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Princeton Digital Image Corp. v. Konami Digital Entertainment Inc.

United States District Court, D. Delaware

March 30, 2017

PRINCETON DIGITAL IMAGE CORPORATION, Plaintiff/Counterclaim-Defendant,
v.
KONAMI DIGITAL ENTERTAINMENT INC., HARMONIX MUSIC SYSTEMS, INC., and ELECTRONIC ARTS, INC., Defendants/Counterclaim-Plaintiffs.

          MEMORANDUM ORDER

          LEONARD P. STARK, UNITED STATES DISTRICT JUDGE

         WHEREAS, Magistrate Judge Burke issued a 14-page Report and Recommendation (the "Report") (D.I. 188), dated January 19, 2017, recommending that the Court grant-in-part and deny-in-part Plaintiff and Counterclaim-Defendant Princeton Digital Image Corporation's ("Plaintiff or "PDIC") motion (D.I. 101), seeking to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendants and Counterclaim-Plaintiffs Harmonix Music Systems, Inc. ("Harmonix") and Electronic Arts, Inc.'s ("EA") (collectively, "Defendants") counterclaims for a declaratory judgment of invalidity ("First Counterclaim") and noninfringement ("Second Counterclaim") (D.I. 97);

         WHEREAS, on February 2, 2017, PDIC objected to the Report ("Objections") (D.I. 189), specifically objecting to the Report's conclusion that Defendants are not estopped from asserting the invalidity of dependent claims 14, 19, and 20 of United States Patent No. 5, 513, 129 (the "' 129 patent") in their First Counterclaim, based on the plain text of 35 U.S.C. § 315(e) and precedent from the United States Court of Appeals for the Federal Circuit;

         WHEREAS, on February 16, 2017, Defendants responded to PDIC's Objections ("Response") (D.I. 190), asserting that the Report properly denied Plaintiffs motion to dismiss the First Counterclaim;

         WHEREAS, neither party objected to Judge Burke's recommendation to grant PDIC's motion to dismiss the Second Counterclaim without prejudice to Defendants' ability to amend their pleading;

         WHEREAS, the Court has considered the parties' objections and responses de novo, see St. Clair Intellectual Prop. Consultants, Inc. v. Matsushita Elec. Indus. Co., Ltd., 691 F.Supp.2d 538, 541-42 (D. Del. 2010); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3);

         NOW THEREFORE, IT IS HEREBY ORDERED that:

         1. PDIC's Objections (D.I. 189) are OVERRULED, Judge Burke's Report (D.I. 188) is ADOPTED, and PDIC's Motion to Dismiss (D.I. 101) is DENIED as to the First Counterclaim and GRANTED as to the Second Counterclaim (without prejudice to Defendants' ability to amend their Second Counterclaim).

         2. PDIC argues that the Report erroneously concludes that the plain text of § 315(e) and Federal Circuit precedent foreclose PDIC's argument on estoppel. (Objections at 1) PDIC specifically objects to the Report's interpretation that § 315(e) does not estop challenges to patent claims that are not explicitly addressed in a final written inter partes review ("IPR") decision.[1] (Id. at 3) PDIC contends that § 315(e) extends estoppel to any ground that the petitioner raised or reasonably could have raised while seeking IPR, regardless of whether that IPR results in a final written decision as to the challenged claim. (Id. at 2)

         Section 315(e)(2), the section implicated here, provides, in relevant part:

The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert... in a civil action . . . that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.

         As the Report explained, this section precludes a petitioner from asserting invalidity of a claim on "any ground that the petitioner raised or reasonably could have raised during th[e] IPR proceedings - but only to the extent that the IPR proceeding at issue is one that 'results in a final written decision' as to those claims." (Report at 8) (emphasis added) PDIC asserts that this interpretation is inconsistent with the statute and its legislative history, because "it would limit the estoppel to the specific invalidity grounds that are actually raised, and that the PTO finds are sufficient to support an institution decision." (Objections at 4) The Court disagrees. The Report's interpretation, which the Court adopts, clearly states that estoppel applies to "any ground the petitioner raised or reasonably could have raised, " but only if the claim to which that ground applies is a subject of the final written decision. (Report at 8)[2] The Report's interpretation is consistent with both the statute's plain text and Federal Circuit precedent.

         Regarding the plain text of the statute, § 315(e)(2) references the word "claim" twice: first as, "a claim, " and second, as "the claim." The "claim" referred to in each instance, therefore, must be the same. Accordingly, in line with the Report's interpretation, for estoppel to apply under § 315(e)(2), the claim which a petitioner asserts is invalid in a civil action or ITC proceeding ("the claim") must be the same claim for which an IPR resulted in a final written decision ("a claim").[3]

         Because an IPR cannot result in a final written decision unless it is instituted, see Shaw Indus., 817 F.3d at 1300 ("IPR does not begin until it is instituted."), and the final written decision only addresses claims upon which IPR was instituted, see Synopsys, Inc. v. Mentor Graphics Corp.,814 F.3d 1309, 1317 (Fed. Cir. 2016) (stating final written decision under "Section 318(a) only requires the Board to address claims as to which review was granted"), the Report concludes that the claim referenced in ยง 315(e)(2) must necessarily have been the subject of an instituted review, and resulted in a final written decision, for estoppel to apply. The Court agrees. Therefore, because neither the Harmonix IPR nor the Konami/Harmonix IPR ever resulted in a final written decision as to claims 14, 19, or 20 (because no review of claims 14, 19, or 20 was ever instituted), Defendants are not estopped from asserting ...


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