GREE v. Supercell Continued

Jul 09, 2020

THE BIG PICTURE

Supercell loses a pair of motions/filings in the Gree v. Supercell case due to timeliness. First, we discuss Supercell’s inter partes review petitions, then its motion to amend invalidity contentions.

INTER PARTES REVIEW PETITIONS

Patent suit defendants have one year from being served with a complaint to file for inter partes review. The Patent Trial and Appeal Board ("PTAB") has recently been exercising its discretion under 35 U.S.C. § 314(a) to deny instituting IPRs with more frequency due to the status of related district court proceedings. In 2016, 5 petitions were denied under § 314(a), but in 2020 the PTAB is on pace for over 150 similar denials. Some of the factors the PTAB considers are discussed below.

BACKGROUND

Gree and Supercell have a long litigation history detailed in a previous post. Gree filed its complaint against Supercell on February 27, 2019 in the Eastern District of Texas. Supercell recently petitioned for inter partes review of two of the patents-in-suit, U.S. Patent Nos. 9,795,873 and 9,774,655. The ’873 patent “relates to a shooting game control method and a game system, which are suited to a device including a touch-panel-type display screen such as a smartphone.”

The ’655 patent relates to transferring an object from a first user to a second user in a social game, to encourage users to purchase items or give them as gifts.

Supercell filed the petition for IPR of the ’873 patent on December 19, 2019 and of the ’655 patent on February 3, 2020, within the one year timeline for filing.

THE PTAB DECISIONS

The PTAB denied institution of the IPR of the ’873 patent on June 10, 2020 and of the ’655 patent on June 24, 2020. Both decisions shared similar reasoning so they will be discussed collectively unless noted otherwise. The PTAB analyzed six factors citing the recent Apple v. Fintiv precedential Order (Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper 11 at 5‒6 (PTAB Mar. 20, 2020)):

whether a stay exists or is likely to be granted if a proceeding is instituted;
proximity of the court’s trial date to the Board’s projected statutory deadline;
investment in the parallel proceeding by the court and parties;
overlap between issues raised in the petition and in the parallel proceeding;
whether the petitioner and the defendant in the parallel proceeding are the same party; and
other circumstances and considerations that impact the Board’s exercise of discretion, including the merits.

Due in large part to the speed at which the E.D. Tex. operates, the PTAB found the factors were either neutral or in favor of denying institution. Without going through the PTAB’s analysis of each of the factors, the first three and the sixth stand out:

1. Motion to Stay Status

In this case, Supercell did not file a motion to stay and argued to the PTAB that the E.D. Tex. does not generally entertain motions to stay until institution of an IPR. The PTAB found this factor neutral, but the fact remains that I can’t see many E.D. Tex. defendants ever carrying this factor. You may see more wasted motions to stay in the E.D. Tex. so the defendant can at least argue that it tried, though a denied motion to stay would probably also result in this factor being neutral at best.

2. Proximity to Trial Date

The E.D. Tex. sets short timelines to trial. The PTAB noted that the trial date was set for 10 to 11 months before a final decision on an IPR would issue, absent a stay. Supercell argued that even if it had filed its IPR on the same day as the complaint, the final decision would still be due after the E.D. Tex.’s trial date. In evaluating Supercell’s argument, the PTAB stated in the ’655 patent IPR petition, “We appreciate that, when sued in a fast-moving jurisdiction, this factor may often weigh toward denial, even if a petitioner files its petition very quickly.” In other words, tough luck. This factor weighed in favor of denying institution.

3. Investment in Parallel Proceedings

As noted above, the E.D. Tex. rarely stays cases pending IPR institution and the PTAB noted that, unsurprisingly, the district court case had continued on towards trial with fact discovery having closed on May 8, 2020. While the first factor of a stay in the case was neutral, the result of not having a stay was that the substantial investment in the district court proceedings weighed "strongly in favor of denying institution."

6. Merits

While procedurally it seems that Supercell was doomed from the start, most damning was the PTAB’s analysis of the merits of the ’655 patent IPR petition. The PTAB found that Supercell failed to provide adequate motivations to combine the prior art references it asserted invalidated the patents and that this factor also weighed in favor of denying institution. In the ’873 patent IPR petition, the PTAB found that Supercell had a strong case on the merits, but the balance of issues still weighed in favor of denying institution.

IPR CONCLUSION

If the PTAB continues to follow the Fintiv Order as it did in these IPR petitions, it will be difficult for an E.D. Tex. defendant to have IPRs instituted.

MOTION FOR LEAVE TO AMEND INVALIDITY CONTENTIONS

Supercell moved to amend its invalidity contentions six months after its final invalidity contentions were due. Supercell attempted to include a newly discovered prior art reference. On July 2, 2020, the court denied Supercell's motion.

Pursuant to E.D. Tex. Local Rule 3-6, Supercell needed to show good cause to amend its invalidity contentions. In analyzing whether Supercell had good cause, the court considered four factors (1) the explanation for the party’s failure to meet the deadline, (2) the importance of what the court is excluding, (3) the potential prejudice if the court allows that thing that would be excluded, and (4) the availability of a continuance to cure such prejudice.

Most importantly, the court found Supercell's explanation for needing to amend under the first factor lacking. Supercell argued that it did not understand GREE's claim construction positions until after GREE filed its claim construction reply brief on March 17, 2020. Critically, the court found that GREE's positions were detailed at least as early as December 10, 2019 in GREE's expert report. While the court found the other factors mitigated against granted Supercell's motion as well, that fact was probably enough to doom Supercell’s motion.