Litigation Blackmail: Sanctions for Gaming IPR System

by Dennis Crouch

OpenSky Indus v. VLSI, IPR 2021-1064 (Before Dir. Vidal)

Stepping-in like a court of equity, Dir. Vidal today issued a Precedential Order finding that OpenSky had abused the IPR process.  OpenSky filed its IPR petition soon after VLSI won a $2 billion judgment against Intel.  At that point though, OpenSky offered to work on behalf of either VLSI or Intel. Essentially, asking for some pay-off to either continue its challenger or to bow-out. Dir. Vidal writes:

I determine that OpenSky, through its counsel, abused the IPR process by filing this IPR in an attempt to extract payment from VLSI and … Intel, and expressed a willingness to abuse the process in order to extract the payment. OpenSky’s behavior in this proceeding is entirely distinguishable from conventional settlement negotiations that take place in an adversarial proceeding. I also find that OpenSky engaged in abuse of process and unethical conduct by offering to undermine and/or not vigorously pursue this matter in exchange for a monetary payment. Taken together, the behavior warrants sanctions to the fullest extent of my power.  . . . The conduct of the individual attorneys in this case might also rise to the level of an ethical violation under the rules of their respective bars

Vidal Precedential Order.  As a sanction, the order excludes OpenSky from participating and also demands that OpenSky “show cause” as to why it should not be ordered to pay damages and attorney fees to VLSI.

Great work Dir. Vidal.

59 thoughts on “Litigation Blackmail: Sanctions for Gaming IPR System

  1. 11

    Although there are assumptions here that this IPR will continue with the joinder party, its not clear yet, since the actual Director Order on that is “.. the Board panel shall determine and issue an order, within two weeks, addressing whether the petition, based only on the record before the Board prior to institution, presents a compelling, meritorious challenge, and shall take the appropriate action to dismiss or maintain the underlying action as identified above based on its determination” and elsewhere in the Order the Director says that this determination must include whether there have been rebuttals in the trial.
    Also note that the misconduct findings here heavily include shocking refusals to even answer Director discovery orders in this IPR related to the IPR misuse – misconduct investigation, which is unlikely to be successfully challenged.

  2. 10

    What is the substantive difference between asking if the other side wants to settle and “blackmail.”

    Is it just the wording of the request? If so, isn’t form over substance?

    It seems to me that this decision will discourage settlements, which would be unfortunate.

    It also seems to me that this decision is yet another blow to the enforceability of patents.

    1. 10.1

      The difference seems to be asking BOTH sides. This was a third party asking BOTH sides what their best offer was.

      Roughly the same as if I went to an accident victim, and said I”ll testify that the other car was at fault, THEN going to the other car and saying I’ll testify that the victim was at fault . . . just waiting to see who offers me the most money. That’s the difference between blackmail and negotiating a settlement.

      1. 10.1.1

        Slight difference, as I think the gambit was “I WILL testify” stated to the one side, and a “I Won’t show up when called to testify” stated to the other.

        Small potatoes probably, but I don’t think we had abject falsehoods here.

    2. 10.2


      Yes, that is about what I said.

      What is the “intent of the litigation” or agency action when there is no need for standing?

    3. 10.3

      How is a sanction against the petitioner a blow against enforceability? Do you mean that the sanction needed to be stronger?

  3. 9

    OldCurm: “ Cynical me will even go so far as to suggest that “friendly lawsuits” are a widespread problem that the courts seem unable/unwilling to prevent.”

    It seems my memory must be fading but I can’t recall this topic ever being discussed here before. It’s definitely cynical but … this is the time of widespread cynicism.

    Just curious: what percentage of patent lawsuits currently fall into this category, do you think? It’s basically a form of collusion to effect fraud on the court (not to mention the public) if both parties are aware of a patent’s invalidity but nevertheless work together to achieve a “gold plating” by cooperatively steering the patent trial towards a win for the patentee.

    1. 9.1

      My comment was mostly about “sue and settle” and “AG takes a dive” methods of changing law.

