IPR2016-00213, Paper 45
`Trials@uspto.gov
`IPR2016-00295, Paper 37
`
`571-272-7822
` Entered: March 20, 2017
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`FPUSA, LLC,
`Petitioner,
`
`v.
`
`M-I LLC,
`Patent Owner.
`____________
`
`Case IPR2016-00213 (Patent 9,004,288 B2)
`Case IPR2016-00295 (Patent 9,074,440 B2)
`____________
`
`
`Before JAMES A. TARTAL, CARL M. DEFRANCO, and
`TIMOTHY J. GOODSON, Administrative Patent Judges.
`
`GOODSON, Administrative Patent Judge.
`
`
`
`
`
`
`
`ORDER
`Denying Patent Owner’s Motion to Terminate
`35 U.S.C. § 312(a)(2) and 37 C.F.R. § 42.72
`
`
`
`
`
`
`Trials@uspto.gov
`IPR2016-00295, Paper 37
`
`571-272-7822
` Entered: March 20, 2017
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`____________
`
`FPUSA, LLC,
`Petitioner,
`
`v.
`
`M-I LLC,
`Patent Owner.
`____________
`
`Case IPR2016-00213 (Patent 9,004,288 B2)
`Case IPR2016-00295 (Patent 9,074,440 B2)
`____________
`
`
`Before JAMES A. TARTAL, CARL M. DEFRANCO, and
`TIMOTHY J. GOODSON, Administrative Patent Judges.
`
`GOODSON, Administrative Patent Judge.
`
`
`
`
`
`
`
`ORDER
`Denying Patent Owner’s Motion to Terminate
`35 U.S.C. § 312(a)(2) and 37 C.F.R. § 42.72
`
`
`
`
`
`
`
`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`INTRODUCTION
`I.
`Patent Owner moves to terminate these proceedings on the grounds that the
`Petitions failed to list all real parties-in-interest. Paper 42 (“Mot.”).1 The only real
`party-in-interest listed in the Petitions is FPUSA, LLC (“Petitioner”). Case
`IPR2016-00213 (“the 213 IPR”), Paper 6, 2; Case IPR2016-00295 (“the 295
`IPR”), Paper 1, 3. Patent Owner argues that MarkWater Handling Systems Ltd.,
`FP Marangoni Inc., and Western Oilfield Equipment Rentals Ltd. also qualify as
`real parties-in-interest, and that their omission from the Petitions means that
`Petitioner did not meet the requirements of 35 U.S.C. § 312(a)(2) for a complete
`petition. Mot. 1. Patent Owner contends that the filing date of the Petitions should
`be vacated and the proceedings should be terminated, as any corrected petition
`would be time-barred under 35 U.S.C. § 315(b). Id. at 1–2. Petitioner opposes the
`Motion and disputes Patent Owner’s contention that the unlisted entities are real
`parties-in-interest. Paper 43 (“Opp.”). For the reasons discussed below, we deny
`Patent Owner’s Motion to Terminate.
`LEGAL STANDARDS
`II.
`Under the rules governing these proceedings, the moving party has the
`burden of proof to establish that it is entitled to the requested relief. 37 C.F.R.
`§ 42.20(c). Accordingly, a patent owner that moves for termination of an instituted
`proceeding due to a petition’s improper identification of real parties-in-interest
`carries the burden to show, by a preponderance of the evidence, that it is entitled to
`
`
`1 Unless indicated otherwise, citations in this Order refer to the papers and exhibits
`in Case IPR2016-00213. Similar, if not identical, briefs and exhibits were also
`filed in Case IPR2016-00295.
`
`2
`
`
`
`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`termination. See 37 C.F.R. § 42.1(d); Corning Optical Communications RF, LLC
`v. PPC Broadband, Inc., IPR2014-00440, slip op. at 13 (PTAB Aug. 18, 2015)
`(Paper 68).
`A complete listing of real parties-in-interest is a required component of a
`petition for inter partes review. 35 U.S.C. § 312(a)(2); 37 C.F.R. § 42.8(a)(1),
`(b)(1). A petitioner must also notify the Board of changes to the real parties-in-
`interest after the petition is filed. 37 C.F.R. § 42.8(a)(3). However, because Patent
`Owner’s Motion is premised on a defect in the Petitions, the relevant time frame
`for analyzing the real parties-in-interest for the purposes of this Motion is the time
`when the Petitions were filed. See Jiawei Tech. Ltd. v. Richmond, Case IPR2014-
`00935, slip op. at 10 (PTAB Aug. 21, 2015) (Paper 52). In the 213 IPR, a Petition
`was filed on November 19, 2015, and, pursuant to a Notice from the Board
`concerning formatting errors, a corrected Petition was filed on December 9, 2015.
