Takeaway: The Board analyzes real party-in-interest questions based on whether the non-party exercises control over a party’s participation in a proceeding.

In its Decision, the Board denied institution of inter partes review, finding that the Petition failed to identify “all real parties in interest,” pursuant to 35 U.S.C. § 312(a)(2).  In the Petition, only Paramount Home Entertainment Inc., Twentieth Century Fox Home Entertainment LLC, and Universal Studios Home Entertainment LLC were identified as the real parties-in-interest pursuant to 37 C.F.R. § 42.8(b)(1).  In its Preliminary Response, Patent Owner argued that each of Paramount Pictures, Paramount Home Entertainment Distribution Inc., NBCUniversal, Universal City Studios, Twenty-First Century Fox, MGM Studios and MGM Home Entertainment (“the non-identified entities”) was a real party-in-interest for a number of reasons.

First, Patent Owner argued that “several of the non-identified entities are involved in one of the three declaratory-judgment actions” related to the ’715 patent. In this regard, Petitioners had indicated in the Petition that “they were ‘each planning to file complaints for declaratory relief with respect to the ’715 patent in the U.S. District Court for the Central District of California’ concurrently with the Petition.”  Patent Owner argued that the actions covered the same subject matter as the Petition, and each action “was virtually a carbon copy of the others.”  In addition, Patent Owner noted that counsel for Petitioners in the instant proceeding is also counsel for the plaintiffs in all of the declaratory judgment actions.  Thus, Patent Owner argued that Petitioners’ co-plaintiffs in these actions are real parties-in-interest.

Patent Owner also argued that the corporate relationships between Petitioners and the non-identified entities supported a finding that they are real parties-in-interest. For example, Petitioner Paramount Home Entertainment Inc. is a wholly-owned subsidiary of Paramount Pictures Corporation, and both entities were listed as “Interested Parties” under FRCP 7.1 in one of the declaratory judgment actions.

Patent Owner argued that “some of the non-identified entities exercise control over respective Petitioners in connection with the dispute involving the ’715 patent.” In particular, Patent Owner cited correspondence related to Patent Owner’s license offer in which the non-identified Paramount Pictures entity responded without mentioning Petitioner Paramount Home Entertainment.

Petitioners argued that they were the only real parties-in-interest because they “are theonly parties who could even hypothetically be infringers.”  Petitioners explained that other entities were named as co-plaintiffs in the declaratory judgment actions because Patent Owner had sent licensing correspondence to those parties even though they could not reasonably infringe the ’715 patent.  Petitioners argued that Patent Owner’s wrongly accusing parties of infringement could not transform those parties into real parties-in-interest.

Moreover, Petitioners argued that identification of a party in a Corporate Disclosure Statement in litigation is immaterial because different standards apply; the failure to name the non-identified parties was not a deliberate effort to avoid estoppel; and a parent corporation is not a de facto real party-in-interest.

The Board stated that determination of a real party-in-interest is a fact-dependent question that is based upon “whether the non-party exercised or could have exercised control over a party’s participation in a proceeding.” The Board was persuaded that Paramount Pictures Corporation is a real party-in-interest in the proceeding, and did not reach the question as to the other non-identified entities.  In particular, the Board noted that Paramount Pictures Corporation has “a documented interest in invalidating the ’715 patent,” evidenced by its participation as a co-plaintiff in a declaratory judgment action.  The evidence also established that Paramount Pictures Corporation “is an involved parent corporation that has exercised control, on behalf of itself and Petitioner Paramount Home Entertainment Inc., over the dispute involving the ’715 patent.”  Petitioner Paramount Home Entertainment Inc. did not cite any evidence showing that it or its attorneys “took any action independent from its parent, Paramount Pictures Corporation, regarding the subject matter of this dispute prior to filing the Petition.”

Addressing Petitioners’ arguments, the Board first noted that whether a party could be a “hypothetical infringer” is not relevant. Instead, the question is whether “the non-party exercises control over a party’s participation.”  Second, Patent Owner’s alleged failure to investigate was found to be “misplaced” because the Board found that the evidence showed that the parent corporation exercised control in the related litigation and “had the opportunity to control Petitioner” in this proceeding.  Third, the absence of estoppel under 35 U.S.C. § 315(a)(1) does not “relieve a petitioner of its obligation under 35 U.S.C. § 312(a)(2) to identify all real parties-in-interest.”  Finally, regarding the corporate relationships, the Board noted that Patent Owner’s challenge was not based solely on this argument.  Therefore, the present case is distinguishable from others because the evidence establishes that the parent corporation “exercised or could have exercised control over the petitioner subsidiary.”

The Board finally addressed Patent Owner’s Motion to Seal an exhibit filed with its Preliminary Response. Because the Board did not rely upon information in the exhibit, the exhibit was expunged and the Motion dismissed as moot.

Paramount Home Entertainment Inc., Twentieth Century Fox Home Entertainment LLC, and Universal Studios Home Entertainment LLC v. Nissim Corporation, IPR2014-00961
Paper 11: Decision Denying Institution of Inter Partes Review
Dated: December 29, 2014
Patent: 6,304,715 B1
Before: Patrick R. Scanlon, Michael J. Fitzpatrick, and Brian P. Murphy
Written by: Scanlon
Related Proceedings: Paramount Pictures Corp. v. Nissim Corp., No. 2:14-cv-04624 (C.D. Cal.); Twentieth Century Fox Home Entertainment LLC v. Nissim Corp., No. 2:14-cv-04626 (C.D. Cal.); and Universal City Studios LLC v. Nissim Corp., No. 2:14-cv-04628 (C.D. Cal.).