What We Know About Sanctions at the PTAB
John D.V. Ferman for Law360, New York (March 2, 2016, 10:42 AM ET) —
In inter partes review, covered business method and post-grant review proceedings, the Patent Trial and Appeal Board can impose sanctions “against a party for misconduct,” which may include failure to comply with rules and orders; misleading or frivolous arguments or requests; factual misrepresentations; dilatory tactics; abusing discovery or “process;” and a catch-all “improper use of the proceeding.” Possible sanctions include expunging filings; excluding evidence; precluding submission of papers, arguments or issues; awarding attorneys’ fees and “compensatory expenses”; requiring terminal disclaimers; and entering judgment or dismissing a petition.
A party must obtain prior authorization to file a motion for sanctions, allowing the board to filter out insignificant disputes and unmeritorious requests. Still, when deciding whether to grant authorization, the board most commonly has denied it. Even where authorization has been granted, the board has tended not to impose sanctions. In fact, the board appears to have imposed sanctions primarily sua sponte, and then mainly in the interest of preserving the integrity of its administrative process and records. This article examines PTAB decisions relating to its sanctions authority.
Orders Denying Authority to Seek Sanctions
When the board denies leave to file a motion for sanctions, it might find that there is no identifiable misconduct or that sanctions are unwarranted on the record. Parties’ squabbles can appear petty and pedantic. In one proceeding where cross-requests for authorization were denied, the patent owner complained about deposition cross-examination questions exceeding the scope of direct, while the petitioner criticized the opposing expert’s failure to identify two major filings among the documents he had considered and bemoaned deposition questions about the sources of its own expert’ compensation.
The board might decide that any alleged misconduct is insufficiently serious to warrant expending time and energy on motions practice. In such cases, the board has usually concluded that other avenues of relief could be available to the complaining party to address the conduct at issue, such as a motion to exclude evidence or including the asserted grounds for sanctions in an argument against institution of proceedings. Authorization also has been denied based on moving parties’ failures to protect their own interests, such as by waiting too long to seek authorization, delaying to raise the issue with the opposing side, or failing to make timely objections to deposition questions.
Occasional Orders Granting Authority to Seek Sanctions
One authorization to move for sanctions was granted based on an individual member of the patent owner, a limited liability company, repeatedly flouting a board order that precluded him from contacting the petitioner directly rather than through counsel.
In several other related cases, the board granted leave based on alleged “abuse of process,” while noting that this did not constitute a decision on the merits.
Another board authorization for leave was based on a patent owner allegedly sending threatening and harassing ex parte emails to the petitioner’s expert.
The board also has authorized motions for sanctions relating to protective order violations. One authorization was based on alleged disclosure of confidential information in violation of the standard protective order. Another was based on an alleged “violation of a protective order in a related district court case,” where the board determined “that briefing will facilitate development of a complete record and, thereby, will promote the just resolution of the issues raised by Patent Owner.”
The Board Denies Motions for Sanctions
Other than sanctioning parties sua sponte in the three instances discussed below, the board has not favored issuing sanctions, denying requests for sanctions at least four times. In the first denial, the board deemed objections at a deposition “insufficiently frivolous” to warrant sanctions even though they were “based on weak evidence.” In the second, although the governing protective order may have been violated, the harm was deemed insubstantial because the exhibits at issue were about to be made public due to the board denying a motion to seal. In the third, the panel was “unable to discern harm to Petitioner sufficient to warrant sanctions at this time” where the patent owner’s threatening and harassing emails to the petitioner’s expert did not appear to have any impact on the expert’s testimony. Finally, a fourth panel was “not persuaded that Patent Owner has established that the Board has the authority to enforce the terms of a district court protective order.”
Sua Sponte Sanctions
The PTAB has issued sanctions sua sponte in at least three instances. In one, a panel imposed the ultimate sanction — dismissal — due to the petitioner’s disregard for board orders, reflected by 64 and 74 day delays in proposing corrections to two defective petitions without contacting the board or the patent owner or showing good cause. The delays had left the “Patent Owner speculating as to the content of the Petition[s] during most of Patent Owner’s time for preparing … Preliminary Response[s].” Key considerations in the decision to dismiss were “the integrity of the administrative process” and an unwillingness “to convey a message that a party may use self-help to secure, for itself, time extensions.”
The board’s sanctions were less draconian for arguably much more severe, intentional misconduct, albeit by a pro se party. The patent owner improperly filed, without prior authorization, papers objecting to evidence and requesting motion-type relief that “contained sensitive information and unsubstantiated allegations” against the administrative law judge. The board sealed the materials. Two days later, the same documents were published on a website (with apparently fabricated ‘whois’ identification information) that referred to the patent owner and included “a picture of [the administrative judge] … superimposed on a background of simulated targets with a skull and crossbones in a yellow triangle.” The Board announced that “[a]ttempts to intimidate … [the administrative law judge] … are unacceptable.”
A week later, the patent owner “filed another unauthorized paper complaining about due process violations and judge bias without substantiation.” These unauthorized filings were the patent owner’s third and fourth offenses and the patent owner previously had been warned about the possibility of sanctions. Characterizing the misconduct as a “refusal to conform to our rules,” the board expunged the filings, terminated the patent owner’s access to upload electronic filings, required the patent owner to file hard copies if continuing to proceed pro se, required any counsel entering an appearance on behalf of the patent owner to obtain prior permission before uploading electronic filings, and warned that future unauthorized filings would be expunged.
A third sua sponte order sanctioned a patent owner for “inconvenienc[ing] the panel, Board staff, and/or opposing counsel.” The infractions included uploading motions to exclude evidence with missing pages, filing replacement motions scanned upside down without prior authorization, and failing to confer with opposing counsel despite the board’s prior instructions to do so. The patent owner had preceded this misconduct with two missed scheduled conference calls, filings containing typos, and filings not complying with formatting requirements. The panel expunged the offending motions and precluded the patent owner from filing any more motions to exclude evidence already of record.
Conclusions and Takeaways
With respect to the issue of sanctions, practitioners should be mindful of the following:
- The board has not favored granting authority to file motions, nor imposing sanctions when authority is granted. Do not waste time seeking sanctions for insignificant misconduct or conduct that does not affect the substance of the evidence.
- If the issue is better addressed via a distinct legal avenue, for example by arguing for noninstitution of a duplicative petition based on 35 U.S.C. § 325(d), it is probably not worthwhile to seek sanctions based on that issue.
- Unlike in litigation, substantive evidentiary objections are not preserved at a deposition. Make all available objections at a deposition to avoid the Board finding a waiver or denying sanctions for a failure to preserve an issue.
- A prime concern of the board is delay by either side. Do not wait to seek sanctions. Do not dither to correct errors in the record.
- Maintaining integrity of the administrative process and an orderly record will take precedence over the parties’ interests. Take care to file papers correctly and to seek leave when necessary.
- If there is parallel litigation, it may be wise to retain separate counsel for Board proceedings to avoid complications relating to confidentiality obligations.
- Counsel should keep strict tabs on clients’ behavior.
- Given the board’s apparent reluctance to grant motions for sanctions and its preference to resolve petitions on the merits, if granted authority to move for sanctions consider seeking alternative sanctions with different degrees of severity.
 37 C.F.R. § 42.12.
 35 C.F.R. § 42.20(b).
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