Director Vidal’s recent orders granting Director review highlights limited application

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On Tuesday, June 7, 2022, Katherine Vidal, the Under Secretary of Commerce for Intellectual Property and Director of the US Patent and Trademark Office (USPTO), issued two separate orders granting Director review of two recent decisions by the Patent Trial and Appeal Board (PTAB) to institute inter parties reviews (IPRs), IPR2021-01229 and IPR2021-01064, for two registered patents, US Reg. Nos.: 7,523,373 (the ‘373 Patent) and 7,725,759 (the ‘759 Patent).Both patents are owned by the same entity, VLSI Technology LLC (VLSI), which became high profile after VLSI was awarded a monetary judgment of $2.18 Billion by a jury in Waco, Texas for infringement of both the ‘373 Patent and ‘759 Patent in 2021.ii

Director Vidal’s decision to exercise her authority as the Director of the USPTO to grant Director review comes in the wake of the Supreme Court’s recent decision in United States v. Arthrex.iii Issued on June 21, 2021, the Arthrex decision held that agency decisions, such as the final written decisions issued by the PTAB regarding patent validity, must be subject to review by a presidentially appointed principal officer before the decision can become final.iv In response to the Arthrex decision, the USPTO began implementing an interim procedure in which review of a PTAB final written decision by the Director may be requested by a party or initiated sua sponte by the Director.v Click here for a more in-depth discussion regarding the Arthrex decision . When Director review is not granted, the PTAB's final written decision becomes the final decision of the USPTO.

This is not the first time that Director review has been granted since Arthrex was issued; however, Director Vidal’s June 7th orders are unique because they concern the PTAB’s decision to initiate the IPRs, not the final written decisions.vi In fact, the PTAB has not yet issued a final written decision in either case, because both are still pending.vii Interestingly enough, neither case was stayed by Director Vidal’s orders, so the Director reviews of the decisions to institute are going to be conducted simultaneously with the IPRs themselves.viii

It is also important to note that Director review of the decision to initiate an IPR, as recently clarified by the USPTO, cannot be requested by a party and may only be granted sua sponte by the Director.ix However, parties to a PTAB AIA proceeding such as inter parties reviews, post-grant reviews or covered business method patent reviews may request Director review of a final written decision issued in their case for any issue of fact or law.x As the reasons for the sua sponte Director review, Director Vidal cited novel issues of law and policy at issue in both cases as well as issues important to the patent community and the USPTO itself.xi However, the Director did not go into specifics as to what those issues where.xii

What does Director Vidal’s orders granting Director review of the PTAB’s decision to initiate proceedings against VLSI’s high profile patents mean for current and future IPRs?

First, the Director review process is still in flux, and concerned parties should expect more changes in the future.xiii The USPTO has prioritized transparency during this process and made guidance readily available.xiv As such, it would be prudent for all current and potential IPR litigants to periodically review the available guidance and notable decisions issued by the USPTO so they can make accurate risk assessments and appropriate strategic decisions. More information regarding the process and what to expect from the USPTO regarding its future development can be located here.

Second, Director Vidal’s decisions also highlight a recent issue called “reverse patent trolling.” Reverse patent trolling typically occurs when a patent owner who has been awarded a high-value verdict for patent infringement is targeted by a third party threatening to institute an IPR against the victorious patent in order to leverage a quick settlement.xv Generally, reverse patent trolling is considered an abuse of the IPR system, which stifles innovation.xvi In view of the circumstances surrounding both IPR2021-01229 and IPR2021-01064, commentators have expressed concern that one or both of the petitioner’s actions and behavior may qualify as reverse patent trolling.xvii

For instance, both petitioners in the IPRs under Director review were formed after the infringement verdict in favor of VLSI was awarded, and neither entity appears to have any connection with the prior litigants.xviii Both essentially copied and refiled arguments and evidence previously proffered in earlier petitions for institution of IPRs, which were denied on procedural grounds.xix Further, one of the petitioners made a written offer to VLSI to effectively undermine its own case in exchange for cash payments.xx Director Vidal’s analysis and review of the institution decisions of IPR2021-01229 and IPR2021-01064 should provide insight as to how the USPTO plans to handle the issue of reverse patent trolling going forward.

