SecureBuy v. CardinalCommerce (CBM2014-00035): A Prior Declaratory Judgment Action Bars Review

The AIA keeps a challenger from pursuing the same validity attack in two forums of its own choosing. SecureBuy, LLC v. CardinalCommerce Corp., CBM2014-00035 (Paper 12, April 25, 2014), applies that principle in its simplest form. The decision was among the Board’s earliest precedential decisions; designations can change, so check the USPTO’s current list of precedential and informative decisions.

The decision is short, but its rule carries across all three AIA trial types.

Background

SecureBuy petitioned on November 15, 2013, for covered business method (CBM) review of CardinalCommerce’s U.S. Patent No. 7,051,002, and filed a corrected petition two weeks later. Two weeks before the original petition, on November 1, 2013, SecureBuy had filed two declaratory judgment actions against CardinalCommerce, one in the District of Delaware and one in the Southern District of Mississippi. Each sought a declaration that the patent’s claims, including at least claim 1, were invalid under 35 U.S.C. §§ 101, 102, 103 and 112.

What the Board decided

The Board started with the structure of the transitional CBM program. Section 18(a)(1) of the AIA provides that a CBM review is treated as, and employs the standards and procedures of, a post-grant review under chapter 32 of title 35, except for specific provisions it lists as inapplicable: § 321(c) and subsections (b), (e)(2) and (f) of § 325. Section 325(a)(1) is not on that list, so it applies to CBM reviews.

Section 325(a)(1) provides that a post-grant review may not be instituted if, before the petition is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent. SecureBuy’s declaratory judgment complaints did exactly that, and both preceded the petition. The Board therefore denied the corrected petition in all respects, without reaching the merits.

Why it matters

The bar is triggered by the petitioner’s own choice to file a validity challenge in court first. It does not depend on how far the civil case has progressed or whether the challenge in court and at the Board are the same. Timing is everything: a validity action filed even two weeks before the petition was enough.

The same rule exists for the other AIA trials. Section 315(a)(1) bars an inter partes review if the petitioner or real party in interest filed a civil action challenging validity before the petition, and § 325(a)(1) applies directly to post-grant review. Both statutes also say that a counterclaim challenging validity is not such a civil action (§§ 315(a)(3), 325(a)(3)), so a defendant who is sued for infringement and counterclaims invalidity is not barred by this provision. For more on how these threshold rules fit together, see the different threshold standards.

A party considering both a declaratory judgment action and an AIA petition therefore needs to think about the order of filing. The decision does not address whether a later dismissal of the civil action would change the result, so this note does not either.

Later developments

The transitional CBM program stopped accepting new petitions in September 2020, so the CBM-specific holding is now mainly historical. The underlying civil-action bars in §§ 315(a)(1) and 325(a)(1) remain in force for IPR and PGR. For CBM background, see the CBM review guide; for estoppel in CBM reviews, see Westlake v. Credit Acceptance.

Key takeaways

• CBM reviews employ post-grant review procedures, including the civil-action bar of § 325(a)(1).
• A declaratory judgment action challenging validity, filed before the petition, barred institution.
• The parallel IPR bar is § 315(a)(1); counterclaims of invalidity do not trigger either bar.
• The decision was among the Board’s earliest precedential decisions; check the current designation list.