The Patent Trial and Appeal Board (the Board) can terminate inter partes review (IPR) and post-grant review proceedings following a settlement between the parties. Parties should note, however, that settlement does not guarantee termination of the proceeding. Recent decisions have made clear that the Board retains—and will sometimes exercise—the power to enter a final decision on patentability even after the parties have settled. In particular, the Board appears less inclined to terminate when settlement occurs at an advanced stage in the proceedings, and patent owners should therefore be wary of settling too late.

A. Statutory Basis for Settlement

The laws governing IPR and post-grant review proceedings expressly provide for voluntary termination after settlement. An instituted IPR “shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner, unless the Office has decided the merits of the proceeding before the request for termination is filed.” 35 U.S.C. §§ 317(a); see also id. § 327(a). When settlement occurs, however, the Board “may terminate the review or proceed to a final written decision.” Id.

B. The Board’s Approach to Termination Requests

How can one predict whether the Board will choose to terminate or continue a proceeding after settlement? Two general considerations may affect the Board’s decision: (i) the stage of the proceeding at settlement, and (ii) the strength of the petitioner’s case against the patent.

1) Settlement Timing

In numerous cases, the Board has agreed to terminate proceedings settled during the petition stage, i.e., before institution of trial. E.g., IBM Corp. v. Financial Systems Technology, IPR2013-00078, Paper No. 11, at 2 (PTAB Feb. 12, 2013). The Board has also agreed to terminate proceedings settled within the first few months of trial, Hitachi Cable America Inc. v. Belden Inc., IPR2013-00408, Paper No. 14, at 2 (PTAB Jan. 30, 2014), and as late as ten days before a scheduled oral argument, Sony Corp. v. Tessera, Inc., IPR2012-00033, Paper No. 39, at 2 (PTAB Nov. 15, 2013).

In other instances, however, the Board has denied motions to terminate after settlement. For example, the parties in Blackberry Corp. v. Mobilemedia Ideas LLC, IPR2013-00016, filed a joint motion to terminate seven months after institution of the IPR and just one day before a scheduled oral hearing. The Board declined to terminate “in view of the advanced stage of this proceeding.” Paper 31, at 2–3 (PTAB Dec. 11, 2013). In another case, the parties unsuccessfully sought termination almost two months after oral argument; the Board explained that “the issues for trial had been briefed fully at the time the parties moved to terminate the proceeding.” Blackberry Corp. v. Mobilemedia Ideas LLC, IPR2013-00036, Paper No. 64, at 2–3 (PTAB Jan. 21, 2014). In sum, the Board appears more likely to grant early termination motions, and denials have been most frequent at later stages, particularly if the Board has already prepared for or conducted oral argument.

2) Manifestly Unpatentable Claims

A second factor that may influence the Board’s response to a settlement could be the relative strength of the unpatentability arguments asserted in the petition. In a case presenting one or more obviously unpatentable claims, the Board might be reluctant to terminate without requiring cancellation or amendment. Consistent with that notion, the Board has indicated that it “if the records clearly show that the challenged claims are unpatentable and the patent owner has not yet filed a patent owner response and/or amendment, the Board may continue the proceeding” for the patent owner to do so. 77 Fed. Reg. 48,648 (Aug. 14, 2012).

C. Practical Considerations

The possibility that review proceedings may continue after settlement should be of primary concern to patent owners. For example, a patent owner might make concessions to facilitate settlement, thus expecting to preserve its claims, only to see the Board unexpectedly continue the proceeding to an adverse final decision on patentability. Even worse—at least from the patent owner’s perspective—is that the risks to the patent (i.e., narrowed or canceled claims) would remain in place without the benefit of estoppel provisions triggered by a contested trial that prevent a petitioner from later challenging the patent on grounds that were raised or could have been raised before the Board. See 35 U.S.C. §§ 317(a), 327(a).

Accordingly, patent owners should draft and negotiate settlement agreements with such contingencies in mind. More broadly, patent owners should recognize how the particular stage and relative merits of their case may affect their chances of successfully terminating the review. Early settlement—ideally before the Board even institutes trial proceedings—is advisable.

Trends at the Board

Current trends show petitioners have been largely successful in obtaining a trial on at least some of the challenged claims.  The Board has issued several final written decisions in IPR trials resulting in the cancellation of the claims upon which the trial was instituted in most cases.  In a few cases, the Board has upheld the patentability of some of the challenged claims.