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A new era at the PTAB? Director Vidal issues new guidance on discretionary denials of institution
2022 PRINDBRF 0331
• Practitioner Insights Commentaries
• July 22, 2022
(July 22, 2022) - Scott McKeown, Jim Davis, Matt Rizzolo and Brendan McLaughlin of Ropes & Gray LLP explain new procedures meant to clarify the circumstances in which the government's patent review process can proceed or be denied.
On June 21, 2022, U.S. Patent and Trademark Office (USPTO) Director Katherine K. Vidal issued new, binding interim guidance (Guidance) addressing the Patent Trial and Appeal Board's (PTAB) approach to discretionary denials of PTAB petitions.1
Specifically, the Guidance addresses the PTAB's application of its precedential Apple Inc. v. Fintiv decision.2
Most notably, the Guidance clarified that the PTAB will not deny institution of an inter partes review (IPR) or post-grant review (PGR) petition under Fintiv in the following scenarios:
•A petitioner stipulates not to pursue in a parallel district court proceeding the same grounds as in the petition or any grounds that could have reasonably been raised in the petition (i.e., a petitioner agrees to a so-called "Sotera stipulation").
•A request for denial under Fintiv is based on a parallel U.S. International Trade Commission (ITC) proceeding.
•A petition presents "compelling evidence" of unpatentability.
The Guidance is effective immediately, but the USPTO "expects to replace this interim guidance with rules after it has completed formal rulemaking."3
However, a question remains: Will the Guidance actually change the PTAB's approach to Fintiv? In recent months, practitioners have noted a decrease in discretionary denials.4
We analyzed 100 unique5 institution decisions leading up to July 1 where the PTAB discussed Fintiv, and our data is in accord — the PTAB denied only eight unique petitions based on Fintiv between November 16, 2021 and July 1, 2022. Digging deeper into the data, it seems likely that the first change noted above, a petitioner stipulation, will continue to reduce discretionary denials.
Sotera stipulations
After Fintiv was designated as precedential, petitioners began to search for ways to avoid discretionary denials under § 314(a), and they quickly looked to Fintiv Factor 4.
Under Factor 4, the PTAB considers the overlap between issues raised in a petition and in a parallel proceeding, and evaluates "concerns of inefficiency and the possibility of conflicting decisions."6 To reduce overlap and inefficiency, petitioners began filing stipulations stating that they will not pursue particular invalidity grounds in district court if the PTAB granted institution.
One common stipulation was the subject of a PTAB decision designated informative in mid-2020. In Sand Revolution II, LLC v. Continental Intermodal Group, the petitioner "stipulated to counsel for Patent Owner that, if the IPR is instituted, Petitioner will not pursue the same grounds in the district court litigation."7
The PTAB found that "Petitioner's stipulation ... mitigates to some degree the concerns of duplicative efforts between the district court and the Board, as well as concerns of potentially conflicting decisions," and concluded therefore that Fintiv Factor 4 "weigh[ed] marginally in favor of not exercising discretion to deny institution."
Soon after the PTAB's Sand Revolution decision, it designated precedential a decision concerning a stipulation with a far broader scope. In Sotera Wireless, Inc. v. Masimo Corporation, the petitioner filed a stipulation in district court that it "will not pursue ... the specific grounds [asserted in the inter partes review], or on any other ground ... that was raised or could have been reasonably raised in an IPR."8
The PTAB stated that "Petitioner's stipulation here mitigates any concerns of duplicative efforts between the district court and the Board, as well as concerns of potentially conflicting decisions," and the PTAB accordingly found that Fintiv Factor 4 "weighs strongly in favor of not exercising discretion to deny institution" because "Petitioner's broad stipulation ensures that an inter partes review is a 'true alternative' to the district court proceeding."
Yet, even though the Board recognized that a Sotera stipulation ensures that IPR is a "true alternative" to district court litigation, agreeing to such a stipulation did not initially guarantee avoiding a Fintiv denial. Indeed, PTAB statistics confirm that it denied over 35% of petitions despite a stipulation between October 2020 and March 2021, but during the rest of 2021, less than 20% of petitions with a stipulation were denied institution.9
And now, the Guidance has eliminated all doubt by clarifying that when a PTAB petitioner agrees to a Sotera stipulation, "the PTAB will not discretionarily deny institution of an IPR or PGR in view of parallel district court litigation."