      But, to answer your question, I doubt many at the moment, but the cat’s out of the bag and I doubt the patent bar is immune to the temptation. See e.g., collusive settlements between brand and generic drug mfgs.

      1. 9.1.1

        OC, I and others always thought the settlement payments to generics was risky and going to eventually get those pharmaceutical companies in trouble, but it took the FTC years to get the Supreme Court to even make lower courts make it potentially anti-trust actionable. That is not a all comparable to the clear misconduct charges here.

    2. 9.2

      Re:”.. I can’t recall this topic ever being discussed here before.” [If you look under its label of “straw man” lawsuits you might find some discussions?] But they are indeed rare in actuality for the very reason you mention, that it may be considered “basically a form of collusion to effect fraud on the court.” Which means a serious danger of being disbarred, and few attorneys are willing to thereby risk their entire future livelihood for a one-time activity. [Unlike crooked business people with no such vital licensing-loss risks, but they cannot normally represent themselves in either the courts or the PTO.]

  4. 8

    The heart of the whole thing is below. I wonder if this is true. The IPRs were set up to allow anybody for any reason to file an IPR. So, why can’t they pursue the IPR in accordance with the value to their company based on what others will pay? I guess one could limit IPR purpose to clearing the public square but I am not sure that my own monetary gain cannot be used as a motive to pursue an IPR or not.

    See the problems that happen without standing?

    > I also find that OpenSky engaged in abuse of process and unethical conduct by offering to undermine and/or not vigorously pursue this matter in exchange for a monetary payment. See Woods Servs., Inc. v. Disability Advocs., Inc., 342 F. Supp. 3d 592, 606 (E.D. Pa. 2018) (“The essence of an abuse of process claim is that
    proceedings are used for a purpose not intended by the law.”).

    1. 8.1

      Whenever someone like a director or DC judge writes 50 pages, it means they are afraid of being overturned at the appellant level.

      1. 8.1.1

        I meant to reply to your appeal point below, but I’ll do it here instead.

        First, I am curious how and when this order can be appealed. In the DCT maybe it could be an immediate appeal as a collateral order etc. But I have no clue about at the PTAB.

        Second, on the standing note, who can appeal this order? Maybe VLSI can appeal the refusal to terminate entirely, but I’d think only OpenSky can appeal the sanctions portion that impacted it. I just wonder if OpenSky, given (1) how indifferent they’ve been and (2) their apparently quite limited budget, is going to have the determination and/or resources to push for an appeal.

    2. 8.2

      So, you get that “intended by law” means what in the context of the IPR?

      No standing requirements. Statements that all should be able to file an IPR to clear the public commons from unwanted claims. But is the motive money? Maybe.

      I am not convinced that someone can’t file an IPR to make money. So, can one file an IPR to make money? Does the AIA exclude making money to file an IPR? I think making money is part of the “intended by law” of the AIA statute.

      See the kind of problems that arise from not requiring standing?

      1. 8.2.1

        > See the kind of problems that arise from not requiring standing?

        This is a pretty egregious one-off and the Director’s order observes that it’s a fact pattern not likely to be repeated. Reexamination has existed for more than 40 years, and IPR for more than 10 years, without a standing requirement. Prior incidents of this type of abuse are pretty much unheard-of, and issues involving suspected “proxy” IPR filers (e.g., RPX) have been largely dealt with by the Board’s enforcement of real party in interest (RPI) and privity rules.

        > I am not convinced that someone can’t file an IPR to make money

        This goes back to age old concepts of champerty and maintenance, which today are embodied in modern “abuse of process” concepts that the Director relied on, which exist in civil litigation outside the IPR context. It’s an interesting thought experiment — how can OpenSky be guilty of “abuse of process” for filing what was actually a meritorious IPR challenge (as evidenced by the fact that it was instituted by the PTAB)? The answer is that the filing of the IPR in the first instance wasn’t the issue, it was OpenSky’s conduct after institution. When you read the OpenSky “settlement letter” to VLSI, they basically agreed to take a dive on the IPR, refuse to make the IPR experts available for deposition, etc., if VLSI agreed to pay. The order also goes out of its way to emphasize that OpenSky repeatedly violated discovery orders in order to obstruct investigation of its conduct. The order isn’t even a close call, so even if it can or would be appealed by OpenSky (unlikely), it’s not going to be overturned.


