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VLSI-Intel Fight Is Test of How Vidal Wields PTAB Review Power

June 9, 2022, 8:45 AM

US Patent and Trademark Office Director Kathi Vidal’s intervention in administrative tribunal decisions to review patents underlying a $2.18 billion verdict against Intel Corp. puts her in the middle of a thorny patent fight involving allegations of sabotage against one of the parties.

The cases are among the first in which Vidal has exercised the authority to review Patent Trial and Appeal Board decisions, a power the US Supreme Court granted last year.

It’s unclear whether Vidal will back the PTAB’s decisions or reverse them. But her handling of the cases will offer clues about how she intends to put her own stamp on the tribunal.

The board agreed to institute review of two VLSI Technology LLC patents, following the March 2021 verdict. VLSI has accused the entities that brought the challenges of conducting a shakedown.

Vidal, who inherited the dispute when she became the agency’s director in April, said in orders Tuesday she would review the institution decisions. Attorneys, who saw the board’s decisions as incentivizing opportunists to harass patent owners that win in court, called it a step in the right direction.

“It’s good that Director Vidal has acknowledged that this is a problem,” said Alison Aubry Richards, an attorney at Global IP Law Group LLC. “Not saying or doing anything would be a clear signal that anything goes.”

Big Verdict

VLSI’s win against Intel in the Western District of Texas was one of the largest patent verdicts in U.S. history.

Both OpenSky Industries LLC and Patent Quality Assurance LLC were formed after the verdict. VLSI said they recycled old petitions that had been filed by Intel and denied by the PTAB in 2020 because of the status of the parallel infringement suits.

The PTAB said there was a “reasonable likelihood” OpenSky and Patent Quality Assurance would be able to show various claims in the patents are invalid because they cover obvious inventions.

The decisions plunged the board into what has been described as a public relations nightmare. Sens. Mazie Hirono (D-Hawaii) and Thom Tillis (R-N.C.) said in an April letter to Vidal that OpenSky and Patent Quality Assurance appear to have brought the challenges to “manipulate” the PTO “for their own financial gain.”

“The PTAB’s decisions to endorse this scheme are troubling and undermine the USPTO’s recent efforts to ensure post-issuance proceedings are not used to harass patent owners,” the bipartisan duo wrote.

The letter came after VLSI made public an email in which OpenSky suggested the two “work together to secure dismissal or defeat” the review petition. VLSI cited the email as evidence OpenSky was willing to “run a sham” validity trial “for pay.”

“I can’t imagine the director blessing that,” Scott McKeown, chair of the PTAB group at Ropes & Gray LLP, said. “It seems to me that the writing’s been on the wall with respect to those proceedings—they’re going to be shut down on some level.”

OpenSky has maintained that its goal is to have the validity of VLSI’s patents rechecked. Patent Quality Assurance made similar statements in board filings. It has also promised the board that it wouldn’t ask that its challenge “be terminated in exchange for compensation” from VLSI.

Public Interest

Some attorneys have called for more forceful action from the patent office, including immediate termination of the “inter partes” reviews, particularly after the revelation of OpenSky’s email. Another issue, Richards said, is Vidal indicated review of VLSI’s patents won’t be paused for now.

“The problem is the further IPRs go, the harder it is to stop the train,” Richards said.

Others said the focus on OpenSky and Patent Quality Assurance misses an important point: a patent office tribunal has said it likely will be shown that parts of VLSI’s patents shouldn’t have been issued.

“Whatever the agency decides is the appropriate remedy for OpenSky, I hope it keeps in mind its obligation to uphold the public interest in a case like this,” said Joseph Matal, an attorney at Haynes and Boone LLP and a former senior patent office official.

The patents, which relate to chip-making technology, were acquired by VLSI and once belonged to the Dutch chipmaker NXP Semiconductors. VLSI is owned by investment funds with assets managed by the Softbank-owned Fortress Investment Group, according to a Texas federal court.

Allowing VLSI to collect over $2 billion from Intel, “one of our nation’s premier chipmakers,” based on “patents that are pretty clearly invalid” would be a major black eye to the patent system, Matal said.

Intel Joining

Vidal’s orders initiating director review of the PTAB’s institution decisions came a day after the board agreed to allow Intel to join Patent Quality Assurance’s challenge. The board Wednesday also allowed Intel to join OpenSky’s case.

Intel said its participation would ensure a challenger is there to complete the reviews if Patent Quality Assurance or OpenSky settled with VLSI. Intel also said it would simplify the cases because each petition “raises issues and arguments derived from Intel’s Original IPR Petition and relies on Intel’s expert.”

It’s unclear what happens to Intel if Vidal addresses Patent Quality Assurance or OpenSky’s participation. It’s possible Intel could continue in the cases alone.

“It’s not as though Intel whiffed on the merits,” said McKeown, adding the company would, in effect, be taking over its own petitions. “From that perspective, its not necessarily unfair if they were allowed to continue.”

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Keith Perine at kperine@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com