Amicus Brief in OpenSky Case Implores USPTO Director to Change Rule on Abuse of PTAB Process

“If anything, the Board has erred in the past to abrogate its duties and tolerate such abuses as a matter of so-called discretion, when this aspect of the statute permits none.” – Amicus brief of Ramzi Khalil Maalouf Ramzi Khalil Maalouf yesterday filed an amicus brief suggesting that U.S. Patent and Trademark Office (UPSTO) Director Kathi Vidal change the language of Rule 37 CFR 42.12(a)(6)) to indicate that the Patent Trial and Appeal Board (PTAB) “shall” rather than “may” sanction abuse of the post grant process. The brief was filed in response to Vidal’s July request relating to OpenSky Industries, LLC v. VLSI Technology LLC, IPR2021-01064 and Patent Quality Assurance [PQA], LLC v. VLSI Technology LLC, IPR2021-01229, both of which have been the subject of much scrutiny by members of Congress and patent practitioners.

The petitioners involved in the OpenSky and PQA cases were incorporated after Intel was found to have infringed VLSI’s patents in district court and have no discernable business operations beyond challenging VLSI’s patent claims. The two entities’ petitions were also nearly identical to inter partes review (IPR) petitions previously filed by Intel that had been rejected by the USPTO. Vidal sua sponte intervened in the case in June of this year, marking the first time Director Review has been initiated on an institution decision. Intel has been joined as a party to both Director Review proceedings.

Maalouf is himself an inventor whose U.S. Patent No. 9,503,627 was successfully challenged via an IPR brought by Microsoft, despite no conflict existing between the two parties. Maalouf is presently appealing the PTAB’s decision to the U.S. Court of Appeals for the Federal Circuit.

The Problem

In Vidal’s July call for amicus briefs, she asked that amici address the following issues raised by the two cases:

  1. What actions the Director, and by delegation the Board, should take when faced with evidence of an abuse of process or conduct that otherwise thwarts, as opposed to advances, the goals of the Office and/or the AIA; and
  2. How the Director, and by delegation the Board, should assess conduct to determine if it constitutes an abuse of process, or if it thwarts, as opposed to advances, the goals of the Office and/or the AIA, and what conduct should be considered as such.

Maalouf’s brief explained that 35 U.S.C. § 316(a)(6) states that “[t]he Director shall prescribe regulations – prescribing sanctions for abuse of discovery, abuse of process, or any other improper use of the proceeding, such as to harass or to cause unnecessary delay or unnecessary increase the cost of the proceeding.”

Yet, 37 CFR 42.12(a)(6)) says that the Board “may” sanction abuse of process. “The ambivalent word ‘may’ in Rule 42.12(a)(6) is wrong and has always been wrong because it should be ‘shall,’” said the brief. This has led to the proliferation of litigation conduct similar to the OpenSky and PQA cases, but “[t]hat can change now, for the betterment of the patent system, through conventional interim agency rulemaking (followed by notice-and-comment rulemaking) spurred by the abominable facts of this case,” the brief added.

The tort of abuse of process, which exists in all 50 states, provides clear guidance for regulating sanctions in America Invents Act (AIA) trials, continued Maalouf. And in In re Vivint, the U.S. Court of Appeals for the Federal Circuit recognized that the PTAB has applied sanctions when it found a serial filing to amount to an abuse of process, thus denying a third petition by the same petitioner on the same patent.

Contrary to the true intent of the AIA, as per the legislative history, the PTAB has “historically turned a blind eye to fact patterns that categorically show petitioners using IPR process for primarily ulterior purposes,” Maalouf said. Specifically, the PTAB has allowed proceedings where: 1) a petitioner was simply trying to “curry goodwill with a business relation”; 2) where a petitioner was acting as a shell company for an entity who was no longer able to bring a petition; or 3) where for-profit companies filed petitions with the express purpose of burdening patent owners. The brief explained:

If anything, the Board has erred in the past to abrogate its duties and tolerate such abuses as a matter of so-called discretion, when this aspect of the statute permits none. The time has come to fix 37 CFR 42.12(a)(6). The Director should change the word “may” to the word “shall.”

How it Would Work

The immediate solution, said Maalouf, is to mandate that the PTAB review post-grant proceedings for abuse of process, and set forth such procedures via an interim rule prior to notice and comment rulemaking. As part of this, the Rule should introduce a mechanism for filing motions to dismiss petitions for abuse of process, which could be filed in place of or with a preliminary response. Pre-institution discovery could be requested and allowed. Then, if abuse of process is determined by the Director (or her delegee) to exist, the petition would be denied; if no abuse of process is determined to exist, a respondent can file a preliminary response on the merits. Maalouf also suggested the rule should indicate that “the issue may arise and be briefed at any stage of IPR, including post-appeal, prior to issuance of the Director’s Certificate.”

The brief concluded with a suggestion that such interim rule, once issued, could also apply to the VLSI cases.

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Author: donscarpo


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Join the Discussion

5 comments so far.

  • [Avatar for Anon]
    August 18, 2022 09:45 am

    Big Al,

    No matter the merit of your proposals, such simply does not accord with the way that Congress choose to have the first part of the Post Grant Review system BE in a non-Article III forum, with the knowledge that standing simply was not required.

  • [Avatar for Pro Se]
    Pro Se
    August 17, 2022 08:29 pm

    *excuse mobile typos on last post.

  • [Avatar for Pro Se]
    Pro Se
    August 17, 2022 08:27 pm

    The problem is Rule 3.3 doesn’t exist among the fraternity of bar lawyers.

    So it seems Rule 3.3 does exist in the law in,theory, but the bad acting in law is worse than the Blue Wall of Silence of the NYPD.

    I have a petitioner who admitted to using the PGR process for harassment on frivolous art… the PTAB has no Rule 3.3 respect or even a process to submit evidence such as petitioner admissions…

    It’s all rigged… well thought out dissipation of the USPTO…

    A tribunal that used to be run by engineers and inventors and now run by corporate lawyers and Big Law examiner/APJ moles… they spy on pending patents from District Court plaintiff and feed corporate defendants unpublished a-location info and office actions that you’ll see shared with District Court defense briefs…

    Funny, those 3 references used by the examiner on this unpublished application just appeared in a District Court defendant case.

    Evidence will be in my book exposing this.

  • [Avatar for Pro Say]
    Pro Say
    August 17, 2022 05:36 pm

    Thank you Ramzi, Robert, and Brian.

    A superb, well-supported brief.

    May Kathi and PTO leadership bring IPRs & PGRs into alignment with the intention of Congress by putting a stop to these rampant abuses.

    The assault on innovation — and in particular American innovation — must come to an end.

    Your sound proposal in one of the critical steps in ending the assault.

  • [Avatar for Big Al]
    Big Al
    August 17, 2022 02:58 pm

    While OpenSky’s and PQA’s petitions are worthy of sanctions, it is just as bad when Big tech companies (either directly or through 3rd party sham organizations) file numerous PTAB petitions resulting in enormous costs and burdens on patent owners. Litigation should never be stayed for IPRs brought by non-parties. Oftentimes, those 3rd party petitions are preceded by communication between a defendant and the 3rd party – any evidence of such communications should preclude institution if the defendant was barred from filing the petition directly. If the 3rd party petitioner is a member organization including the defendant the petition should also be denied.