Practice Areas

Print PDF

Challenger, beware: PTO director sanctions abuse of IPR process

April / May 2023 IP Newsletter

Link to the newsletter here  

Well-known technology giant Intel has been at war with a patent holding company for years. Recently, a new company inserted itself into the proceedings, apparently hoping to cash in. In an unusual move, the director of the U.S. Patent and Trademark Office (PTO) got involved in the case, OpenSky Industries, LLC v. VLSI Technology LLC. Things went downhill for the newcomer from there.

A tangled web

In April 2019, VLSI Technology sued Intel for infringing its patent for a system of managing clock speed in an electronic device. Intel responded by seeking inter partes review (IPR) from the Patent Trial and Appeal Board (PTAB), challenging the system’s patentability. The reviews were denied, and a jury eventually awarded VLSI $675 million in March 2021.

In June 2021, OpenSky requested an IPR of the VLSI patent, copying extensively from Intel’s earlier request. OpenSky was founded the month after the jury verdict, and its only apparent business activity was filing two IPR requests against VLSI — though it was at no risk of being sued by VLSI for infringement. Nonetheless, the PTAB instituted IPR, finding the jury trial didn’t resolve the unpatentability issues. Intel was granted the right to join the IPR.

VLSI subsequently requested a rehearing and a request for Precedential Opinion Panel (POP) review. In June 2022, the PTO director initiated a “Director Review” of the PTAB’s institution decision, and the POP dismissed the rehearing and review requests.

The director’s disgust

The director initially found that OpenSky engaged in discovery misconduct by failing to comply with a discovery order. Because of that failure, the director applied a negative inference when analyzing disputed facts relevant to whether the company’s conduct amounted to an abuse of process.

For example, VLSI and OpenSky opened settlement negotiations, but it was disputed who initiated them. The director inferred that OpenSky initiated the negotiations, which she deemed relevant to the larger question of whether its pursuit of the IPR was improper, abusive conduct.

She also found that OpenSky sought monetary payment from Intel in return for success in the IPR. When rebuffed by Intel, OpenSky proposed a scheme to sabotage its IPR in exchange for payments from VLSI.

Both before and after institution of the proceedings, the director concluded, OpenSky abused the process by focusing on obtaining payment from VLSI or Intel, instead of pursuing the merits of its patentability challenge. She also found that OpenSky engaged in abuse of process and unethical conduct by offering to undermine and/or not vigorously pursue the matter in exchange for monetary payment.

According to the director, each aspect of OpenSky’s conduct — discovery misconduct, violation of an administrative order, abuse of the IPR process and unethical conduct — taken alone constituted sanctionable conduct. Together, the behavior warranted sanctions to the fullest extent of the director’s power.

In response, the director precluded OpenSky from actively participating in the underlying proceeding. She also ordered the company to show cause as to why it shouldn’t have to pay compensatory damages to VLSI, including attorney’s fees.

Stay tuned

Interestingly, after all that, the PTO director didn’t terminate the IPR. Instead, she ordered the PTAB to reconsider whether it should continue with Intel as lead petitioner to resolve the unpatentability issues. The board found it should — but the director has again stepped in, this time to review that decision. The upshot? Going after the money without being concerned about the underlying patent issue doesn’t pay.