CAFC Orders PTAB To Re-evaluate Whether RPX Client Is The Real Party In Interest

In another decision that seems to be mysteriously absent from the CAFC website, a Fed Circuit panel just vacated and remanded an Inter Partes Review back to the Patent Trial and Appeal Board. The case, Applications in Internet Time v. RPX Corp., deals with an IPR ostensibly filed by RPX in service of their client, Salesforce.com. Whether RPX or Salesforce is the “real party in interest” matters because the latter was already time barred from filing their own petition.

Naturally, the PTAB found that RPX was the sole real party in interest and permitted the petition to proceed. Reversing, the CAFC, in a lengthy opinion, held that the board’s decision violated it’s explicit obligations under the AIA and the Administrative Procedure Act. Instead, the PTAB must reconsider all of the facts to determine whether Salesforce “is a clear beneficiary that has a preexisting, established relationship with” RPX. The decision seems to be a foregone conclusion, as it already seems conclusively established that Salesforce, as a client of RPX, has a pre-existing relationship. Moreover, Salesforce is clearly benefitting from that relationship.

Regardless, the CAFC was fairly critical of the PTAB in its explanation:

For example, the Board did not meaningfully examine two factors the Trial Practice Guide deems “[r]elevant”: Salesforce’s relationship with RPX and “the nature of” RPX as an entity. 77 Fed. Reg. 48,760. The Trial Practice Guide lists these factors after posing a hypothetical in which a trade association to which “Party A” belongs, “Trade Association X,” files an IPR. … “[D]eeper consideration of the facts in the particular case is necessary to determine whether Party A is a ‘real party-in-interest’ or a ‘privy’ of the petitioner.” Id.

However, as RPX is not a mere trade association, the CAFC continued:

The evidence of record reveals that RPX, unlike a traditional trade association, is a for-profit company whose clients pay for its portfolio of “patent risk solutions.” J.A. 73. These solutions help paying members “extricate themselves from NPE lawsuits.” J.A. 29. The company’s SEC filings reveal that one of its “strategies” for transforming the patent market is “the facilitation of challenges to patent validity,” one intent of which is to “reduce expenses for [RPX’s] clients.” J.A. 31. Yet the Board did not consider these facts, which, taken together, imply that RPX can and does file IPRs to serve its clients’ financial interests, and that a key reason clients pay RPX is to benefit from this practice in the event they are sued by an NPE. (emphasis added)

Even RPX’s claim of not discussing IPRs with clients rang hollow with the panel:

This implication becomes stronger when one considers the discovery produced in this case. First, even though it is undisputed that RPX nominally adhered to its “best practices,” which prohibit it from discussing IPRs with clients who do not agree to be named as real parties in interest, J.A. 80, these practices do not bear on whether RPX files IPR petitions to benefit specific clients that previously have been accused of patent infringement. Moreover, several of the factors that RPX considers when identifying potential IPR candidates are highly probative of whether particular individual clients would benefit from having RPX file IPR petitions challenging patents they have been accused of infringing. … Each of these factors is suggestive of whether any given RPX client would benefit from having RPX file an IPR petition challenging patents that have been asserted against that client in district court. Yet, again, the Board did not examine these factors, in contravention of its obligations under the Administrative Procedure Act (“APA”). Falkner v. Inglis, 448 F.3d 1357, 1363 (Fed. Cir. 2006) (“This court applies the standards of the Administrative Procedure Act (‘APA’) in reviewing decisions of the Board.” (citation omitted)).

The case should have wide-ranging implications for companies whose business models rely on filing IPRs to assist clients who are defending allegations of patent infringement.

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