In Latest OpenSky Order, Vidal Awards VLSI Attorney Fees, Restores OpenSky as Party to IPR

On Friday, February 3, U.S. Patent and Trademark Office (USPTO) Director Kathi Vidal issued an order in the ongoing Director Review of OpenSky v. VLSI, restoring OpenSky as a party to the inter partes review (IPR) and awarding reasonable attorney fees to VLSI as sanctions against OpenSky.

Vidal had dismissed OpenSky from the proceedings in December after first merely relegating OpenSky to be a “silent understudy” to the proceedings. In Friday’s order, following briefing from OpenSky and VLSI on her order to show cause as to why OpenSky shouldn’t have to pay compensatory damages to VLSI, Vidal held that VLSI was entitled to attorney fees for the time it spent addressing OpenSky’s abusive behavior, “including the Director Review process in its entirety.”

Nonetheless, she restored OpenSky as a party, perhaps to avoid the perception they were sanctioned twice–first via dismissal and then via monetary sanctions–according to IPWatchdog sources.

In her analysis of whether OpenSky deserved sanctions, Vidal dismissed OpenSky’s arguments that it should not be subject to attorney fees and that there was no harm to VLSI due to the identified misconduct. OpenSky had argued that there is no statutory provision for “fee shifting” in IPR proceedings, but Vidal said that this is a misinterpretation of the order. “The order to show cause is not directed to fee shifting; it is a sanction order,” wrote Vidal. Instead of a reward for VLSI, the fee award is a punishment for OpenSky’s abusive conduct, she added. Vidal further cited Rule 42.12, which authorizes the Patent Trial and Appeal Board (PTAB) to issue sanctions for a range of misconduct and expressly mentions attorney fees.

OpenSky also argued that it was not given proper notice or opportunity to respond to the Director Review allegations and was denied due process under the Constitution and Administrative Procedure Act. Vidal said this argument was “unavailing” and that her Director Review Scheduling Order was unambiguous as to its intentions to investigate OpenSky’s abuse of process. OpenSky responded to the interrogatories posed in the Scheduling Order “by citing a single piece of evidence already of record…, and offered no other supporting evidence.” While the Order did not permit new declaratory evidence to be filed, OpenSky did not request permission to file such evidence or object to its exclusion, said Vidal.

OpenSky further argued that Vidal made an adverse inference across the board based on documents not produced with no proof that the missing documents contained relevant information. But Vidal said she made it explicit that she may draw adverse inferences from a failure to comply with the discovery order and “despite that explicit warning, OpenSky chose noncompliance.”

As to OpenSky’s argument that meritorious IPR petitions cannot be subject to sanctions and that its conduct did not harm VLSI, Vidal said this “mischaracterizes the nature of the sanctions and would negate the purpose of imposing sanctions for misconduct before the Board…. OpenSky’s argument ignores one of the congressional intents that undergirds the America Invents Act (“AIA”) itself—“the integrity of the patent system”—which considers interests broader than just patentability.”

Vidal made it clear that she is not sanctioning OpenSky for the petition itself but for its conduct following the filing of the petition, which took place throughout the Director Review process and did cause harm to VLSI in that OpenSky’s failure to comply with the mandated discovery order resulted in an incomplete record to assess OpenSky’s claim that there was no abuse of process.

While VLSI argued that sanctions must be tied to harm that was solely caused by the misconduct within two limited timeframes it identified from the Director Review Decision, Vidal said that “OpenSky’s misconduct was not so limited” and occurred throughout the proceeding. She therefore authorized VLSI to file a Motion for Fees specifying the total amount requested for the related tasks during the Director Review, but did not extend sanctions outside of the Director Review to all of the IPRs filed by OpenSky, as VLSI requested. Vidal explained:

“As discussed above, I distinguish the merits of this proceeding from the misconduct of OpenSky…. This distinction between the merits and misconduct applies to the joinder requests. For example, IPR2022-00366 deals entirely with the merits, and there is no evidence of misconduct by Intel…. Rather, Intel appears to be another target of OpenSky’s misconduct…. Accordingly, fees relating to IPR2022-00366 are not included in this sanction.”

Vidal noted that OpenSky’s other IPRs may give rise to similar misconduct allegations, providing a very specific example from IPR2021-01056, in which “OpenSky’s failure to engage the expert on whom its petition relied may suggest that OpenSky was attempting to file a petition with the lowest possible cost in an effort to generate leverage against VLSI, but without the intent or expectation of litigating the proceeding through trial.”

VLSI asked that OpenSky’s attorneys also be held liable for the fees but Vidal said that, while the PTAB’s authority extends to individuals involved in the proceeding, including attorneys or practitioners, the Director Review process only examined OpenSky’s misconduct and not the attorneys’. Thus, she reserved judgment on that issue.

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