Third, the Director review process, at least thus far, is proving to be a rarely and conservatively granted remedy. As of May 23, 2022, there had been 202 cases considered for review. Of these, four (4) have been granted review, meaning only two percent (2%) of petitions for Director review have been granted so far. Since May 23, 2022, four (4) more written decisions, as well as the decisions to institute discussed above, have been granted Director review. While it is too early to identify any hard trends, several cases in which Director review was granted involved similar themes: irrefutable legal errors involving black letter law or recent Federal Circuit decisions on related patents. Practitioners seeking Director review should focus arguments on the key issues highlighted by Director Vidal: intervening change in the law or USPTO procedures or guidance; material errors of fact or law; novel issues of law or policy; split panel decisions; and issues of particular importance to the USPTO or patent community.

Fourth, the Director review procedure provides an alternative avenue for parties to challenge the outcome of a final written decision. Instead of requesting rehearing to the Board or an appeal to the Federal Circuit, parties may view a Director review as a more appealing alternative. Answers to these questions will only emerge over time. The one current certainty is that the Director review process introduces yet another layer of complexity that must be factored into a party’s enforcement or defense calculus.

Fifth, as previously stated above, both petitioners in IPR2021-01229 and IPR2021-01064 utilized arguments and evidence originally included in a prior litigant’s petition never addressed on the merits. The prior litigant’s petition was denied under the so-called Fintiv Policy, which looks at six (6) different factors to determine whether institution of an IPR is an effective use of resources in view of overlapping infringement litigation.xxi By denying the prior litigant’s petition for procedural reasons and not on the merits, the door was opened to allow for other third parties such as the petitioners in IPR2021-01229 and IPR2021-01064 to repurpose the prior litigant’s arguments while expending minimal resources in the process.xxii

The Fintiv Policy is controversial to say the least.xxiii On June 21, Director Vidal issued a guidance memo directed at some of the issues related to the Fintiv Policy, including issues related to IPR2021-01229 and IPR2021-01064.xxiv While neither IPR2021-01229 or IPR2021-01064 are explicitly referenced, the guidance memo appears to be directed at minimizing the possibility that the facts that gave rise to IPR2021-01229 and IPR2021-01064 do not happen again. Specifically, the Director directed the PTAB to, inter alia, “not rely on the Fintiv factors to discretionarily deny institution in view of parallel district court litigation where a petition presents compelling evidence of unpatentability.”xxv Presumably, if the prior litigant’s own petition against VLSI’s patents had not been denied, then the petitioners in IPR2021-01229 or IPR2021-01064 would have had to expend their own resources to develop a valid attack on those same patents instead of simply repurposing arguments and evidence already prepared by the prior litigant.

Sixth, during an online webinar streamed on June 21, 2022,, Director Vidal addressed her decisions to order a Director review of the decision to institute IPR2021-01229 and IPR2021-01064 without going into any specifics of either case.xxvi According to Director Vidal, abuses of the IPR process before the PTAB were not going to be tolerated.xxvii However, she also cautioned that not all questionable behavior rises to the level of abuse even though the behavior in questions does not further the goals of the USPTO.xxviii The Director then went on to state that she did not have all of the answers regarding this issue and welcomed the public’s input into the discussion.xxix

Finally, it should be noted that Congress is also concerned with the new Director review procedure. On September 30 2021, Senator Patrick Leahy introduced the Restoring the America Invents Act to address the potential for politicization of Director opinions. Under this Act, any opinion by the Director would need to be written and set forth the reasons for the action.

