PTAB Holds that Parties Cannot Contractually Alter Legal Effect of District Court Dismissal

In Superior Communications, Inc. v. Voltstar Technologies, Inc., IPR2017-00067, Paper 14 (P.T.A.B. Apr. 25, 2017), the Patent Trial and Appeal Board instituted inter partes review of U.S. Patent No. 7,910,833, despite Voltstar’s objection that such an institution was statutorily barred under 35 U.S.C. § 315(b). Section 315(b) prohibits institution “if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”

Voltstar asserted the ‘833 patent against Superior in district court but later voluntarily dismissed the case upon entering a tolling agreement with Superior. Subsequently, more than one year after Volstar served its complaint, Superior filed the present IPR petition. Voltstar then filed a new district court complaint against Superior reasserting the ‘833 patent.

Because Volstar dismissed the original case without prejudice, the Board reiterated that the “Federal Circuit has consistently interpreted the effect of such dismissals as leaving the parties as though the action had never been brought.” Therefore, the Board viewed the original case as a “nullity” that could not give rise to the statutory bar of Section 315(b), even though more than a year had passed. Voltstar argued that such a result was inapt because the tolling agreement imposed terms that would not have existed, absent the original suit. Nonetheless, the Board found no legal basis for a contractual agreement between private parties to alter the legal effect of a voluntary dismissal without prejudice.

Voltstar further argued that the effect of the tolling agreement was to “essentially stay the litigation” of identical claims, but the Board emphasized that the new district court litigation did not legally “stem from” the dismissed litigation. The Board also rejected Volstar’s argument that the parties were subject to the continuing jurisdiction of the district court through enforcement of the tolling agreement. Thus, the Board instituted the IPR.