IBM v. Financial Systems Technology (IPR2013-00078, Paper 11): Terminating an IPR before Institution

Many inter partes reviews settle, and some settle before the Board decides whether to institute. International Business Machines Corp. v. Financial Systems Technology (Intellectual Property) Pty. Ltd., IPR2013-00078, Paper 11, entered February 12, 2013, shows how such a case ends. The patent was a reissue, RE40,526.

The Board’s earlier order telling the parties how to file their settlement (Paper 7) is covered separately.

Background

IBM filed its petition on December 12, 2012. The patent owner’s preliminary response was not yet due. The parties settled, and at the Board’s direction they filed three things on February 8, 2013:

• a copy of their settlement agreement, under 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74;
• a joint request to treat the agreement as business confidential information kept separate from the patent file; and
• a joint motion to terminate the proceeding under § 317.

What the Board decided

The Board granted all of it in a short judgment under 37 C.F.R. § 42.73. Its reasoning rested on two definitions in 37 C.F.R. § 42.2, which it cited in footnotes:

• A preliminary proceeding begins with the filing of a petition and ends with the written decision on whether to institute a trial. The case was in that stage.
• A judgment means a final written decision or a termination of a proceeding.

Because the case was still preliminary and, in the Board’s words, “based on the facts of this case,” entering judgment was appropriate. The Board ordered that the settlement agreement be kept confidential and separate from the patent file, granted the motion and terminated the proceeding.

Why it matters

The decision illustrates the settlement procedure at its simplest:

• Settlement terminates the case, usually. Section 317(a) addresses instituted reviews: one is terminated as to a petitioner on the parties’ joint request unless the Office has already decided the merits. Before institution, as here, the Board terminated the preliminary proceeding by judgment under its rules.
• The agreement must be filed. Section 317(b) and § 42.74(b) require that any agreement made in connection with or in contemplation of termination, including collateral agreements, be in writing and filed before termination.
• Confidential treatment is available on request. Under § 317(b) and § 42.74(c), a party may ask that the agreement be treated as business confidential and kept separate from the patent file. Such agreements remain available to government agencies on written request and to others on a showing of good cause.
• No petitioner estoppel. Petitioner estoppel under § 315(e) arises from a final written decision, which a pre-institution settlement never reaches. Section 317(a) also provides that it does not attach when a review is terminated as to a petitioner because of settlement. See estoppel arising from PTAB trials.

Settlements after institution can differ. Once a trial is under way, the Board has discretion to continue to a final written decision even if no petitioner remains, as it explained in Macauto v. BOS. Readers should check the current Trial Practice Guide for settlement procedures.

Key takeaways

• IBM and the patent owner settled before institution and jointly moved to terminate.
• The Board entered judgment under § 42.73, relying on the § 42.2 definitions of “preliminary proceeding” and “judgment.”
• The settlement agreement was filed and kept as business confidential information under § 317(b) and § 42.74(c).
• With no final written decision, § 315(e) estoppel does not attach to the settling petitioner.