`Case IPR2016-00213, Paper 2, 60; Paper 4; Paper 6, 60. In the 295 IPR, the
`Petition was filed on December 8, 2015. Case IPR2016-00295, Paper 1, 60.
`The Office Patent Trial Practice Guide provides guidance to parties on the
`issue of whether a non-party constitutes a real party-in-interest. See 77 Fed. Reg.
`48,756, 48,759–60 (Aug. 14, 2012). “A common consideration is whether the non-
`party exercised or could have exercised control over a party’s participation in a
`proceeding.” Id. at 48,759. Other relevant factors include the non-party’s
`relationship to the petitioner and to the petition itself, including the nature and
`degree of involvement in the filing. Id. at 48,760. The Trial Practice Guide
`advises that “generally a party does not become a ‘real party-in-interest’ or a
`‘privy’ of the petitioner merely through association with another party in an
`
`3
`
`
`
`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`unrelated endeavor.” Id. Consistent with that guidance, previous decisions of the
`Board have emphasized that “RPI is the relationship between a party and a
`proceeding; RPI does not describe the relationship between parties. As such, . . .
`the Board’s focus [is] on the degree of control the nonparty could exert over the
`inter partes review, not the petitioner.” Aruze Gaming Macau, Ltd. v. MGT
`Gaming, Inc., Case IPR2014-01288, slip op. at 11 (PTAB Feb. 20, 2015) (Paper
`13); see also Bungie, Inc. v. Worlds Inc., Case IPR2015-01325, slip op. at 24
`(PTAB Nov. 30, 2015) (Paper 13) (same); Hughes Network Systems v. California
`Inst. of Tech., Case IPR2015-00059, slip op. at 11 (PTAB Apr. 21, 2016) (Paper
`42) (same).
`
`III. FACTUAL BACKGROUND
`Petitioner is a subsidiary of the entities that Patent Owner contends should
`have been listed as real parties-in-interest. As of June 2015, MarkWater Handling
`Systems, Ltd. (“MarkWater”) owned 100% of the shares of FP Marangoni, Inc.
`(“FPM”), which owned 100% of the shares of FP Marangoni America, Inc. (“FP
`America”), which in turn owned 90% of the shares of Petitioner. Ex. 2003; Ex.
`2004 ¶ 7; Ex. 2005 ¶ 3. In January 2016, after the filing of the Petitions in these
`proceedings, Western Oilfield Equipment Rentals Ltd. (“Western”) was
`amalgamated into MarkWater. Mot. 4 n.3; Opp. 3; Ex. 2024; Ex. 2034, 1. In July
`2016, the legal name of the amalgamated entity was changed from MarkWater to
`Western. Ex. 2024; Ex. 2034, 1–2. In addition to their parent-subsidiary
`relationship, Petitioner shares officers and directors in common with FPM and
`MarkWater. In 2015, Robert Russell and Art Robinson served on the Management
`
`4
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`Committee of Petitioner and were also directors and officers of MarkWater, FPM,
`and FPM America. Ex. 2005 ¶ 3; Ex. 2025, 6–7, 25, Ex 1.
`The Board is one of three forums where disputes concerning this family of
`patents are ongoing. Petitioner and Patent Owner are also adversaries in a lawsuit
`in the U.S. District Court for the Western District of Texas (M-I LLC v. FPUSA,
`LLC, Civil Action No. 5:15-CV-00406 (DAE)), in which Patent Owner accuses
`Petitioner of infringing the two patents that are the subject of these IPR
`proceedings. See Paper 20, 3. The same counsel represents Petitioner and FPM in
`both the Texas case and these proceedings. See id. at 9 (citing Ex. 2003, 2;
`Ex. 2006, 11). In addition, Patent Owner is engaged in legal proceedings in
`Canada against MarkWater concerning “the Canadian counterpart” to the patent
`that is the subject of the 213 IPR. Id. at 4.
