February 2021: Patent Litigation Update

Quinn Emanuel Urquhart & Sullivan, LLP
Contact

Quinn Emanuel Urquhart & Sullivan, LLP

New Challenge to IPR Discretionary Denials in View of Parallel Patent Litigation

On August 31, 2020, four leading tech companies filed a declaratory action against Andrei Iancu, the Director of the U.S. Patent and Trademark Office (“USPTO”), challenging the USPTO’s discretionary authority under 35 U.S.C. § 314(a) to deny inter partes review (“IPR”) petitions in view of parallel patent litigation. Apple, Inc. v. Iancu, Case No. 5:20-CV-06128-EJD, Dkt. 1 (N.D. Cal. Aug. 31, 2020). Just two weeks later, several self-proclaimed Small Business Inventors, led by the non-profit US Inventor, moved to intervene seeking to enhance the Director’s discretionary authority. Dkt. 28. Soon after, US Inventor moved for a preliminary injunction to enjoin the USPTO from instituting any IPRs until it promulgates rules on this issue. Dkt. 34. On February 5, 2021, the Court denied the motion to intervene and further denied the motion for preliminary injunction as moot. The ultimate outcome of Plaintiffs’ claims could have far-reaching consequences for the adjudication of hundreds of IPR petitions filed every year.

I. Plaintiffs’ Challenge to the “NHK-Fintiv Rule”

Plaintiffs assert that the Director adopted an improper discretionary rule for IPR denial by designating as precedential two recent decisions by the Patent Trial and Appeal Board (“PTAB”), NHK Spring Co. v. Intri-Plex Technologies, Inc. and Apple Inc. v. Fintiv, Inc. The six discretionary factors articulated by the PTAB in these institution denials concern the stage, similarity, and merits of parallel district court litigation, namely (1) whether the court has granted or will grant a stay; (2) proximity of the court’s trial date to the deadline for an IPR final written decision; (3) investment in the parallel proceeding by the court and the parties; (4) overlap between issues raised; (5) whether the same parties are involved; and (6) other circumstances impacting the Board’s discretion, including the merits. See Apple Inc. v. Fintiv, Inc., No. IPR2020-00019, Paper 11 at 6-6 (P.T.A.B. Mar. 20, 2020); NHK Spring Co. v. Intri-Plex Technologies, Inc., No. IPR2018-00752, Paper 8, at 20 (P.T.A.B. Sept. 12, 2018).

Plaintiffs contend this “NHK-Fintiv Rule” runs afoul of the “weeding out” mechanism served by IPRs of eliminating weak patents. Apple, Inc. et al., Case No. 5:20-CV-06128-EJD, Dkt. 1 at ¶ 2. They assert the rule violates the America Invents Act (AIA), is arbitrary and capricious, and violates the Administrative Procedure Act (“APA”). Id. ¶¶ 61-77.

First, they posit the rule overrides congressional judgment embodied in several specific statutes, including the one-year statutory deadline to file an IPR petition after an accused infringer is served with a complaint. Id. ¶¶ 61-67. They argue this deadline embodies Congressional judgment that “so long as the IPR is filed within a year after a lawsuit against the petitioner starts, IPR is appropriate.” Id. Plaintiffs argue that Congress, by not expressly providing it, has denied the Director any discretionary privilege to deny institution in view of parallel district court proceedings. Id.

Plaintiffs next contend the rule is arbitrary and capricious by arguing the PTAB’s discretionary factors are uncertain and indeterminate. Id. ¶¶ 68-75. For instance, they argue the rule’s second factor—concerning proximity of trial date—calls for speculation as to when trial will begin. Id. Plaintiffs similarly point to the application of the fourth factor—overlap of issues—as inconsistently applied by the PTAB. Id. Here, they contend the PTAB selectively finds overlapping issues to favor or disfavor institution depending only on how distant it perceives trial to be. Id.

Finally, Plaintiffs argue the rule is procedurally invalid under the APA. Id. ¶¶ 76-77. They argue the NHK-Fintiv rule amounts to a substantive rule that required, but never received, notice-and-comment under the APA. Id.

II. Proposed Intervenors’ Effort To Expand USPTO Discretion and Enjoin All IPRs

Like Plaintiffs, Proposed Intervenors complained about ad hoc rule-making and unpredictability from the PTAB. Apple, Inc ., Dkt. 28-1 (N.D. Cal. Sep. 14, 2020). But in contrast to Plaintiffs, intervenors sought to increase the frequency of discretionary denials, complaining of growing expenses associated with IPR proceedings for patent inventors against large corporate opponents. Dkt. 34.

In this vein, proposed intervenors sought a declaration that the Director’s “adjudicative rulemaking” is unlawful and seek to compel notice-and-comment rulemaking. Dkt. 28-1. at 22. The intervenors also sought an injunction preventing PTAB panels from treating any prior precedential decisions analyzing discretionary considerations as precedential. Id. They primarily rested this argument on a recent Federal Circuit decision, Facebook, Inc. v. Windy City Innovations, LLC, arguing the decision makes clear “the Director’s current practice of marking certain decisions ‘precedential’ does not constitute th[e] required rulemaking.” Dkt. 28-1 at 11; Dkt. 34 at 11. Finally, intervenors moved for a preliminary injunction against Director Iancu to enjoin him from instituting any IPR trials until the completion of notice-and-comment rule making. Dkt. 28-1 at 22.

On January 14, 2021, the Court held a hearing on proposed intervenors’ motions to intervene and for preliminary injunction . Three weeks later, on February 5, the Court denied the motion to intervene, including because the proposed intervention would “unduly delay and prejudice the adjudication of the original parties’ case.” Dkt. 101 at 10. The Court further denied the motion for a preliminary injunction as moot.

The parties concluded their briefing of both the motion to dismiss and motion for summary judgment on February 4, and no hearing has yet been set.

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.

© Quinn Emanuel Urquhart & Sullivan, LLP | Attorney Advertising

Written by:

Quinn Emanuel Urquhart & Sullivan, LLP
Contact
more
less

Quinn Emanuel Urquhart & Sullivan, LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.