by Dennis Crouch
Worlds Inc. v. Bungie, Inc. (Fed. Cir. 2018)
The appeal here stems from three Inter Partes Review (IPR) proceedings — each cancelling the claims of aseparate Worlds’ patent. U.S. Patent Nos. 7,945,856; 8,082,501; and 8,145,998. The Worlds’ patents involve methods and systems for displaying avatars within a virtual environment and claim priority back to a 1995 provisional patent application.
The appeal here does not focus on the merits of the case but rather whether the IPR proceedings were time barred. I.e., whether the patentee’s still-pending lawsuit against Bungie’s contracting partner Activision will block Bungie from pursuing its IPR.
35 U.S.C. § 315(b) is fairly clear — “an inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”
Here, the petitioner Bungie was never sued for infringing the patents. However, game distributor Activision was sued for infringement 2012 for its World of
Warcraft games. Bungie develops virtual-world games such as Halo — and distributes those games through a deal with Activision. Back in 2014, Worlds notified Activision that it planned to add the Bungie products to the lawsuits. Within six months, Bungie filed the IPRs at issue here. The Activision lawsuit is ongoing – though it was conveniently stayed pending outcome of the Bungie IPR.
In the IPR, the patentee Worlds requested discovery on the connection between Bungie and Activision in order to determine whether Activision could be considered a “real party in interest” or “privy.” However, that request was summarily denied and the PTAB concluded that the patentee “has not demonstrated that Activision is an unnamed real party in interest in this proceeding.”
On appeal, the Federal Circuit has vacated and remanded — holding that the PTAB should have investigated the relationship between the IPR petitioner (Bungie) and the prior litigant (Activision) and that the PTAB should have explained its reasoning.
Absent from the Board’s analysis of the real-party-in interest issue is any clear statement of what, if any, burden framework the Board used to analyze the evidence presented in these IPRs, including an identification of which party the Board viewed as bearing the burden of persuasion.
In its decision, the court made several important findings:
- An “IPR petitioner bears the ultimate burden of persuasion to show that its petitions are not time-barred under § 315(b).” However, an IPR petitioner’s identification of the real parties in interest in the petition papers will ordinarily serve as prima facie evidence meeting this burden. At that point, the patentee must produce some evidence to support its contention otherwise.
- Note here, that the initial statement by the patentee does not create a “presumption” but only serves as an initial starting point for the analysis. The court explains: “[i]nstead of viewing this as a presumption, we simply view this as practical. In short, we see no reason for the Board to question an IPR petitioner’s identification of the real parties in interest unless and until a patent owner has chosen to raise the issue.”
- In order to properly “raise the issue”, a patentee will need to provide “some evidence” showing that a particularly third-party should be named as a real-party-in-interest. The court expressly refused to state the “quantum” of evidence required — but suggested that it might follow the PTAB’s prior ruling that evidence should “reasonably brings into question the accuracy of a petitioner’s identification of the real parties in interest.” Note — this requirement is clearly less than a preponderance of the evidence.
Here, the court found that the patent owner “presented more than enough evidence to sufficiently put this issue into dispute.” The evidence here was:
- Worlds pointed to a particular party it saw as a real-party-in-interest — Activision.
- Worlds provided evidence of a development-distribution agreement between petitioner Bungie and Activision. This agreement placed an obligation on Bungie to clear-rights for its products distributed by Activision and also provided Activision with ability to review and approve the clearance;
- Worlds provided evidence that it had provided notice to Activision regarding its intent to add Bungie products to the Activision litigation; and
- The patents challenged by Bungie are the exact same patents that are the subject matter of the pending litigation with Activision.
The Federal Circuit saw this evidence as sufficient to force the Board’s hand and no longer simply rely upon the petition’s statement in a conclusory judgment. Rather, at that point the Board should have considered the evidence and expressly made “the factual determinations necessary to evaluate whether Bungie had satisfied its burden to demonstrate that its petition was not time-barred based on the complaints served upon Activision, the alleged real party in interest.”
On remand, the Board will reconsider its the real-party-in-interest decision — placing the ultimate burden of persuasion on the IPR petitioner.
Vacated and Remanded.
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Claim 1 of the ‘856 patents is listed below:
1. A method for enabling a first user to interact with second users in a virtual space, wherein the first user is associated with at first avatar and a first client process, the first client process being configured for communication with a server process, and each second user is associated with a different second avatar and a second client process configured for communication with the server process, at least one second client process per second user, the method comprising:
(a) receiving by the first client process from the server process received positions of selected second avatars; and
(b) determining, from the received positions, a set of the second avatars that are to be displayed to the first user;
wherein the first client process receives positions of fewer than all of the second avatars.