“Eleventh Hour” Sotera Stipulation Sufficient to Avoid Denial

By Daniel Sloan and Josh Nightingale –

The PTAB recently declined to exercise its discretion to deny IPR, instituting review in BMW of North America, LLC v. NorthStar Systems LLC, IPR2023-01017, Paper 12 (Dec. 8, 2023).  There, the PTAB held that (1) a Sotera stipulation could be entered after a patent owner responds to a petition, (2) patent owner was not prejudiced by the “eleventh hour” stipulation here, and (3) a party that uses a parallel declaratory judgment (DJ) action as a basis to argue for discretionary denial must show the relevance of that action.

BMW of North America, LLC (“BMW”) petitioned for review of U.S. Patent No. 8,014,943 (“the ’943 patent”) owned by Northstar Systems LLC (“Northstar”).  The ’943 patent is directed to a “Method and System for Displaying Social Networking Navigation Information.”  After NorthStar filed a preliminary response requesting denial based on parallel district court proceedings, BMW sent a Sotera stipulation to NorthStar.  BMW thus stipulated to not pursue in a parallel district court proceeding the same grounds as in the petition or any grounds that could have reasonably been raised in the petition.

The PTAB may not institute IPR unless a petition shows there is a reasonable likelihood the petitioner would prevail with respect to at least one of the challenged claims.  35 U.S.C. § 314(a).  The PTAB has discretion to deny institution, including in situations where there is a parallel district court proceeding involving the same or substantially the same parties and invalidity challenges.  Apple Inc. v. Fintiv, Inc., IPR2020-0019, Paper 11 (Mar. 20, 2020).  However, as covered on our blog, the USPTO Director’s June 21, 2022 Memorandum titled “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation” states that the Board will not discretionarily deny institution when a petitioner submits a Sotera stipulation.  Such stipulations mitigate concerns of potentially conflicting PTAB and district court decisions and duplicative efforts between the district court and PTAB.

The parties here were engaged in both (i) a DJ action initiated by BMW that sought declaratory judgment of noninfringement, and (ii) a patent infringement lawsuit initiated by Northstar.  NorthStar argued that these parallel district court litigations weighed in favor of denying institution under Fintiv.  BMW disagreed, arguing that discretionary denial was not appropriate because of its Sotera stipulation.  But NorthStar responded that the PTAB should not credit BMW with the stipulation because it came “at the eleventh hour.”  BMW submitted the stipulation by email several days after NorthStar filed its preliminary response to BMW’s petition for IPR.

The PTAB agreed with BMW.  In its opinion, the PTAB noted it was unaware of any precedent establishing a specific time limit by which a Sotera stipulation must be submitted.  The PTAB also noted that NorthStar did not allege that it had been prejudiced by the timing of the stipulation.  That said, at footnote 12 the PTAB noted that, for practical purposes a petitioner needs to submit a Sotera stipulation well in advance of the PTAB’s deadline for entering its institution decision.

The PTAB also addressed arguments directed at the separate DJ action concerning the ’943 patent.  It held that the DJ action was irrelevant because NorthStar’s Fintiv analysis relied on the parallel patent infringement litigation and not the DJ action.

After addressing these arguments and considering the evidence, the PTAB held that the information presented showed a reasonable likelihood of success on the merits as to at least one of the ’943 patent’s claims and instituted review.

Takeaways:  While there is no formal time limit to submit a Sotera stipulation, a petitioner should submit its stipulation early enough that the PTAB can consider it before deciding whether to institute IPR.  If a patent owner wants to challenge the timing of a Sotera stipulation, the patent owner should be prepared to argue how it was prejudiced.