Macauto v. BOS (IPR2012-00004, Paper 21): Termination after Settlement Is Discretionary

Settling an inter partes review after trial has begun is not quite the same as settling before institution. Macauto U.S.A. v. BOS GmbH & KG, IPR2012-00004, Paper 21, entered February 4, 2013, is an early order explaining the difference. The patent at issue was U.S. Patent 6,422,291.

The Board’s notice of defective petition from the start of the same proceeding is covered separately.

Background

On February 1, 2013, counsel for petitioner Macauto and patent owner BOS held a status call with the panel at Macauto’s request. They reported a written settlement agreement calling for dismissal of their district court suit in the Western District of New York and for Macauto to withdraw from the IPR under 35 U.S.C. § 317. Both said that suit was the only other proceeding involving the patent that they knew of. They asked how to request termination under 37 C.F.R. § 42.72 and how to file the agreement.

What the Board decided

Termination is discretionary. The Board quoted § 317(a): if no petitioner remains in the inter partes review, the Office “may terminate the review or proceed to a final written decision.” It emphasized the word “may.” Rule 42.72 confirms the point, providing that the Board may terminate a trial without a final written decision. And under 37 C.F.R. § 42.74(a), the Board is not a party to the settlement and may independently decide any question of jurisdiction, patentability or Office practice.

The agreement must be filed. Under § 317(b) and § 42.74(b), the agreement must be in writing and filed in the Office before the trial is terminated. On a party’s request, it will be treated as business confidential information and kept separate from the patent file (§ 317(b); § 42.74(c)).

The Board authorized a joint motion to terminate under § 317(a) and § 42.72, required that it be accompanied by a true copy of the agreement, and suspended the trial for one week so the parties could prepare the motion.

Why it matters

The order highlights what changes once a trial is instituted:

• The patentability question has a public dimension. Because the Board is not bound by the settlement, it can continue to a decision, particularly when the merits are well developed. In practice it often terminates, but parties should not assume termination is automatic.
• Withdrawal of the petitioner is the trigger. Section 317(a) requires termination as to the petitioner on joint request unless the Office has already decided the merits. The discretion concerns whether the review itself continues without a petitioner.
• Estoppel follows the termination. When the review is terminated as to a petitioner because of settlement, § 315(e) estoppel does not attach to that petitioner. See estoppel arising from PTAB trials.
• Disclose related matters. The parties’ statement that the district court case was the only related proceeding helped the Board assess the request.

Compare IBM v. Financial Systems Technology, where the case settled before institution and the Board entered judgment terminating it. Current settlement procedure is described in the Trial Practice Guide, which readers should check.

Key takeaways

• After institution, the Board may terminate a settled IPR or proceed to a final written decision under § 317(a).
• Rule 42.72 and § 42.74(a) confirm the Board’s independence from the parties’ agreement.
• A true copy of the written settlement must be filed before termination, with confidential treatment available on request.
• The Board authorized a joint motion to terminate and suspended the trial for one week.