i Opensky Industries, LLC v. VLSI Technology LLC, IPR2021-01064, Paper 41 at 2–3 (P.T.A.B. Jun. 7, 2022; Patent Quality Assurance, LLC v. VLSI Technology LLC, IPR2021-01229, Paper 31 at 2–3 (P.T.A.B. Jun. 7, 2022).
iiVLSI Tech. v. Intel Corp., CA No.: 6:21-cv-057-ADA (W.D. Tex. Apr. 21, 2022).
iii United States v. Arthrex, Inc., 141 S.Ct. 1970 (2021).
iv Id
v Interim Process for Director Review, USPTO, https://www.uspto.gov/patents/patent-trial-and-appeal-board/interim-process-director-review (last visited Jun. 12, 2022).
vi Status of Director review request, USPTO, https://www.uspto.gov/patents/patent-trial-and-appeal-board/status-director-review-requests#:~:text=Status%20of%20Director%20review%20requests%20Director%20review%20 requests,a%20week%20of%20the%20receipt%20of%20the%20request (last visited Jun. 12, 2022).
vii Opensky Industries, LLC v. VLSI Technology LLC, IPR2021-01064, Paper 41 at 2–3; Patent Quality Assurance, LLC v. VLSI Technology LLC, IPR2021-01229, Paper 31 at 2–3.
viii Opensky Industries, LLC v. VLSI Technology LLC, IPR2021-01064, Paper 41 at 2–3; Patent Quality Assurance, LLC v. VLSI Technology LLC, IPR2021-01229, Paper 31 at 2–3.
ix USPTO issues interim processes for PTAB decision review; updates Director review interim process, USPTO (May 26, 2022), https://www.uspto.gov/subscription-center/2022/uspto-issues-interim-processes-ptab-decision-review-updates-director.
x See USPTO supra note v, section 8.
xi Opensky Industries, LLC v. VLSI Technology LLC, IPR2021-01064, Paper 41 at 2–3; Patent Quality Assurance, LLC v. VLSI Technology LLC, IPR2021-01229, Paper 31 at 2–3.
xii Opensky Industries, LLC v. VLSI Technology LLC, IPR2021-01064, Paper 41 at 2–3; Patent Quality Assurance, LLC v. VLSI Technology LLC, IPR2021-01229, Paper 31 at 2–3.
xiii See USPTO supra note v. 
xiv See id.
xv Brent Saunders, Reverse Patent Trolls Are Harming Drug Innovation—and Patients, WSJ (Oct. 8, 2017), https://www.wsj.com/articles/reverse-patent-trolls-are-harming-drug-innovationand-patients-1507487600.
xvi Id.
xvii Gene Quinn, OpenSky Attorney Emails Expose the Seedy Underbelly of PTAB Practice, IPWatchdog (March 4, 2022), https://www.ipwatchdog.com/2022/03/04/opensky-attorney-emails-expose-seedy-underbelly-ptab-practice/id=147155/.
xviii Jonathan Stroud, Patent Filings Round-up: IPR on $2.18 Billion VLSI Patent Instituted; IP Edge Filing Patterns Emerge, IPWatchdog (Dec. 29, 2021), https://www.ipwatchdog.com/2021/12/29/ipr-on-2-18-billion-vlsi-patent-instituted-ip-edge-filing-patterns-emerge/id=142230/.
xix See id.
xx OpenSky Industries, LLC v. VLSI Technolgoy LLC, IPR2022-00645, Paper 8, Ex. 2029 (P.T.A.B. Mar. 2, 2022); see, e.g., Gene Quinn supra note xvi.
xxi Derek Forinash, What’s Really Going On With Fintiv At The Patent Trail And Appeal Board?, JDSUPRA (Oct. 4, 2021), https://www.jdsupra.com/legalnews/what-s-really-going-on-with-fintiv-at-2576054/.
xxii See Stroud supra note xviii.
xxiii See Id.
xxiv Katherine Vidal, Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation, USPTO, at 2 (Jun. 21, 2022), https://www.uspto.gov/sites/default/files/documents/interim_proc_discretionary_denials_aia_parallel_district_court_litigation_memo_20220621_.pdf; see Director Vidal provides clarity to Patent Trial and Appeal Board practice on discretionary denials of patent challenges based on parallel litigation, USPTO (Jun. 22, 2022), https://www.uspto.gov/about-us/news-updates/director-vidal-provides-clarity-patent-trial-and-appeal-board-practice.
xxv Vidal supra note xxiv.
xxvi Ryan Davis, Vidal Pledges Action Soon On IPR Denials, Director Review, Law360 (June. 21, 2022, 7:46 pm EDT), https://www.law360.com/ip/articles/1503210/vidal-pledges-action-soon-on-ipr-denials-director-review?nl_pk=9f46923f-23e0-4a57-9355-13e5ca5ad38b&utm_source=newsletter&utm_medium=email&utm_campaign=ip&utm_content=2022-06-22.
xxvii Id.
xxviii Id.
xxix Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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