Patent Owner Says PTAB Petitioner Made ‘Extortionary,’ Sanctionable Attempt at Free License

In Sur-Replies filed late last week in inter partes review (IPR) proceedings, Urban Intel, Inc. told the Patent Trial and Appeal Board (PTAB) that threats made by ASSA ABLOY Global Solutions “to file IPR petitions and a declaratory judgment action unless granted a free license to three valuable patents,” among other allegations, “runs directly counter to the purpose and goals of the post-grant administrative challenge system.”

The sur-replies are in response to petitioner’s replies filed earlier this month by hotel security company ASSA, addressing abuse of PTAB process allegations by Urban Intel. ASSA argued that the U.S. Patent and Trademark Office (USPTO) cannot enter sanctions against it because ASSA did not seek payment from Urban Intel’s exclusive licensee when it threatened to “rain down an avalanche of IPRs” if ASSA didn’t obtain a cost-free license to Urban Intel’s patents, according to the patent owner’s preliminary response.

ASSA Offers to Forgo Validity Challenge in Exchange for Cost-Free License

The abuse of process allegations were raised by Urban Intel in its preliminary response filed with the PTAB in mid-September. Arguing that ASSA’s IPR petition should be denied under Fintiv, Urban Intel detailed unsolicited licensing discussions broached by ASSA in early December of last year. In a letter, ASSA sought a license to Urban Intel patents asserted last August in infringement litigation filed against hotel chain Marriott by Liberty Access Technologies, Urban Intel’s exclusive licensee. In return, ASSA offered to refrain from filing IPRs to challenge those patents, which cover technologies for app-based hotel room keys. ASSA’s IPR avalanche threat allegedly occurred during a phone call exchange following ASSA’s first unsolicited license demand.

Two weeks later, ASSA sent another letter to Liberty Access, reiterating that ASSA was prepared to pursue validity challenges based on prior art “known only to ASSA” through both IPR and declaratory judgment actions. In a second phone call, ASSA’s counsel again insisted on obtaining a cost-free license to Urban Intel’s patents. A third letter dated December 23 further indicated that ASSA had evidence of Urban Intel’s inequitable conduct in obtaining its patent claims.

Urban Intel alleges that Liberty Access had no plan to sue ASSA, which supplies lock hardware to Marriott, and was unaware of its relationship with Marriott as of the first unsolicited letter. However, in response to ASSA’s growing threats, Liberty Access filed a patent infringement suit against ASSA in U.S. district court at the end of last December. ASSA responded by filing a declaratory judgment action in a different U.S. district court this February and then filed three petitions for IPR proceedings against Urban Intel’s patents by this May. Urban Intel contends that ASSA’s efforts to extract a cost-free license under the implied threat of validity challenges and inequitable conduct allegations amount to an abuse of the PTAB’s post-grant review system.

“More troublesome, it appears that running up Liberty’s costs was ASSA’s strategy all along. ASSA could have filed its IPRs in December 2022, when Liberty’s [counsel] informed ASSA that it would under no circumstances agree to a royalty free license in response to ASSA’s threats. Instead, ASSA waited a full five months before filing its IPRs, and in the interim chose instead to file a declaratory judgment action to further run up Liberty’s litigation costs.”

Extracting Payment is ‘The Only Circumstance the Board Has Found Abusive’

In response, ASSA’s recent reply argues that its IPR petitions are purely defensive in response to litigation. ASSA acknowledges the letters it sent to Liberty Access last December, as well as offers to forgo invalidation proceedings and not share prior art references with other entities, as good faith attempts to negotiate a license with Liberty Access. The reply does not mention the cost-free licensing discussions via phone between Liberty Access and ASSA.

ASSA’s filing notes that it never sought to extract payment from Liberty Access, “the only circumstance the Board has found abusive.” Rather, it sought to avoid costly litigation and paying royalty fees that ASSA believed were unmerited. Citing the PQA and OpenSky IPR proceedings that led to the PTAB’s only sanctions rulings for abuse of process, ASSA notes that it never demanded payment from either the patentee or the exclusive licensee.

Under the Federal Circuit’s 2004 ruling in Globetrotter Software v. Elan Computer Group, ASSA contends that the PTAB should apply an objectively baseless test to determine whether pre-litigation communications were in bad faith. “Like the defendant in Globtrotter [sic], Patent Owner ‘has not even attempted to make such a showing [of objective baselessness] here,’” ASSA writes, noting that its letters from last December include no objectively baseless claims or falsehoods.

Although Urban Intel argues that ASSA used its inequitable conduct allegations as a bullying tactic, ASSA responded that inequitable conduct is not an issue that can be decided at the PTAB and thus is irrelevant to the IPR proceedings. As a third party to the prosecution of the patents obtained through allegedly inequitable means, ASSA further pointed out that it is under no duty to disclose such information to the USPTO, nor did it propose any violation of the duty of disclosure.

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