District Court Awards Sanctions for False RPI Identification

by | Oct 27, 2023 | PTAB News, PTAB Trial Basics, Real Party in Interest

By Sue Gerber and Matt Johnson –

The PTAB requires that all petitioners in IPR and PGR proceedings disclose the real party(ies)-in-interest.  While that might seem like a mere formality, a false disclosure can lead to very harsh consequences.  In a recent decision, the U.S. District Court for the Southern District of California granted a default judgment against Ventex Co., Ltd. (“Ventex”) in the amount of nearly $2.4 million for claims arising out of its involvement in seeking inter partes review in its own name without disclosing that the real party-in-interest was another company, Seirus Innovative Accessories, Inc. (“Seirus”).  Columbia Sportwear North America Inc. v. Ventex Co., Ltd., Case No. 20-cv-709-RSH-JLB, ECF No. 379 (S.D. Calif. Sept. 20, 2023).  The patents were owned by Columbia Sportswear North America, Inc. (“Columbia”).

The story begins in W.D. Wash in 2013 with Columbia’s bringing patent infringement claims against Seirus.  That case was voluntarily dismissed and refiled in the U.S. District Court for the District of Oregon in 2015.  Between January 2015 and January 2017, Columbia and Seirus litigated the dispute to the verge of trial.  To delay the trial, Seirus and Ventex purportedly entered into an agreement by which Ventex would file IPR petitions on Seirus’ behalf.  Ventex falsely represented that Seirus was not a real party-in-interest because if Seirus had been properly identified, the IPRs would have been time barred.  The strategy did not go according to plan, however, because the Oregon district court denied Seirus’ motion to stay the trial while the IPRs were pending.

Columbia aggressively sought discovery in the IPR proceedings to determine whether Seirus was, in fact, a real party-in-interest.  Those attempts at additional discovery were initially denied, and the case proceeded through Oral Argument.  Just before a Final Written Decision was expected, the PTAB issued an order extending the proceedings in light of the AIT case. The Court then invited the parties to brief whether additional discovery was needed, and Columbia successfully argued for certain discovery, which was granted. The PTAB then expanded the scope of discovery as Columbia demonstrated what had occurred.  Through that discovery, Columbia uncovered evidence that Seirus had been funding the Ventex IPRs.  Columbia brought this evidence to the PTAB’s attention, and the PTAB terminated the Ventex IPRs.  Columbia, slip op. at 6.  In its decision, the PTAB held that:  (1) Seirus was a real party-in-interest to the Ventex IPRs; (2) Seirus was in privity with Ventex; and (3) the “Exclusive Manufacturing Agreement” between Seirus and Ventex “may have been a cover for Seirus to fund the inter partes reviews without leaving a paper trail.”  Id.  The PTAB awarded sanctions to Columbia in the amount of $32,761.  Id. at 46.

The story does not stop there, however.  On January 29, 2019, Columbia sued Seirus and Ventex, as well as numerous executives at both companies and Seirus’s in-house attorney who drafted the Exclusive Manufacturing Agreement, in district court for the Southern District of California, asserting claims for violations of the federal and Oregon RICO statutes, conspiracy to violate the RICO statute, fraud under Oregon and Virginia state law, conspiracy to commit fraud, abuse of process under Virginia law, and exemplary punitive damages.  Seirus settled these claims with Columbia, but Ventex failed to appear in the case.  Columbia sought a default judgment against Ventex and its two named executives.  In a thoroughly analyzed, 60-page decision, the district court granted the requested default judgment.  It found that Columbia had stated a claim and proven actual damages from Ventex’s deception at the PTAB in the amount of $789,942.08, which included fees and expenses from litigating the Ventex IPRs, IPR-related fees and expenses incurred in the two Oregon patent infringement cases, minus the sanctions awarded by the PTAB.  Slip op. at 44.  Then, because the district court concluded that the RICO statute required it to award treble damages, it granted judgment in the amount of $2,369,826.24.

The court then conditionally denied Columbia’s request for prejudgment interest, attorney fees in the California action, and costs, but allowed Columbia 14 days to submit (1) a revised calculation for prejudgment interest on only the approximately $800,000 of actual damages (not the trebled amount), (2) detailed billing records to support its claim for attorney fees, and (3) separate requests for taxable and non-taxable costs.  When these revised submissions are taken into account, the final judgment against Ventex and its executives could be substantially higher.

 

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Matthew Johnson

Partner at Jones Day
Matt Johnson is one of the Firm's primary contacts on practice before the PTAB. Currently co-chairing the Firm's PTAB subpractice and involved in proceedings at the Board since the first day of their availability in September 2012, Matt regularly represents clients as both petitioners and patent owners at the Board. He further works as an advocate for clients in appeals from Board proceedings at the Federal Circuit.