So, let’s say you want to file a petition for IPR in response to an infringement complaint. If the plaintiff previously filed a complaint against someone you indemnify, according to the PTAB (“the Board”) you might be barred from filing an IPR. This happens because some indemnity provisions put the parties in privity for the purposes of the IPR time bar—when one party’s clock starts, so does the other’s. Because a bar on IPR petitions dramatically affects party rights, it’s worth investigating when an indemnity agreement might establish privity.

Our examination starts with the text of 35 U.S.C. § 315(b), which states that “inter partes review may not be instituted if the petition . . . is filed more than 1 year after . . . the petitioner, . . . or privy of the petitioner is served with a complaint alleging infringement of the patent.”1 Unfortunately, the statute does not define “privy.” The Federal Circuit filled this gap by applying “common law considerations” to define privy—specifically, the Federal Circuit pointed to the six “considerations” set forth in Taylor v. Sturgell.2 And it is the 4th consideration—“assumption of control over the litigation in which the judgment was rendered”—that clouds some indemnity agreements.3

Many indemnity agreements let the indemnitor assume some control over the indemnitee’s litigation. How much control is enough to establish privity, however, is tough to gauge.

In some decisions, the Board has focused on active control of the litigation. For example, in Broadcom v. Ericsson the Board stated the “normal rule [is] that privity requires a finding of active control of the trial.”4 The Board then suggested that an indemnity agreement, by itself, is not enough to find privity.5 And not only that, but privity only goes in one direction—an indemnitee will not be privy to a suit served on an indemnitor.6 At least, not merely resulting from the indemnification.

But other times the Board has found “active control” not only unnecessary, but “immaterial to the privity determination.”7 Quoting WesternGeco, the Board instead suggested that the correct test should focus on “whether the petitioner and the prior litigant’s relationship—as it relates to the lawsuit—is sufficiently close that it can be fairly said that the petitioner had a full and fair opportunity to litigate the validity of the patent in that lawsuit.”8 This means mere opportunity, not activity, controls. For example, an indemnity agreement that allows the petitioner-indemnitor “sole authority . . . to direct and control all defense, settlement, and comprise negotiations” might be sufficient to establish privity, even in the absence of actual control.9

The Board recently applied this second interpretation in ARRIS v. ChanBond.10 In that case, ARRIS sold cable systems and cable services to Charter Communications, amongst others.11 That sale was governed by a sales agreement, which stated: “ARRIS will pay Damages as the result of the Claim provided that . . . (iii) Customer gives ARRIS reasonable assistance in and sole control of the defense.”12 Charter was then served with an infringement complaint based on the cable systems and services.13 Over a year later, ARRIS filed an IPR petition challenging one of the asserted patents.14 Because Charter had to give ARRIS “sole control of the defense” to receive any indemnity payment, the Board found ARRIS “had the opportunity to exercise ‘sole control’ of those [indemnitees] defense” more than one year before it filed its IPR petition.15 ARRIS’ argument that it lacked actual control, and could not get control, was unsuccessful.16 Thus, the Board found that ARRIS’s IPR petition was barred under § 315(b).

In conclusion, sometimes a complaint against an indemnitee, even a dismissed complaint,17 can start the indemnitor’s § 315(b) one-year timer just because of the indemnity agreement. And because of this, the indemnitor will have to either file its IPR petitions before that timer runs out or argue about the scope of its indemnity agreements before the Board. Until the Board further clarifies what constitutes sufficient indemnitor control to establish privity, indemnitors should be aware of any complaints filed against their indemnitees and should consider whether any desired IPR petition should be filed within one year of such complaints.

1 35 U.S.C. § 315(b) (emphasis added).
2 WesternGeco v. ION Geophysical Corp., 889 F.3d. 1308, 1319 (Fed. Cir. 2018) (quoting Taylor v. Sturgell, 553 U.S. 880, 894–95 (2008)).
3 Taylor, 553 U.S. at 895.
4 Broadcom Corp. v. Telefonaktiebolaget LM Ericsson, Nos. IPR2013-00601, IPR2013-00602, IPR2013-00636 at 8 (P.T.A.B. Jan. 24, 2014).
5 Id. at 9 (“Contrary to Ericsson’s assertion that “[t]he weight of authority strongly supports that an indemnity agreement . . . establish[es] privity,” Mot. 6, Bros. Inc, TRW, Dentsply and other cases noted supra illustrate that more is required.”)
6 Petroleum Geo-Servs. Inc. v. WesternGeco LLC, No. IPR 2014-00687 at 19 (P.T.A.B. Dec. 15, 2014) (“Because Petitioner [Petroleum Geo-Services] was never served as a defendant in the ION lawsuit, no indemnity impacting funding or control of such a defense could have arisen in that proceeding.”).
7 Gen. Elec. Co. v. Transdata, Inc., No. IPR2014-01380 at 10 (Apr. 15, 2015).
8 ARRIS Int’l PLC v. ChanBond, LLC, No. IPR2018-00575 at 7 (July 20, 2018) (emphasis added).
9 Gen. Elec. Co., No. IPR2014-01380 at 10.
10 ARRIS Int’l PLC, No. IPR2018-00575.
11 Id. at 3–4; Complaint for Patent Infringement at ¶ 21, ChanBond, LLC. v. Charter Commc’ns, Inc., No. DED-1-15-cv-00847 (E.D. Del. Sep. 21, 2015).
12 ARRIS Int’l PLC, No. IPR2018-00575 at 14–15.
13 Id. at 4.
14 Id.
15 Id. at 16.
16 Id. at 16–17.
17 Click-to-Call Tech., LP v. Ingenio, Inc., 899 F.3d 1321, 1336 (Fed. Cir. 2018).

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