Notably, among the eight Fintiv-based denials that we analyzed in the months leading up to the Guidance, no Sotera stipulations were filed. Rather, petitioners filed stipulations in only four of those cases and instead opted for stipulations closer in scope to the one at issue in Sand Revolution.
Additionally, as of July 15, our analysis indicates that the PTAB last discretionarily denied a petition based on Fintiv on May 19, 2022.10 In the institution decisions the PTAB issued between May 19 and July 1, 2022, petitioners filed stipulations in 80% of the cases.
In view of the Guidance, a Sotera stipulation may be a good solution for petitioners — and in particular, for those petitioners facing a trial date before the statutory deadline for a final written decision. But there are other ways to avoid a Fintiv denial.
The ITC and Fintiv
Given that the PTAB has denied institution under Fintiv in view of parallel Section 337 investigations as recently as May 3, 2022,11 the Guidance will have an immediate impact. Indeed, among the last six cases where the PTAB has weighed whether to deny institution under Fintiv in light of a parallel ITC proceeding, the PTAB exercised that discretion 50% of the time.
For decades, the ITC has decided patent invalidity issues during so-called "Section 337 investigations." But important differences exist between Section 337 investigations and invalidity trials in federal district courts: (1) unlike district courts, the ITC lacks authority to invalidate patents; and (2) the ITC's invalidity rulings are not binding on either the USPTO or district courts.12
In the early days of Fintiv, the ITC's inability to invalidate patents led the Board to conclude in many cases that discretionary denial in view of a parallel ITC investigation was improper.13 But over time, the Board gradually began discretionarily denying petitions under Fintiv in light of parallel Section 337 investigations, citing overlap of issues and the ITC's expedited trial dates.14
Now, the Guidance has swung the pendulum back, explaining that because "an ITC determination cannot conclusively resolve an assertion of patent invalidity, … denying institution because of a parallel ITC investigation will not necessarily minimize potential conflicts between PTAB proceedings and district court litigation." Accordingly, the PTAB will no longer "discretionarily deny petitions based on applying Fintiv to a parallel ITC proceeding."
Compelling evidence
The Guidance further states that "compelling, meritorious challenges will be allowed to proceed at the PTAB even where district court litigation is proceeding in parallel." Such challenges "are those in which the evidence, if unrebutted in trial, would plainly lead to a conclusion that one or more claims are unpatentable by a preponderance of the evidence."
This clarification is meant to "strike[] a balance among the competing concerns of avoiding potentially conflicting outcomes, avoiding overburdening patent owners, and strengthening the patent system by eliminating patents that are not robust and reliable."
It is not yet clear how — or if — the Guidance concerning "compelling evidence" will substantively change the application of Fintiv. While the two changes above apply bright-line tests for the PTAB to apply, the Guidance provides no such line when considering "compelling evidence."15
Because of the subjectivity of a "compelling evidence" analysis, it will be worth watching for how panels actually apply this portion of the Guidance in future institution decisions.
Trial date
In addition to the changes above, the Guidance updates the PTAB's approach to Fintiv Factor 2, under which the PTAB considers the proximity of a parallel district court's trial date to the PTAB's projected statutory deadline for a Final Written Decision.
The Guidance recognizes that "[a] court's scheduled trial date … is not by itself a good indicator of whether the district court trial will occur before the statutory deadline for a final written decision," and it states that "when other relevant factors weigh against exercising discretion to deny institution or are neutral, the proximity to trial should not alone outweigh all of those other factors."
And the Guidance now specifies that "[p]arties may present evidence regarding the most recent statistics on median time-to-trial for civil actions in the district court in which the parallel litigation resides for the PTAB's consideration."16
Recently, a PTAB panel issued a pair of institution decisions where a trial in the Eastern District of Texas was scheduled several weeks before the statutory deadline for a final written decision.17 But because the most recent statistics on median time-to-trial for civil actions in the Eastern District of Texas suggest that the expected trial date would be months after the statutory deadline, "factor two weighs against exercising discretion to deny institution," and the PTAB ultimately instituted IPR.18
Consistent with the cases we analyzed, each of these developments indicates a continued trend toward fewer Fintiv-based discretionary denials of institution.
Notes
1 Memorandum from Katherine K. Vidal, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office on Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation (June 21, 2022), available at https://bit.ly/3PGkFX0.
2 Apple Inc. v. Fintiv, Inc., No. IPR2020-00019, (P.T.A.B. May 20, 2020).
3 Guidance at 9.
4 See, e.g., Scott A. McKeown, PTAB Fintiv Practices Need Reality Check, Patents Post-Grant (May 17, 2022), available at https://bit.ly/3cmYAyu; Matthew Bultman, et. al., 'Fintiv' Patent Review Denials Fall as Calls to End Rule Persist, Bloomberg Law (May 31, 2022), available at https://bit.ly/3RKwEoo.
