SecureBuy, LLC v. CardinalCommerce Corp.

When a covered business method patent review petitioner (or real party in interest) filed a civil action challenging the validity of a claim of the patent before the date the petition was filed, the Board may not institute review and must deny the petition, because 35 U.S.C. § 325(a)(1) applies to CBM proceedings through AIA § 18(a)(1). Section 325(a)(1) states that a post-grant review "may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent." Here, declaratory judgment complaints filed two weeks before the petition triggered the bar. The decision follows Branch Banking & Trust Co. v. Maxim Integrated Prods., Inc., CBM2013-00059 (PTAB Mar. 20, 2014) (Paper 12), which it cites, and applies the bar to declaratory judgment complaints. For the petitioner, filing a declaratory judgment action of invalidity, even only two weeks before the petition, forecloses CBM review entirely, and the Board denied all of the petition. For the patent owner, an earlier-filed invalidity civil action by the petitioner is a complete basis for opposing institution in a preliminary response, with no need to reach the merits. The Board relied on the statutory text of AIA § 18(a)(1), which excludes only 35 U.S.C. §§ 321(c) and 325(b), (e)(2), (f) from CBM proceedings, so § 325(a)(1) applies; the text cites no Federal Circuit, CCPA or Supreme Court authority. LEGAL TEST OR STANDARD: AIA § 18(a)(1) makes CBM review employ the standards and procedures of post-grant review, except that 35 U.S.C. §§ 321(c) and 325(b), (e)(2), and (f) do not apply. Section 325(a)(1) is not excluded, so it applies. Under it, review may not be instituted if, before the petition's filing date, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent. TRIGGERING FACTS: Petitioner filed its petition on November 15, 2013. Two weeks earlier, on November 1, 2013, it filed two separate civil actions (D. Del. and S.D. Miss.) seeking a declaratory judgment that the claims of the '002 patent, including at least claim 1, are invalid under 35 U.S.C. §§ 101, 102, 103, and 112. Both complaints preceded the petition and challenged validity. KEY QUOTE: "Because the Board may not institute a covered business method patent review of a challenged patent when the petitioner filed a civil action challenging the validity of a claim of the patent before the date on which the petition for review is filed, we deny the Corrected Petition in all respects." (Paper 12, p. 3) PRIOR PRECEDENT AFFECTED: Follows Branch Banking & Trust Co. v. Maxim Integrated Prods., Inc., CBM2013-00059 (PTAB Mar. 20, 2014) (Paper 12) (Denial of Institution of CBM Patent Review), cited with 35 U.S.C. § 325(a)(1). No prior decision is overruled or modified. PRACTICE TIP: Before filing a CBM petition, confirm that neither the petitioner nor any real party in interest has filed a civil action challenging the validity of any claim of the patent, including a declaratory judgment action. If one has been filed, the petition is barred. A patent owner should check for such complaints and raise § 325(a)(1) in the preliminary response.