`In an attempt to resolve these IPR proceedings as well as the Texas and
`Canadian cases, Mr. Russell sent to Gary Cole of “M-I Swaco Schlumberger” a
`letter written on Western letterhead proposing a settlement that would “result[] in
`the termination of further legal expenditures[ and] a discontinuation of the
`outstanding Inter Partes Review. . . .” Ex. 2008, 1.2 The letter proposed as one
`option that Patent Owner would acquire the business of “the former entity Western
`Oilfield Equipment Rentals Ltd. (currently operated by Markwater Handling
`Systems Ltd.), as well as FP Marangoni Inc., Pomerleau Mechanica Inc., FP
`Marangoni America Inc. and FP USA LLC (collectively referred to as ‘Western’).”
`
`
`2 The letter is undated and Mr. Russell could not recall when he sent the letter,
`other than it was “[p]robably in 2016.” Ex. 2025, 78:8–15.
`5
`
`
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`Id. Mr. Russell’s letter listed as a benefit of that option that “Western would not
`pursue the IPRs, the Canadian Declaration of Non-Infringement, or the Pomerleau
`litigation.” Id. In another proposed option not involving an acquisition, Mr.
`Russell listed as one of the terms of a settlement that “Western will not pursue the
`IPR action and will consent to the return of MI’s bond.” Id. at 2.
`IV. ANALYSIS
`Patent Owner argues that the Petitions’ listing of real parties-in-interest was
`incomplete for three reasons. First, Patent Owner argues that the boundaries
`between MarkWater, FPM, Western, and Petitioner are so blurred that each of
`those entities should be considered a real party-in-interest. Mot. 3–6. Second,
`Patent Owner argues that MarkWater, FPM, and Western exercised control over
`these proceedings. Id. at 6–8. Third, Patent Owner argues that Western has
`funded these proceedings. Id. at 8–9. We address each of these arguments below.
`A. Corporate Boundaries
`In arguing that the boundaries between Petitioner and the other companies
`are unclear, Patent Owner focuses chiefly on the role and activities of Mr. Russell.
`Patent Owner asserts that Mr. Russell exercises control over each of the companies
`and acts on their behalf interchangeably. Mot. 4. Patent Owner points to
`Mr. Russell’s deposition testimony describing his job responsibilities at each
`company as “overseeing the day-to-day business.” Id. (citing Ex. 2025, 8:3–19,
`10:18–24, 57:23); see also Ex. 2025, 48:3–11 (testifying, in response to question of
`whether he held the title of CEO at MarkWater, that “I believe I was, but like I say,
`titles were more for, you know, signing documents and so forth. I was in charge of
`the operation is probably an easier way to describe it.”). Mr. Russell does not have
`
`6
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`
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`an office or email address for Petitioner, but he does have an email address,
`business cards, and “access to letterhead” for Western. See Mot. 5; Ex. 2025,
`58:20–23, 42:3–21. Western also paid for an office in Calgary that Mr. Russell
`used part-time. Mot. 5; Ex. 2025, 71:1–17.
`Patent Owner also argues that Mr. Russell’s settlement offer letter to
`Mr. Cole shows that MarkWater, FPM, and Western each had the opportunity to
`control these proceedings. Mot. 6; Ex. 2008. Patent Owner emphasizes that
`Mr. Russell’s deposition testimony indicates that he did not need approval from
`anyone else to send this letter. Mot. 6 (citing Ex. 2025, 79:25–80:4). According to
`Patent Owner, this testimony, in conjunction with Mr. Russell’s testimony that he
`had complete say in the decision to file the petitions in these proceedings, shows
`that MarkWater, FPM, and Western had the opportunity to control these
`proceedings. Id. (citing Ex. 2025, 67:17–25, 74:2–10).
`Patent Owner also argues that blurred boundaries between the companies are
`demonstrated by the logo on Petitioner’s website in 2015 indicating that Petitioner
`was “a Western Oilfield Company” and a graphic on Western’s 2015 website
`pointing to Midland, TX, Houston, TX, and Seguin, TX, where Petitioner’s offices
`were located. Id. at 5 (citing Ex. 2028; Ex. 2029; Ex. 2025, 14:21–15:2). Patent
`Owner analogizes the facts here to Atlanta Gas Light Co. v. Bennett Regulator
`Guards, Inc., IPR2013-00453 (PTAB Jan. 5, 2015) (Paper 88), in which the Board
`determined that an unnamed party was a real party-in-interest, in part because it
`was “so intertwined [with the petitioner in that case] that it is difficult for both
`insiders and outsiders to determine precisely where one ends and another begins.”
