Federal Circuit Will Not Second-Guess IPR Institution Denials

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In a series of non-precedential orders, the US Court of Appeals for the Federal Circuit reiterated that it lacks jurisdiction to hear appeals on whether the Patent Trial and Appeal Board properly decided to deny inter partes review (IPR) petitions based on parallel district court litigation. Cisco Systems Inc. v. Ramot at Tel Aviv University, Case Nos. 20-2047, -2049 (Fed. Cir. Oct. 30, 2020); Google LLC v. Uniloc 2017 LLC, Case No. 20-2040 (Oct. 30, 2020); In re: Cisco Systems Inc., Case No. 2020-148 (Fed. Cir. Oct. 30, 2020); Apple Inc. v. Maxell, Ltd., Case No. 20-2132, -2211, -2212, -2213, 21-1033 (Fed. Cir. Oct. 30, 2020).

The 2011 Leahy-Smith America Invents Act (AIA) created various mechanisms for challenging the validity of issued patents in post-grant proceedings before the US Patent and Trademark Office PTO) by adding transitional covered business method and post-grant review proceedings to existing ex parte re-examination, and expanding and renaming inter partes re-examination to inter partes review (IPR).

Under 35 USC §§ 311, 312, a petition for IPR must identify all real parties in interest, identify and support the prior art grounds for challenges to the claims, and provide “such other information as the Director may require by regulation.” Under 35 USC § 314 and 37 CFR 42.4(a), the Board institutes a trial on behalf of the PTO Director, and a “determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” In deciding whether to institute the trial, the Board considers, at a minimum, whether a petitioner has satisfied the relevant statutory institution standard. Even when a petitioner has satisfied the institution standard, the Director has statutory discretion under 35 USC 314(a) and 324(a) to deny a petition.

In 2016, the Supreme Court of the United States held in Cuozzo Speed Techs. v. Lee that “the agency’s decision to deny a petition is a matter committed to the Patent Office’s discretion,” and that there is “no mandate to institute review.” The Supreme Court also found that the Director is given broad discretion under 35 USC 315(d) and 325(d) to determine the manner in which “multiple proceedings” before the PTO involving the same patent may proceed, “including providing for stay, transfer, consolidation, or termination of any such matter or proceeding.” Subsequent PTO policies and precedential Board decisions set forth factors affecting the case-specific analysis of whether to institute an AIA proceeding, and particularly a follow-on or serial petition, or discretionary denial due to the timing of parallel district court proceedings.

In Cisco v. Ramot, the Board denied Cisco’s petitions to institute IPRs against two patents that Ramot had asserted against it in a district court case. The decisions denying Cisco’s petitions cited the Board’s discretion under 35 USC § 314(a) not to institute review and relied on the factors determining whether efficiency, fairness and the merits support the exercise of authority to deny institution in view of an earlier trial date in the parallel proceeding. Specifically, the Board noted that any final decision it could make would not be issued until about six months after the district court trial was scheduled to begin, that the parties spent months briefing the district court on claim construction issues, that expert discovery was scheduled to be completed shortly, and that the petitions included the same parties and the same or substantially the same claims, grounds, arguments and evidence as the district court proceeding. Thus, the Board concluded that “instituting would be an inefficient use of Board, party, and judicial resources.” Cisco appealed and also sought mandamus relief.

On appeal, Cisco argued that the Board’s decisions, and reliance on any so-called “NHK/Fintiv rule,” were unlawful because the precedential decisions impermissibly established substantive rule governing institution that violated the Administrative Procedure Act (APA) and the AIA since they were not promulgated by notice-and-comment rulemaking. Cisco claimed that this “contravene[d] Congress’s deliberate judgment that district court defendants should be able to pursue IPR alongside the infringement action, so long as they petition for IPR within one year.”

The Federal Circuit’s decision gave complete deference to 35 USC §314(d) and earlier Supreme Court and Federal Circuit precedent on these issues. The Federal Circuit noted that Supreme Court decisions in Thryv, Inc. v. Click-to-Call Technologies, LP and SAS Institute also involved appeals from a final written decision after a decision to institute. Moreover, the Court noted that any possibility left open by the Supreme Court that § 314(d) may not bar appeals that implicate constitutional questions or concerns that the agency acted outside its statutory limits, had been closed in Cuozzo for review of matters “closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.” As further support, the Court pointed to its statement in St. Regis Mohawk Tribe v. Mylan Pharms. Inc. that § 314(d) indicates that when “the Director decides not to institute, for whatever reason, there is no review,” and in St. Jude Med., Cardiology Div., Inc. v. Volcano Corp. that the Court’s review authority under § 1295(a)(4)(A) does not extend to appeals from non-institution decisions.

The Federal Circuit refused to look further and did not discuss the APA. It considered Cisco’s basic challenge to be whether the Board has authority to consider the status of parallel district court proceedings as part of its decision under § 314(a) in deciding whether to deny institution, and categorized any such procedural and substantive challenges as closely tied to the application and interpretation of statutes relating to the PTO’s decision whether to initiate review, and therefore outside the Federal Circuit’s jurisdiction.

The Federal Circuit also found that Cisco had not met the high standard for mandamus relief. Although the Court did not draw “any definitive conclusions on the issue,” it found that Cisco failed to establish a “clear and indisputable right that precludes” the Board’s exercise of discretion to decline review, and to rely on Board precedent establishing a non-exclusive set of factors relevant to deciding whether it would be a proper use of resources to conduct such review when there is a parallel district court proceeding. The Court noted that Cisco had already activated alternative legal channels to raise its substantive and procedural arguments concerning Cuozzo, and its original district court proceedings provided an alternative legal channel to raise its patent validity arguments. Thus, the Court found that although Cisco perhaps preferred to raise arguments before the Board, it had no clear and indisputable right to do so.

The opinions in Google v. Uniloc and Apple v. Maxell issued on the same day as the Cisco order and referred to the Cisco order in confirming the Federal Circuit’s lack of jurisdiction to hear Google and Apple’s appeals. The appeals were similarly dismissed and mandamus denied.

Similar challenges by GlaxoSmithKline and Apple are still pending, although in each case the Court has issued an order to show cause, within 14 days, why the appeals should not be dismissed for lack of jurisdiction. GlaxoSmithKline Consumer v. Cipla Ltd., Case No. 21-1016 (Fed. Cir. Nov. 2, 2020); Apple Inc. v. Optis Cellular Technology, LLC, Case No. 21-1043 (Fed. Cir. Oct. 29, 2020). Mylan Laboratories filed for appeal in late October 2020 on similar issues, but filed a motion to terminate in early November 2020. Mylan Laboratories Ltd. v. Janssen Pharmaceutica, N.V., Case No. 21-1071 (Fed. Cir. Nov. 5, 2020).

Practice Note: On October 19, 2020, the PTO requested public comments on considerations for instituting trials for issued patents under the AIA in relation to serial and parallel AIA petitions, as well as proceedings in other tribunals. The comment period ends November 19, 2020.

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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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