Arbitration and the PTAB

In earlier articles and in my book, Arbitrating Patent Disputes, I began to look at the interplay between post-grant proceedings at the Patent Office’s Patent Trial and Appeal Board (PTAB) and arbitration.  The initial question was, “why not just settle patent disputes at the PTAB?”  PTAB review can provide a relatively quick and inexpensive way to resolve patent validity issues in a sort of administrative trial before specialized judges.  Those proceedings have become very popular as an alternative to federal patent litigation.  Why not use them to save time and money rather than using arbitration to do the same thing?

A one trick pony

The answer is that the PTAB can only determine patent validity.  It can’t determine infringement or settle contractual disputes as to whether products or processes are covered by a patent license, whether the correct amount of royalties were paid, or other issues likely to arise in a patent dispute.  PTAB review is a one trick pony.  It can be, to be sure, quite a trick if the PTAB invalidates the patent.  But otherwise, the parties will need to litigate their disputes if they don’t arbitrate them. 

Preferring the PTAB to arbitration

Of course, in many cases, the party charged with breaching a patent license agreement would prefer to try to invalidate the licensed patent or patents at the PTAB as a first step.  Why arbitrate when you can tee up a complete defense at the PTBA, even if you have agreed to arbitrate?

Which brings us to In Re: Maxpower Semiconductor, Inc. (Fed. Cir. September 8, 2021).  In that case, Maxpower had a dispute with its licensee, ROHM Semiconductor, as to whether the license agreement covered certain products.  The license had an arbitration clause.  Maxpower told ROHM it would initiate arbitration in 30 days.  ROHM then sued in federal court to declare the involved patents invalid.  The court found the arbitration clause delegated the issue of arbitrability to the arbitrator, then compelled arbitration and dismissed the case.   

ROHM next petitioned for inter partes review of the involved patents at the PTAB.  The petitions were granted.  The PTAB found that “even if the question of whether patentability falls within the scope of the agreement to arbitrate is committed to the arbiter” there is no “statute, rule, or policy that would preclude the Office from acting on the Petition.”

Maxpower then appealed the PTAB’s decisions to the Court of Appeals for the Federal Circuit.  Alternatively, it asked for mandamus relief. 

No appealing the institution

The Federal Circuit ruled that the PTAB’s decisions were not subject to review on appeal, citing 35 U.S.C. § 314(d). That section, it said, makes decisions to institute inter partes review “nonappealable.”   Two of the three judges deciding the case also found mandamus was not warranted because Maxpower did not show the PTAB had exceeded its authority.  It was not bound by the parties’ private contract to arbitrate disputes. Nor was is it tasked with “enforcing private arbitration agreements.”   Appeal dismissed.   Mandamus petition denied.

Dissent: What about the patent arbitration statute?

In her concurrence and dissent, Judge O’Malley readily agreed the PTAB’s institution decisions were not appealable.  But she thought mandamus relief should be available.  35 U.S.C. § 294 makes agreements to arbitrate patent validity “valid, irrevocable, and enforceable, except for any grounds that exist at law or in equity for revocation of a contract.”  She saw no exception in the statute for inter partes proceedings.  But this reasoning did not carry the day.

A light at the end of the tunnel?

Yet, there is still some light at the end of the tunnel for parties in Maxpower’s position.  In a footnote, the majority decision noted that Maxpower “remains free to ask the courts to enjoin ROHM from proceeding with the inter partes reviews.” For this possibility it referred to Dodocase VR, Inc.  v. MerchSource, LLC, 767 F. App’x 930 (Fed. Cir. 2019).  There the Federal Circuit affirmed a preliminary injunction ordering a petitioner to withdraw its inter partes petitions due to a forum selection clause in the parties’ contract.

Now what?

The holding that appeal or mandamus is not available to foreclose inter partes review in favor of arbitration is not favorable for arbitration of patent disputes. 

But the Maxpower case suggests a new path to enforce an agreement to arbitrate against a party that would rather go to the PTAB.  Take them to district court to stop them from pursuing inter partes review and require them to arbitrate as they had agreed.