          Completely agree on both points, especially the latter which I tried to articulate below in 6.1.2.


          Lode_Runner > Not sure you are right. Without a standing requirement, then what is the purpose of the administration action of filing the IPR? Settlements are allowed for companies accused of infringement to settle where the IPR is dropped rather than invalidating the claims.

          I understand what you wrote but I think there is a theory of the case here where without a standing requirement that what OpenSky did is fine. I think without standing that one can then position OpenSky in various hypothetical positions and if in any position there conduct would be acceptable, then what they did is acceptable.

          Just don’t buy your arguments. If you don’t have standing, then what is the intent of the litigation or administrative action?


            Standing (or not) is not the same as truthfulness before a tribunal — not sure if I can get to your “this is what happens without standing” position.


          > Prior incidents of this type of abuse are pretty much unheard-of,

          I admire your faith in the collective ethics of the legal profession. I’m a bit more cynical and think that, once a money-making technique is known, others will copy it.

          >it was OpenSky’s conduct after institution.

          I suspect that’s a pretty easy fix for the next one of these. Cynical me will even go so far as to suggest that “friendly lawsuits” are a widespread problem that the courts seem unable/unwilling to prevent.


            > I admire your faith in the collective ethics of the legal
            > profession. I’m a bit more cynical and think that,
            > once a money-making technique is known, others
            > will copy it.

            It’s not based on faith, it’s based on history. We’re have more than 40 years of reexamination history, and more than 10 years of IPR history, and this type of thing has happened only a few times.
            And each time someone tries to “innovate” some new way to abuse the system and make money like OpenSky, precedential orders like this slam the door on that particular theory/conduct.

            Another factor here is that filing an IPR petition isn’t cheap. This isn’t like a FOIA request or other types of administrative actions that people can file at little or no charge. The minimum filing fee for a single IPR petition (for 20 or fewer claims) is more than $40,000, in addition to whatever you’re having to pay the attorneys to prepare and file the petition. The filing fee isn’t a substitute for a formal standing requirement, but it does limit the universe of IPR filers to people who, at least indirectly, have some legitimate interest in the validity or invalidity of the patent.

  5. 7

    But, Intel may benefit from Open Sky’s wrongdoing by getting a second bite of the apple after they lost at trial? How is that a win for the patentee? It isn’t.

    1. 7.1

      Exactly. And how is the patentee ever to have quiet title when there is no standing requirement to file an IPR.



            Congress made the affirmative choice to NOT have standing (leastwise, in the phase before the Administrative Agency).

    2. 7.2

      I would say it’s a fractional win for VLSI in that OpenSky is effectively DQed from the remainder of the proceedings. But the fraction is fairly small because the proceedings continue, OpenSky was a mostly indifferent participant anyway even before getting DQed, and Intel remains an active player.

      A minor fractional win is, of course, just the same as an almost complete loss.

      Regarding Intel’s benefit, well, the record didn’t show any complicity of theirs in OpenSky’s hijinks. And Intel properly followed the requirements to achieve joinder. So, it’s not clear why they should be penalized in this circumstance.

      1. 7.2.1

        They would not be able to file an IPR on their own but for the wrongdoing of Open Sky. So, they should not be able to benefit from it. They are not being punished. They already lost in court. The litigation is over.


          You are conflating two separate things. Whether an IPR should be instituted at all, and whether OpenSky should be allowed to participate in any instituted IPR, are distinct issues. You are treating them as interchangeable even though they aren’t. If an IPR is properly instituted and an innocent party is properly joined, that party can proceed, regardless what happens to other culpable parties. That is sort of the whole point of joinder too—a party who can’t petition independently is still allowed to join an ongoing proceeding. And as we all know, the Board even has the option to go forward in the absence of any remaining petitioners. See 35 U.S.C. § 317(a).

