August 24, 2020Client Alert

Collateral Agreements Referred To In Settlement Agreements Must Be Filed Under 35 U.S.C. § 317(b)

The Patent Trial and Appeal Board (Board) determined that collateral agreements referred to in Settlement Agreements to terminate an Inter Partes Review (IPR) proceeding must be filed under 35 U.S.C. § 317(b).

DTN, LLC (Petitioner) and Farms Technology, LLC (Patent Owner) settled two IPR proceedings. Pursuant to 35 U.S.C. § 317(b)[1], the parties filed the Joint Motion to Terminate the proceedings and a copy of their written Settlement Agreement. The Settlement Agreement referred to two other agreements (Collateral Agreements), which the Board requested be filed before the proceedings could be terminated. In response, the parties filed the two Collateral Agreements and Joint Motions to Expunge the Collateral Agreements.  In the Motions to Expunge, the parties used a two-fold argument for why the two Collateral Agreements were not subject to the mandatory filing requirement of § 317(b). The Board disagreed and denied the Motions to Expunge.

First, the parties claimed that the Collateral Agreements were not “between the patent owner and a petitioner” (35 U.S.C. § 317(b)) or “between the parties” (37 C.F.R. § 42.74(b)) because the Patent Owner was not a party to either of the two Collateral Agreements. The Board disagreed explaining that the statutory language of § 317(b) does not limit the “collateral agreements” to agreements that are between the patent owner and a petitioner. The Board also determined that the term “any” means “any” so the collateral agreements need not be between the patent owner and a petitioner to fall under the statute. Additionally, in contrast to the statute cited in Hughey v. U.S., 495 U.S. 411 (1990), the surrounding terms in § 317(b) are expansive rather than restrictive in nature. The Board thus concluded that by referring to the two Collateral Agreements, the Settlement Agreement includes the Collateral Agreements, as required by § 317(b), regardless of whether the Patent Owner and the Petitioner were both parties to the Collateral Agreements. The Board held that interpreting § 317(b) in the manner proposed by the parties would allow parties to IPR proceedings to circumvent the statute’s filing requirement, thereby frustrating the purpose of the statute.

Second, the parties argued that the Collateral Agreements were not “made in connection with, or in contemplation of, the termination of” these two IPR proceedings (quoting 35 U.S.C. § 317(b)) and 37 C.F.R. § 42.74(b)). The Board disagreed finding that both the statute and the regulation require the Settlement Agreement, not the collateral agreements, to have been made in connection with, or in contemplation of, the termination of the IPR proceedings.

Although the Board denied the Motions to Expunge since the Collateral Agreements fall under the ambit of 35 U.S.C. § 317(b), the Board agreed to treat the Settlement Agreement and the Collateral Agreements as business confidential information.

[1] 35 U.S.C. § 317(b):

“Any agreement or understanding between the patent owner and a petitioner, including any collateral agreements referred to in such agreement or understanding, made in connection with, or in contemplation of, the termination of an inter partes review under this section shall be in writing and a true copy of such agreement or understanding shall be filed in the Office before the termination of the inter partes review as between the parties.”

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