IBM v. Financial Systems Technology (IPR2013-00078, Paper 7): Guidance on Filing a Settlement

When parties to an inter partes review settle, they cannot walk away; the rules require certain filings. International Business Machines Corp. v. Financial Systems Technology (Intellectual Property) Pty. Ltd., IPR2013-00078, Paper 7, entered February 8, 2013, is the Board’s order explaining those filings to parties that settled before institution.

The judgment that followed four days later, terminating the case (Paper 11), is covered separately.

Background

IBM filed its petition on December 12, 2012, challenging reissue patent RE40,526. The patent owner’s preliminary response was due in March 2013. On February 6, 2013, counsel for both sides held a conference call with two of the panel judges. They explained that they had a written settlement agreement contemplating dismissal of the related district court suit and termination of the IPR. They asked how to file the agreement and end the proceeding. Litigation counsel for IBM also attended, without objection.

What the Board decided

The order, issued under the Board’s general authority over the conduct of proceedings (37 C.F.R. § 42.5), set out the following points.

Termination is the expected result. The Board generally expects a proceeding to end once a settlement agreement is filed, citing the 2012 Trial Practice Guide.

The agreement must be in writing and filed. Under 37 C.F.R. § 42.74, any agreement made in connection with, or in contemplation of, the termination of a proceeding must be in writing and filed with the Board. The order noted that a “proceeding” includes a preliminary proceeding (37 C.F.R. § 42.2), so the requirement applies even before institution. Counsel confirmed they understood they had to file the agreement.

Confidentiality must be requested at filing. The parties wanted the agreement treated as business confidential information and kept separate from the patent file. Such a request must be filed with the agreement (§ 42.74(c)). The Board directed the parties to the instructions then on its website for uploading the agreement so that only the parties and the Board could see it.

A joint motion to terminate. Based on the facts of the case, the Board required, in addition to the agreement, a joint motion briefly explaining why termination was appropriate.

The Board ordered the joint motion and a true copy of the agreement filed by February 11, 2013, electronically in the Board’s filing system then in use.

Why it matters

The order sets out a practical sequence for settling an AIA proceeding that still applies in substance:

1. Contact the Board to report the settlement and get authorization for the filings.
2. File a true copy of the written agreement, including any collateral agreements made in contemplation of termination, as 35 U.S.C. § 317(b) and § 42.74(b) require.
3. Request confidential treatment at the same time, if the parties want the agreement kept out of the public patent file.
4. File a joint motion to terminate that briefly explains why termination is appropriate.

Two features of the statute frame these steps. Under § 317(b), an agreement kept as business confidential information is still available to government agencies on written request, and to others on a showing of good cause. And failure to file a required agreement can make it, and any patent involved, permanently unenforceable. Filing systems and Board procedures have changed since 2013. Readers should consult the current Trial Practice Guide and the Board’s filing instructions; see also the guide to the Patent Trial and Appeal Board.

Key takeaways

• Settlement agreements must be in writing and filed with the Board, even before institution, because a “proceeding” includes a preliminary proceeding.
• A request for business-confidential treatment must accompany the agreement.
• The Board required a joint motion to terminate explaining why termination was appropriate.
• The parties met the deadline, and the Board terminated the case in Paper 11.