          You would like for this litigation to be over, but your personal preferences don’t control or set the governing rules of procedure.


            Intel could not get IPRs instituted because of Fintiv.

            IPRs were supposed to provide an alternative forum, not additional.

            Patent owners should not be constantly having to defend their patents. IPRs were supposedly modeled after the opposition system in Europe. You have to file those within a certain amount of time after issuance. You don’t get to keep going until you win.


              “supposed” “should” etc. are just more individual policy preferences. You’re welcome to write your Congressperson about those. Maybe they’ll even read these comments.


            Whether an IPR should be instituted at all, and whether OpenSky should be allowed to participate in any instituted IPR, are distinct issues.

            They are distinct issues, to be sure, but on both of these distinct points, PatentMom has the better argument. As Prof. C noted, Dir. Vidal is operating here in a manner akin to a court of equity. OpenSky’s inequitable conduct rightly earned it the sanction of removal from the proceeding. Meanwhile, Intel has already had its fair shot to kill the patent and lost. The equitable result for all three parties involved in this particular IPR would be to shut it down and efface all results incurred thus far.

            If Dir. Vidal believes that there are remaining infirmities in the patent, and that her duty to the public compels her to fix those infirmities, then she should exercise her statutory power to declare sua sponte a re-exam. That would preserve equity while still attending to the public’s rights.

            I do not mean to say that every IPR involving petitioner misconduct should end as proposed above. Equity is supposed to be flexible and fact specific. I mean merely to say that in this specific instance the outcome that PatentMom proposes more properly comports with equity.

  6. 6

    I’ll have to read this but seems like you don’t need a reason to file an IPR other than you feel like it. I’ll read this but I suspect if her ruling is all about the why they filed the IPR, she may lose in appeal.

    This, by the way, is exactly what I said would happen. Anytime you win a large amount of money, it provides an incentive for others to file an IPR against your claims.

    We need standing to file an IPR.

    1. 6.1

      The tone from the director is more that she doesn’t want IPRs filed against claims that just won large infringement cases. Too bad. That is how the law was written.

      I’ll read it but my guess is that the director will ultimately lose.

      By the way, anyone that isn’t as brain dead as Biden could tell you that any claim that wins a large monetary award in court is going to get IPRs filed against it. And yet our wonderful Obama and Congress passed the AIA.

      1. 6.1.1

        By the way, looks like Musk is going to buy Twitter as I said he was probably just negotiating for price.

        Say goodbye to Go ogle and F B. Good riddance. Goo gle mucks with search results and bans people on you tube. F B is draconian in their censorship of anything that is right of the far left.

        Just watch as Elon takes over the public square and provides us all with a fair chance to speak our minds. All the far lefties who need to censure others to win an argument will lose. Hopefully, Elon will find a way to ban those people that use defamation to silence others. (Notice these people are just like the Ma o terro rists that were unleased in the culture revolution.)


          “Say goodbye to Go ogle and F B”

          Gonna need google to stay around, they help immensely in finding prior art. Even just googling this or that NPL ref is usually made easier with google even compared to bing. And, a lot of the papers have started linking to google scholar pages for various references cited pages.


            Night Wiper has been predicting examiner layoffs for what, 5, 10 years now? Take his predictions on the demise of Google and Facebook for what they are worth.


              And yet, “Breeze”, the number of patent applications filed from US inventors has decreased. I did not anticipate the giant rise in Chinese applications.


                “I did not anticipate the giant rise in Chinese applications.”

                Let’s be real, lots of big time innovation is happening in corps. As the corps started doing business in china now that innovation is formally filed from china from their now chinese inventors and nominally chinese corps (working for parent americorps).


                Actually, the trend was pretty easy to see, as the US was not the only Sovereign that saw that action. (think EPO filings)….