`Atlanta Gas Light, slip op. at 11.
`
`7
`
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`Petitioner responds that Patent Owner’s arguments wrongly assume that
`simply because Mr. Russell manages Petitioner and the other companies, the other
`companies could and did control these proceedings. Opp. 2. Petitioner cites
`previous Board decisions rejecting arguments that common officers and directors
`between parent and subsidiary companies showed that each of the companies had
`control over an IPR proceeding. Id. at 3–5 (citing Par Pharmaceutical, Inc. v.
`Horizon Therapeutics, Inc., Case IPR2015-01117, slip op. at 10 (PTAB Nov. 4,
`2015) (Paper 13); Accord Healthcare, Inc. v. Daiichi Sankyo Co., Case IPR2015-
`00864, slip op. at 8 (PTAB Sept. 15, 2015) (Paper 28)). With respect to the
`settlement letter, Petitioner argues that several entities were collectively referred to
`as “Western” for expediency, because all were involved in the potential settlement
`of disputes between the various entities in the U.S. and Canada. Id. at 5. Petitioner
`also points out that Mr. Russell testified that the representative of Patent Owner to
`whom the letter is addressed helped him draft the letter. Id. (citing Ex. 2025,
`79:19–20).
`We are not persuaded by Patent Owner’s arguments that the boundaries
`between Petitioner, FPM, MarkWater, and Western are so unclear that they should
`all be treated as real parties-in-interest. In essence, Patent Owner’s position is that
`each of the four companies is nothing more than an alter ego of Mr. Russell, who
`uses the resources of the companies interchangeably. The record that Patent
`Owner has presented does not sufficiently support that charge. We also are not
`persuaded that Mr. Russell’s leadership role in FPM, MarkWater, and Western
`establishes that those entities controlled or had the opportunity to control the filing
`or content of the Petitions in these proceedings. Patent Owner was authorized to
`
`8
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`
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`take Mr. Russell’s deposition to investigate whether other entities should have
`been named as real parties-in-interest. See Paper 32. Under Patent Owner’s
`questioning, Mr. Russell testified that he made the decision to file the Petitions,
`and that in doing so he was acting on behalf of Petitioner. Ex. 2025, 67:15–22,
`74:2–13. Mr. Russell also testified that the legal bills from these proceedings were
`sent to Petitioner. Id. at 76:7–11.
`Mr. Russell’s testimony concerning the settlement letter persuades us that
`the letter does not signify that entities other than Petitioner controlled these
`proceedings when the Petitions were filed. As an initial point, the settlement letter
`was sent in 2016, after the Petitions were filed. Ex. 2025, 78:8–15. Patent Owner
`does not explain why the content of the settlement letter informs the real party-in-
`interest analysis at the time the Petitions were filed. We noted in our order
`authorizing additional discovery that the letter could be read to mean that other
`entities can influence whether these proceedings will be maintained, because it
`defines “Western” to include FPM and other companies and states that, under the
`proposed settlements, “Western would not pursue the IPRs.” Paper 32, 7 (citing
`Ex. 2008, 1). Based on the additional information developed through additional
`discovery, we are not persuaded that the settlement letter shows that other parties
`had such influence. The letter was drafted by businesspeople—specifically, Mr.
`Russell and Patent Owner’s representative, Mr. Cole (Ex. 2025, 77:25–78:7,
`79:19–20)—in an attempt to resolve a dispute among several entities. That dispute
`encompassed these proceedings as well as parallel litigation in the U.S. and
`Canada. Against this backdrop, we find credible Mr. Russell’s explanation that the
`letter’s reference to several entities collectively as “Western” was simply a
`
`9
`
`
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`convenience. Id. at 83:1–5, 85:14–19. In our view, the letter’s somewhat casual
`usage of the defined term “Western” should not be understood to signify that
`entities other than Petitioner control these proceedings. See Par Pharmaceutical,
`slip op. at 9–10 (determining that an SEC filing that defined “we” to include both
`the Petitioner and its nonparty parent company and stated “we filed Inter Partes
`Review petitions” did not establish that the parent company was a real party-in-
`interest).
