IAM

Patent Quality Assurance’s misconduct at a Patent Trial and Appeal Board proceeding and the role it played invalidating a patent central to VLSI Technology’s $2 billion patent infringement verdict against Intel Corp has long been the subject of debate among patent attorneys.

However, the matter is spilling out of the United States Patent and Trademark Office, after VLSI filed a civil fraud suit against PQA and its representative Joseph Uradnik in January in the Circuit Court of the City of Alexandria, Virginia. PQA responded last month by filing a motion to remove the suit to the US District Court for the Eastern District of Virginia. While PQA didn’t mince words, describing the suit as “baseless”, experts characterised VLSI’s strategy as unsurprising but difficult to win. It will have to mount several challenges – namely, the question of venue and res judicata based on issues already decided by the USPTO.

Director Kathi Vidal ruled in December 2022 that PQA abused the inter partes review process by filing an IPR and threatening to join a related IPR by OpenSky Technologies against VLSI to receive a payout from it as well as misrepresenting an “exclusive engagement” with a witness.

A year later, Vidal awarded monetary sanctions against OpenSky, but she found PQA’s conduct “was less egregious”. She determined the appropriate sanction was “strong admonishment to PQA for its conduct, and a warning not to repeat this conduct in the future” – which VLSI disagreed with, having filed a case at the US Court of Appeals for the Federal Circuit in addition to the civil fraud suit.

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Vidal’s footnote

In the December 2023 order, Vidal steered clear of commenting on PQA’s position that VLSI suffered no compensable injury stemming from its alleged misconduct, stating in a footnote, “Because I do not assess compensatory expenses, I do not reach these arguments. I also do not reach VLSI’s additional arguments for compensatory expenses”.

In its civil complaint, VLSI said, “that open question should now be decided”, and is seeking approximately $3.2 million in legal fees. Patent attorneys agreed that the question of compensatory damages was unanswered.

“The PTO’s primary focus in issuing sanctions is to protect the integrity of its proceedings and the interests of other parties by deterring future conduct by the sanctioned party and others via example,” says Matthew Johnson, partner at Jones Day. “It is not a vehicle for addressing all compensable harms. If conduct was otherwise tortious, then a civil proceeding may be an appropriate mechanism for examining that conduct.”

Wendy Verlander, an attorney at Verlander LLP, agreed that VLSI should be able to have that issue heard and decided, and questioned whether PQA’s conduct deserved merely “a slap on the wrist”.

PQA had refused to comply with Vidal’s discovery requests and instead challenged her authority to impose discovery. Vidal described it as “a serious matter that cannot occur without consequence” and concluded that strong admonishment was the appropriate sanction that would deter future misconduct. Verlander disagreed with that logic.

“Because of PQA’s noncompliance, the director and we will never know the extent of PQA’s abuse of process, yet she decided to award the most minimal sanction available,” she says. “Why would a party provide information demonstrating its bad actions when it can refuse and get an admonishment?”

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Uradnik declined to comment. Lawyers representing VLSI and PQA didn’t respond to requests for comment. Neither did USPTO.

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