      2. 6.1.2

        It’s a fine distinction maybe, but I saw it more as her criticizing apathetic parties like OpenSky who seem to have no bona fide desire to pursue IPRs all the way to a potential conclusion. If her beef was just with the timing itself, you’d think she would go whole hog (mixed metaphor apology) and terminate the entire proceeding. Yet, she’s letting it continue with Intel now in the driver’s seat.

  7. 4

    Although Director Vidal’s sanctions order for abuse of IPR process has 50 pages of details, I did not see it indicate the names of the attorneys signing the “OpenSky Indus” IPR petition or sending the indicated IPR “settlement” offers? Did I miss that, or, if not, why not? Are they the same as the “Petitioner” who’s service of this order is indicated at the end of the order, or were those attorneys retained later?
    P.S. I assume the PTO OED is already involved?

  8. 3

    Bravo Director. The good, right, and indeed moral thing to do.

    Now, please institute a standing requirement for IPRs and PGRs.

    For that, too, would be the good, right, and moral thing to do.

    Inventors and patent owners who have not first sued an alleged infringer should not be dragged against their will into expensive (and unaffordable for the great majority of independent inventors) AIA trials.

    It’s not right. It’s just not right.

    1. 3.1

      “dragged against their will”

      Maybe you missed the part where these poor oppressed inventors can just amend their claims or do nothing. It’s not that expensive (the second choice costs nothing, in fact).

      If a patent claims is worth defending, then pay what it costs to defend it. Otherwise quit whining. Nobody forced you to apply for a patent, you silly entitled freak.

      1. 3.1.1

        Nobody forced you to make your ad hominem attacks, and yet, that is what you do.

        That Dennis hasn’t, like Gene, removed the stain which is you remains both surprising and disappointing.

        And I am far from alone.

        What little you add to PatentlyO is worth far less than what you take away.

        Far less.


          Gene Quinn is a compulsive li ar (and an obvious unintelligent one) and doesn’t like to have that pointed out.

          Dennis says lots of things I disagree with and goes out of his way to be “edgy” but he’s basically honest.

          PatentDocs is just a collection of self-dealing hacks who can’t lawyer their way out of a paper bag.

          And we all know that you’re just another sad patent maximalist knob mewling on a patent blog about your precious freedums and holy patent rights. Get a life.


            Malcolm translation: “Anyone who does not agree with me (exactly) is a p 00 p y head.”

    2. 3.2

      A more one-eyed view of the patent system I hope never to see. Good patents should be rapidly enforceable, to give effect to the powerful “right to exclude” which is what motivates inventors to deliver to the public an enabling disclosure of their inventive contribution to their technical field. But some issued patents are not good and so, to preserve the precious reputation of the patent system as a force for good, deserve to be struck down in short order, so they can no longer be used to ext 0 rt payment from manufacturers or traders who have done nothing wrong. As Malcolm observes, if the IPR is not well-founded trust the authorities to dismiss it. Here in Europe, one is careful not to file an opposition that has poor prospects of success, for all that does is to raise the presumption of validity, doing the patent owner a favour.

  9. 2

    Nice work, indeed!

    Now let’s hear from the worst attorneys who ever walked the earth explaining how this is sooooo unfair, discriminatory, unconstitutional and totally against the holy scripture as set forth plainly in bazooka joe bubble gum wrappers.

    1. 2.1

      It is unfair IF Intel gets to benefit from Open Sky’s egregious wrongdoing and continue AFTER losing in district court. They get a second bite at the apple. The claims survived litigation under a clear and convincing standard.

      1. 2.1.1

        “The claims survived litigation under a clear and convincing standard.”

        Irrelevant to PTAB (and properly so) if a third party has better art/arguments.


          I would like to see discovery regarding any communications/connections between Intel and Open Sky.

  10. 1

    If inequitable conduct in patent prosecution can render a patent unenforceable, similar unethical conduct in the course of an IPR should end the IPR and institution should be denied.

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