PTAB Finds Return Mail Inapplicable to Alleged Chinese Control Over TikTok in Motion to Terminate IPRs

Yesterday, the Patent Trial and Appeal Board (PTAB) entered an order  denying patent owner Cellspin Soft’s motion to terminate a series of inter partes review (IPR) proceedings petitioned by Chinese social media company TikTok. Finding that Cellspin Soft had waived its right to argue that the Chinese Communist Party (CCP) was a real-party-in-interest (RPI) in the case, the PTAB also found that TikTok’s ultimate control by sovereign government actors did not implicate U.S. Supreme Court precedent on government entities challenging U.S. patent rights through IPR.

Multimedia content data distribution developer Cellspin Soft filed motions to terminate seven IPR proceedings petitioned by TikTok on two separate but related grounds. First, the patent owner argued that TikTok failed to identify the CCP as an RPI on the IPR petition as required by the requirements for petitions codified at 35 U.S.C. § 312(a). Second, Cellspin Soft moved to terminate under the U.S. Supreme Court’s 2019 ruling in Return Mail v. U.S. Postal Service, arguing that TikTok was not a “person” eligible to challenge patent rights through IPR due to its ultimate control by the Chinese government.

Facts Raising Concerns Over TikTok’s Ownership Were Public Well Before Garland

At the outset of its order, the PTAB ruled that Cellspin Soft had waived its right to argue the RPI issue because it did not first raise the issue in the patent owner’s response. Cellspin Soft told the PTAB that it first became aware of CCP’s alleged control of TikTok through the ownership of “golden shares” this January, two months before the Chinese government’s RPI status was raised in Cellspin Soft’s motion to terminate. While Cellspin Soft had concerns over CCP’s control of TikTok as early as June 2024, it was the Supreme Court’s January ruling in TikTok v. Garland, especially its finding that TikTok was susceptible to control by foreign adversaries, that led Cellspin Soft to further research the RPI issue.

However, the PTAB found that Cellspin Soft was not diligent in waiting a month and a half after this position became available through TikTok to file its motion to terminate. Further, Cellspin Soft relied on information publicly available as early as December 2020, well before its motion was filed. For example, Cellspin Soft’s argument that the CCP owns a golden share with special rights to influence TikTok’s corporate governance stems from a news article published in March 2023. Cellspin Soft also cited to the D.C. Circuit’s ruling in Garland in its preliminary response to the IPR, indicating that it was clearly aware of this decision’s bearing on the RPI issue well before the Supreme Court’s ruling.

Even if the PTAB were to find that the CCP was an unnamed RPI in these proceedings, the Board further ruled that this failure would not have required termination. Unnamed RPIs aren’t typically considered unless they violate time bar or estoppel provisions governing IPRs at 35 U.S.C. § 315, which weren’t present in the IPRs as conceded by Cellspin Soft. While Cellspin Soft argued that TikTok’s failure to name CCP as an RPI was bad faith gamesmanship, the PTAB found no gamesmanship in light of the purposes of the RPI requirement, which includes assisting the Board to identify potential conflicts.

Return Mail Only Applies to U.S. Federal Agencies, Not Foreign Sovereign Actors

The PTAB further held that the Supreme Court’s reasoning in Return Mail did not apply to the IPR proceedings at issue. In Return Mail, the Court analyzed statutory provisions governing several types of patent validity proceedings available at the PTAB, in light of the longstanding presumption that a “person” is not the sovereign, to determine that only “a person” was eligible to petition for such validity challenges. As such, a federal agency such as the U.S. Postal Service was not capable of maintaining IPR proceedings against Return Mail’s patents.

The record in TikTok’s IPRs against Cellspin Soft is significantly different than Return Mail, the PTAB found, pointing out the alleged sovereign in this case is the CCP rather than the U.S. government. Further, whereas the U.S. Postal Service was a governmental entity, here TikTok is a corporation that is allegedly controlled by a sovereign. “Thus, even assuming the CCP is an RPI, the Petitions were still filed by a ‘person’ under the statute,” the PTAB reasoned.

Arguing that extensive control can overcome the presumption of separate treatment, Cellspin Soft cited the Supreme Court’s 1983 ruling in First National City Bank v. Banca Para el Comercio Exterior de Cuba, in which control of a foreign credit institution by the Cuban government led the Court to uphold FNC Bank’s right to petition the creditor for an offset following the Cuban government’s seizure of sugar assets. However, the PTAB found that Cellspin Soft failed to demonstrate that the CCP is using TikTok to defeat an overriding public policy or that disregarding TikTok’s corporate form would serve the interests of justice.

Cellspin Soft’s patent battle against TikTok in the U.S. has been fraught with difficulty, underscored by the patent owner’s difficulty obtaining sufficient discovery from TikTok and its parent company ByteDance in U.S. district court proceedings. Separately, the Supreme Court in May denied Cellspin Soft’s petition for writ challenging rulings by U.S. District Judge Yvonne Gonzalez Rogers over her financial ties to defendant Fitbit and its owner Google. In that petition, Cellspin Soft argued that Judge Gonzalez’s $5 million to $25 million stake in a hedge fund and her spouse’s professional ties to a Google investment portfolio should have led to her recusal in a case involving a Google subsidiary.

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Author: rafapress
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