In the Federal Courts, There Is No Time Limit for a Motion for Substitution on the Basis of a Transfer in Interest

Mojave Desert Holdings, LLC v. Crocs, Inc., No. 20-1167 (Fed. Cir. Feb. 11, 2021)

In 2012, the patentee sued for infringement of its signature “foam-molded clog” design patent. The alleged infringer then filed a third-party request for inter partes reexamination. The USPTO ordered the reexamination, and the district court stayed the infringement action pending the PTO’s ruling. The examiner rejected the design-patent claim as anticipated. The patentee then appealed to the Patent Trial and Appeal Board.

While the patentee’s appeal was pending before the Board, the alleged infringer filed for Chapter 11 bankruptcy. The bankruptcy court approved the sale of the alleged infringer’s assets to a recently formed LLC. In 2018, the LLC assigned all of its rights—including the underlying infringement action and inter partes reexamination—to a third party, Mojave. Mojave filed a petition with the Board to take over as the real party in interest for the reexamination proceedings. The Board denied the motion. Thereafter, the Board reversed the examiner’s rejection of the underlying design-patent claim. The LLC appealed to the Federal Circuit and filed a FRAP 43(b) motion to substitute the third party, Mojave, as its successor in interest.

The Federal Circuit granted the motion to substitute. First, the court held that the alleged infringer’s rights—including rights to the reexamination proceeding—had been successfully assigned first to the LLC and then to Mojave. Second, the court also rejected the argument that Mojave was not timely in seeking substitution: “in the federal courts, there is no time limit attached to a party moving for substitution on the basis of a transfer in interest.” Id. at 11. Third, the court clarified a third-party requester’s rights under 35 U.S.C. § 141: “the requester’s right (including its right to appeal) may be transferred at least when it occurs as part of the transfer of the requester’s entire business or assets.” Id. at 14. Finally, the court held that Mojave had standing because its acquired assets face “potential patent infringement claims.” Id. at 16.