`B. Control
`Patent Owner argues that MarkWater, FPM, and Western provided direction
`and control because certain individuals who reviewed the Petitions prior to filing
`had affiliations with those companies. Mot. 6–7. Specifically, Petitioner’s
`interrogatory responses identify Neil Frizzell as an attorney who advised Petitioner
`on whether to file the Petitions. Id. (citing Ex. 2023, 5–6). Mr. Frizzell has also
`worked for Western, MarkWater, and Mr. Russell personally. Id. at 7 (citing Ex.
`2025, 71:15–72:9; Ex. 2030). Petitioner also identified Art Robinson as being
`involved in the decision to file the Petitions, and Mr. Robinson was a director of
`MarkWater. Id.; Ex. 2023, 4–5; Ex. 2025 at Ex. 1. Further, Patent Owner points
`out that Petitioner, MarkWater, and FPM share legal counsel, as Petitioner’s
`counsel in these proceedings at the Bracewell firm has also represented FPM in the
`Texas case, and Canadian counsel for MarkWater and Western helped Mr. Russell
`prepare for his deposition in these proceedings. Mot. 7–8 (citing Ex. 2006, 11; Ex.
`2003, 2; Ex. 2025, 6:21–7:19).
`Patent Owner’s arguments do not persuade us that the Petitions should have
`named MarkWater, Western, or FPM as real parties-in-interest because they were
`
`10
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`directing or controlling these proceedings. As Petitioner correctly notes, previous
`Board decisions have rejected arguments that a non-party was a real party-in-
`interest due to its use of common counsel with a petitioner in a related district court
`case. See Opp. 7 (citing Hughes, slip op. at 10–11; Aruze Gaming, slip op. at 19).
`With respect to the roles of Messrs. Robinson and Frizzell in the decision whether
`to file the Petitions, Petitioner’s interrogatory responses state that Messrs.
`Robinson and Frizzell’s involvement was in their capacities as executive
`committee member and advisor, respectively, of Petitioner. Ex. 2023, 4–6. Patent
`Owner does not present any evidence or argument that reasonably brings into
`question the accuracy of those statements.
`C. Funding
`Patent Owner argues that Western has funded these proceedings by
`extending to Petitioner an interest-free loan of about $9,700 in order to pay Peter
`Matthews, who is Petitioner’s technical expert in these proceedings and in the
`Texas case. Mot. 8–9 (citing Ex. 2033; Ex. 2034). In support of this argument,
`Patent Owner cites documents from Petitioner’s bankruptcy proceeding, in which
`Petitioner sought and was granted the bankruptcy court’s authorization to receive
`the loan from Western. Id.
`The bankruptcy documents do not support Patent Owner’s argument that
`Western should have been listed as a real party-in-interest in the Petitions. The
`invoice from Mr. Matthews for which Petitioner sought permission to receive a
`loan to pay is for fees and costs associated with his deposition on September 15,
`2016. Ex. 2033, 5. The Petitions in these cases were filed approximately nine
`months earlier. Moreover, Patent Owner does not present any authority to support
`
`11
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
`
`
`
`its apparent position that an intercompany loan from a parent to a subsidiary for the
`purpose of allowing the subsidiary to pay an invoice should be treated as if the
`parent had simply paid the invoice itself. Indeed, the fact that Petitioner moved the
`bankruptcy court for permission to receive the loan from Western tends to support
`the view that Petitioner’s parent companies are not funding these proceedings
`because Mr. Matthews’ invoice was Petitioner’s obligation.
`D. Conclusion
`After reviewing all of the evidence and arguments Patent Owner presented
`in support of its Motion, as well as Petitioner’s evidence and arguments in
`opposition, we determine that Patent Owner has not shown by a preponderance of
`the evidence that the identification of real parties-in-interest in the Petitions was
`incomplete.
`
`V. ORDER
`In view of the foregoing, it is hereby:
`ORDERED that Patent Owner’s Motion to Terminate in IPR2016-00213 and
`IPR2016-00295 are denied.
`
`
`
`
`
`
`
`
`
`
`
`
`
`12
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`IPR2016-00213 (Patent 9,004,288 B2)
`IPR2016-00295 (Patent 9,074,440 B2)
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`
`
`For PETITIONER:
`
`Brad Y. Chin
`Brad.Chin@bgllp.com
`
`Kevin R. Tamm
`kevin.tamm@bgllp.com
`
`For PATENT OWNER:
`
`Barry Schindler
`schindlerb@gtlaw.com
`
`Heath Briggs
`briggsh@gtlaw.com
`
`
`13
`
`
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