Intellectual Property > IP Newsflash > PTAB Confirms Decision Denying Institution Based on District Court Action Ultimately Dismissed Without Prejudice
13 Jul '17

On July 6, 2017, the Patent Trial and Appeal Board (the “Board”) denied Petitioner Ford Motor Company’s (“Petitioner”) request for rehearing of the Board’s decision denying institution of multiple inter partes reviews (IPR) based on its finding that, under 35 U.S.C. § 315(b), the petitions were filed more than one year after the date on which the Petitioner was served with a complaint alleging patent infringement.

The dispute dates back to February 19, 2015, when Petitioner filed the first action (the “Ford action”) in the Eastern District of Michigan, seeking declaratory judgment of noninfringement of three Versata Development Group, Inc. (“Patent Owner”) patents. Then, on May 7, 2015, Patent Owner asserted infringement by Petitioner of six patents (the same patents later challenged in the IPR) in the Eastern District of Texas (the “Versata action”). On October 28, 2015, Patent Owner answered Petitioner’s declaratory judgment complaint in Michigan and asserted the same six patents from the Versata action. On November 5, 2015, the Texas court “ordered the parties to file notice of any good faith reasons that [the Versata action] should not be dismissed, without prejudice, so that the issues may [be] dealt with in the Michigan court.” On December 3, 2015, noting that “neither party has provided arguments against dismissing the case,” the Texas court dismissed the Versata action without prejudice to Patent Owner’s ability to assert its claims in the Michigan court. On October 28, 2016, Petitioner filed its IPR petitions related to Patent Owner’s six patents. Finally, on May 1, 2017, the Board denied the institution of the IPRs based on the filing of the petitions more than one year after May 7, 2015 (i.e., the date Patent Owner served its complaint in the Texas court).

In its request for rehearing, Petitioner essentially argued that, based on precedent, the May 7, 2015, date should not have been used to start the one-year clock to file a petition under § 315(b). Specifically, Petitioner argued that (1) the Board misapplied the binding precedent of the Federal Circuit and the Board by refusing to hold that the dismissal “without prejudice” of the Versata action has no legal effect under § 315(b) and must be treated as if the action had never been filed, and (2) the Board misapplied the law in holding that there is a “continuous chain of assertion” exception to the precedential rule that a complaint dismissed “without prejudice” has no legal effect under § 315(b).

In addressing Petitioner’s first argument that the Board failed to follow precedent, the Board noted that it is “bound only by the Board decision in Oracle and then only to the extent that we find the issues and facts involved in Oracle and in the instant proceedings are sufficiently similar.” The Board reiterated that “here, unlike in Oracle and other cases cited by Petitioner, the dismissal without prejudice was not pursuant to Rule 41(a), was not ‘voluntary,’ and, most importantly, did not leave the parties as though the action had never been brought.” Instead, the dismissal of the Versata action was “involuntary,” given that either party could have argued for retaining the Versata action and that, after dismissal, the parties no longer enjoyed the ability to bring the action in the Eastern District of Texas.

As part of its second argument that the Board misapplied the law in holding that there is a “continuous chain of assertion” exception to the precedential rule that a complaint dismissed “without prejudice” has no legal effect under § 315(b), Petitioner argued that the cases cited by the Board were distinguishable in that each case included an action that was consolidated. The Board dismissed this idea and instead found “that the effect of the rulings by the Michigan and Texas courts was to maintain continuous actions between the parties”— “[a] fact different from those present in the precedential decisions cited by Petitioner.” The Board noted that both the Texas and Michigan courts stated this much—the Texas court in its decision dismissing the Versata action and the Michigan court in its decision to adopt the schedule that would have been in effect in the Texas court.

Ford Motor Company v. Versata Development Group, Inc., IPR2017-00146, Paper No. 9 (PTAB July 6, 2017).