5 Where multiple PTAB proceedings related to a single parallel district court or ITC proceeding, we counted only one of the PTAB proceedings.
6 Fintiv at 12-13.
7 IPR2019-01393, Paper No. 24 at 11-12 (June 16, 2020) (designated Informative July 13, 2020) (emphasis added).
8 IPR2020-01019, Paper No. 12 at 13-14 (Dec. 1, 2020) (designated Precedential as to § II.A Dec. 17, 2020) (emphasis added). Effectively, petitioner agreed to estoppel at institution commensurate in scope to estoppel at final written decision under 35 U.S.C.A. § 315(e)(2).
9 Presentation, Patent Trial and Appeal Boar Parallel Litigation Study at 27-28 (June 2022), available at https://bit.ly/3IR99px; see also PTAB Parallel Litigation Study, Executive Summary at 6 (June 2022), available at https://bit.ly/3OlBQMG.
10 F5 Networks, Inc. v. WSOU Investments, LLC, No. IPR2022-00239, (P.T.A.B. May 19, 2022) (non-precedential).
11 Luxshare Precision Indus. Co. v. Amphenol Corp., No. IPR2022-00132, (P.T.A.B. May 3, 2022) (non-precedential).
12 See Texas Instruments, Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558 (Fed. Cir. 1996); see also Guidance at 6.
13 See, e.g., Samsung Elecs. Co. v. Dynamics Inc., No. IPR2020-00499, (P.T.A.B. Aug. 12, 2020) (non-precedential).
14 See, e.g., Garmin Int'l, Inc. v. Koninklijke Philips N.V., No. IPR2020-00754, Paper No. 18 at 3-4 (P.T.A.B. Nov. 12, 2021) (non-precedential).
15 Moreover, under the Fintiv factors, the PTAB was already charged with considering "other circumstances that impact the Board's exercise of discretion, including the merits." Fintiv at 12 (Factor 6).
16 Id. at 8-9 (citing United States District Courts — National Judicial Caseload Profile (Mar. 31, 2022) available at https://bit.ly/3PmU4yq).
17 Samsung Elecs. Co. v. Staton Techiya, LLC, No. IPR2022-00324, Paper No. 13 at 10 (P.T.A.B. July 11, 2022) (non-precedential); Samsung Elecs. Co. v. Staton Techiya, LLC, No. IPR2022-00302, Paper No. 13 at 10 (P.T.A.B. July 11, 2022) (non-precedential).
18 IPR2022-00324, Paper No. 13 at 11-12.
Scott McKeown is a partner in Ropes & Gray's intellectual property litigation practice and chair of the firm's Patent Trial and Appeal Board group in Washington, D.C. He focuses on post-grant patent counseling and litigation matters at the U.S. Patent and Trademark Office and related appeals to the U.S. Court of Appeals for the Federal Circuit. He handles all aspects of post-issuance patent proceedings, specializing in administrative trials before the PTAB. He also provides advice on USPTO post-grant proceedings concurrent with complex International Trade Commission and district court litigations. He can be reached at [email protected]. Jim Davis is a partner in the firm's intellectual property litigation practice in Silicon Valley, California. He focuses his practice on IP litigation and serves as lead counsel in Federal Circuit, district court and PTAB proceedings. Before the Federal Circuit, he has handled matters relating to claim construction, certificates of correction, and covered business method proceedings, among other issues. He can be reached at [email protected]. Matt Rizzolo is a partner in the firm's IP litigation practice in Washington, D.C. He is a litigator who works with companies across industries, developing and implementing creative strategies to enforce clients' IP rights and defend them from infringement claims. He leads the firm's practice in Section 337 actions before the International Trade Commission and has significant experience litigating patent cases in a variety of jurisdictions. His practice encompasses all facets of litigation, from pre-suit investigation through trial, post-trial proceedings, and appeals. He can be reached at [email protected]. Brendan McLaughlin is an associate in the firm's IP litigation practice in Washington, D.C. He represents clients in a variety of IP matters, including patent, trademark, copyright and false advertising disputes. He has worked on litigation matters in federal district court, the PTAB, and the ITC. He can be reached at [email protected]. A version of this article was originally published June 23, 2022, on the firm's website. Republished with permission.
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