If You Buy the Whole Company, You Can Fight Its Legal Battles

MOJAVE DESERT HOLDINGS, LLC v. CROCS, INC.

Before Newman, Dyk, and O’Malley.  Appeal from the Patent Trial and Appeal Board.

Summary: The purchaser or assignee of all assets and interests of the requester of inter partes reexamination could substitute as real-party-in-interest at the PTAB and could assume the original requester’s Article III standing to appeal.

Crocs sued U.S.A. Dawgs in district court for infringement of Crocs’s design patent.  U.S.A. Dawgs filed a third-party request for inter partes reexamination of Crocs’s patent, where the examiner found Crocs’s patent anticipated.  Crocs appealed to the Patent Trial and Appeal Board (“PTAB”).  During the PTAB appeal, U.S.A. Dawgs filed for Chapter 11 bankruptcy and sold all its assets and interests to Dawgs Holdings.  U.S.A. Dawgs continued to exist for the purpose of winding up.  Later, Dawgs Holdings assigned all rights and interests to Mojave, including all claims in the reexamination and the district court.

Months later, Mojave filed  a petition with the PTAB to substitute itself as the real-party-in-interest in the reexamination.  The PTAB expunged and dismissed Mojave’s petition, saying the sale and assignment agreements were insufficient to establish Mojave as the real-party-in-interest, Mojave lacked standing in the reexamination, and the petition was not timely filed within the 20-day period found in 37 C.F.R. § 41.8(a).  The PTAB reversed the examiner’s rejection of Crocs’s patent, and U.S.A. Dawgs appealed.

The Federal Circuit reversed the PTAB decision on substitution, holding that the sale and assignment agreements properly transferred all of U.S.A. Dawgs’s assets, including the interest in the reexamination.  The Federal Circuit also rejected Crocs’s argument that Mojave’s petition was untimely, noting 37 C.F.R. § 41.8(a) was designed to detect conflicts of interest and is not directly related to substitutions.  Finally, the court rejected Crocs’s argument that Mojave lacked standing to appeal, holding that as U.S.A. Dawgs’s successor-in-interest, Mojave met the Article III requirements for standing.  The court granted Mojave’s substitution on appeal without remanding to the PTAB.

Editor: Paul Stewart