PQA Says Its Discovery Failures Were ‘Legitimate Objections’ in Recent PTAB Briefing on VLSI Attorneys’ Fees Award

Months after invalidating patent claims undergirding one of the largest infringement verdicts ever entered in U.S. district court, the Patent Trial and Appeal Board (PTAB) recently received a round of briefing regarding potential sanctions against petitioner Patent Quality Assurance (PQA). Once accused by the U.S. Patent and Trademark Office (USPTO) of using the America Invents Act (AIA) process to extort money, PQA argues that its failure to respond to mandated discovery and its alleged misrepresentations regarding exclusive retainer of an expert witness should not result in an attorneys’ fees award as compensatory damages to patent owner VLSI.

Failure to Respond to Mandated Discovery was ‘Legitimate Objection’ to Novel Process

In an opening brief filed August 31, PQA argues that the two instances of alleged misconduct, identified by an order to show cause entered August 3 by USPTO Director Kathi Vidal, do not warrant sanctions for several reasons. PQA argues that its objections to the USPTO’s mandatory discovery were legitimate, as the process was entirely novel and it invited such objections.

PQA’s brief also alleges that VLSI suffered no compensable harm stemming from either alleged instance of misconduct. In support of this, PQA points out that VLSI made similar representations about PQA’s expert witness retainer to avoid an inter partes review (IPR) challenge petitioned by OpenSky. Further, PQA argued that it could not have harmed VLSI by failing to respond to USPTO interrogatories on PQA’s own potential infringement liability, other real parties in interest, and whether PQA conditioned its actions in the proceedings based on payments from interested parties. Largely, PQA argues that VLSI could not have been harmed by these lack of disclosures “because VLSI already had copies and/or knowledge of those communications.”

The lack of a causal connection between VLSI’s requested relief and PQA’s alleged misconduct was further explained by a separate response to VLSI’s brief requesting attorneys’ fees, also filed August 31. PQA contended that each category of work identified in VLSI’s request, including pre-institution activities and settlement negotiations, was voluntary on VLSI’s part.

“[F]or VLSI’s pre-institution activities, VLSI does not explain how those activities were caused by PQA’s statement regarding its exclusive engagement of Dr. Singh… VLSI similarly does not explain how PQA’s statement in its Petition caused VLSI to discuss settlement or file a POP request. Again, these activities were completely voluntary.”

VLSI: ‘Nothing PQA Says Should Be Taken at Face Value’

On September 1, patent owner VLSI filed a brief on compensatory damages alleging that attorneys’ fees would compensate VLSI for only a small fraction of the harm inflicted by PQA’s misconduct. While VLSI acknowledged that Director Vidal’s order to show cause did not make a finding on PQA’s alleged use of IPR proceedings to extort money from VLSI, last December’s sanctions decision by Director Vidal had concluded PQA engaged in such activities, amounting to an abuse of PTAB process. However, in January of this year, Vidal restored PQA as a petitioner to the IPR after PQA had argued it should have been afforded an opportunity to show cause and an opportunity to explain why the sanctions should not have been imposed.

“The full record of this case confirms that nothing PQA says should be taken at face value,” VLSI argues, adding that PQA failed to respond to even basic questions about its formation and main business activities. PQA never would have procured institution of its IPR proceeding if not for its misleading statements on its exclusive retainer of OpenSky’s expert witness, VLSI argued. “Because the genesis of this IPR was false and misleading statements, PQA should be liable for all of VLSI’s fees,” the patent owner argued.

However, in PQA’s eyes, any sanction levied upon PQA should in turn be applied to VLSI “because VLSI acted in the same manner – and worse.” PQA’s opening brief on attorneys’ fees purports to identify several instances of such behavior by VLSI, including a failure to discuss the extent of its own communications with PQA, refusal to disclose VLSI’s own members in Delaware district court, and fraudulent inducement of PQA into settlement negotiations with no intention of honoring contractual provisions on confidentiality.

PQA Seeks Expungement of Confidential Settlement Negotiations

VLSI’s response to PQA’s opening brief, filed September 1, called PQA’s attempts to blame VLSI’s own conduct “irrelevant, improper, and baseless.” VLSI also pushed back on PQA’s claims that its objections to mandated discovery were legitimate, noting that PQA had previously been warned twice by the PTAB that noncompliance would result in sanctions. As to PQA’s assertion that VLSI suffered no harm attributable to PQA’s misconduct, VLSI argued that “PQA’s raison d’etre was to harm VLSI and from the outset of this case, it engaged in egregious misconduct to that end.” At the very least, all of VLSI’s fees incurred post-institution should be considered the direct consequence of PQA’s misleading statements to the PTAB, VLSI’s brief reads.

The publicly available documents on the docket for PQA’s IPR, including the recent filings, contain several redactions to references of settlement agreements between PQA and VLSI. On September 1, PQA filed a motion to expunge at the PTAB seeking removal of documents from the record, including PQA’s opening brief in response to Director review as well as several exhibits related to settlement communications. While Director Vidal’s review decision last December indicated that public policy favors confidentiality in settlement agreements, it would be highly informative to the public debate surrounding PQA’s abuse of process at the PTAB if such figures ever came to light.

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